Companies added more workers than projected in December. The 238,000 increase in employment was the biggest since November 2012 and followed a revised 229,000 gain in November that was stronger than initially estimated, according to the ADP Research Institute. The Labor Department will release its December employment report on Jan. 10. The economy probably added about 195,000 jobs after 203,000 a month earlier, according to the median projection in a Bloomberg survey.
Equities: The MAR14 E-mini S&P 500 (CME:ESH14) is up 2 points to 1832.75, trading above a key support level of 1823. The recent jobs data from this morning, in our view, are exactly what the Fed is looking for to continue the tapering at the next meeting. Even with the tapering, the market is still up! We believe 1850 could be a very significant barrier going forward. Overall, we still believe in the bull market, and look for the market to approach 1900 this year. We have two key events left this week, one this afternoon (the Fed minutes) and one on Friday (payrolls report). We think if by chance the payrolls report comes out lackluster, that could be an impetus to cause the market to drop. However, if the jobs report comes out at 200K or higher, we could see more rallying in the S&P 500. If the market makes new highs on Friday, this could be an interesting point to fade the move in our view.
Bonds: The MAR14 30-year bonds (CBOT:ZBH14) are down almost a full point to 128’13. We believe the bonds could have a significant down day on Friday if we see a big jobs number, such as 250K or higher. We believe the Fed is making it clear that they are very intent on reducing the taper program to zero stimulus by the end of the year. We would not be surprised at all to see the 30-year bonds approach 120 this year. The JUN15/JUN16 Eurodollar futures spread we have been tracking is up again today to 106.5. We believe this spread is a “taper trade.”
Currencies: The MAR14 U.S. Dollar Index (NYBOT:DXH14) continues its bullish trading activity today, higher by 26 ticks to 81.24. The next significant barrier in our view is 81.50. Again, we do detect a longer term upside target at 82.60. The MAR14 Euro (CME:E6H14) is down 46 ticks to 135.71. We could potentially see some more euro selling later in the week if we see a big U.S. jobs report on Friday. Our key upside resistance for the euro is now at 136.20. Our key upside resistance to the Swiss franc (CME:SFH14) is 1.11. The outlier today is the pound, which is up 42 ticks to 164.42.
Commodities: FEB14 crude oil (NYMEX:CLG14) is down $.74 to $92.93, and we detect upside resistance at $97.50. To us, as long as this market is below this key level of $97.50, we think crude oil could head lower, possibly to the $88 region. MAR14 corn (CBOT:CH14) is down to $4.18. This looks bearish to us, and even with the recent short covering rallies, we think corn will break below $4. Regarding spreads, we are closely watching the APR14-JUN14 live cattle spread rocket higher recently to +7375. We think that this spread could keep journeying higher, but have our upside target area of 8000.