The Thomson Reuters/University of Michigan final January index of consumer sentiment fell to 81.2 from 82.5 a month earlier, while consumer spending in the U.S. climbed more than forecast in December even as incomes stagnated. U.S. benchmark indexes are headed for their first monthly decline since August. Emerging-market currencies slumped amid signs China’s economy is slowing.
Equities: The MAR14 E-mini S&P 500 (CME:ESH14) is down 9 points today to 1772.25, almost breaching one of our significant support levels of 1760. We believe this 1760 level is a very important barrier to further downside action. If the market breaks through 1760, this could be construed to be a bearish sign. 1775 is one of our key lines in the sand. We believe even further downside action would not necessarily mean the bull trend is over, because at this point overall the U.S. economy seems to be improving, thus still potentially providing more impetus on the whole for stocks to head higher on a longer term basis.
Bonds: The MAR14 U.S. 30-year bonds (CBOT:ZBH14) are up 15 ticks to 133’24, still showing some very strong activity. We believe the bonds have recently, including today, experienced safe haven flows as stocks have come down, as well as because of the emerging market currency devaluations. At this point, we believe the bearish case for bonds in the short term is weak.
Currencies: We focus on the MAR14 Euro (CME:E6H14). We believe the Euro, with today’s low inflation numbers, might be headed much lower from here. We also note next week’s ECB meeting as a potential catalyst for more downside for the Euro, even in front of this meeting. We target 1.30 as a first major level, possibly to be hit before the summer. The MAR13 USD (NYBOT:DXH14) is up 18 ticks to 81.37. Again, we believe the USD is headed higher to at least 82.60. The MAR14 Aussie dollar (CME:A6H14) is back near 2014 lows at 86.87. It is tough to pick bottoms in this currency, as it has been so weak even since breaking the 1.00 level last year. 85.75 is our next key support/target area.
Commodities: Several commodities which have been beaten down recently are having strong rallies today, including MAR14 sugar (NYBOT:SBH14) and MAR14 coffee (NYBOT:KCH14). We believe these commodities are seen as attractive investments now not only because of their relatively low price compared to their prices last year, but also as a potential safe haven investment instead of shaky currencies around the world. APR14 gold (COMEX:GCJ13) is up $3 to $1245, after having some trouble breaking above the $1250 level. We tend to think gold might have a big rally soon to $1292, but it seems very quiet today, perhaps due to Chinese new year. MAR14 natural gas (NYMEX:NGH14) continues its major reversal downwards today, trading down $.17 to $4.84.