Global Markets Cautious, Dow Sets New Record

U.S. markets fell a bit yesterday as they backed off all-time highs that saw the Nasdaq Composite going above 4,000 for the first time in over 13 years. Sentiment was hurt by another drop in pending home sales and investors continued to think about the new Iran agreement over its nuclear program.

Pending home sales or signed contracts fell for the fifth time in a row last month as the recent government shutdown took its toll. This index tracked down 0.6 percent in October. We are down 1.2 percent from October 2012.

STOCKS

Overnight, the DJIA continued to move higher as the blue chip closed at 16,072.54 rising 7.77 points by the end of the day. During the day, the S&P 500 hit an intraday high at 1808.10 but closed 2.28 points lower at 1802.48. The index was hurt by a drop in the energy and materials sectors. The Nasdaq Composite climbed above 4,000 at one point before settling back. For the day, the tech heavy composite was up 2.92 points to close at 3,994.57.

As far as volume is concerned, we saw 626 million shares traded on the DJIA and the Composite volume was near 3 billion.

Asian markets are cautious and relatively mixed today. At one point the Nikkei was 0.7 percent lower as investors booked profits ending a three day winning streak. The USD/JPY is moving back from its six month high at $101.91 set yesterday. On Monday the Nikkei hit a six month high, as well, and had been trading over 5 percent above the 20 DMA, a sign of overheating. Profit taking is only logical at this point and to be expected.

In Australia, the ASX 200 is back above the flat line as it is holding onto gains. The Hang Seng on mainland China is also up a marginal 0.1 percent. Both indexes have been fluctuating around the flat line all day.

CURRENCIES

EUR/USD (1.3531) very little movement here from yesterday so far. We need a move above 1.3560 to go bullish and target 1.36 and then 1.3620. A failure at 1.3560 can see us dip to 1.3450.

USD/JPY (101.47) is correcting after a weeklong rally. Could be a small correction which will hold at current levels then rebound targeting 105. If not we could fall to 100.10. Intraday resistance is at 101.70 then slightly higher at 101.89. GBP/USD (1.6150) failed at 1.6265. We need to crack this level to continue our rally or risk a dip towards support levels.

COMMODITIES

Gold (1252.30) is back above 1250 which is a good sign. While above this level we could target 1265 and higher towards 1275. Silver (20.155) is up like gold but remains below the key resistance at 20.50. While this is the case we remain bearish for 18.50.

Copper (3.2195) made a bearish candle but remains in its bullish channel. We could still target 2.30 while above 3.20. We will wait and see.

TODAY’S OUTLOOK

Investors will be digesting what they saw in the Bank of Japan minutes released today. Some BOJ members are pessimistic even though they are close to their two percent inflation target. They still see a number of downside risks to their economy.

The U.S. will release building permits, home prices and consumer confidence later in the day. These will help gauge the QE taper date…. Need to watch closely.