Iran has won an easing of certain sanctions on oil, auto parts, gold and precious metals for six months by agreeing to curtail its nuclear activities. Diplomacy has “opened up a new path toward a world that is more secure,” Obama said in a televised speech. Iran sits on the world’s fourth-largest proven oil reserves. The S&P 500 dropped less than 1 point to 1,804.20 at 10:04 a.m. in New York, erasing an earlier gain of as much as 0.2 %. The S&P 500 rose for a seventh straight week last week, its longest winning streak since February. Data today showed the number of contracts Americans signed to buy previously-owned homes unexpectedly fell in October for a fifth consecutive month.
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) is up 2 points to 1803.25, after running up to 1809 in overnight trade. We would not be surprised to see consolidation period coming up in this holiday week. There seemed to be a swift rejection of the 1810 level, as the market came right back down once hitting 1809. The market still seems very strong. We have our next upside target of 1814, which could very well be hit this month. The next key data point we are watching is the jobs report in the first week of December. We believe the 1810-1820 area might be the ceiling for the rest of the year. A weaker than expected pending home sales number may have taken some of the early enthusiasm out of the market today.
Bonds: The bonds are higher again today, with the DEC13 U.S. 30-year bonds (CBOT:ZBZ13) up 12 ticks to 132’09. After a sharp selloff recently on discussion of tapering, the bonds have found buyers, yet are still below a key resistance level of 132’25. We believe the bonds have no major reason to head lower before the next jobs report in December. However, if indeed that jobs report shows large gains of 250K+, we believe the bond bulls could be in for a rude awakening, and that the bonds could really take a big slide lower, as that number could potentially solidify a taper either in the December or January FOMC meeting. We believe the jobs number is extremely important for the near term direction of the bond market.
Currencies: The FX markets seem to be reacting to the Iran deal. The major foreign currencies are all down against the USD. The DEC13 U.S. Dollar Index (NYBOT:DXZ13) is up 27 ticks to 81.01, while the DEC13 Yen and DEC13 Swiss Franc are leading the way down. The JPY/USD is getting closer to its 2013 lows of around 96.50, and the DEC13 Aussie is hovering around recent monthly lows of around 91.40. Even with the weaker pending home sales number, the USD is up, which is interesting to see. We believe this shows us that the USD has some strong foundation above 80.
Commodities: Gold (COMEX:GCG14) traded very weak in the overnight session, getting down to $1,227. But, it has recently popped higher to around $1,241, and now down only $2.50 on the day. This is likely due to the Iran deal enabling more precious metals trading in Iran. The energy complex is down today on the Iran deal, with JAN14 crude oil (NYMEX:CLF14) down almost $1 to $93.90, and JAN14 heating oil down $.0275 to $3.0118. We believe crude oil can extend its losses to even the high $80s on a perceived less tense Middle East due to this Iran deal. There are critics of the deal, namely Netanyahu of Israel, expressing strong concern over the enhanced economic benefits to Iran in return for supposedly curtailing their nuclear program.