Federal Reserve Bank of St. Louis President James Bullard said the central bank may decide to reduce bond purchases at its next policy meeting. A measure of euro-area consumer confidence compiled by the European Commission rose less than economists had predicted. Treasuries are posting the biggest weekly gains in two months as traders seem to be diminishing bets for early interest-rate increases .
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) is down 4 points to 1713.50, likely having a small reaction to Bullard’s comment that we could see a taper next month from the Fed. As we noted yesterday, 1719 is our key level for this market, and if the market has trouble staying above 1719, we think it will go to 1706. We think at these levels, some investors will be inclined to take profits on a recent rally to new highs in the markets. We believe the 1730 level will be tough to breach in the short-term, especially with the debt ceiling negotiations coming up. Another possible bearish event for the stock market today was India surprisingly raising its interest rate.
Bonds: The DEC13 U.S. 30-year bond futures (CBOT:ZBZ13) are up 8 ticks to 131’15. Our key support level is 131’08, and it looks like the market profile is still bullish, with an upside target of 132’20. It doesn’t look like the bonds are reacting strongly to the Bullard tapering comment, thus to us this shows the strength of the bond market at these levels. Our two major support levels to watch are 131’08 and 129’21. If these levels are breached then we could see some new selling, but for now, we believe the bonds might head higher.
Currencies: The DEC13 Yen is down 21 ticks to 100.52, while the DEC13 Aussie dollar is down even more, trading down 38 ticks to 93.49. Overall, the big rally in the foreign currencies on Wednesday is running out of steam today, and the strongest currencies today against the USD are the DEC13 Swiss Franc and the DEC13 New Zealand Dollar. The Franc is pushing up against the 1.10 level, and our next target is 110.34. At these levels, we believe the Franc may run into strong resistance. 82.34 is our pivot level for the Kiwi, and if it can’t stay above here, it could have some profit-taking down to 82.58. It does look strong though, and our next key longer term upside target is 85.10.
Commodities: DEC13 gold futures (COMEX:GCZ13) are down $30 to $1,338, which is also incidentally very close to a key support level at $1336. Two key factors caused this drop most likely: 1) India raising interest rates, and 2) Bullard’s taper-talk indicating a potential taper next month. NOV13 WTI crude oil is consolidating today, trading down slightly to $105.29. NOV13 soybeans are down $.21 to $13.18, after failing to breach contract highs this month. We believe gold has the chance to head lower and test $1300 again soon.
Commodities: DEC13 gold (COMEX:GCZ13) was the big winner on the commodities board yesterday, trading up over $50. Today DEC13 gold is up to $1363, after bouncing off of a key resistance level of $1375. NOV13 WTI Crude oil (NYMEX:CLX13) also had a powerful kneejerk bullish reaction, but today is down $.42 to $106.85. DEC13 Cocoa futures (NYBOT:CCZ13) look to be in an uptrend, and are up $1 today to $2624. $2700 and then $2766 are our next upside targets. The DEC13 corn (CBOT:CZ13) contract is up $.05 today to $4.62, likely benefiting from the no-taper decision yesterday.
The DEC13 E-mini S&P 500 is down 4 points to 1713.50, likely having a small reaction to Bullard’s comment that we could see a taper next month from the Fed.