Equity, bond, and commodities markets are somewhat quiet before this Friday’s US non-farm payrolls report scheduled to be released at 7:30am CST. US Bonds were not able to maintain their “Jackson Hole” rally yesterday, and US stocks (unlike their Japanese counterpart Nikkei index) are extremely resilient, and holding above the 1400 level as of this writing. We see the potential of 1400 being a base going forward, and if we see a big upside surprise on Friday in the jobs numbers, we look for US bonds to drop sharply and the S&P 500 to show a strong rally. Our previously stated S&P 500 technical target of 1530 is still intact.
Today we focus on the crude oil market. We share a weekly chart with our commentary to show you that crude oil futures have been in a bullish upward channel since June 2012 lows. With the recent drop from $98 to $94 per barrel, this market is approaching the lower band of this channel. If crude oil futures can hold this lower channel, we look for a rally to the key psychological price level of $100. If the noted trendline (see chart) from March and April 2012 highs is breached, we see the next major level/target for crude oil futures at the $104 area. The risks of this not happening are, in our view, a major Europe catastrophe or surprise supplies being released into the market.