Friday, May 21, 2010
RUT Roll Fill
Bought back 5 Jun 580/570 pust spreads @ 2.15 Debit
Sold 4 Jun 490/480 put spreads @ 0.70 Credit
Sold 4 Jun 490/480 put spreads @ 0.70 Credit
RUT Roll Down
We need to make another adjustment. We will buy back our Jun 580/570 put spread and look to roll it down to the Jun 500/490 on the opening.
Tuesday, May 18, 2010
Monday, May 17, 2010
RUT Buy Back
We just got filled on our nickel buy back of the May 770/780 call spread.
I'm working a new order for the Jun 780/790 call spread @ 0.61 Credit. I have been filled on 1 out of 4 so far.
I'm still working the IWM May 71/70 for 0.60 Credit. We were filled on 2/3 so far.
I'm working a new order for the Jun 780/790 call spread @ 0.61 Credit. I have been filled on 1 out of 4 so far.
I'm still working the IWM May 71/70 for 0.60 Credit. We were filled on 2/3 so far.
Friday, May 14, 2010
Thursday, May 6, 2010
Current RUT Picture
OK, so wow, what else can you say. Our system got a real shot in the arm today. This is why it is so important to have the stop orders in place. Not only does it save you from days like today, we make a very nice profit if you play it right. 2k is pretty amazing since the trade did exactly what we didn't want it to do.
Here is the chart below of where we stand. The trackers is up to date with all fills and all current working orders. The market has really bounced so at this point we don't need to roll another layer tomorrow. I'll post tomorrow morning if anything has changed.
Here is the chart below of where we stand. The trackers is up to date with all fills and all current working orders. The market has really bounced so at this point we don't need to roll another layer tomorrow. I'll post tomorrow morning if anything has changed.
Stop Triggered
Our stop on our May 640 puts triggered and they were bought back for $6.00. I'm trying to sell out the May 630 puts while the volitity is so high.
Sold the May 630 for $12.30. NICE!
Sold the May 630 for $12.30. NICE!
Rut Roll
With the markets continued sell off this morning I will be rolling our May 670/660 put spread out to June. I'll post the fills, and get the tracker up to date.
Monday, May 3, 2010
Rut Update
Well with the market moving strong in both direction over the last week we are left with needing to protect both sides. We already have a debit spread to the upside. So I'm lookiong to buy another to the down side.
Two new orders are working this morning as we look also to open up our first June spread. And with the new month we are pushing up to 4 contracts.
IWM
Buy 3 May 71/70 put spreads for limit $0.30 Debit
RUT
Sell 4 Jun 800/810 call spreads for limit GTC $0.50 Credit.
Two new orders are working this morning as we look also to open up our first June spread. And with the new month we are pushing up to 4 contracts.
IWM
Buy 3 May 71/70 put spreads for limit $0.30 Debit
RUT
Sell 4 Jun 800/810 call spreads for limit GTC $0.50 Credit.
Friday, April 30, 2010
Today's Market Guidance
Financial Overview:
While the stock markets were trying to show positive action in the overnight trade, the market in total wasn't able to project a definitively bullish environment. However, many markets remain confident that the Euro zone debt crisis would remain under control today, but there is some disappointment that promises to have a deal in place before the weekend appears unlikely. While the Treasury market might not see much of a reaction to the scheduled US data flow this morning, we think that the US stock market needs to see something helpful from the numbers in order to leave the bull camp in control. We have to wonder if the market will show some profit taking late in the trading session, as some traders balk at holding longs ahead of what could fresh Euro zone conflict over the weekend while others are fearful of additional negatives flowing on the Goldman front. On the other hand, the bear camp probably won't be overly interested in attacking equities because they too could see some adversity into Monday's opening. It does seem as if the US equity markets are starting to discount or mostly ignore the flow of scheduled earnings but so far earnings have provided the market with an underpin. Traders might need to buy weakness today and keep fairly narrow objectives on those positions.
Dow:
The June Mini Dow was able to forge another new high for the move overnight but the market didn't seem to be displaying much in the way of upward momentum. Critical pivot point support in the June Mini Dow is seen at 11,132 this morning with more significant support seen down at 11,108. Initial resistance is seen at 11,168 today but the market will probably need a perfect storm of scheduled data and nothing in the way of discouraging EU news to continue to claw back toward the 2010 highs. Some traders are concerned that the major oil spill in the Gulf is capable of derailing sentiment, as the environmental impact could be quite significant on the Gulf Coast.
Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The close above the 9-day moving average is a positive short-term indicator for trend. There could be more upside follow through since the market closed above the 2nd swing resistance. The next downside target is now at 10951. The next area of resistance is around 11211 and 11256, while 1st support hits today at 11059 and below there at 10951.
S&P:
With some Press outlets touting the prospect of additional government charges against Goldman and the markets waiting for confirmation of an EU debt deal there is certainly a measure of cross currents keeping sentiment off balance. We see an initial pivot point at 1205.30 early today and more significant support of 1201.60 seen early today. We suspect that the market will show some initial weakness if the GDP number fails to come in above the +3.4% level, as the bull camp needs something to put the bulls back into a forward gear.
Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The cross over and close above the 18-day moving average indicates the intermediate-term trend has turned up. The market's close above the 2nd swing resistance number is a bullish indication. The next downside target is 1182.94. The next area of resistance is around 1214.37 and 1219.43, while 1st support hits today at 1196.13 and below there at 1182.94.
Nasdaq:
The June Nasdaq has managed a minor rise above the prior session's high in the early action today and that would seem to leave the bull camp in control. Critical support in the June Nasdaq is seen at 2035.25, with a closer in pivot point of 2041.00. As suggested already, we get the feeling that the market is bullishly biased today, but that the market needs help from favorable scheduled data to tamp down the Euro zone fears and restart the upward momentum that kicked in at 10:30 am on Wednesday.
Bonds:
The US Treasury market comes into the action today showing signs of trading above yesterday's range. Perhaps all the talk about a favorable auction cycle provided an added lift to prices, as that action came on the heels of the US Fed promising to leave rates down for an extended period of time. Technically one could suggest that participation in the auctions is showing signs of tapering off, but under the current environment, the market just isn't looking for major cracks in the bull's foundation. We also think that renewed flight to quality interest off the Greek debt situation is providing the market with some minimal early buying interest today. With the markets earlier in the week playing off the news that the EU/IMF would agree to an aid package before this weekend, and the weekend nearly upon the markets, it is possible that some players are anticipating a delay and a delay easily expands the uncertainty. In looking ahead to the action today in the US, the trade will be presented with a 1st quarter GDP reading that is generally expected to have risen markedly less than the 4th quarter reading. The market will also be presented with an Employment Cost Index reading, a regional ISM reading and a Consumer confidence reading but we are not sure that the market is going to react sharply to those readings. While the initial and ongoing claims readings showed some improvement in the economy yesterday, the bear camp just hasn't been able to crack the flight to quality stranglehold of the EU debt crisis. With the US equity market early this morning showing only minimal gains and the rest of the markets showing some weakness, that should leave the bull camp with a very minor edge in the Friday morning Treasury market action. At least in the early action today, the June bonds look to have forged fairly solid support just above the 117-30 level, with similar support in the June Notes pegged at 117-06. Given the delay from a package that was expected 'ahead of the weekend' to a package coming 'in a few days' we have to give the edge to the bull camp and we suspect that June bonds will be able to trade in a range bound by 117-29 to 118-12. We expect a similar trading range in June Notes pf 117-06 to 117-17. In the end, it would take much stronger than expected US economic readings or a surprise 'ahead of the weekend agreement' to force a sharp slide in Treasuries in the current environment. While the market is fairly convinced that inflation remains under control, the US Employment Cost Index reading was a pet statistic of the prior US Fed Chairman and a sharper than expected rise in that reading this morning could serve to shift the pendulum away from totally being mostly to Treasuries, to perhaps a more neutral view. In short, we just get the feeling that hard breaks are not in the cards today, unless there are some big surprises in the headlines. For now, the bull camp looks to be able to maintain control of the trend.
Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The market's short-term trend is positive on the close above the 9-day moving average. With the close over the 1st swing resistance number, the market is in a moderately positive position. The next downside target is 117-070. The next area of resistance is around 118-150 and 118-240, while 1st support hits today at 117-230 and below there at 117-070.
US Dollar:
The Dollar continues to drift away from its recent highs this morning, as concerns over the EU debt crisis appear to be subsiding for now. While the final details of any package have not been finalized yet, and it may be a stretch to think that the Greeks will totally follow through with all of their austerity measures, the absence of the words 'debt restructure' in any of today's rhetoric may be providing enough positive euphoria to the markets to keep risk aversion off the table for now. A full slate of US economic numbers this morning have the potential to change sentiment quickly, but it would likely take some fresh negative news out of Europe in order for the Dollar to make another run at this week's highs. Baring that, look for the Dollar to stay under moderate pressure today, although the lack of any formal solution to the EU debt problem will likely keep prices supported above the 81.40 lows from last weekend.
Euro:
The June Euro has continued its recovery from this week's lows, as the chances of a finalized agreement for an aid package for Greece appear to be increasing or the market just seems to be buying into that argument. Maybe the credit downgrades this week for several EU nations was the scare that negotiators needed for a quicker move toward an agreement, but there is plenty of work left to be done, particularly for the Greeks who will not be used to these sort of government spending cuts. There were reports that the German Finance Minister suggested that some credit rating agencies can be wrong and that seemed to give the Euro an added boost. Decent Euro Zone inflation and Employment data released this morning have added to the support for the June Euro this morning, but there is still a strong possibility that negative news could derail this up move without notice. With that in mind, look for the June Euro to hold its gains above the 1.33 level and perhaps expect a move up to the next chart resistance point of 134.15.
Yen:
The June Yen has come under pressure this morning, both from the easing of risk aversion and from the results of today's Bank of Japan meeting. Although the BOJ kept Japanese rates unchanged, they also said that they needed to do more in order to increase growth outside of straight monetary policy and that deflation would likely not end before next year at the earliest. With the June Yen already on the doorstep of new lows, the lack of details in today's statement could not have given the market much comfort. Look for a test of the June Yen's lows around 105.60, if not today, then early next week.
Gold:
While EU debt concerns remain in place this morning gold and other classic physical commodities don't appear to be off balance because of that situation. In fact, seeing gold trade higher with the rest of the metals markets is a change of pace from the action seen early in the week. Not surprisingly, the gold market appears to be discounting news of higher gold production from Gold Fields, perhaps because of favorable Indian gold price action overnight. The bulls might be emboldened by the capacity to make new 2010 highs on the charts early this morning, but some tech traders also suggest that the $1,175 level in the June gold contract is potentially some form of pivot point today. Comex Gold Stocks were 10.148 million ounces down 4,739 ounces. Stocks have increased 11 of the last 20 days.
