The Nasdaq Biotechnology Index headed for its steepest two-day slide since April this morning. Both the S&P 500 (CME:SPU14) and the Dow retreated from records yesterday. Twitter sank 7.3 percent to $37.32. The Fed will release minutes from its June meeting tomorrow. Policy makers trimmed bond purchases last month by $10 billion for the fifth consecutive time. Alcoa, the largest American aluminum producer, will report second-quarter earnings after the close of trading today.
Equities: The E-mini S&P 500 (CME:ESU14) could not hold above the 1980 level, and is now down 16 points to 1955. We would not be surprised at all to see this market head lower to the 1920 area over the next several weeks. The 1920 is a key low area from early June 2014. We believe the prospect of rising U.S. interest rates in Q1 2015 is causing the bulls to take book some gains and get out while the market is close to 2000. From our volume analysis, it looks like major selling volume has increased each of the last 3 days including today.
Bonds: The U.S. bonds (CBOT:USU14) are up 29 ticks to 136’19, as the S&P 500 (CME:SPU14) heads lower. It seems that 134’25 is a solid support level for the bonds. If the S&P 500 continues lower, we could see more buying in bonds, potentially taking this contract back up to the 138 level. As we have noted previously, the bonds are in an interesting conundrum--do they head lower due to potentially rising rates in 2015, or will they head higher as higher rates could bring the stock market lower and cause a slower period of growth?
Currencies: Even with all the talk of U.S. Dollar Index (NYBOT:DXU14) strength due to a rising rate scenario in the United States, the September USD futures are down 5 ticks today to 80.21. The September Euro is up 4 ticks to 136.16. The big mover in the forex markets is the Yen, with the September Yen rising by 31 ticks against the USD to 98.53. We still believe the Yen/USD will rally to at least 100!
Commodities: Very interesting times in the energy markets. August heating oil (NYMEX:HOQ14) is down over 3 cents to $2.8826, and August Gasoil is down to 889.50. August RBOB (NYMEX:RBQ14) is also down over 1 cent to $2.9763. Are the energy markets afraid of a global slowdown, or is it something else? Energy markets can change with the seasons, and this could be what we are seeing. August gold (COMEX:GCQ14) is down $1.6 to $1315.5. We believe gold might push higher and stay above $1,300. August feeder cattle (CME:GFQ13) is having trouble staying above $218, and we believe this area of $218 could be the high over the next few weeks.