Friday, September 12, 2014

Are US bonds and gold anticipating higher rates?

By Anthony Lazzara

Retail sales climbed at the fastest pace in four months. The Thomson Reuters/University of Michigan preliminary consumer sentiment index rose to 84.6 in September from 82.5 the month before. The S&P 500 (CME:SPZ14) has declined 0.8 percent this week.

Equities: The E-mini S&P 500 is down 5 points to 1984. The next key Fibonacci support level is at 1957. We would not be surprised to see the market head towards that area, possibly even this month as the Fed meets next week. With the strong retail sales data, it looks like the bond and stock markets are starting to try to adjust for the potential of higher rates. 2000 is a tough barrier for the E-mini S&P500, and for the past couple of weeks, the market has not been strong enough to overcome that key level. If this market sells off, we look for 1957 to be hit.

Currencies: The Aussie dollar is down 50 ticks to 89.85, while the USD is down just one tick to 84.45. The Swiss Franc has rebounded slightly to 107.03. It looks like the big move in the USD has been made, and perhaps we will see some consolidation in the short term. We would not be surprised to see the USD move higher in the future however. The Pound is up 5 ticks to 162.12, in back and forth trade before the big referendum vote later this month.

Bonds: The U.S. bonds are down over one point today in a significant downmove. We believe the bonds will continue to slide, possibly along with stocks this month, as the implications of higher interest rates spook bond and stock bulls. Our next key support/target level is 134’28. We would not be surprised to see the bonds head towards that level. We believe the Fed will likely try to talk interest rates lower until they actually start to raise them. However, if we continue to get strong economic reports out of the United States, we believe the bond market will act first.

Commodities: Many key commodities are lower today, likely in conjunction with rising U.S. bond yields. Gold (COMEX:GCV14) is down $10 to $1229. Our next key technical support level is $1225. Crude (NYMEX:CLV14) oil is reversing some of yesterday’s gains, down $.25 to $92.58. Nov14 soybeans spiked lower on yesterday’s quarterly USDA report, and are now at one of our key areas at $9.83, up almost $.02 on the day.

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