Silver:
July silver has managed a fresh new high for the move and has reached the highest level since early January. While the silver market has seen some periodic pressure recently off fears that the EU debt crisis was going to derail, or slow the global recovery, the capacity to forge new highs for the move, is probably something that emboldens the technical crowd into the US Friday morning opening. Some would suggest that silver continues to benefit from favorable Indian demand dialogue, but it still seems like silver and gold are taking a large measure of direction from big picture macro economic developments. Comex Silver Stocks were 115.429 million ounces up 429,217 ounces. Stocks have declined 11 of the last 20 days.
Crude Oil:
July crude oil looks to be continuing its move higher today, as the easing of EU sovereign debt concerns have helped the market overcome high storage levels and in turn forge a higher high for the move in the early Friday action. It is interesting to note that the only area of the oil complex not close to new highs for the move are the front two months in crude oil, as the supply glut in Cushing, OK has allowed deferred months to gain quite a bit over the front months. With expectations for increased summer driving activity seen as a reflection of US economic recovery capacity, any sort of sustained drawdown in crude stocks could send prices towards new highs for the year, particularly as this does not take into account sustained demand from China and the rest of the world. We continue to think that the market is overly infatuated with the US supply and demand situation and that in turn has prompted the anti speculation crowd to make a lot of stupid statements. One does have to brace for a politically inspired call to 'do something' with position limits. We think that the agency will be forced to lower speculative limits from the initial offering, but we also think that the world will rush to get even longer before the new limits are in place. There is a very real danger that attempting to artificially lower oil prices, will result in higher prices than would have been seen if the market were allowed to do its own thing. Apparently news of higher a-float oil supply overnight is not undermining oil prices this morning as the ebb and flow of crude oil prices looks to sit with the ebb and flow of the debt crisis and perhaps the direction of US equities. Critical support in July crude oil today is seen at $87.34, with critical resistance pegged at $88.03.
Natural Gas:
While July natural gas has managed to respect the prior session's low overnight, the sharp reversal and failure in the prior trading session appears to have temporarily wounded the bull case. Clearly the market isn't ready to overcome the patently bearish supply side of the equation, as the weekly natural gas storage report showed an injection of 83 bcf yesterday and total storage stands at 1,912 bcf or 18.8% above the 5 year average. Over the last four weeks natural gas storage has increased 274 bcf and that clearly worried the bull camp. While the trade is fearful that the massive oil spill will restrict production, or perhaps shipping movement, we are not sure that the oil spill will physically support prices. It is possible that limiting drilling activity will be supportive and it is also possible that the US will reevaluate its recent renewed push for off shore drilling. We still have to wonder why Congress, the President and those claiming foul over long speculation aren't lobbying for the increased use of a very abundant and safer environmental energy supply source like natural gas. Apparently a new extreme disparity between crude oil costs in BTU and natural gas costs in BTU is lost on most people! We think players need to have long duration call positions in play.
While the stock markets were trying to show positive action in the overnight trade, the market in total wasn't able to project a definitively bullish environment. However, many markets remain confident that the Euro zone debt crisis would remain under control today, but there is some disappointment that promises to have a deal in place before the weekend appears unlikely. While the Treasury market might not see much of a reaction to the scheduled US data flow this morning, we think that the US stock market needs to see something helpful from the numbers in order to leave the bull camp in control. We have to wonder if the market will show some profit taking late in the trading session, as some traders balk at holding longs ahead of what could fresh Euro zone conflict over the weekend while others are fearful of additional negatives flowing on the Goldman front. On the other hand, the bear camp probably won't be overly interested in attacking equities because they too could see some adversity into Monday's opening. It does seem as if the US equity markets are starting to discount or mostly ignore the flow of scheduled earnings but so far earnings have provided the market with an underpin. Traders might need to buy weakness today and keep fairly narrow objectives on those positions.
Dow:
The June Mini Dow was able to forge another new high for the move overnight but the market didn't seem to be displaying much in the way of upward momentum. Critical pivot point support in the June Mini Dow is seen at 11,132 this morning with more significant support seen down at 11,108. Initial resistance is seen at 11,168 today but the market will probably need a perfect storm of scheduled data and nothing in the way of discouraging EU news to continue to claw back toward the 2010 highs. Some traders are concerned that the major oil spill in the Gulf is capable of derailing sentiment, as the environmental impact could be quite significant on the Gulf Coast.
Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The close above the 9-day moving average is a positive short-term indicator for trend. There could be more upside follow through since the market closed above the 2nd swing resistance. The next downside target is now at 10951. The next area of resistance is around 11211 and 11256, while 1st support hits today at 11059 and below there at 10951.
S&P:
With some Press outlets touting the prospect of additional government charges against Goldman and the markets waiting for confirmation of an EU debt deal there is certainly a measure of cross currents keeping sentiment off balance. We see an initial pivot point at 1205.30 early today and more significant support of 1201.60 seen early today. We suspect that the market will show some initial weakness if the GDP number fails to come in above the +3.4% level, as the bull camp needs something to put the bulls back into a forward gear.
Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The cross over and close above the 18-day moving average indicates the intermediate-term trend has turned up. The market's close above the 2nd swing resistance number is a bullish indication. The next downside target is 1182.94. The next area of resistance is around 1214.37 and 1219.43, while 1st support hits today at 1196.13 and below there at 1182.94.
Nasdaq:
The June Nasdaq has managed a minor rise above the prior session's high in the early action today and that would seem to leave the bull camp in control. Critical support in the June Nasdaq is seen at 2035.25, with a closer in pivot point of 2041.00. As suggested already, we get the feeling that the market is bullishly biased today, but that the market needs help from favorable scheduled data to tamp down the Euro zone fears and restart the upward momentum that kicked in at 10:30 am on Wednesday.
Bonds:
The US Treasury market comes into the action today showing signs of trading above yesterday's range. Perhaps all the talk about a favorable auction cycle provided an added lift to prices, as that action came on the heels of the US Fed promising to leave rates down for an extended period of time. Technically one could suggest that participation in the auctions is showing signs of tapering off, but under the current environment, the market just isn't looking for major cracks in the bull's foundation. We also think that renewed flight to quality interest off the Greek debt situation is providing the market with some minimal early buying interest today. With the markets earlier in the week playing off the news that the EU/IMF would agree to an aid package before this weekend, and the weekend nearly upon the markets, it is possible that some players are anticipating a delay and a delay easily expands the uncertainty. In looking ahead to the action today in the US, the trade will be presented with a 1st quarter GDP reading that is generally expected to have risen markedly less than the 4th quarter reading. The market will also be presented with an Employment Cost Index reading, a regional ISM reading and a Consumer confidence reading but we are not sure that the market is going to react sharply to those readings. While the initial and ongoing claims readings showed some improvement in the economy yesterday, the bear camp just hasn't been able to crack the flight to quality stranglehold of the EU debt crisis. With the US equity market early this morning showing only minimal gains and the rest of the markets showing some weakness, that should leave the bull camp with a very minor edge in the Friday morning Treasury market action. At least in the early action today, the June bonds look to have forged fairly solid support just above the 117-30 level, with similar support in the June Notes pegged at 117-06. Given the delay from a package that was expected 'ahead of the weekend' to a package coming 'in a few days' we have to give the edge to the bull camp and we suspect that June bonds will be able to trade in a range bound by 117-29 to 118-12. We expect a similar trading range in June Notes pf 117-06 to 117-17. In the end, it would take much stronger than expected US economic readings or a surprise 'ahead of the weekend agreement' to force a sharp slide in Treasuries in the current environment. While the market is fairly convinced that inflation remains under control, the US Employment Cost Index reading was a pet statistic of the prior US Fed Chairman and a sharper than expected rise in that reading this morning could serve to shift the pendulum away from totally being mostly to Treasuries, to perhaps a more neutral view. In short, we just get the feeling that hard breaks are not in the cards today, unless there are some big surprises in the headlines. For now, the bull camp looks to be able to maintain control of the trend.
Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The market's short-term trend is positive on the close above the 9-day moving average. With the close over the 1st swing resistance number, the market is in a moderately positive position. The next downside target is 117-070. The next area of resistance is around 118-150 and 118-240, while 1st support hits today at 117-230 and below there at 117-070.
US Dollar:
The Dollar continues to drift away from its recent highs this morning, as concerns over the EU debt crisis appear to be subsiding for now. While the final details of any package have not been finalized yet, and it may be a stretch to think that the Greeks will totally follow through with all of their austerity measures, the absence of the words 'debt restructure' in any of today's rhetoric may be providing enough positive euphoria to the markets to keep risk aversion off the table for now. A full slate of US economic numbers this morning have the potential to change sentiment quickly, but it would likely take some fresh negative news out of Europe in order for the Dollar to make another run at this week's highs. Baring that, look for the Dollar to stay under moderate pressure today, although the lack of any formal solution to the EU debt problem will likely keep prices supported above the 81.40 lows from last weekend.
Euro:
The June Euro has continued its recovery from this week's lows, as the chances of a finalized agreement for an aid package for Greece appear to be increasing or the market just seems to be buying into that argument. Maybe the credit downgrades this week for several EU nations was the scare that negotiators needed for a quicker move toward an agreement, but there is plenty of work left to be done, particularly for the Greeks who will not be used to these sort of government spending cuts. There were reports that the German Finance Minister suggested that some credit rating agencies can be wrong and that seemed to give the Euro an added boost. Decent Euro Zone inflation and Employment data released this morning have added to the support for the June Euro this morning, but there is still a strong possibility that negative news could derail this up move without notice. With that in mind, look for the June Euro to hold its gains above the 1.33 level and perhaps expect a move up to the next chart resistance point of 134.15.
Yen:
The June Yen has come under pressure this morning, both from the easing of risk aversion and from the results of today's Bank of Japan meeting. Although the BOJ kept Japanese rates unchanged, they also said that they needed to do more in order to increase growth outside of straight monetary policy and that deflation would likely not end before next year at the earliest. With the June Yen already on the doorstep of new lows, the lack of details in today's statement could not have given the market much comfort. Look for a test of the June Yen's lows around 105.60, if not today, then early next week.
Gold:
While EU debt concerns remain in place this morning gold and other classic physical commodities don't appear to be off balance because of that situation. In fact, seeing gold trade higher with the rest of the metals markets is a change of pace from the action seen early in the week. Not surprisingly, the gold market appears to be discounting news of higher gold production from Gold Fields, perhaps because of favorable Indian gold price action overnight. The bulls might be emboldened by the capacity to make new 2010 highs on the charts early this morning, but some tech traders also suggest that the $1,175 level in the June gold contract is potentially some form of pivot point today. Comex Gold Stocks were 10.148 million ounces down 4,739 ounces. Stocks have increased 11 of the last 20 days.
