U.S. lawmakers have to approve emergency legislation by midnight to keep the federal government operating from tomorrow, the beginning of the 2014 fiscal year. The S&P 500 fell 1.1% last week, its first weekly drop since August. The debt limit is a bigger problem than a federal shutdown, though the U.S. will probably avoid both, Moody’s Investors Service said in a report today. Business activity in the U.S. expanded more than forecast in September, reaching a four-month high.
Equities: The DEC13 E-mini S&P 500 futures (CME:ESZ13) are down 9.25 points to 1677 this morning, gapping lower after the weekend. The gap above these levels is at 1686.50. The key support level that was actually touched this morning is at 1667.50, and the market bounced higher from this level pretty quickly. If the market can stay below this level of 1667, we believe it could head lower to the bottom part of its recent range is 1630. Fundamentally, we of course have the potentially bearish headwinds of not only funding the government, but also the mid-month debt ceiling deadline.
Bonds: The DEC13 U.S. 30-year bond futures (CBOT:ZBZ13) are down slightly, likely on a better than expected Chicago manufacturing data release this morning. Our key resistance level of 133’16 has held recently, and our key support level of 132’05 is still over one point below the current price. We believe the bonds are not just yet ripe for another leg down, as there is too much political uncertainty (that could have negative effect on economy). We would not be surprised to see the bonds trade and hold above the 133’16 level for the short term..
Currencies: The big winner on the currency board is the DEC13 New Zealand dollar, trading up 43 ticks to 82.76. The recent trend has been very strong for this currency, and we would not be surprised to see it move higher from here. The New Zealand dollar seems to be in the uptrend due to the widely held belief that the New Zealand Central bank might be the first central bank from a developed economy to raise rates, possibly as soon as next year. The DEC13 British Pound is up 53 ticks to 161.78, but to us it is looking like it is running up against some strong resistance lines.
Commodities: DEC13 gold futures (COMEX:GCZ13) are down $10 to $1,329, likely heading lower today on a higher than expected Chicago manufacturing number. As we have been writing, we believe the $1,336 level is key for the gold market, and gold has been moving back and forth around this level. We believe gold is not the safe haven it used to be, and would not be surprised to see gold head below $1,300. The corn market has tumbled today, with DEC13 corn (CBOT:CZ13) down 7 cents to $4.4650. It rallied initially to $4.60, but then experienced a sharp rejection from that resistance point. We believe DEC13 corn is headed lower to the $4.25 area. NOV13 crude oil (NYMEX:CLX13) almost dipped below $101 this morning, and is now down $1.17 to $101.70.