Hot Rolled Futures: Now Where To?

Financial Markets:

When I last wrote, I mentioned that the SP 500 was likely headed to 1720 before a retracement and then an eventual rally up the 1775 zone. Well the SP 500 reached 1709 on August 2nd from which we have since retraced to 1640 yesterday. We settled today at 1657. In this retracement , it looks like we are headed to test the 1550 support zone before we can climb again in earnest. I’m sure you have all heard that the 10 yr treasury has been coming off in the last few weeks in anticipation of Bernanke’s easing of the purchasing program – that schedule for easing was reiterated yesterday by the FOMC notes, where it reflected full support from all members. This is the root cause of the uncertainty in the stock market. So when we reach 1550 don’t think by any means that that support is not susceptible to being broken, particularly if  the bond market erodes further. The 10 year treasury yield  was at 2.587% at the time of the last Fed meeting at the end of July, we have since reached a 3.10% high to settle last at 2.90% today.  A quarter point increase in the yield doesn’t seem like a lot unless it’s just enough to stop that buyer from taking that mortgage or that new car. It is certainly going to have an effect on buyer behavior. Results from Costco and Walmart and the like may well already be reflecting that waning appetite in this higher interest rate, higher tax , sequester environment.