The S&P/Case-Shiller index of property prices in 20 cities climbed 13.7% from November 2012, the biggest 12-month gain since February 2006. The Federal Open Market Committee starts its last meeting under Chairman Ben S. Bernanke today. Orders for durable goods unexpectedly slumped in December by the most in five months.
Equities: The MAR14 E-mini S&P 500 (CME:ESH14) is up 5.5 points to 1781 this morning, on inspiring corporate earnings from Comcast and Ford. We believe the market is strong overall, and we think investors are ultimately in “buy on the dip” mode. Tomorrow’s announcement by the FOMC is likely key to this market. If the Fed surprises markets and does not taper, we might see a rally back toward 1800. If there is another taper tomorrow, that could act as headwinds for a rally. We think the markets may actually not make any big moves not only before tomorrow’s Fed announcement, but possibly not before the next jobs report in February. We think it won’t be long before we see a rally back to the 1800s.
Bonds: The MAR14 U.S. 30-year bonds (CBOT:ZBH14) are up 3 ticks to 132’14. It seems as though the bearish “taper trade” in the bond market has run its course. Especially with the equity markets coming down recently, bonds have found a bid, and they don’t seem to be losing it just yet. If the Fed is more dovish than expected tomorrow, we could see another bond rally. Ever since hitting the recent low of just below 128, the bonds have been in a steady uptrend. The bond market is not just about the taper, it is also a “flight to quality.”
Currencies: The MAR14 Canadian dollar (CME:D6H14) is down 51 ticks to 89.49, almost breaching recent lows. It does look like the Canadian might have further downside ahead of it. The 89.10 area is our next market profile target for the Canadian dollar. The MAR14 Japanese Yen has been in “buy the dip” mode for the past few sessions, and today the dip to 97 was bought, now trading at 97.32. We believe the Yen could retest the 98 level. The MAR14 British Pound (CME:B6H14) seems very strong, and today is up 26 ticks to 165.94. Overall, we believe the Pound will head to 1.70.
Commodities: FEB14 gold (COMEX:GCG14) is down $8 to $1,255, which is the key breakout level from last week. If the Fed is more dovish than expected and perhaps tapers $5 billion instead of $10 billion, we could see gold stage a rally to $1,275. However, gold might also be susceptible to more selling pressure if the stock market starts to rally again. FEB14 natural gas (NYMEX:NGG14) is up $.09 to $4.94, one day before expiration of the FEB14 contract. FEB14 WTI crude oil (NYMEX:CLG14) is up $1.67 today to $97.38. This level is actually a key resistance level for us, and if crude can break through this level, we could see a test of the $100 level.