Silver:
July silver has managed a fresh new high for the move and has reached the highest level since early January. While the silver market has seen some periodic pressure recently off fears that the EU debt crisis was going to derail, or slow the global recovery, the capacity to forge new highs for the move, is probably something that emboldens the technical crowd into the US Friday morning opening. Some would suggest that silver continues to benefit from favorable Indian demand dialogue, but it still seems like silver and gold are taking a large measure of direction from big picture macro economic developments. Comex Silver Stocks were 115.429 million ounces up 429,217 ounces. Stocks have declined 11 of the last 20 days.
Crude Oil:
July crude oil looks to be continuing its move higher today, as the easing of EU sovereign debt concerns have helped the market overcome high storage levels and in turn forge a higher high for the move in the early Friday action. It is interesting to note that the only area of the oil complex not close to new highs for the move are the front two months in crude oil, as the supply glut in Cushing, OK has allowed deferred months to gain quite a bit over the front months. With expectations for increased summer driving activity seen as a reflection of US economic recovery capacity, any sort of sustained drawdown in crude stocks could send prices towards new highs for the year, particularly as this does not take into account sustained demand from China and the rest of the world. We continue to think that the market is overly infatuated with the US supply and demand situation and that in turn has prompted the anti speculation crowd to make a lot of stupid statements. One does have to brace for a politically inspired call to 'do something' with position limits. We think that the agency will be forced to lower speculative limits from the initial offering, but we also think that the world will rush to get even longer before the new limits are in place. There is a very real danger that attempting to artificially lower oil prices, will result in higher prices than would have been seen if the market were allowed to do its own thing. Apparently news of higher a-float oil supply overnight is not undermining oil prices this morning as the ebb and flow of crude oil prices looks to sit with the ebb and flow of the debt crisis and perhaps the direction of US equities. Critical support in July crude oil today is seen at $87.34, with critical resistance pegged at $88.03.
Natural Gas:
While July natural gas has managed to respect the prior session's low overnight, the sharp reversal and failure in the prior trading session appears to have temporarily wounded the bull case. Clearly the market isn't ready to overcome the patently bearish supply side of the equation, as the weekly natural gas storage report showed an injection of 83 bcf yesterday and total storage stands at 1,912 bcf or 18.8% above the 5 year average. Over the last four weeks natural gas storage has increased 274 bcf and that clearly worried the bull camp. While the trade is fearful that the massive oil spill will restrict production, or perhaps shipping movement, we are not sure that the oil spill will physically support prices. It is possible that limiting drilling activity will be supportive and it is also possible that the US will reevaluate its recent renewed push for off shore drilling. We still have to wonder why Congress, the President and those claiming foul over long speculation aren't lobbying for the increased use of a very abundant and safer environmental energy supply source like natural gas. Apparently a new extreme disparity between crude oil costs in BTU and natural gas costs in BTU is lost on most people! We think players need to have long duration call positions in play.
Wednesday, April 28, 2010
Today's Market Guidance
Financial Overview:
The stock market is still facing a number of big picture negatives and because of those negatives, signs of recovery, favorable earnings and even the promise of low rates for an extended period of time won't be given much credence. In other words, the bears have a 'cause' and the positives will likely be discounted, or ignored in the short term. Nothing of significant seems to have changed overnight with the EU seemingly set to let events take their own course and that could result in the next country coming under attack. Favorable confidence readings and the first year over year house price rise in years from a private survey was totally lost in the Euro shuffle. With the added negative sentiment flowing from heated and hateful Congressional testimony, the bear camp clearly has an environment to their favor. Ordinarily we would expect the US equity market to get a lift from the type of statement we expect to see from the FOMC early this afternoon, but in the current environment, the positives are going to have limited or no impact. We suspect that prices are set to work lower early this morning, but if there is the slightly fresh negative from the Euro zone, or the credit rating agencies on the Euro zone problem, the selling could intensify again.
Dow:
After the big range down extension and no recovery effort at all into the close yesterday, the path of least resistance remains down. In looking ahead it would seem like the debt situation is seemingly cemented into a front row seat. Critical support in the June Mini Dow is seen at 10,915 today but we can't rule out a further decline to 10,875 in the coming trading sessions. To even think about turning the trend away from the downside today would require a close back above up trend channel support line of 10,941 today.
The daily stochastics gave a bearish indicator with a crossover down. Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The intermediate trend has turned down with the cross over back below the 18-day moving average. The market is in a bearish position with the close below the 2nd swing support number. The next downside target is 10753. The next area of resistance is around 11078 and 11246, while 1st support hits today at 10832 and below there at 10753.
S&P:
With the European debt crisis showing no sign of coming under control and commodity prices serving to unhinge natural resource and oil sector shares, the S&P would seem to remain vulnerable to more selling pressure. In our book the failure to forge an exhaustion washout and recovery attempt in the action yesterday, suggests that the selling hasn't run its course yet. We also don't see the development yet that can effectively truncate or shut off the negative speculation against other EU debt issues. Initial support is seen at 1176.80 but that level clearly won't hold and that would put the next downside target at the April 8th low of 1171.30.
The daily stochastics gave a bearish indicator with a crossover down. Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The intermediate trend has turned down with the cross over back below the 18-day moving average. The close below the 2nd swing support number puts the market on the defensive. The next downside objective is now at 1154.88. The next area of resistance is around 1197.25 and 1219.87, while 1st support hits today at 1164.75 and below there at 1154.88.
Nasdaq:
The June Nasdaq seems to have found some measure of support around the 2000 level, with the bull/bear line today seen at 2002.75 into the close. While the market might see a fleeting bounce off the US Fed's promise to leave rates low, any bounce off that issue might simply be seen as an opportunity to get short at a slightly higher level on the charts. Keep in mind, the Nasdaq was one of the more overbought markets in the stock index sector in the last COT report. If the 2000 level fails to hold today that would set up the next downside target of 1985.50, which is only the mid April low!
Bonds:
The Treasury market might have gotten a little ahead of itself with the explosive rally yesterday, as it isn't a given that US debt is going to consistently benefit from the deterioration in global credit markets. After all, the US still has a massive load of debt to offer to the market, with another tranche of debt in the midst of flowing today and Thursday. In other words, some investors might see Treasuries as a safe harbor, but others might suggest that a global tsunami of foreign debt is likely to lift all boats/yields. If investors have a cornucopia of moderately high debt offerings, it is possible that the US will be forced to pay up along with other deadbeats. It is also possible that increased inflationary concerns could serve to cap off the upside, as the gold market started to show signs of lift yesterday and the ECB's Stark overnight suggested that high budget deficits might eventually serve to drive up CPI expectations. Overnight the Aussie central bank expressed concerns of inflation but hinted at leaving interest rates low because of the concerns being thrown off by the EU debt crisis. However, we don't think the crisis has reached such a severe level that Treasuries will be discounted by inflation, or that they will miss out on further near term flight to quality incidents. We do think that a situation is building where yields are set to rise sharply and prices are set to fall sharply when and if the EU debt crisis is put back under partial control. However, with Greek debt given junk status and Portugal getting pulled under the microscope, it is possible that the next failure target has already been identified. The Germans are likely to pay for their foot dragging with a much bigger overall problem ahead. In the mean time, we continue to think that scheduled US data is unlikely to have a pronounced impact on Treasury prices, especially after an improvement in confidence was noted in the US and in other countries yesterday and that news was completely lost on the trade. In the action today, the market will see countervailing forces from the 5 Year auction and the FOMC statement. We suspect that the Note auction will be a slight negative to prices, especially given the downward adjustment in yields over the last month, but we also think that traders will be unable to hold prices down into and through the FOMC statement, as the US Fed is clearly set to provide confidence and ongoing low rate promises to the marketplace. In fact, given the high state of flux in the Euro zone and the dovish statements from the Australian central bank overnight we suspect that the Fed could purposely tone down any internal dissent for leaving rates down. In looking back to the last US inflation data, it is also possible that benign inflation readings will serve to sooth the hawks within the US Fed. In the early morning action, the trade will remain fixated on the news flowing from the European arena, with some minor additional losses in Treasuries seen into the auction results, but we would think the FOMC statement window will result in fresh buying and perhaps a return to the prior session's high levels. However, the magnitude of the 'slide' in equity prices today will be the main arbiter of direction in Treasuries and we don't think that anything has been done by the EU to simply stop the meltdown after one day. Therefore, it is difficult to suggest that a top has been forged in Treasury prices with the action yesterday. In short, assume the bias is up unless June bonds manage to violate close-in support of 118-05 in the June contract or June Notes fall back below 117-17 level. Aggressive and short term traders should consider buying weakness into or just ahead of mid session and playing for more debt crisis news later this week.
The daily stochastics have crossed over up which is a bullish indication. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's short-term trend is positive on the close above the 9-day moving average. The market has a bullish tilt coming into today's trade with the close above the 2nd swing resistance. The next upside target is 119-280. The next area of resistance is around 119-060 and 119-280, while 1st support hits today at 117-120 and below there at 116-070.
US Dollar:
The Dollar has retained its safe haven strength this morning as a lack of progress in resolving a now expanding European sovereign debt crisis may be adding to a capital flight out of Euro-denominated assets and into the US Dollar. While the chances for a full default are still remote, the loss of investment grade status on Greek debt creates its own set of problems for many investment firms who are unlucky enough to still be holding those issues. Equally frightening to the market was the Portuguese credit downgrade yesterday, which may only be starting to have a Greek-type decline, but as yet has an unknown price tag for the EU. With events in Europe holding the market's focus, the FOMC announcement later today has probably lost some of its relevance but it would seem almost impossible that the Fed would make any sort of move in the wake of yesterday's events. As long as EU debt concerns hold the market in its sway, the Dollar will remain well supported across the board. Unless there are concrete moves towards a solution to this crisis and that doesn't look to be in the cards today, look for the June Dollar to hold its gains above the 82.50 level and perhaps make even more new highs for the move.
Euro:
The June Euro remains under pressure this morning as a resolution to the EU sovereign debt crisis still appears to be far away. The May 19th deadline for Greece to find some sort of aid package in order to roll out some longer-term debt may provoke some sort of compromises over the next few weeks, but as long as political posturing on both sides takes center stage, the June Euro is likely to be remain under selling pressure for the near future. While the chances for a sharp short-covering rally rise whenever officials start to make statements, look for the June Euro to continue its descent past the 1.3120 level unless concrete steps are put into place quickly. The Germans don't want Greece to get off easy, but they might have already shot themselves in the foot by allowing the Greece crisis to undermine the situation in Portugal.
