U.S. stocks fell after benchmark gauges climbed to records yesterday. The Fed is due to release minutes from its Oct. 28-29 meeting at 2 p.m. in Washington. Staples added 10 percent. The world’s largest office-supply chain said earnings will be as much as 32 cents a share in the fourth quarter, beating the 31 cent estimate by analysts. Most Fed policy makers expect the central bank will raise the federal funds rate, which represents the cost of overnight loans among banks, some time next year, according to projections released in September.
Equities: The DEC14 emini S&P 500 (CME:ESZ14) is down 7.5 points this AM to 2041, failing to hold above the key 2050 level. 2015 is our first important technical level of support, as that is a previous high area. We would not be shocked to see the market approach that level, which really would constitute a very normal pullback. The minutes of the prior Fed meeting are released this afternoon. We believe at this point, any significant pullbacks in the SP500 will be very attractive as buying opportunities. The main thing, in our opinion, that could derail this powerful rally is a potential major bond market sell-off, pointing to higher rates.
Bonds: The DEC14 US 30yr bonds are down 12 ticks to 141’10. Our key top of the recent value area on the market profile is 141’22. We would not be surprised to see bonds head lower from here. The recent low of around 140’10 looks like a clear target at this point. Longer term, the bonds could continue to head lower, especially if US economic data continues to suggest higher rates in 2015.
Currencies: The DEC14 USD is up 5 ticks today to 87.70. This has been a truly incredible bullish trend since the summer, and it may just continue into next year. We would not be shocked to see the USD above 90 next year, especially with what we are seeing with the yen. The DEC14 Yen/USD futures are in a major slide lower, and today are down 59 ticks to 84.97. The 2007 low of the yen on a continuation chart is around 81.30.
Commodities: DEC14 gold (COMEX:GCZ14) interestingly could not maintain its recent rally today, down $18 to $1178, failing to hold above $1200. Energy markets have a bid today, with DEC14 natural gas (NYMEX:NGZ14) leading the way, up a full 5% to $4.45. DEC14 WTI crude oil (NYMEX:CLZ14) is up $.25 to $74.89. We believe the $70 price will be a solid floor. The cattle markets look to weakening today. DEC14 live cattle (CME:LEZ14) and JAN15 feeder cattle (CME:GFF15) are both lower today. These markets have been on truly historic bull runs, so a bit of downward movement doesn’t necessarily mean a trend change, but nevertheless we believe we could see lower prices heading into winter for the cattle markets.