Will tapering talk taper off for now?

U.S. equities rose, with the Standard & Poor’s 500 Index extending a record, as results from Google Inc. and General Electric (GE) Co. topped estimates. In addition, data showed that China’s economic growth has accelerated. Earnings at the 99 companies that have reported so far grew by an average of 4.4%.  The September U.S. jobs report, originally scheduled to be released on Oct. 4, will be issued on Oct. 22. Chicago Fed President Charles Evans said yesterday the central bank should not begin reducing the pace of asset purchases.

Equities: The DEC13 emini SP500 futures are up 4.5 points this morning to 1732.25, and we do have a short term market profile upside target of 1741. We believe the market looks like it could continue to march higher to at least that level in the short term. With key corporate earnings announcements of Google and GE topping estimates, the overall sentiment towards equities seems to be very positive. Further, it seems like the market is starting to think that the taper might not even occur this year. We do have some key targets/resistance coming up at 1741 and 1748, so we’ll see if those levels hold as short term highs.

Bonds: The DEC13 US 30yr bonds are up 6 ticks after spiking higher to 134’24. We believe the new anti-taper sentiment is supporting bonds, and we once again point to our key pivot level of 133’18. As long as the bonds are above this level, they could rally into ther 135′s. A very pivotal number for the bond market happens next Tuesday when the labor report is released. If the monthly jobs number blows the estimates out of the water and comes out very high, we could see the bonds pull back a bit. If the number comes out lower than expected, we anticipate a big bond rally into the 135′s.

Currencies: The bearish USD trend continues today, with the DEC13 USD futures down 8.5 ticks to 79.63. The 79.75 level could be key resistance, and as long as the USD is below 79.75, we view it as in a very bearish technical environment.  The DEC13 Euro futures hit a key target at 1.37 this morning. The bull trend in the Euro seems very strong, and we would not be surprised to see it continue, and the Euro could head to 1.38 if not higher. Again we do focus on next week’s employment # as the next key driver for the currencies. The DEC13 Aussie dollar is very strong, trading up 32 ticks to 96.31. We believe this currency is approaching overbought levels.

Commodities: NOV13 WTI crude oil is up slightly today to $101, but we would not be surprised to see a test of sub-$100 levels. DEC13 gold futures are down $8 to $1315. If they get below $1300, buyers potentially could come in and drive the price up again. However, we are watching next week’s jobs number as a key driver for gold. If the number comes in super-high, we could see gold sell off as that may make the market try to price in a taper again. DEC13 cocoa has sold off significantly today, signifying a potential short term top at the $2770 level. Cocoa is trading down $43 to $2724.


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