Yen:
The benefit that the June Yen was receiving from European weakness has been turned around overnight, as risk aversion strength may have been offset by ideas that many in the government are looking for a weaker Yen in order to stimulate the deflationary Japanese economy. Unless there are further problems in Europe today, look for the June Yen to head back towards the 106.00 level.
Gold:
A number of analysts have seized on the higher trade in gold yesterday and gold's ability to positively diverge with the rest of the metals markets as a sign that gold is reclaiming some flight to quality standing. Seeing the gold market rise in the face of a sharp down day in equities and forging those gains in the face of a higher Dollar clearly points to a change of pace and that has to make the gold bugs happy. Surprisingly Indian gold players were not enticed into the market overnight and that might take some of the shine off gold into the US Wednesday trade action. On the other hand, the futures price rise in gold was also accompanied by signs that equity investment in gold was on the rise and therefore gold was and is seeing broad based interest. Some traders are suggesting that seeing the US Fed remain on hold again today will support gold prices later today, while others are pointing to the dovish dialogue from Australian officials overnight as a positive for gold over the longer term. In other words, some players think that the EU debt situation, combined with the commitment to sustained low rates in the US is laying the ground work for inflation ahead. At least for the time being, more EU debt travails would seem to benefit to gold prices. Comex gold stocks were 10.158 million ounces down 97 ounces. Stocks have increased 12 of the last 20 days.
Silver:
Clearly the silver market is not benefiting from the view being adopted in the gold market, as price divergence was distinct yesterday and also appears to be present again in the early Wednesday trade action. With copper, energy and a host of physical commodity prices showing weakness in the face of the Euro debt crisis, it would seem like some traders are fearful that the debt crisis will serve to derail the global recovery or perhaps simply reduce physical demand for certain commodities like silver. In other words, the silver market seems to have a positive relationship with the US equity market, while the gold market seems to have forged a bit of an inverse relationship with the equity markets. Some traders in silver have attempted to fan the prospects of inflation potentially lifting silver prices in the wake of soaring government debt offerings ahead but apparently ideas that the current crisis is capable of derailing the recovery have also surfaced and have the attention of many silver traders. Comex Silver Stocks were 115.149 million ounces down 319,369 ounces. Stocks have declined 11 of the last 20 days.
Crude Oil:
June crude oil has remained under pressure this morning, but at least has lifted itself off of overnight lows as the sell off in physical commodities appears to be losing some downward momentum. A private industry survey released after the close yesterday indicated a much higher than expected rise in crude oil stocks, but the negative effects of this number were blunted by draws in both products, as well as the fact that prices were under sharp pressure already this week. We also think that the markets were and are expecting news of flush oil US EIA oil inventory levels later this morning. If the private stock rise is matched by this morning's EIA data, there may be additional pressure put on crude prices, but it is likely that a recovery in the US equity market would be capable of countervailing internal negative supply side news. However, the threat against demand is going to remain in place in many physical commodity markets, as the February through April rally in many commodity prices was clearly the result of positive global economic expectations and the global recovery is being called into question because of the EU debt situation. Some might even suggest that crude oil prices are even more vulnerable than other commodities because of the lofty spec long positioning in the last COT report. While July crude oil might be able to respect the overnight spike down low of $83.80, the bull camp remains on the ropes and any deterioration in global equity markets could put July crude oil on a track to return to the $82.50 level. On a positive note, it is possible that crude could bounce because of a bounce in equities and also because of assurances from the US FOMC statement later today but we have wonder what support will be available Thursday and Friday as the EU sits while Rome continues to burn.
Natural Gas:
June natural gas has performed fairly well in the face of the broad based physical commodity sell off over the past few days, but the market may need to get past the EIA storage numbers later this week in order to make an upside breakout or perhaps even sustain at levels above $4.25. If US equity markets can hold onto their early strength, natural gas prices should at least be able to find some solid support this morning, as negative sentiment for crude oil is probably providing some favorable spread liquidation support for natural gas. Seeing the natural gas market weather what appears to be a significant macro economic let down, would seem to suggest that this market is indeed changing. We continue to think that a long term bottom is in place, but natural gas needs to get beyond to Greek crisis to get the shorts to cover and for fresh fund buyers to boost prices consistently.
The stock market is still facing a number of big picture negatives and because of those negatives, signs of recovery, favorable earnings and even the promise of low rates for an extended period of time won't be given much credence. In other words, the bears have a 'cause' and the positives will likely be discounted, or ignored in the short term. Nothing of significant seems to have changed overnight with the EU seemingly set to let events take their own course and that could result in the next country coming under attack. Favorable confidence readings and the first year over year house price rise in years from a private survey was totally lost in the Euro shuffle. With the added negative sentiment flowing from heated and hateful Congressional testimony, the bear camp clearly has an environment to their favor. Ordinarily we would expect the US equity market to get a lift from the type of statement we expect to see from the FOMC early this afternoon, but in the current environment, the positives are going to have limited or no impact. We suspect that prices are set to work lower early this morning, but if there is the slightly fresh negative from the Euro zone, or the credit rating agencies on the Euro zone problem, the selling could intensify again.
Dow:
After the big range down extension and no recovery effort at all into the close yesterday, the path of least resistance remains down. In looking ahead it would seem like the debt situation is seemingly cemented into a front row seat. Critical support in the June Mini Dow is seen at 10,915 today but we can't rule out a further decline to 10,875 in the coming trading sessions. To even think about turning the trend away from the downside today would require a close back above up trend channel support line of 10,941 today.
The daily stochastics gave a bearish indicator with a crossover down. Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The intermediate trend has turned down with the cross over back below the 18-day moving average. The market is in a bearish position with the close below the 2nd swing support number. The next downside target is 10753. The next area of resistance is around 11078 and 11246, while 1st support hits today at 10832 and below there at 10753.
S&P:
With the European debt crisis showing no sign of coming under control and commodity prices serving to unhinge natural resource and oil sector shares, the S&P would seem to remain vulnerable to more selling pressure. In our book the failure to forge an exhaustion washout and recovery attempt in the action yesterday, suggests that the selling hasn't run its course yet. We also don't see the development yet that can effectively truncate or shut off the negative speculation against other EU debt issues. Initial support is seen at 1176.80 but that level clearly won't hold and that would put the next downside target at the April 8th low of 1171.30.
The daily stochastics gave a bearish indicator with a crossover down. Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The intermediate trend has turned down with the cross over back below the 18-day moving average. The close below the 2nd swing support number puts the market on the defensive. The next downside objective is now at 1154.88. The next area of resistance is around 1197.25 and 1219.87, while 1st support hits today at 1164.75 and below there at 1154.88.
Nasdaq:
The June Nasdaq seems to have found some measure of support around the 2000 level, with the bull/bear line today seen at 2002.75 into the close. While the market might see a fleeting bounce off the US Fed's promise to leave rates low, any bounce off that issue might simply be seen as an opportunity to get short at a slightly higher level on the charts. Keep in mind, the Nasdaq was one of the more overbought markets in the stock index sector in the last COT report. If the 2000 level fails to hold today that would set up the next downside target of 1985.50, which is only the mid April low!
Bonds:
The Treasury market might have gotten a little ahead of itself with the explosive rally yesterday, as it isn't a given that US debt is going to consistently benefit from the deterioration in global credit markets. After all, the US still has a massive load of debt to offer to the market, with another tranche of debt in the midst of flowing today and Thursday. In other words, some investors might see Treasuries as a safe harbor, but others might suggest that a global tsunami of foreign debt is likely to lift all boats/yields. If investors have a cornucopia of moderately high debt offerings, it is possible that the US will be forced to pay up along with other deadbeats. It is also possible that increased inflationary concerns could serve to cap off the upside, as the gold market started to show signs of lift yesterday and the ECB's Stark overnight suggested that high budget deficits might eventually serve to drive up CPI expectations. Overnight the Aussie central bank expressed concerns of inflation but hinted at leaving interest rates low because of the concerns being thrown off by the EU debt crisis. However, we don't think the crisis has reached such a severe level that Treasuries will be discounted by inflation, or that they will miss out on further near term flight to quality incidents. We do think that a situation is building where yields are set to rise sharply and prices are set to fall sharply when and if the EU debt crisis is put back under partial control. However, with Greek debt given junk status and Portugal getting pulled under the microscope, it is possible that the next failure target has already been identified. The Germans are likely to pay for their foot dragging with a much bigger overall problem ahead. In the mean time, we continue to think that scheduled US data is unlikely to have a pronounced impact on Treasury prices, especially after an improvement in confidence was noted in the US and in other countries yesterday and that news was completely lost on the trade. In the action today, the market will see countervailing forces from the 5 Year auction and the FOMC statement. We suspect that the Note auction will be a slight negative to prices, especially given the downward adjustment in yields over the last month, but we also think that traders will be unable to hold prices down into and through the FOMC statement, as the US Fed is clearly set to provide confidence and ongoing low rate promises to the marketplace. In fact, given the high state of flux in the Euro zone and the dovish statements from the Australian central bank overnight we suspect that the Fed could purposely tone down any internal dissent for leaving rates down. In looking back to the last US inflation data, it is also possible that benign inflation readings will serve to sooth the hawks within the US Fed. In the early morning action, the trade will remain fixated on the news flowing from the European arena, with some minor additional losses in Treasuries seen into the auction results, but we would think the FOMC statement window will result in fresh buying and perhaps a return to the prior session's high levels. However, the magnitude of the 'slide' in equity prices today will be the main arbiter of direction in Treasuries and we don't think that anything has been done by the EU to simply stop the meltdown after one day. Therefore, it is difficult to suggest that a top has been forged in Treasury prices with the action yesterday. In short, assume the bias is up unless June bonds manage to violate close-in support of 118-05 in the June contract or June Notes fall back below 117-17 level. Aggressive and short term traders should consider buying weakness into or just ahead of mid session and playing for more debt crisis news later this week.
The daily stochastics have crossed over up which is a bullish indication. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's short-term trend is positive on the close above the 9-day moving average. The market has a bullish tilt coming into today's trade with the close above the 2nd swing resistance. The next upside target is 119-280. The next area of resistance is around 119-060 and 119-280, while 1st support hits today at 117-120 and below there at 116-070.
US Dollar:
The Dollar has retained its safe haven strength this morning as a lack of progress in resolving a now expanding European sovereign debt crisis may be adding to a capital flight out of Euro-denominated assets and into the US Dollar. While the chances for a full default are still remote, the loss of investment grade status on Greek debt creates its own set of problems for many investment firms who are unlucky enough to still be holding those issues. Equally frightening to the market was the Portuguese credit downgrade yesterday, which may only be starting to have a Greek-type decline, but as yet has an unknown price tag for the EU. With events in Europe holding the market's focus, the FOMC announcement later today has probably lost some of its relevance but it would seem almost impossible that the Fed would make any sort of move in the wake of yesterday's events. As long as EU debt concerns hold the market in its sway, the Dollar will remain well supported across the board. Unless there are concrete moves towards a solution to this crisis and that doesn't look to be in the cards today, look for the June Dollar to hold its gains above the 82.50 level and perhaps make even more new highs for the move.
