Market Overview

US Dollar Bulls Take Over, Oil Remains Strong


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The IMF said that Global growth will be 3.1 percent this year, unchanged from the 2012 rate. The IMF reduced its 2013 projection for the U.S. to 1.7 percent growth from 1.9 percent in April.


Equities: The SEP13 emini SP500 futures are up once again this morning, trading up 9.25 points to 1644.75. 1644 is our short term pivot level, and our short term upside target is 1652. We believe the market may consolidate in the mid 1600′s above 1650, awaiting further earnings reports and also further inflation data to provide potential indication on the tapering actions of the Fed. The market does indeed seem extremely strong, and we are starting to think about where this market could be 12 months from today. We believe it could be 100 points higher to 1750, as investors potentially get out of bonds and into equities on a larger scale.


Bonds: The SEP13 US 30yr bond market is very quiet today, like so in anticipation of the mid-week FOMC minutes report along with another round of Bernanke-speak. Overall, we have 133’16 as the key short term pivot level. We also believe the bonds are in the beginning stages of a longer term move lower in price/higher in yield. We have the mid 131′s as our next downside target area, and if Bernanke spooks the bond market again, we could see this level sooner rather than later. We will be closely watching any important inflation #’s coming out of the US as we believe these are highly important #’s to the Fed. Inflation has not posed a problem according the recent data, but if we start to see an uptick in the CPI, the Fed could be more convinced to reduce stimulus and possibly even start a rate-rising discussion.


Commodities: AUG13 crude oil is up slightly today to $103.19. We have $103 as a potential magnet level for the short term as it is a high volume area of the recent trade. However, the market profile structure still looks bullish to us, and we have our next upside target at $105. The oil market will be watching tomorrow morning’s weekly inventory report for cues as the next potential move. Continuing Egypt tensions may continue to provide support to WTI crude. AUG13 gold futures are up $12.5 to $1247. We believe gold is in a short term consolidation phase, and might stay between $1150 and $1350 over the next month or so. The grain markets are experiencing a recent short covering rally, but will perhaps slow down the buying in front of Thursday’s supply-demand report. We believe corn futures especially might head to the recent lows established.


Currencies: The US Dollar index is trading back up today, this time up 49.5 ticks to 84.91. We have a short term target at 85.16, but on the longer term horizon we believe this market could head to 88. The Euro and the Pound are both experiencing pretty strong selling this morning on dovish central bank statements. The Euro is down over 100 ticks while the Pound is down 117 ticks. We would not be surprised to see the Pound continue to head lower as a very dovish new BOE chief has just taken the helm.



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