Bonds above key resistance level

The Federal Reserve yesterday said it would continue to trim the pace of bond purchases as the economy gains momentum. Data today showed consumer spending surged in March by the most in almost five years. The Institute for Supply Management’s factory index rose to 54.9 in April from 53.7 in the prior month.

Equities: The E-mini S&P 500 (CME:ESM14) is down 1 point to 1877. 1880 seems to be a solid resistance level, but we believe the market will approach 1900 soon. The remaining report this week is a big one tomorrow – the monthly jobs report. Expectations for Friday’s report range widely, from 190,000 to 250,000 new jobs created, with a consensus around 200,000 and an unemployment rate of 6.6%. It just seems like the market does not want to have an extended downturn. It seems like the market wants to test the 1900 level.

Bonds: Bonds are up 16 ticks to 135’14, above our key resistance level of 135. Again, we believe the bonds may travel higher to 138. The bonds have been trending higher throughout 2014. It will be interesting to see how the bonds start to react once the taper is complete and the Fed starts to discuss higher rates. For now, the bonds seem to be strong. It is still very interesting to us to see the bonds look strong as the Fed is tapering stimulus. Why are the bonds rallying in 2014 while the Fed is reducing stimulus? This is a very interesting question! One could surmise that the bond market is trying to price in slower growth in the future due to a less accomodative monetary policy. Or one could surmise that due to geo-political uncertainty with Russia-Ukraine, the world wants “safe-haven” investments from the most durable country.

Currencies: The U.S. Dollar Index is up 5 ticks to 79.58, while the JUN14 Euro is down 4 ticks to 138.66. The Swiss Franc is up 8 ticks to 113.77. It will be interesting to see if the Franc will approach 1.15 again. Right now it looks like the forex markets are having very subdued volatility. The The British Pound (CME:B6M14) broke above 1.69 this morning, only to come right back down. It is down 1 tick on the day to 1.6880. We still believe the Pound will approach and hit 1.70. The bottom line for the short term is that tomorrow’s non farm payrolls # could have a big impact on the forex markets. If the number is weak, we look for the equity market to launch higher and the USD to head much lower.

Commodities: Soybeans (NYBOT:JSN14) have taken a tumble today, down $.27 to $14.85. If the beans can hold below $14.60, we look for $14.40 to be hit, then possibly $14.00. $14.20 is a key barrier to sustained downside action in our view.

Gold (COMEX:GCM14) is down a solid $15 to $1280, potentially trying to prepare for a big jobs number tomorrow.

WTI crude oil (NYMEX:CLM14) is down again today for a third day in a row to $99.19. We would not be surprised to see crude have a more sustained downmove to the low $90′s, especially if the Ukraine and Russia situation starts to turn more peaceful.

Feeder cattle almost went limit up today, trading up 2.75 cents now to $1.90225. This market is on its 9th day in a row trading higher.

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