Euro:
The June Euro remains under pressure this morning as a resolution to the EU sovereign debt crisis still appears to be far away. The May 19th deadline for Greece to find some sort of aid package in order to roll out some longer-term debt may provoke some sort of compromises over the next few weeks, but as long as political posturing on both sides takes center stage, the June Euro is likely to be remain under selling pressure for the near future. While the chances for a sharp short-covering rally rise whenever officials start to make statements, look for the June Euro to continue its descent past the 1.3120 level unless concrete steps are put into place quickly. The Germans don't want Greece to get off easy, but they might have already shot themselves in the foot by allowing the Greece crisis to undermine the situation in Portugal.
Yen:
The benefit that the June Yen was receiving from European weakness has been turned around overnight, as risk aversion strength may have been offset by ideas that many in the government are looking for a weaker Yen in order to stimulate the deflationary Japanese economy. Unless there are further problems in Europe today, look for the June Yen to head back towards the 106.00 level.
Gold:
A number of analysts have seized on the higher trade in gold yesterday and gold's ability to positively diverge with the rest of the metals markets as a sign that gold is reclaiming some flight to quality standing. Seeing the gold market rise in the face of a sharp down day in equities and forging those gains in the face of a higher Dollar clearly points to a change of pace and that has to make the gold bugs happy. Surprisingly Indian gold players were not enticed into the market overnight and that might take some of the shine off gold into the US Wednesday trade action. On the other hand, the futures price rise in gold was also accompanied by signs that equity investment in gold was on the rise and therefore gold was and is seeing broad based interest. Some traders are suggesting that seeing the US Fed remain on hold again today will support gold prices later today, while others are pointing to the dovish dialogue from Australian officials overnight as a positive for gold over the longer term. In other words, some players think that the EU debt situation, combined with the commitment to sustained low rates in the US is laying the ground work for inflation ahead. At least for the time being, more EU debt travails would seem to benefit to gold prices. Comex gold stocks were 10.158 million ounces down 97 ounces. Stocks have increased 12 of the last 20 days.
Silver:
Clearly the silver market is not benefiting from the view being adopted in the gold market, as price divergence was distinct yesterday and also appears to be present again in the early Wednesday trade action. With copper, energy and a host of physical commodity prices showing weakness in the face of the Euro debt crisis, it would seem like some traders are fearful that the debt crisis will serve to derail the global recovery or perhaps simply reduce physical demand for certain commodities like silver. In other words, the silver market seems to have a positive relationship with the US equity market, while the gold market seems to have forged a bit of an inverse relationship with the equity markets. Some traders in silver have attempted to fan the prospects of inflation potentially lifting silver prices in the wake of soaring government debt offerings ahead but apparently ideas that the current crisis is capable of derailing the recovery have also surfaced and have the attention of many silver traders. Comex Silver Stocks were 115.149 million ounces down 319,369 ounces. Stocks have declined 11 of the last 20 days.
Crude Oil:
June crude oil has remained under pressure this morning, but at least has lifted itself off of overnight lows as the sell off in physical commodities appears to be losing some downward momentum. A private industry survey released after the close yesterday indicated a much higher than expected rise in crude oil stocks, but the negative effects of this number were blunted by draws in both products, as well as the fact that prices were under sharp pressure already this week. We also think that the markets were and are expecting news of flush oil US EIA oil inventory levels later this morning. If the private stock rise is matched by this morning's EIA data, there may be additional pressure put on crude prices, but it is likely that a recovery in the US equity market would be capable of countervailing internal negative supply side news. However, the threat against demand is going to remain in place in many physical commodity markets, as the February through April rally in many commodity prices was clearly the result of positive global economic expectations and the global recovery is being called into question because of the EU debt situation. Some might even suggest that crude oil prices are even more vulnerable than other commodities because of the lofty spec long positioning in the last COT report. While July crude oil might be able to respect the overnight spike down low of $83.80, the bull camp remains on the ropes and any deterioration in global equity markets could put July crude oil on a track to return to the $82.50 level. On a positive note, it is possible that crude could bounce because of a bounce in equities and also because of assurances from the US FOMC statement later today but we have wonder what support will be available Thursday and Friday as the EU sits while Rome continues to burn.
Natural Gas:
June natural gas has performed fairly well in the face of the broad based physical commodity sell off over the past few days, but the market may need to get past the EIA storage numbers later this week in order to make an upside breakout or perhaps even sustain at levels above $4.25. If US equity markets can hold onto their early strength, natural gas prices should at least be able to find some solid support this morning, as negative sentiment for crude oil is probably providing some favorable spread liquidation support for natural gas. Seeing the natural gas market weather what appears to be a significant macro economic let down, would seem to suggest that this market is indeed changing. We continue to think that a long term bottom is in place, but natural gas needs to get beyond to Greek crisis to get the shorts to cover and for fresh fund buyers to boost prices consistently.
Tuesday, April 27, 2010
Today's Market Guidance
Financial Overview:
Global markets are off balance because of the inability to get the Greece situation out of the headlines. With Goldman scheduled for a public beating from Congressional testimony today, investors are destined to feel bad about overall prospects. With several kinks in EU member countries promising to delay the authorization for the Greek aid package, that negative situation isn't about to go away. With a number of analysts predicting that Greece is just the tip of the debt iceberg problem in Europe, there is certainly a negative bias operating in the current market. We even suspect that favorable scheduled US economic data will be discounted today, as the markets instead look for blood in the Goldman testimony. In fact, we suspect that the Goldman situation will remain front and center until the Financial Reform push has been completed. In conclusion, the path of least resistance looks to be pointing downward today, with the first distinctly favorable development not expected until early afternoon on Wednesday, when the Fed releases its FOMC statement.
Dow:
The June Mini Dow remains slightly off balance into the opening today, as the negatives seem to be out weighing the positives. We see the potential for a near term decline back to the middle of the up trend channel line down at 11,100 and perhaps even the potential to fall to the bottom of the up trend channel support line down at 11,015, with that support channel rising to only 11,033 on Wednesday. In short, the bear camp has the current edge and we doubt that favorable scheduled numbers or favorable earnings reports are capable of shifting this market out of a weak profit taking bias.
The market rallied to a new contract high. Momentum studies are trending higher but have entered overbought levels. The market's short-term trend is positive on the close above the 9-day moving average. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside objective is at 11237. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 11190 and 11237, while 1st support hits today at 11112 and below there at 11081.
S&P:
The bias is clearly pointing lower today, with the key reversal on the charts from yesterday given added credence because of ongoing Greek debt concerns. In fact, we have to think that Congress is planning an all out attack on Goldman today and that is likely to injure investor and consumer sentiment in the process. With a long list of experts predicting even more debt problems out of the Euro zone ahead, favorable economic readings and the promise of lingering low US rates is going to be lost in the shuffle. We see a move to the middle of the up trend channel down at 1201.20 as an easy target today, with the bottom of the up trend channel of 1194.60 likely in the coming trading sessions.
A new contract high was made on the rally. Rising stochastics at overbought levels warrant some caution for bulls. The market's close above the 9-day moving average suggests the short-term trend remains positive. The daily closing price reversal down puts the market on the defensive. The market's close below the pivot swing number is a mildly negative setup. The near-term upside objective is at 1219.43. The next area of resistance is around 1212.87 and 1219.43, while 1st support hits today at 1203.63 and below there at 1200.94.
Nasdaq:
With the middle of the up trend channel in the June Nasdaq seen at 2037.15, we can't rule out some additional downside action ahead. In fact, given the propensity to discount favorable earnings and the prospect for positive scheduled data points, we suspect that the June Nasdaq might be poised to slide toward the bottom of the up trend channel support line of 2009.10. The up trend channel support line does rise to 2013 on Wednesday and perhaps by then, the market will be able to find support off buying ahead of the FOMC statement release. At least in the short term, the market might even turn a deaf ear toward favorable tech sector news.
Bonds:
The Greece crisis lives on and that means flight to quality interest in US Treasuries will remain in place. In the prior trading session the Treasury bulls weathered higher equities and a significant jump in the Dallas Fed readings and still managed to remain positive. With both Bernanke and Geithner recently making comments about the economy remaining slack and US rates remaining low, we suspect that the Treasury market is also getting a bid from those who doubt the strength of the US recovery. With the Germany pushing for more tax increases and spending cuts for Greece, and the Bank of Greece overnight calling for a multi year approach to the budgetary reductions and increased taxes, there would appear to be a bit of a debate possible on the final package of aid and a delay in the negotiations would simply play into the Treasury bull's hands. While the TIPS auction seemed to go off well according to auction stats, the markets reaction was a decline yesterday in the wake of the results and that might turn up the pressure a bit on the market in the wake of the 2 Year note auction later today. In addition to Consumer Confidence, the market will also see a series of regional Fed readings and a Case-Shiller Home price survey and that means the market will be faced with an avalanche of second and third tier economic readings. With $44 billion in 2 year Notes to be auctioned at mid session today, we suspect that part of the lift from the Greece situation will be mitigated, but it could take a really shockingly bad result to fully remove the bulls from control. In fact, with heated testimony expected today on Capitol Hill regarding Goldman, we would expect the bull camp to even pick up an additional measure of buying support off the wrangling in Washington. With the Fed expected to maintain its view on rates and inflation recently found to be diminished, the market is likely to be lifted in the wake of the FOMC statement on Wednesday afternoon. Therefore, the overall tilt in Treasury prices looks to remain up over the coming two sessions, with the scheduled data and auction results at best, only offering up a temporary pause in the weak bullish tilt. In fact, even if the numbers this morning depict growth, we suspect that the market will not react to the data because of bigger issues ahead and because of the need to see the auction results at mid session before making a big move. Short term traders can probably buy 3 to 5 tick breaks off the data, or a 1/2 point break off the auction results, as it would appear that the Greek situation, the FOMC statement or residual concern for the US economy in the wake of the attempt to kill Goldman, should leave the bias in Treasury prices pointing upward. In fact, we see up trend channel support in the June Bonds today at 116-26, but that support level rises to 116-31 on Wednesday. In June Notes, solid support is pegged at 116-19, with that support level rising to 116-27 on Wednesday. Since there doesn't appear to be a way to quickly signal an all clear on the Euro debt issue, there doesn't look to be threat of a sustained downside moves in Treasury prices anytime soon.
