Heating oil spreads rush higher, yen sees buying vs. USD

Lululemon Athletica Inc. slumped 17% after the sportswear maker lowered its profit and sales forecast. The S&P 500 has dropped 0.3% so far in 2014. JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc., and Citigroup Inc. are among 29 members of the S&P 500 to report quarterly results this week. Atlanta Fed President Dennis Lockhart is scheduled to speak today. Charles Plosser from the Philadelphia Fed and Richard Fisher from Dallas speak tomorrow.

Equities: The MAR14 E-mini S&P 500 (CME:ESH14) is at unchanged levels from Friday’s close, trading at 1837.75. 1833 is our key decision level. If the market can hold above 1833, we could see another run higher. However, as we noted Friday, we do believe that at these levels the market is pretty expensive for new buying, thus we think the market may go sideways from here until the next major impact event. This event could be the next Fed meeting, February’s jobs report, or something unexpected. We don’t necessarily think the market is due for a 10% correction, but would not be surprised to see a rotation back down approaching 1800. If the tapering schedule is steady continuing with next FOMC meeting, this could weigh on the S&P 500.

Bonds: The MAR14 U.S. 30-year bonds (CBOT:ZBH14) are up 2 ticks to 130’24. This is curious to us because we still believe that with the potential for a steady Fed tapering plan this year, bonds ‘should’ be in a bearish environment. This could be light short covering continuing from Friday on a subpar December jobs number. Overall, it does look like the bonds have found their short term bottom just below 128, and are waiting for more concrete news on the economy and from the Fed.

Currencies: The story of today’s FX markets is the MAR14 Yen/USD (CME:J6G14). The Yen has rallied 66 ticks today to 96.81. It looks like the key support level comes in at 95.20. If the Yen breaks below this level, we could see much more selling. However, as long as the Yen is above 95.20, we could see further short-covering and it may break the key resistance level of 97.50. Both the MAR14 USD (NYBOT:DXH14) and the MAR14 Euro are quiet today. The MAR14 Aussie dollar is also up big today, higher by 72 ticks to 90.26, hitting a key resistance level.

Commodities: We are seeing a rush higher in heating oil spreads, as the state of Michigan has declared a state of emergency due to cold weather helping to cause a shortage in heating oil in that region. We are watching the FEB-APRIL 2014 spread, which is up to $.0379 today. FEB14 gold (COMEX:GCG14) is unchanged at $1,247. We would not be surprised at all to see more gold buying up to perhaps $1,265. FEB14 crude oil (NYMEX:CLG14) is down $.86 to $91.86, and we still believe we could easily see the high $80s soon.

About the Author
Anthony Lazzara

Anthony Lazzara, CEO of Newport Beach, Calif., commodities investment firm Lido Isle Advisors, spent 10 years as a trader and floor broker at the Chicago Board of Trade and Chicago Mercantile Exchange. Anthony has significant experience in the energy, fixed income, and equity futures markets. After being a long-time independent futures trader, Anthony saw a tremendous opportunity to educate investors on how to invest in professional traders. Anthony is now focused on his duty as CEO of Lido Isle Advisors.

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