Investors will assess economic reports this week on jobless-benefit claims and manufacturing in the New York area. On Thursday, Janet Yellen testifies before the Senate Banking Committee Nov. 14 during her confirmation hearing. China will deepen economic reforms and give markets a bigger role in allocating resources, the official Xinhua News Agency reported today.
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) is down .5 points to 1767, on a very quiet morning back from holiday. At this point, it looks as though the market is having some trouble staying above the key 1770 level. We do have a technical target of 1792, which could potentially be approached later this week, especially if Janet Yellen is overtly dovish on Thursday. If she doesn’t rock the boat too much either way, markets could actually sell off. The key line in the sand for our view is 1770. If Yellen is NOT very dovish, and DOES emphasize a strong economy, we could see a move lower in equities.
Bonds: And further, if Yellen emphasizes a strong economy on Thursday, an economy that is able to withstand tapering, we could see the bonds head significantly lower. The DEC13 U.S. 30-year bond futures (CBOT:ZBZ13) are up 2 ticks today, while the DEC13 U.S. 10-year note (CBOT:ZNZ13) is actually down 1.5 ticks today. We continue to look for new 2013 lows for both the 30 and 10yr bond and note futures. We believe the bonds have a long way to go lower, especially if we continue to get positive jobs data.
Currencies: Even with the recent ECB rate cut, the DEC13 Euro currency has been able to bounce back from sub-1.34 levels. Today, the Euro is up 40 ticks to 134.45. The DEC13 Aussie is weak today, trading down 27 ticks to 92.96. We have our next downside target for the Aussie at 92.57. The DEC13 Yen/USD, which we focused on yesterday, is down 41 ticks to 100.37. We believe the Yen will approach 2013 lows at around 96.50, and possible head lower from there.
Commodities: DEC13 coffee futures (NYBOT:KCZ13) continue their recent strength after a capitulation move down to $1.01. Today this contract is trading up to $1.0555. JAN14 Soybeans (CBOT:SF14) are up $.11 to $13.12. DEC13 gold (COMEX:GCZ13) is down slightly to $1,280, and our next target lower for gold is $1,257. DEC13 WTI crude oil (NYMEX:CLZ13) continues its neutral to bearish tone, trading down $.16 to $94.98. We look for further weakness, potentially down to $92. DEC13 Nat. Gas (NYMEX:NGZ13) is up $.64 to $3.638. It looks as though the $3.50 level is key support, and we could be in for more natural gas rallies above this level.