Futures Market Summary - Oct 29

SUMMARY OF UPCOMING DATA 10/30/09

8:30 AM PERSONAL INCOME (0.0), CONSUMER SPENDING (-0.5%)

EMPLOYMENT COST INDEX (0.5%)

9:30 AM CHICAGO PMI (48.5)

9:55 AM US CONSUMER SENTIMENT (70.0)

DATA RESULTS 10/28/09

US GDP (3^RD Q 09) 3.5% VS.3.0%

WEEKLY JOBLESS CLAIMS (530K VS.525 K)

EIA INVENTORY (NAT GAS) 25 BCF

1:00 PM 7 YEAR NOTE AUCTION BID TO COVER 2.65, YIELD 3.141%

US DEBT REVIEW AND OUTLOOK

US TREASURIES gave up nearly all of their gains from the last two sessions, as investors sold off Treasury debt as risk tolerance rebounded. US 3^rd quarter GDP came in stronger than expected at 3.5%, thoroughly beating a downgraded outlook released by analysts at Goldman Sachs earlier in the week. Treasuries also contended with another record auction of debt which failed in inspire buyers further out on the yield curve. Thursday's auction of $31 billion of US 7 year notes posted acceptable demand at best. The record level of debt posted a respectable 2.65 bid to cover ratio, though at the cost of a higher yield than had been forecast (3.14% vs. 3.120%).

Treasuries may also be going through a brief regrouping period, as today the Federal Reserve completed its $300 billion Treasury purchase plan. The plan was designed to help stabilize mortgage rates and work in congress with 1^st time homebuyer tax credits to help to bring down the massive inventory of residential property fueling the credit and financial crisis. The expected unveiling of a massive overhauling of the US healthcare system is also likely to pressure Treasuries as the question of how to pay for health care.

Technically, 30 year treasury futures pulled backed to support range of 118-24. Downward momentum from this level could set up for target of 117-26, with 117-08 setting up as key level of support for recent range. Resistance level pulls back to 119-19.

US EQUITY REVIEW AND OUTLOOK

US EQUTIES regained all of Wednesday's losses as risk tolerance jumped back into the markets after US 3^rd quarter GDP beat expectations, in particular a downgrade released by Goldman Sachs earlier in the week. The gain (nearly a ½ percent higher than analyst's forecasts) represented the first positive gain in US GDP in nearly a year. This acted as a catalyst for buyers to return to the market after yesterday's test of key support levels in several of the major market indices. Buyers of equities appeared to have a renewed sense of optimism that global recession pressures may finally be waning. Financial stocks led the markets higher on this renewed optimism. Commodity, material, and technology stocks- the sectors which have come under the most pressure during this last week- rebounded sharply as the US dollar fell, spurring a jump in underlying commodity prices.

Not surprisingly, there are a number of critics to the move higher today; explaining it as expected short covering off key levels of support. Many feel that the outlook for gains in equities will shift focus from the earnings cycle to the unemployment picture in order to determine how the longer term picture for revenue creation will shape up.

Technically, Dec S&P futures closed just slightly above near term resistance level of 1060.00. Expecting the markets to have a hard time pushing much higher-may be settling into a range. Look for initial pullback to 1052.00, with 1048.75 initial level of support. Looking for downside target in medium term of 1032.00. Resistance sets up at 1068.75, with a break of this level possibly targeting 1073.75.