U.S. stocks rose this morning. The ADP Research Institute reports the change in companies’ payrolls tomorrow and minutes from the Federal Reserve’s December meeting will be released the same day. Furthermore, to add to a huge week of data, the Labor Department will provide the unemployment rate and new hiring figures for last month on Friday.
Equities: The MAR14 E-mini S&P 500 (CME:ESH14) is up 11.75 points to 1832.50. We are detecting a short term bullish structure, which may indicate a move up to 1844. This week is another pivotal week for major financial markets, as we are getting two key jobs reports plus the minutes from the most recent Fed meeting. The overall bull market in stocks will continue this year. We would not be surprised to see 2014 provide closer to historical average returns for the stock market, approximately 7%-8%. Thus, our 2014 target for the S&P 500 is 1950. We believe that, even with the “Year of the Taper” potentially strongly affecting bond yields, Yellen will remain dovish with the underlying interest rate policy thus potentially supporting stock prices.
Bonds: The MAR14 U.S. 30-year bonds (CBOT:ZBH14) are just about unchanged, up 1 tick to 129’02. This week is a huge week for the bond market! The theme to us really has not changed that much: If the ADP and non-farm payrolls reports surprise to the upside, we could see another jump higher in bond yields by end of day Friday, as the market may get even more prepared for a consistent tapering cycle this year. We believe the MAR14 U.S. 10-year note (CBOT:ZNH14) could head below 120 in Q1 2014 if we see very impressive jobs numbers. We anticipate Yellen attempting to talk down bond yields whenever she gets the chance, but also believe that the market may trade with a mind of its own and prepare itself for a steady 2014 tapering cycle, thus potentially resulting in lower bond prices and higher yields. We believe the 10yr note will hit 3.6% this year. We believe 2014 will be the “year of the rising mortgage rate.”
Currencies: We are seeing some fairly one way moves in FX markets today, with the MAR14 U.S. Dollar Index (NYBOT:DXH14) jumping higher above 81 to 81.04. We continue to detect a potentially very important bullish technical pattern in the USD with our technical completion target for this move at 82.60. We believe this could occur over the next months especially if the U.S. economic data continues to support a consistent tapering cycle. The MAR14 Canadian tanked this morning, trading down 83 ticks to 92.86, while the MAR14 Swiss Franc is also down 65 ticks to 110.02. We believe the Franc could fall much farther because at this point the market doesn’t seem to be too excited about traditional ‘safe haven’ investments. The MAR13 Euro is down 29 ticks to 136.07. We would not be surprised to see the Euro approach 1.30 this year due to potential continued strength in the US economy.
Commodities: FEB14 crude oil (NYMEX:GCG14) is up .54 to $93.97 after a violent bearish reaction at the $100 level recently. We would not be surprised to see crude approach $90, especially if the USD continues to rise. FEB14 gold (COMEX:GCG14) is down $10 to $1,227 after recently approaching $1,250. Again, to us in the short term it’s all about the data. If we do see impressive jobs numbers this morning, we could see more bearish trading in commodities. MAR14 soybeans (CBOT:SH14) are up $.02 to $12.78, and our next key support/target level is $12.50. We believe gold will hit $1,150 this year.