Crude Oil Has Quick Turnaround Rally

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Several key factors are likely culprits for today’s stock market rally: lower than expected jobless claims, a higher than expected UK GDP number, along with another batch of upbeat earnings reports from companies like Cliffs Natural and Akamai Technologies. The market is preparing for an important GDP estimate out of the USA, released tomorrow at 8:30am EST.

Equities: The JUN13 emini SP 500 futures are continuing their bullish tone, trading up 9.5 points today to 1583.50. This market is just 10 points away from its high set earlier this month, and it looks to us as though the market will test that level of 1593. The GDP # tomorrow will likely have a big impact on whether or not that happens soon. If the market gets a big upside surprise to GDP, we anticipate more rallying in the stock market. We believe 1625 will be a ceiling for this market in the short term.

Bonds: The US bond market is selling off today, with the JUN13 30yr bond futures market down 13 ticks to 147 25. We strongly believe that this market’s prices will decline sharply tomorrow if we see a positive surprise on the GDP reading.  If the market starts to think that the Fed will pull their QE away sooner rather than later, we could see bond prices fall quickly.

Currencies: On anticipation of a dovish ECB statement next week, the Euro is trading down today. The Euro is just slightly above 130, trading down 20 ticks to 130.07. We believe the Euro is vulnerable to a move to 127, but it should be very dependent on the ECB’s meeting next week. The British Pound had a sharp rally upon the release of better than expected UK GDP data, but has since declined off highs by 50 ticks. To us, this shows us that the market still may be expecting the BOE to institute more stimulus to try to propel the UK recovery.

Commodities: Gold is up $30 today, while silver is up over 5%. Gold has retraced about %50 of its down move last week, and we believe that $1450 will be sort of a price magnet for gold in the short to medium term. We focus more on crude oil. After hitting a recent low of $86, crude has showed strength, rallying over 1% more today to $92.42.  It has been tough to hold oil down recently. It seems though there are two strong sides to the oil market. On one hand, there is the side that says supplies are plentiful and oil should head lower this year. On the other side is the peak-oil group that says that oil should be a permanent uptrend until a major change in global energy policy occurs.