Goldman Sachs Group Inc. and Citigroup Inc. declined at least 1.9% this morning, as Fed Bank of New York President William C. Dudley said policy makers must “forcefully” push against economic headwinds. German Chancellor Angela Merkel was re-elected yesterday. The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, jumped 9.2% to 14.32.
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) is down 6.75 points this morning to 1696, trading well below our key decision level of 1719. Our first support level/target of 1706 has been touched and breached, and now we look for the 200EMA on the 5-hour bar chart at 1680 to be approached. It looks like 1704.50 is a key first resistance level, and 1684 is a first target, which is a gap from Sept. 15. We believe this 1684 level will be hit very soon. We believe the uncertainty over not only the Fed policy but the debt ceiling issue might cause the market to seek lower prices.
Bonds: The DEC13 U.S. 30-year bond futures (NYBOT:ZBZ13) are up 10 ticks this morning to 131’31, just above a key short term 200 EMA. We believe the bonds might rally to another key resistance level/potential price magnet at 133’16, as investors may seek a safe-haven asset in these times of political uncertainty. Our first key support level is 131’13. We believe the “no-taper” event last week was, in hind-sight, a key turning point for the bond market, as a taper was being priced in the whole year, as the 30-year bonds sold off to the tune of about 22 points!
Commodities: DEC13 gold (COMEX:GCZ13) is down $4 to $1,327, and NOV13 WTI crude oil (NYMEX:CLX13) is down $1.09 to $103.69. It seems like the whole energy complex of oil related products (RBOB gas, Heating oil) is down today and could fall further as political relations between USA and Iran potentially improve. We also focus on DEC13 coffee futures (NYBOT:CCZ13) this morning, as they are up 2.14% on what looks to be a small short-covering rally from yearly lows. A key level for coffee is $1.1655, and today coffee is trading up to $1.1720. We see $1.185 as the next key resistance level. U.S.-based industry research group Green Coffee Association said last week that U.S. stocks of unroasted coffee in August totaled to 5.56 million 60-kilogram bags, up 2.4% from July and highest level since July 2009.
Currencies: The DEC13 Euro futures have come down from their strong recent rally today, trading down 32 ticks to 134.92. The DEC13 Swiss Franc is also down 16 ticks to 109.77, after not being able to breach the 1.10 level to the upside. We believe the Swiss Franc is vulnerable to the downside, especially if the USA-Iran relations officially and overtly improve. The DEC13 Aussie dollar is up 41 ticks to 93.95, as China data continues to improve and impress. 94.50 is the next resistance level for the Aussie. The DEC13 USD index is up 5 ticks to 80.60, and looks to be in a downtrend as the tapering schedule is still very uncertain.