The daily stochastics have crossed over down which is a bearish indication. Daily stochastics turning lower from overbought levels is bearish and will tend to reinforce a downside break especially if near term support is penetrated. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. The next downside objective is now at 116-080. The next area of resistance is around 117-100 and 117-250, while 1st support hits today at 116-180 and below there at 116-080.
US Dollar:
The Dollar looks to have regained some of its strength overnight as problems in Europe continue to over shadow the market. As negotiations continue in Athens, it appears that other nations in the EU are beginning to show the same credit difficulties that were the first signal that Greece debt would be a major problem. While the chance for full-out contagion is small, the lack of any resolution to this problem in the near term will remain an underlying support for the Dollar. While the market will see a series of secondary economic readings today from the US we doubt that the scheduled data is going to be given that much attention in the grand scheme of things. In fact, with a long list of analysts predicting other problems within the Euro zone and the US adding to the turmoil with a public roasting of Goldman today, the potential for more flight to quality buying off the Dollar is high. In fact, we see a near term rise back above 82.00 in the coming trading sessions.
Euro:
The June Euro continues to find it difficult to expand on Friday's reversal, as new problems seem to undercut any potential for a move higher. While an upcoming regional election is provoking German politicians towards adding more punitive austerity measures to the EU/IMF aid package to Greece, the Greeks themselves are looking to a multi-year approach to spreading out 'the pain' and that suggests a more pro tracked push and pull environment. The doubts whether this can be all tied up by mid-May, when Greece has to roll some longer-term debt, are beginning to weigh on the June Euro again as the resignation of the Belgium government yesterday, makes the passage of an aid package by all EU nations all the more difficult. As long as the news from Europe continues to be bleak, look for the June Euro to continue to head back towards the 1.32 level this morning.
Yen:
The June Yen has been a beneficiary of Euro weakness, as risk aversion from the problems in Europe looks to have thwarted a move towards its recent lows. Any strength show by the June Yen clearly runs counter to what Japanese officials are looking for, so any upside potential may be limited to a quick run towards 107.00. While a move lower only seems a matter of time, the June Yen should stay well supported as long as European problems continue to generate most of the market's headlines.
Gold:
With international equity markets a little soft this morning, the Euro under ongoing pressure and issues in the number of EU member countries making it unlikely that a vote on Greek debt assistance can take place quickly, it would seem like the Greek debt issue is destined to remain in the headlines for a while longer. With the Fed Chairman and the US Treasury Secretary recently hinting at the need to leave interest rates low, that would normally be supportive of gold prices, but gold and other physical commodity markets seem to be weak this morning because of classic slowing fears and some flight to quality migration. However, the gold market remains divided on the actual influence of the Greek situation on gold prices, with some thinking that further and more serious problems from the Euro zone will support gold prices, and others thinking that another break down in the Euro debt situation will serve to sink gold prices. With the market seeing an increase in gold production from Barrick Africa for the 1st quarter overnight that might be seen as a negative by some traders, but recently supply issues have played second fiddle to demand issues. The trade continues to float ideas that Indian gold demand is going to be strong due to favorable rainy season weather, but that story has been seen on several prior occasions and it could be offset by concerns of falling demand in the face of another European debt meltdown. Comex Gold Stocks were 10.158 million ounces up 6,336 ounces.
Silver:
In the early action today, the silver market is facing weakness in most industrial and precious metals markets. One might have expected silver to have soared off the very impressive Dallas Fed output readings yesterday, but instead fears of renewed trouble from the EU debt crisis seems to have stepped into dominate market action again. With the added pressure of weak energy prices this morning, it would seem like the positive industrial metals market track for silver seen in the prior trading session has been lost in the early Tuesday morning action. As suggested in the gold market coverage this morning, the silver market will see a flurry of scheduled US economic data points this morning, but that news is likely to be viewed as insignificant in the face of a geopolitical news focus. Some silver bulls might expect the upcoming FOMC statement to provide support to silver prices, but that news is still over 36 hours off in the future. Comex Silver Stocks were 115.468 million ounces up 135,231 ounces.
Crude Oil:
Ongoing problems in Europe are beginning to weigh on crude oil prices and a host of physical commodity markets. When one adds in a rekindling of position limit talk, the prospect of a public flogging of Goldman and a consistently negative currency market impact on energy prices, we have to give the bear camp a distinct edge today. With the market also seemingly whipping up talk of large US oil inventories again it would seem like internal and external factors are set to favor the bear camp. When one acknowledges the overbought spec long positioning in the last COT positioning reports, even the technical condition rings in as a negative. In our view the market is facing either a negative or very negative track in prices. While OPEC official seemingly promised to add production/supply if crude oil prices reach $90 or $100 a barrel, the market just isn't in a position to embrace positive angles. Early estimates for this week's storage numbers are showing builds for crude and the products, with refinery utilization expected to have a slight decline and that is also bearish toward prices. Watch the Dollar and equities, as action in those markets could result in a downside move to $84.99 or perhaps even $84.00 in the coming two trading sessions.
Natural Gas:
While the natural gas market still appears to have made a major bottom action over the last two months, we suspect that the market is destined to fall victim to broad based selling and negative macro economic sentiment. At least for the time being, the natural gas market looks to almost totally forget the favorable Wall Street Journal coverage last Friday, regarding the relatively cheaper cost of converting coal plants to natural gas, versus the cost to add the next round of pollution control requirements. Given the mostly bearish fundamental view toward natural gas into the March lows, we have to think that the market is destined to see a slide in prices back below the critical $4.25 level in the June contract. In fact, if the big picture macro economic outlook deteriorates even further, one could quickly make a case for a June Natural gas slide back even deeper into the consolidation range bound by $4.23 and $4.00.
Cattle:
The market remains in a solid uptrend, and ideas that cash cattle can trade higher this week along with continued strong gains in beef price should help support the uptrend in the discounted June futures. Cash cattle traded $99 last week, and traders see $100 or more in the next few weeks as a strong possibility. The spring demand season is upon us, and good weekend weather during the next few months could spark a jump in retail demand for beef. Boxed beef cutout values were up $1.38 at mid-session yesterday and closed $1.21 higher at $170.17. This was up from $167.10 the prior week, and is the highest trade for beef since July 16th of 2008. Cattle managed to close higher on the session yesterday due to supportive news from the USDA from the Cattle-On-Feed report. The market opened higher, but saw a fairly significant break back to near unchanged for the session before seeing a late rally to move back near the highs. Fears of the market's overbought technical condition may have limited prices on the upside to hold inside of Friday's range. With the low placements news, August cattle saw a contract high and a new contract high close. The estimated cattle slaughter came in at 125,000 head yesterday. This was unchanged from last week but down from 126,000 a year ago at this time. Placements for the month of March came in at 2.7% above last year, which was near the low end of estimates with most traders looking for close to a 7% increase from last year. This means less cattle coming off of feedlots into the summer. March was the 5th month in a row in which cattle-on-feed were below the previous year's pace, and the on-feed supply for the month of March was only at a 6-year low. The COT report as of April 20th showed the market in an extreme overbought condition, with the non-commercial and the combined spec and fund net long positions posting new record highs. However, the buying trend of the fund traders is considered a short-term bullish force. There are still no deliveries against the April contract.
Global markets are off balance because of the inability to get the Greece situation out of the headlines. With Goldman scheduled for a public beating from Congressional testimony today, investors are destined to feel bad about overall prospects. With several kinks in EU member countries promising to delay the authorization for the Greek aid package, that negative situation isn't about to go away. With a number of analysts predicting that Greece is just the tip of the debt iceberg problem in Europe, there is certainly a negative bias operating in the current market. We even suspect that favorable scheduled US economic data will be discounted today, as the markets instead look for blood in the Goldman testimony. In fact, we suspect that the Goldman situation will remain front and center until the Financial Reform push has been completed. In conclusion, the path of least resistance looks to be pointing downward today, with the first distinctly favorable development not expected until early afternoon on Wednesday, when the Fed releases its FOMC statement.
Dow:
The June Mini Dow remains slightly off balance into the opening today, as the negatives seem to be out weighing the positives. We see the potential for a near term decline back to the middle of the up trend channel line down at 11,100 and perhaps even the potential to fall to the bottom of the up trend channel support line down at 11,015, with that support channel rising to only 11,033 on Wednesday. In short, the bear camp has the current edge and we doubt that favorable scheduled numbers or favorable earnings reports are capable of shifting this market out of a weak profit taking bias.
The market rallied to a new contract high. Momentum studies are trending higher but have entered overbought levels. The market's short-term trend is positive on the close above the 9-day moving average. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside objective is at 11237. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 11190 and 11237, while 1st support hits today at 11112 and below there at 11081.
S&P:
The bias is clearly pointing lower today, with the key reversal on the charts from yesterday given added credence because of ongoing Greek debt concerns. In fact, we have to think that Congress is planning an all out attack on Goldman today and that is likely to injure investor and consumer sentiment in the process. With a long list of experts predicting even more debt problems out of the Euro zone ahead, favorable economic readings and the promise of lingering low US rates is going to be lost in the shuffle. We see a move to the middle of the up trend channel down at 1201.20 as an easy target today, with the bottom of the up trend channel of 1194.60 likely in the coming trading sessions.
A new contract high was made on the rally. Rising stochastics at overbought levels warrant some caution for bulls. The market's close above the 9-day moving average suggests the short-term trend remains positive. The daily closing price reversal down puts the market on the defensive. The market's close below the pivot swing number is a mildly negative setup. The near-term upside objective is at 1219.43. The next area of resistance is around 1212.87 and 1219.43, while 1st support hits today at 1203.63 and below there at 1200.94.
Nasdaq:
With the middle of the up trend channel in the June Nasdaq seen at 2037.15, we can't rule out some additional downside action ahead. In fact, given the propensity to discount favorable earnings and the prospect for positive scheduled data points, we suspect that the June Nasdaq might be poised to slide toward the bottom of the up trend channel support line of 2009.10. The up trend channel support line does rise to 2013 on Wednesday and perhaps by then, the market will be able to find support off buying ahead of the FOMC statement release. At least in the short term, the market might even turn a deaf ear toward favorable tech sector news.
