U.S. stocks rose, extending the biggest rally in four weeks for the S&P 500 Index. Fed policy makers will probably begin reducing $85 billion in monthly bond buying at the Dec. 17-18 meeting, according to 34% of economists surveyed on Dec. 6 by Bloomberg. The S&P 500 has gained 27% in 2013. Data today from China showed the country’s trade surplus widened last month to the largest in more than four years. German industrial production unexpectedly dropped for a second month in October.
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) is up 3.5 points to 1808.50, trading briefly above 1810 this morning. It seems like it is a commonly held belief that the market is headed higher, generally speaking. We believe that at these levels there may not be major new buying interest until Fed policy is clearer (after the next FOMC meeting this month). Also, we believe the trading going into the holiday may be subdued as traders start to leave for vacation. We believe 1850 may be approached in Q1 2014. 1807 is our key pivot level, and 1830 is our next technical upside target according to our analysis of the market profile.
Bonds: The MAR14 U.S. 30-year bonds (CBOT:ZBH14) are up 24 ticks today to 129’20. It is interesting to see this recent move higher in bonds. It seems to us as though last Friday’s jobs report wasn’t strong enough to convince the bond market the higher rates were coming sooner than the Fed has communicated. The bonds are seeing steady buying above the 128 level, and may rally to the 130’16 area from here. The next key data for the bonds would be retail sales and PPI data later this week, and of course the FOMC policy decision later this month.
Currencies: The DEC13 Euro continues its bull run against the USD, trading up 28 ticks to 137.24. We would not be surprised to see this contract approach the 1.40 level over the next 3 months. The DEC13 Yen continues going down, trading down 18 ticks to 96.99. We believe the Yen could approach 96.50 and possibly head to 95. The DEC13 U.S. Dollar Index (NYBOT:DXZ13) is down 8 ticks to 80.23. The USD has defied bulls’ predictions of a rally recently, as the taper has not come as soon as some had expected. We believe the USD looks weak and could find a longer term home below the 80 level.
Commodities: The high flier on the commodities board is still JAN14 natural gas (NYMEX:NGF14), today trading up $.07 to $4.18. $4.24 is our next technical upside target. FEB14 gold (COMEX:GCG14) is up $7 to $1,236, and we could see this market trending higher to at least $1,255. JAN14 WTI crude oil (NYMEX:CLF14) is down slightly today after trading higher 6 days in a row. This contract is down $.07 to $97.58. $96.30 is a key support level below here. This oil market awaits the key EIA supply data which gets released Wednesday morning. We believe the $99/100 area could serve as a short term ceiling level for JAN14 WTI crude oil. We also believe we could be in the early stages of a longer term copper rally.