U.S. stocks fell, following the biggest drop for the Nasdaq 100 Index in two years. Twitter Inc. is down 32 percent this year. Alcoa Inc., the largest U.S. aluminum producer, unofficially kicks off the U.S. quarterly earnings season when it releases financial results after the close of trading tomorrow. European stocks declined, with the Stoxx Europe 600 Index falling from a six-year high.
Equities: The E-mini S&P 500 (CME:SPM14) is down 4 points to 1856, after a very significant drop on Friday. It almost touched the 1900 level, but did not make it. Earnings season kicks off soon, and of course investors will closely watch reports to gauge recent economic health. Why did the market sell off so much on Friday? We believe the prospect of a consistent tapering coupled with the prospect of higher interest rates being discussed by the Fed is making the ultra-bullish lose their conviction to stay long, and perhaps start to be more concerned with how less stimulus will effect housing and overall economic growth. Our area of key resistance is 1865. If the market approaches this area, we believe sellers could bring it lower quickly.
Bonds: The U.S. 30-yr bonds are up 12 ticks to 133’11, after a big rally on Friday. It looks like the bonds are having a difficult time heading lower, and an “easier” time rallying. We believe the bonds are more likely at this juncture to rally than to fall. If the bonds can rally up to 134 and stay above there, we could see short players really start to get out of their positons and potentially bring the market higher. If the stock market starts to weaken, this could further support bond prices.
Currencies: The Swiss Franc is up 53 ticks to 112.71, after briefly falling below the 112 level. Our next key resistance level is 113. The Canadian dollar (CME:D6M14) is up 4 ticks to 90.94, showing consistent strength over the past several weeks. The JUN14 Euro is up 41 ticks to 137.41. If US bonds keep rallying and the JUN14 USD keeps falling, we could see the Euro start to pick up steam to the upside. The U.S. Dollar Index is down 21 ticks to 80.36. Overall, the Euro looks to be in somewhat of a sideways trading range. We would need to see a sustained trend below 136.50 before thinking the Euro is very bearish.
Commodities: Copper bounced back above the $3 level this morning, trading up to $305.50 today. Gold (COMEX:GCK14) is down $4 to $1299. We believe $1,280 is a very good support level for gold, and it looks as though the March selling volume has recently dried up. Coffee has found buyers again, trading up over 3% today to $1.90. $1.95 looks to be a first resistance level. Crude oil is down $.11. to $101.03. We believe this product may head lower soon, possibly breaking $100 and approaching $98.