Caterpillar dropped 5.9% after reducing its 2013 revenue and profit forecast while Boeing Co. (BA) climbed 5.5% after boosting its full-year earnings estimate. The S&P 500 fell 0.6% to 1,743.44 at 11:11 a.m. in New York, snapping a five-day, 3.3% rally. The S&P 500 was valued at 15.9 times estimated earnings yesterday, the highest since December 2009. Oil and copper tumbled after China’s money-market rates jumped.
Equities: The market is down slightly today, with the DEC13 E-mini S&P 500 (CME:ESZ13) trading down 9.25 points to 1740.25, just above our key short term pivot level of 1738. We would not be surprised to see the markets try to break this support level and approach the 1720s. Furthermore, after this big rally in October, we believe the markets might start to quiet down in front of next week’s Fed meeting, which will likely give investors more clarity on the Fed’s views on their tapering ideas and timeline. If the Fed is clearly dovish with regards to tapering, we would not be surprised to see the market try to rally and stay above 1750. If the Fed indicates that they still have tapering ideas and that they do see an improving economy, we look for the market to head back down to the 1700 level.
Bonds: The bond market (CBOT:ZBZ13) has been very strong recently, and we believe this is due to the perception that the Fed will not taper at all this year, especially due to the sub-estimate jobs report released yesterday. Our next key upside target for this market is 136’02. We believe the bonds have potential to rally to this level before the FOMC meeting next week in anticipation of a dovish statement.
Currencies: Movement in currencies is varied this morning, with the Yen and Swiss Franc both trading stronger to the USD, while the Pound, Kiwi, Aussie, and Canadian are all trading lower by anywhere from .45% (Pound) to -1% (Canadian). The jump in Chinese money market rates may be causing investors to exit some of their long positions especially in the Aussie and Kiwi. The DEC13 Euro is still higher from yesterday, trading up 3 ticks to 137.88. We believe the Euro still has room to run.
Commodities: The story of today and this week overall has been crude oil weakness. Mainly because this shows how quickly the tides can turn in this market. DEC13 crude oil (NYMEX:CLZ13) is down $1.28 to $97.00. Our key pivot level for the longer term view is $92. We believe crude might want to test this level. DEC13 Cocoa (NYBOT:CCZ13) could not find new buying near 2013 highs yesterday, and thus is down $52 this morning to $2,717. We believe cocoa could head lower before trying to break 2013 highs near $2,800. DEC13 gold (COMEX:GCZ13) is down $7 to $1,335, a key magnet level. We believe gold could head towards $1,350.