Bonds:
The Greece crisis lives on and that means flight to quality interest in US Treasuries will remain in place. In the prior trading session the Treasury bulls weathered higher equities and a significant jump in the Dallas Fed readings and still managed to remain positive. With both Bernanke and Geithner recently making comments about the economy remaining slack and US rates remaining low, we suspect that the Treasury market is also getting a bid from those who doubt the strength of the US recovery. With the Germany pushing for more tax increases and spending cuts for Greece, and the Bank of Greece overnight calling for a multi year approach to the budgetary reductions and increased taxes, there would appear to be a bit of a debate possible on the final package of aid and a delay in the negotiations would simply play into the Treasury bull's hands. While the TIPS auction seemed to go off well according to auction stats, the markets reaction was a decline yesterday in the wake of the results and that might turn up the pressure a bit on the market in the wake of the 2 Year note auction later today. In addition to Consumer Confidence, the market will also see a series of regional Fed readings and a Case-Shiller Home price survey and that means the market will be faced with an avalanche of second and third tier economic readings. With $44 billion in 2 year Notes to be auctioned at mid session today, we suspect that part of the lift from the Greece situation will be mitigated, but it could take a really shockingly bad result to fully remove the bulls from control. In fact, with heated testimony expected today on Capitol Hill regarding Goldman, we would expect the bull camp to even pick up an additional measure of buying support off the wrangling in Washington. With the Fed expected to maintain its view on rates and inflation recently found to be diminished, the market is likely to be lifted in the wake of the FOMC statement on Wednesday afternoon. Therefore, the overall tilt in Treasury prices looks to remain up over the coming two sessions, with the scheduled data and auction results at best, only offering up a temporary pause in the weak bullish tilt. In fact, even if the numbers this morning depict growth, we suspect that the market will not react to the data because of bigger issues ahead and because of the need to see the auction results at mid session before making a big move. Short term traders can probably buy 3 to 5 tick breaks off the data, or a 1/2 point break off the auction results, as it would appear that the Greek situation, the FOMC statement or residual concern for the US economy in the wake of the attempt to kill Goldman, should leave the bias in Treasury prices pointing upward. In fact, we see up trend channel support in the June Bonds today at 116-26, but that support level rises to 116-31 on Wednesday. In June Notes, solid support is pegged at 116-19, with that support level rising to 116-27 on Wednesday. Since there doesn't appear to be a way to quickly signal an all clear on the Euro debt issue, there doesn't look to be threat of a sustained downside moves in Treasury prices anytime soon.
The daily stochastics have crossed over down which is a bearish indication. Daily stochastics turning lower from overbought levels is bearish and will tend to reinforce a downside break especially if near term support is penetrated. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. The next downside objective is now at 116-080. The next area of resistance is around 117-100 and 117-250, while 1st support hits today at 116-180 and below there at 116-080.
US Dollar:
The Dollar looks to have regained some of its strength overnight as problems in Europe continue to over shadow the market. As negotiations continue in Athens, it appears that other nations in the EU are beginning to show the same credit difficulties that were the first signal that Greece debt would be a major problem. While the chance for full-out contagion is small, the lack of any resolution to this problem in the near term will remain an underlying support for the Dollar. While the market will see a series of secondary economic readings today from the US we doubt that the scheduled data is going to be given that much attention in the grand scheme of things. In fact, with a long list of analysts predicting other problems within the Euro zone and the US adding to the turmoil with a public roasting of Goldman today, the potential for more flight to quality buying off the Dollar is high. In fact, we see a near term rise back above 82.00 in the coming trading sessions.
Euro:
The June Euro continues to find it difficult to expand on Friday's reversal, as new problems seem to undercut any potential for a move higher. While an upcoming regional election is provoking German politicians towards adding more punitive austerity measures to the EU/IMF aid package to Greece, the Greeks themselves are looking to a multi-year approach to spreading out 'the pain' and that suggests a more pro tracked push and pull environment. The doubts whether this can be all tied up by mid-May, when Greece has to roll some longer-term debt, are beginning to weigh on the June Euro again as the resignation of the Belgium government yesterday, makes the passage of an aid package by all EU nations all the more difficult. As long as the news from Europe continues to be bleak, look for the June Euro to continue to head back towards the 1.32 level this morning.
Yen:
The June Yen has been a beneficiary of Euro weakness, as risk aversion from the problems in Europe looks to have thwarted a move towards its recent lows. Any strength show by the June Yen clearly runs counter to what Japanese officials are looking for, so any upside potential may be limited to a quick run towards 107.00. While a move lower only seems a matter of time, the June Yen should stay well supported as long as European problems continue to generate most of the market's headlines.
Gold:
With international equity markets a little soft this morning, the Euro under ongoing pressure and issues in the number of EU member countries making it unlikely that a vote on Greek debt assistance can take place quickly, it would seem like the Greek debt issue is destined to remain in the headlines for a while longer. With the Fed Chairman and the US Treasury Secretary recently hinting at the need to leave interest rates low, that would normally be supportive of gold prices, but gold and other physical commodity markets seem to be weak this morning because of classic slowing fears and some flight to quality migration. However, the gold market remains divided on the actual influence of the Greek situation on gold prices, with some thinking that further and more serious problems from the Euro zone will support gold prices, and others thinking that another break down in the Euro debt situation will serve to sink gold prices. With the market seeing an increase in gold production from Barrick Africa for the 1st quarter overnight that might be seen as a negative by some traders, but recently supply issues have played second fiddle to demand issues. The trade continues to float ideas that Indian gold demand is going to be strong due to favorable rainy season weather, but that story has been seen on several prior occasions and it could be offset by concerns of falling demand in the face of another European debt meltdown. Comex Gold Stocks were 10.158 million ounces up 6,336 ounces.
Silver:
In the early action today, the silver market is facing weakness in most industrial and precious metals markets. One might have expected silver to have soared off the very impressive Dallas Fed output readings yesterday, but instead fears of renewed trouble from the EU debt crisis seems to have stepped into dominate market action again. With the added pressure of weak energy prices this morning, it would seem like the positive industrial metals market track for silver seen in the prior trading session has been lost in the early Tuesday morning action. As suggested in the gold market coverage this morning, the silver market will see a flurry of scheduled US economic data points this morning, but that news is likely to be viewed as insignificant in the face of a geopolitical news focus. Some silver bulls might expect the upcoming FOMC statement to provide support to silver prices, but that news is still over 36 hours off in the future. Comex Silver Stocks were 115.468 million ounces up 135,231 ounces.
Crude Oil:
Ongoing problems in Europe are beginning to weigh on crude oil prices and a host of physical commodity markets. When one adds in a rekindling of position limit talk, the prospect of a public flogging of Goldman and a consistently negative currency market impact on energy prices, we have to give the bear camp a distinct edge today. With the market also seemingly whipping up talk of large US oil inventories again it would seem like internal and external factors are set to favor the bear camp. When one acknowledges the overbought spec long positioning in the last COT positioning reports, even the technical condition rings in as a negative. In our view the market is facing either a negative or very negative track in prices. While OPEC official seemingly promised to add production/supply if crude oil prices reach $90 or $100 a barrel, the market just isn't in a position to embrace positive angles. Early estimates for this week's storage numbers are showing builds for crude and the products, with refinery utilization expected to have a slight decline and that is also bearish toward prices. Watch the Dollar and equities, as action in those markets could result in a downside move to $84.99 or perhaps even $84.00 in the coming two trading sessions.
Natural Gas:
While the natural gas market still appears to have made a major bottom action over the last two months, we suspect that the market is destined to fall victim to broad based selling and negative macro economic sentiment. At least for the time being, the natural gas market looks to almost totally forget the favorable Wall Street Journal coverage last Friday, regarding the relatively cheaper cost of converting coal plants to natural gas, versus the cost to add the next round of pollution control requirements. Given the mostly bearish fundamental view toward natural gas into the March lows, we have to think that the market is destined to see a slide in prices back below the critical $4.25 level in the June contract. In fact, if the big picture macro economic outlook deteriorates even further, one could quickly make a case for a June Natural gas slide back even deeper into the consolidation range bound by $4.23 and $4.00.
Cattle:
The market remains in a solid uptrend, and ideas that cash cattle can trade higher this week along with continued strong gains in beef price should help support the uptrend in the discounted June futures. Cash cattle traded $99 last week, and traders see $100 or more in the next few weeks as a strong possibility. The spring demand season is upon us, and good weekend weather during the next few months could spark a jump in retail demand for beef. Boxed beef cutout values were up $1.38 at mid-session yesterday and closed $1.21 higher at $170.17. This was up from $167.10 the prior week, and is the highest trade for beef since July 16th of 2008. Cattle managed to close higher on the session yesterday due to supportive news from the USDA from the Cattle-On-Feed report. The market opened higher, but saw a fairly significant break back to near unchanged for the session before seeing a late rally to move back near the highs. Fears of the market's overbought technical condition may have limited prices on the upside to hold inside of Friday's range. With the low placements news, August cattle saw a contract high and a new contract high close. The estimated cattle slaughter came in at 125,000 head yesterday. This was unchanged from last week but down from 126,000 a year ago at this time. Placements for the month of March came in at 2.7% above last year, which was near the low end of estimates with most traders looking for close to a 7% increase from last year. This means less cattle coming off of feedlots into the summer. March was the 5th month in a row in which cattle-on-feed were below the previous year's pace, and the on-feed supply for the month of March was only at a 6-year low. The COT report as of April 20th showed the market in an extreme overbought condition, with the non-commercial and the combined spec and fund net long positions posting new record highs. However, the buying trend of the fund traders is considered a short-term bullish force. There are still no deliveries against the April contract.
RUT Order Update
We are changing our current working put spread order to the 670/660 spread from the 660/650.
So sell 3 May 670/660 put spreads for limit GTC 0.50 Credit.
So sell 3 May 670/660 put spreads for limit GTC 0.50 Credit.
Friday, April 23, 2010
Today's Market Guidance
Financail Overview:
The US stock market looks to be set to start the trade today on a positive footing. While the market might eventually gain momentum and forge a moderate rally today, the initial setup isn't completely favoring the bull camp. For instance, the Chinese equity market action overnight was somewhat troubling, as the trade in that region continued to fear government efforts to restrict Chinese real estate activity. However, the Asian markets were already entrenched in a slightly bearish tilt and therefore didn't get as much of a benefit from the news that the Greeks were officially going to ask for aid. Apparently the markets are viewing the official request as a positive, as asking for the aid could have confirmed to some that the credit crisis is indeed real and potentially the first of other travails in the Euro zone. However, the market is initially taking the latest iteration as a positive and that in conjunction with up beat UK Prime Minister economic comments, a positive German Ifo result and the expectation for positive US scheduled data later this morning, that leaves the bull camp in control. However, we get the feeling that the bull camp isn't totally into the upside tilt and that buying interest might dry up this morning after another run to new highs for the year.
Dow:
The June Mini Dow is poised for a move to new highs for the year but we think that the market is in need of a lot of bullish headline fuel in order to make and sustain gains on the upside. We are a little concerned that the US equity market saw its first disappointing earnings report yesterday, but the reaction to the US durable goods and new home sales reports this morning will be very telling. If minor improvements (as expected) are seen in the data this morning and the Mini Dow manages to forge a small upside extension off that data, we would expect the bull camp to be able to control for the rest of the trading session. Initial resistance today is seen at the old high of 11,103 and we suspect that level will fall early.
