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This morning's ADP report shows that private employers added just 119,000 jobs in April employment data, which was well below estimates and is the lowest gain since September. This should serve as a well-timed reminder of the current forces driving markets.
(Read More: Spring Slowdown Paints Ugly Picture for Jobs: ADP)
Softness in the latest string of numbers, coupled with tame inflation, has eliminated any chance that the Fed will change their dovish rhetoric. Stocks and bonds have broken from the traditional risk-on/risk-off rotation which saw them moving in opposite directions, and they have become comfortable rallying together. This makes sense to me, as the Fed has pledged to keep a strong bid in the Treasurys, which forces everyone else to look for yield in risk assets.
Another element in this trade is a perception of less issuance by the Treasury as a response to increased tax receipts. Persistent Fed demand, coupled with less supply, could provide some extra torque in the move toward lower yields.
As for equities, we will get a glimpse of their underlying strength later today after the highly anticipated Fed announcement, and my guess is it will be just what the S&P futures need to take out the 1595 highs with conviction.
My current objective in the June S&P e-mini futures is 1624, and my target for the June 10-year note futures is 134.
Mark Dow, a former hedge fund manager who writes at the Behavioral Macro Blog, notes a key difference between the two. While "Apple is a bubble that has popped," Dow said, "gold is a bubble that is in the process of popping." For that reason, on Tuesday's "Futures Now," Dow advised going long Apple and short gold.
Apple and gold are certainly two charts that are at the front of investor's minds. After all, both appear to be making runs at technically important levels. For the first time in a month, Apple has managed to rise about its 50-day moving average. Gold, meanwhile, is edging closer to the psychologically important level of $1,500 an ounce.
U.S. drivers paid the least for gas in April than they have in at least three years, the AAA said on Tuesday, bringing hopes of relief at the pump just in time for the summer driving season.
The AAA said national gas prices averaged $3.55 per gallon, their least expensive in April since 2010. Over the course of the month, retail gasoline shed nearly 3 percent, or 13 cents per gallon—its largest percentage decline for the month in a decade, the agency said.
"Gas prices have fallen faster and earlier than ever before for this time of year, and it is saving motorists millions of dollars per day in lower fuel costs," said Avery Ash, a spokesman for the AAA.
Market watchers cite a combination of factors behind the move. Primarily, sliding crude oil prices in world markets, and a lack of major refinery outages that normally lead to fuel shortages and drive up prices, have helped to contain prices.
In particular, the steep drop in Brent crude—which has plunged from over $116 per barrel in February to under $103 on Tuesday—has trickled down to the pumps.
Bonds and stocks tend to move in opposite directions. But this year, they've traded like best buddies.
In 2013, the S&P 500 has risen over eleven percent, and 10-Year Treasurys are up over four percent. Of course, given that the Federal Reserve has been buying bonds, and thus helping stock market, perhaps these moves shouldn't come as too much of a surprise.
What's really driving copper?
We spend a lot of time dissecting the global supply and demand equation is order to explain copper's moves. I'm beginning to believe that this is wasted time, and what we should do instead is focus on the Japanese yen.
It doesn't seem a coincidence that copper (and gold and silver for that matter) found a floor days after the Japanese yen found its floor against the dollar, and then copper and the yen began rallying in tandem.This suggests that dollar strength is still a primary driver of commodity prices, and once that strength declines, copper should rally along with the yen. As a secondary driver, China will release the manufacturing managers' index number tonight, and I believe that the market may have been too pessimistic on its China outlook.
If July copper rises above this morning's highs and trades $3.250, that will be the signal of strength, and would lead me to adopt a bullish bias with an objective of $3.440. A trade below $3.150 will stop me out of the trade. If the June Japanese yen futures trade below 100, that would also change my opinion about copper.
Gold recovered from a rocky session on Friday to trade back above $1,470 an ounce this morning. After failing to retest the session's $1,484.80 high, gold quickly broke back down, as a fear of failure allowed the bears take control.
The metal sold off in a hurry, running through stops and below major support at $1,455.80 to $1,458.50 an ounce. This brought it to the next support level, at $1,447.20. At that point, investors once again found value and were able to help gold finish the week back above $1,460.
Last week, Goldman Sachs' exit of its short bet on gold, coupled with the increase in physical demand, helped bullion recover from its April 16 low. However, gold will need to get back above $1,500 an ounce before investors get the psychological sense that it has bottomed.
(Read More: Goldman Flip-Flops on Gold)
The range trade that I posted Friday is still what I consider the main trade to be as this market consolidates. Namely, I see the market staying between $1,437 and $1,487.50. Until gold can close above or below this band, traders must play the levels on either end of the range.
Gold has bounced $160 higher since everyone and their mother sold out of their gold position. Now undergoing what's described as a "back-and-fill" movement.
So what's "back-'n-fill"? It's a technical term describing the price retracement from a dramatic move—such as the one we are seeing since gold fell from $1,523.
Typically, in fierce swings like that, some prices never get traded, as the huge move easily skipped them over. A "back-'n-fill" price movement then goes back to those skipped prices and fills in the chart.
(Read More: True Floor for Gold? How About $1,200?)
As gold surged again on Thursday, for an 11 percent rally back from bullion's April 16 low, some traders began to think that the precious metal had found a floor.
"The big support on the downside is in the $1,200 handle, which is really the cost of production for the highest producers, which are the South African producers," Haigh told Jackie DeAngelis on CNBC's "Futures Now."
Gold is trading higher on Thursday morning, rising up to nearly $1,450 an ounce, just as expected heading into the day's option expiration for the May contracts.
As many investors were long "put" options—which protected their positions above $1,500 and profited from a downside move—they must now exit these puts. (Learn More: CNBC Explains Put Options.)
This week, traders can exit their put positions by buying futures,offsetting these expiring puts. Or instead, traders can sell their puts, which market makers then hedge by countering the trade. The bottom line is we are seeing an overall increase in buying activity. This, coupled with an oversold market, can really bring some much-needed mojo.
The first major target that we expect to reach is between $1,455.80 and $1,458.50. From there, look for a move toward $1,474 to $1,478.20. Although Wednesday's floor close showed $1,423.70, the 4:15 Globex close pressed above $1,430 toward Tuesday's high. This provided momentum.
We're using $1,427 to $1,438.80 as support, and this level provides a solid early buying opportunity. The market is running into light resistance at $1,447.20, but overall price action at this level should encourage additional buying into options expiration at the floor close Thursday afternoon.
That said, a failure to hold between $1,437.50 and $1,438.80 will be very discouraging for the bull camp, and an inability to hold between $1,424 and $1,428 on a downswing will signal a collapse.
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