The Institute for Supply Management’s non-manufacturing index increased to 55.4 from the prior month’s 54.4, the Tempe, Arizona-based group said today. The European Union trimmed its forecast for euro-area growth next year and raised its unemployment estimate.
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) is down 8.5 points to 1754.50. We have a key pivot level of 1753, and a first downside target of 1742. We would not be surprised to see this market head lower to 1742, possibly even before Friday as investors and traders may square up positions before the important Thursday and Friday economic reports. The DEC13 Dow Jones futures are down 76 points to 15500. Our next key support level is 15300. If we get a big jobs number on Friday, the market could start to price in a December or March taper, and the equity markets could head lower. Overall, we still believe we are in longer-term bull market, but these levels seem to be a potential high area for the short term.
Bonds: The bond market is trading lower today, with the DEC13 U.S. 30-year bonds (CBOT:ZBZ13) down 30 ticks to 133’01. This market is now back below our key level of 133’16, and this market could be ripe for a big down move on Friday if we get a 200K or higher jobs growth number. We would not be surprised to see the bond market head much lower over the next six months, especially if we start to see steady jobs growth that beats expectations. We could see the DEC U.S. 10-year note head lower to at least 120.
Currencies: The U.S. dollar is strong again, with the DEC13 U.S. Dollar Index (NYBOT:DXZ13) trading up 21 ticks to 80.85. The DEC13 Euro is down 60 ticks to 134.58, and has traded below a key level of 135.30. The DEC13 Pound is up 62 ticks to 160.27 on strong UK data. It’s really the same theme today as yesterday, with the jobs report on Friday likely the deciding factor as the whether the U.S. dollar continues its recent rally, and possibly heads to at least 82 in the near term, or whether the dollar rally falters on a weaker jobs number and heads back down to 80. We believe the trend is up for now.
Commodities: Crude oil is down once again this morning, with the DEC13 WTI contract (NYMEX:CLZ13) down $0.88 to $93.73. Crude is approaching some support areas, and we would not be surprised to see this down-move start to pause and see some consolidation. DEC13 gold (COMEX:GCZ13) is also down today, trading down $5 to $1,310. Gold is below one of our key resistance levels of $1,336. We would not be surprised to see gold approach $1,250. DEC13 Cocoa (NYBOT:CCZ13) is storming higher, trading up $81 to $2,735. Indonesia’s cocoa exports are expected to drop about 14% from a year ago to 140,000 tonnes in 2013, said an industry body, which also reversed its earlier forecast for a rise in output, citing crop-damaging wet weather.