Hot Rolled Futures: Fundamentals Reign

When I last wrote two weeks back the SP 500 had failed to break down as expected and technicals suggested we were headed to 1775 as next long term target. Well within one week of that report the SP 500 hit 1730 from that Sep 12th 1685 area. This rally was in large part due to the, at the time, stunning report by the Fed that they would indeed NOT start to taper the bond buying program as had been claimed pretty much all year. We have since retraced back off those highs to settle 1697 area today. Technical picture is still bullish, but I expect the market to retrace further on the concerns over the government funding extension, which comes due Monday, and the ensuing debt ceiling argument, which appears to be a bit of train wreck. I see SP touching 1665 area at a minimum before finding support, if it breaches that support then we should see 1635-40 zone at least, if not lower, should the powers that not get to a resolution quickly.

In Copper, we have picked up about 10 cts/lb in these two weeks as both technical CTA traders and Macro fund traders have gotten long commodities again on the back of the weaker USD shift (linked to the Fed’s surprise announcement). We are last $3.3040/lb. in Copper. In Gold, we have had been a bit calmer market than the prior months as we are essentially flat to two weeks back at $1324/oz, but only after having risen to $1375/oz and coming off again (again USD driven). In Crude, we have tested support right here at $102.3/bbl zone today and bounced for now to $103.03/bbl last. We are at a critical juncture in Crude where if we break support here we will next head to $98.00/bbl, likely to find real support closer to $92/bbl. My guess is likely with the Middle East tensions easing.