The U.S. equity markets are up more than 1% this morning amid speculation lawmakers were making progress toward an agreement on raising the debt limit before tomorrow’s deadline. It looks like House Speaker John Boehner will allow a vote on a Senate agreement to end the government shutdown and extend U.S. borrowing authority. On the data front, the Federal Reserve is scheduled to release its Beige Book of current economic conditions today.
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) is up 23.50 points (1.37%) this morning on hopes a deal will be agreed upon to raise the debt limit. We have been focusing on 1724 as a short term target for this contract, and we believe this level will be hit. We also would not be surprised to see new index highs for both the Dow and the SP500 before the year ends. Regarding the DEC13 mini-Dow futures, they are up 198 points to almost 15300, with the contract high at just over 15,600. We believe that if a deal is reached, that will potentially propel the Dow futures to approach this 15,600 level and possibly head for 16,000.
Bonds: The DEC13 U.S. 30-year bond futures (CBOT:ZBZ13) are down 3 ticks to 132’02, not really able to put together major downside momentum, even as the stock market is rallying so much. We believe once the important economic #’s start to get released again (CPI, non-farm payrolls, etc.), the bond market’s volatility could pick up, and the tapering talk could be more of a focus again. We do believe the bonds could head lower in the longer term view, but for now the volatility looks subdued.
Currencies: The DEC13 USD (NYBOT:DXZ13) rallied today, up 20 ticks to 80.76, staying above the key 80 level, mainly on optimism a debt deal will be reached before the deadline this week. The DEC13 Pound is down the most of the major pairs, trading down 76 ticks to 159.11. We believe there might be some support near 158.40. The DEC13 Swiss Franc is also down 32 ticks on debt deal optimism, trading at 109.25. We believe this currency could head much lower if and when the debt deal fiasco is behind us. The DEC13 Euro is down 29 ticks to 134.94, has a large impact on the USD index trading higher.
Commodities: We are watching the gold market (COMEX:GCZ13) seem to be having trouble finding selling momentum even though it is below a key level of $1,300. We believe the recent volatility of the gold market may be diminishing. We also believe gold may attract some “value-buying” at these levels. We don’t necessarily believe gold is headed back to $1,400, but we believe gold is in a neutral environment right now. DEC13 corn futures (CBOT:CZ13) came right back down after a nice rally yesterday, and same thing for DEC13 cocoa (NYBOT:CCZ13), which has been very strong recently. NOV13 Natural gas is up almost $.07 to $3.85, and this market looks like it could complete a technical pattern and rally to $3.96.