Friday, April 11, 2014

Coffee heads higher

By Anthony Lazzara

U.S. stocks fell, after the Standard & Poor’s 500 Index yesterday posted its biggest gain in five weeks. Several Fed policy makers said a rise in their projection for the benchmark interest rate exaggerated the likely speed of tightening, according to minutes of their March 18-19 meeting released yesterday. The fewest number of Americans since before the last recession filed applications for unemployment benefits last week. The report showed China’s exports and imports unexpectedly fell in March.

Equities: E-mini S&P 500(CME:ESM14) is down 19.50 points to 1845.25, failing at the key 1865 level. We believe this market is headed lower, perhaps soon breaking below the key 1830 first support area. We would not be surprised to see 1800 sometime soon. We believe the negative surprise on the China data, coupled with the  prospect of steady tapering, is causing weakness in the S&P 500.

Bonds: The U.S. 30-year bonds(CBOT:USM14) are up 29 ticks to 134’11, likely due to inflows as equities decline. Also, the Russia Ukraine situation still seems to be stoking safe haven flows. If the SP500 approaches 1800 over the next few weeks, we could see more bond buying.

Currencies: The key theme recently is USD(NYBOT:DXM14) weakness. The USD is down 11 ticks to 79.44, well below the key psychological level of 80. The Euro is up 40 ticks to 138.91. We believe the Euro will hit 1.40 soon. The JUN14 Aussie is up again today, even in the face of negative China data. The Swiss Franc is up 49 ticks to 114.25. The Franc has had a quick and strong rally from its recent dip to 112.00.

Commodities: Coffee(NYBOT:KCM14) is up 3% to $208.30. We believe coffee has important resistance at the $2.20 area. Gold(COMEX:GCM14) is up $14 to $1320, right at a key moving average resistance level. Gold looks like it could head higher, however it does have some important resistance levels near here, starting with $1,330. MAY14 WTI crude oil is down $.39 to $103.22. There is overall bullishness in crude oil, but it could also be susceptible to a short term sell off back to $100, especially if the market believes the global economy headed by the United States and China are susceptible of a slowdown.

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