Are T-bonds too quiet?

This morning, more economic data showed the economy is expanding. Fed Bank of St. Louis President James Bullard said today policy makers haven’t committed to a specific month to end the bond purchases. Demand for durable goods, climbed a more-than-forecast 2.2 percent. Seven of the 10 main S&P 500 industries advanced today.

Equities: The E-mini S&P 500 (CME:ESM14) is up 4 points to 1863.25, still trading below our key resistance area of 1865-67. At this point, we are not detecting any key bearish reversal signals just yet. We need to see the market above 1867 in order to really have a bullish view. Overall, the market does seem strong, and somewhat happy with recent economic data. However, if the market closes in the red today, today could actually be a bearish candlestick signal. Overall, we believe the market may have a tough time extending its rally by significant amounts (50 points or more) in the face of tapering and ultimately higher rates in the future, which the Fed has already started to publicly discuss.

Bonds: The U.S. 30-year bonds (CBOT:USM14) are up 7 ticks to 133’09. Again, we believe the bonds are quietly trading in a range, not too sure what to make of the taper. Do they go down because of less stimulus? Do they go up because the taper may negatively impact the economy? It looks like more of the latter at this point.

Currencies: The Euro (CME:E6M14) is down 36 ticks to 137.89. The Euro’s key initial support level is 137.50. If it breaks that and can’t find dip-buyers, we could see 136.50, then possibly 135.75. The Aussie (CME:A6M14) just about hit 92, now up 62 ticks to 91.75. The Aussie has been very strong in March. Volume seems to be lighter on the Aussie today, so perhaps 92 might be a short term barrier. The Swiss Franc is down 33 ticks to 113.03. We are not noticing any key signs of a bottom, thus we believe the Franc may head lower to approximately 112.25.

Commodities: Gold (COMEX:GCJ14) is down $8 to $1,304. It almost broke below $1,300 this morning, in what could have been a capitulation down move. However, in the longer term, gold may test below $1,300. Silver (COMEX:SIJ14) is down below $20 to $19.80. Silver has been very weak and lackluster recently. We don’t see any short term catalysts to move silver much higher. MAY14 WTI crude oil tried to hold above $100 this morning, but could not do it, and is now up $.44 to $99.63. If it closes in the red today, we believe this could point to more selling down to the $98 area.

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