The House today could introduce legislation to increase the government’s authority to borrow and pay bills. The Treasury Department estimates that the debt limit could be reached as soon as mid-October. Data from the Commerce Department today indicated purchases of new U.S. homes rose in August.
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) is up 1.25 points to 1693.50, fighting back from early losses, which took the market down to 1684.50. We believe that there are two key levels here: 1695 and 1705. Overall, we believe the market is susceptible to further selling to the low 1680s possibly even 1665. The market seems to be in a “back-and-forth” phase, as massive uncertainty over the Fed’s tapering plan is present in the markets. 1705 is a very key resistance level in our view. There is indeed the chance that the market will head above 1705 and stay there, possibly heading to 1730, but we believe this might be tough in the face of a possible December tapering and the debt ceiling issues.
Bonds: The DEC13 U.S. 30-year bond futures (NYBOT:ZBZ13) are up 7 ticks to 133’06, and we still believe this contract is headed to 133’16, and possibly higher. We have seen a very nice rally over the past couple of weeks though. Ultimately we would not be surprised to see the rally continue to the 135 level, as we are seeing a correction in yields and prices.
Currencies: The DEC13 U.S. Dollar Index (NYBOT:DXZ13) is weak today, trading down 26 ticks to 80.43. The recent low is at around 80.15, and we believe this index will test that low and possibly break through it. On a related note, the DEC13 Euro is up 54 ticks today to 135.33, and we still have our sights on the 1.37 level to the upside. 134.50 is our key support level which held up from yesterday’s decline in the Euro. The DEC13 British Pound is up 60 ticks to 160.57, pushing the upper end of its recent range since coming down from the FOMC highs. The DEC13 Swiss Franc is up 43 ticks to 110.10, and we have our next key resistance level at 110.50 area. If the Franc does keep rallying, we have a longer term upside target at 111.90.
Commodities: DEC13 gold (COMEX:GCZ13) is up $18 to $1,334, trading right around a key level of $1,335. Gold may rally further, especially if the USD keeps declining. DEC13 wheat (CBOT:WZ13) futures are up $.1275 to $6.71. NOV13 crude oil (NYMEX:CLX13) is up $.33 to $103.46, after dipping into the $102′s overnight, as inventories at Cushing, Oklahoma, fell for a 12th week. OCT13 Sugar (NYBOT:SBV13) continues its strength this month, trading up to 17.52 cents/lb.