Dow Jones on Fire, Headed to 13,900?

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Builders broke ground on more houses than forecast in December, capping the best year for the industry since 2008. In addition, US jobless claims sunk to the lowest level in 5 years. These two items alongside Ebay’s estimate-beating revenue results, are causing the US equity markets to continue their bullish tone today, with the MAR13 emini SP 500 trading up 8.75 points to 1475. 1500 is obviously not that far away, and we continue to believe that the market will touch that level in Q1. It will be very interesting to see how the market responds if it hits 1500. We foresee, if this occurs, a media deluge of headlines saying the bulls are back or something to that effect. This could in turn incite even more buying.

The US bond futures are sliding down today, with the MAR 10yr note trading down 12 ticks to 131’30. We believe that the first half of the year may result in a large bond market downmove, especially if labor numbers keep coming in very strong. The conventional wisdom is that markets take the stairs up but the elevator down. Thus we believe a potential bond market sell off could happen fairly rapidly if 2013 truly turns on to a full fledged risk on environment for investors.

Gold futures have had interesting price action thus far this morning. With an initial dip to $1666, gold buyers came in strong to cause a rally of over $20 in just a couple of hours. Gold is approaching our resistance level of $1690. We don’t believe gold is due for a big rally and think that it will come back down if the stock markets of the world continue to rally.

We focus our technical analysis on the MAR13 mini Dow futures for you. The Dow is breaking through some key resistance today, trading above the important level of 13,500. The Dow is well above our key pivot level of 13,000. According to our technical analysis, we believe the next upside target for the Dow stands at 13,900. We believe this level will be hit in Q1.

Dow Jones Futures

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