The daily stochastics have crossed over up which is a bullish indication. Rising stochastics at overbought levels warrant some caution for bulls. The market's short-term trend is positive on the close above the 9-day moving average. The upside daily closing price reversal gives the market a bullish tilt. It is a mildly bullish indicator that the market closed over the pivot swing number. The near-term upside target is at 11186. The next area of resistance is around 11136 and 11186, while 1st support hits today at 11000 and below there at 10914.
S&P:
The June S&P was showing a positive tilt in the early action today, as the markets were initially embracing the latest EU debt event as a modestly positive event. We get the sense that this market remains skeptical about the EU situation remaining positive through out the day and we also get the sense that this market remains skeptical on the capacity to recover and therefore the bull camp doesn't appear to have much capacity to digest negatives. In short, the bulls control early, but they probably need a perfect storm of favorable US numbers this morning to keep control. Initial resistance is seen at the old high of 1210.40 but also at this week's high of 1209.40.
Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. A positive signal for trend short-term was given on a close over the 9-bar moving average. The daily closing price reversal up is a positive indicator that could support higher prices. It is a mildly bullish indicator that the market closed over the pivot swing number. The next downside target is 1178.44. The next area of resistance is around 1212.12 and 1219.93, while 1st support hits today at 1191.38 and below there at 1178.44.
Nasdaq:
While Microsoft posted positive earnings, the market was apparently expecting the software giant to perform even better in the wake of the stellar performance in the rest of the tech sector. Therefore the bias in the Nasdaq is pointing higher, but there are some detractors that are worried about valuations. However, in the event that the Greek debt request is allowed to remain a positive in marketplace into the US opening today and given positive readings from both US reports this morning, we suspect that the prior session's high will be taken out and the market might attempt to retest the 2050 level.
Bonds:
The Treasury market enters the Friday trade right around the prior session's lows and roughly 23 ticks below the prior session's highs. While the anxiety toward the Greece situation appears to be down shifted this morning, a statement from the Greek Finance Minister this morning has some markets frozen in place. However, the UK Prime Minister this morning suggested that the UK recovery was 'definitively Under way' and that in conjunction with an official request for aid from the Greeks might allow for an overall improvement in global economic psychology. While credit spreads seem to have fallen back in their initial response to this morning's news, there is no way to determine if the Greece debt situation is going to remain under control. In the short term, it would appear that flight to quality interest in Treasuries is set to wane a bit and that could leave the focus of the market on the pace of the US economy. However, it should also be noted that the Ifo overnight noted a rise in German expectations and suggested that German companies were much more confident than in their prior survey. In short, the Treasuries are seeing a general improvement in global economic sentiment and since the US economic report slate this week has been very thin, that could make this morning's US Durable goods reading even more important. Expectations generally call for a modest rise in both Durables and new home sales and as long as the readings are positive, we suspect that the trade will see them as bearish to Treasury prices. However, as suggested already we aren't sure that the market will be able to migrate away from EU zone flight to quality focus. In an added negative development, the markets have also been presented with news of another record weekly auction supply next week and that might be serving up a bit of pressure on Treasury prices. The bull camp might also attempt to hang onto the idea that inflation remains under control and that the recovery is likely to be uneven. However, we suspect that the bear camp will be able to exert some control today, but unless both scheduled reports this morning from the US are slightly above expectations, we are not sure that June Bonds are going to markedly fall below the 117-00 level, with June Notes potentially seeing some initial support around the 116-18 level. The biggest influence on the magnitude of movement in the Treasury market this morning, might be the equity markets, as a big rally in the US equity markets would accentuate the recovery expectation, while a minor decline in US equities today might serve to fully mitigate the impact of positive scheduled US data flow. Given the lack of initial downside this morning, in the wake of the initial news on Greece we expected more downside movement in bonds and notes and since ranges have been narrow, we are doubtful that June bonds will manage a slide to more significant support down at 116-26 in June bonds and down at 116-15 in June Notes. The bears have the edge, but it still feels like they will need a perfect storm of a smooth Greek aid request, favorable US scheduled numbers and positive equity market action to forge a distinct move lower on the charts today.
Momentum studies are trending higher but have entered overbought levels. The market's close above the 9-day moving average suggests the short-term trend remains positive. The downside closing price reversal on the daily chart is somewhat negative. It is a slightly negative indicator that the close was lower than the pivot swing number. The near-term upside target is at 118-050. The next area of resistance is around 117-210 and 118-050, while 1st support hits today at 116-300 and below there at 116-220.
US Dollar:
News reports that Greece has made a formal request for an EU/IMF aid package this morning has clearly undercut the Dollar's recent strength. Although there are plenty of potential pitfalls still along the way to a final resolution, it is clear that European officials are taking steps to make sure that any agreement is approved, with as few problems as possible, particularly after difficulties produced by the recent volcano-related travel problems in Europe. The clear move in the overnight markets away from risk aversion, shown by overnight recoveries in the Euro and Canada, along with a downturn in the Yen, could also help to keep the Dollar somewhat on the defensive this morning. However, it could take a definitively strong US Durable Goods number today to lend even more support to US equity markets, which in turn could add to the Dollar's weakness. If the substance of the announcement this morning fails to match the initial market reaction, we may see a Dollar revival later today but the severity of the overnight move shows that the market clearly now is leaning in a Dollar bearish position.
Euro:
After the June Euro traded at its lowest levels for nearly a year, the news that Greece has asked for the EU/IMF aid mechanism to be triggered has been the catalyst for an overnight recovery attempt. Considering that negotiations between the two sides were expected to go on for at least another week, and there are serious potential difficulties with the aid package being approved by Germany and Belgium, the June Euro may have gotten ahead of itself with the initial bounce. While the June Euro has not shaken off all of the potential problems with sovereign debt, the market euphoria produced by today's events should be able to keep prices supported for the balance of the morning. However as in the Dollar, the Euro trade will need to see something helpful from the US numbers and from the US equity market to make the events this morning stick.
Yen:
Much of the pressure on the June Yen has come from the Greece aid package announcement, as the Yen was benefiting from the recent risk aversion phase in the markets. Even with the additional support from the impending Chinese Yuan revaluation, prices have fallen back towards the 107.00 level, as the market is leaning towards lower Japanese interest rates, as a stimulus for their economy. If the Euro hoopla continues, look for the June Yen to extend its move below 107.00 during the rest of today's trading.
Gold:
Indian gold prices were slightly lower this morning, as that market was simply marking time ahead of the rumored Greek debt request. However, after it became clear that the Greeks were officially requesting help, the gold market wasn't lifted markedly and of this writing the trade didn't appear to have carved out a distinct reaction to this morning's news flow. It does appear as if the gold market is watching the equity market action closely and given the action in gold over the last 48 hours, some traders are suggesting that gold needs something positive from the US scheduled data flow this morning to keep the fears of a weaker Euro from undermining gold prices again. Fundamentally gold continues to show marked strength in various currencies, but some longs are afraid to come in off the sidelines until the EU situation is under more control. Comex Gold Stocks were 10.152 million ounces up 1,173 ounces.
Silver:
With initially softer silver prices this morning, it would not seem like the initial news flow from the Greece situation has provided an all clear signal. With platinum prices showing some weakness this morning, after a stellar week of gains, that would seem to present a marketplace in a profit taking posture. However, silver, platinum and copper have taken a lot of direction from the equity markets this week and that pattern might continue today. Given the choppy nature of the early price action in silver, it is also possible that the scheduled report flow from the US will be given a little added amount of attention later this morning. Comex Silver Stocks were 115.333 million ounces down 68,183 ounces and some in the bull camp might say that silver stock changes at the end of this week were slightly supportive, especially since silver stocks have now declined in 11 of the last 20 days.
Crude Oil:
With most of today's market ranges occurring in the wake of this morning EU/IMF debt aid announcement, it is clear that the market needs to see continued positive news from the demand side of the equation in order to sustain June crude oil prices close to the $84 level. With the energy market still trying to cope with the high storage levels indicated by this week's inventory reports, the turnaround in equity markets on both sides of the Atlantic should provide decent support to the market. Less weakness in European currencies could also take some pressure off energy prices, but to see currencies help crude today would mean that the Euro would have to drive up into positive ground. In the end, the outside market influence on energy prices today will be determined by the action in the US equity markets. In order to get back into a positive demand posture, the energy complex will need good US numbers and positive equity market action, or we suspect that this week's high of $84.64 will serve to cap off rallies. In fact, the failure to hold above $83.31 in the first hours of trade today could undermine sentiment and reduce the prospect of a demand led rally. Internal fundamentals in oil are slightly negative and without a distraction from that view early today, the bear camp might prevail.
Natural Gas:
June natural gas was able to rally sharply yesterday off of a lower-than-expected build in EIA storage, but the total inventory amount is still close to a record high for this time of the year and therefore the rally might have been partly the result of spread action with the crude oil market. The improvement in sentiment created by a stronger US equity market this morning should see gas prices remain well above the recent lows, but the underlying sentiment for this market needs to turn around aggressively before we see prices exit their recent trading range on the upside. However, seeing the July Natural gas contract manage a rise above the $4.25 level could be cause for additional short covering buying, as the last COT report, adjusted to the recent lows, might have put the net spec short positioning above 80,000 contracts. The weekly EIA natural gas storage report showed an injection of 73 bcf. Total EIA storage stands at 1829 bcf, or 18.5% above the 5 year average. Over the last four weeks EIA natural gas storage has increased 203 bcf.
Cattle:
The demand news was very strong this week, with a jump in weekly export sales and declining cold storage stocks. Traders also believe that imports are slow, and this should help keep US supply relatively tight. There are some concerns that too many cattle will move onto feedlots in March and April and cause an increase in supply into the summer. June cattle experienced an early setback yesterday due to weakness in the stock market and a strong US dollar, but support held above Wednesday's lows and the market closed slightly higher on the session with another new contract high close. Weekly U.S. beef export sales came in at 20,300 metric tonnes, compared with the prior 4-week average of 10,325. This is the highest weekly sales total since August 2008. Cumulative sales for 2010 have reached 228,600 metric tonnes, up 30% from last year's pace. The monthly cold storage report, released after the close, showed frozen beef stocks at the end of March at 390.5 million pounds, which is down 8% from last year and down from 404.5 million pounds in February. Cash cattle in the Southern Plains traded at $99.00, down $1.00 from the highs last week and up $1.00 from the lows last week. The estimated cattle slaughter came in at 126,000 head yesterday. This brings the total for the week so far to 507,000 head, up from 499,000 last week at this time and up from 504,000 a year ago. Boxed beef cutout values were down 9 cents at mid-session yesterday and closed 27 cents lower at $167.35. This was up from $166.96 the prior week. Average dressed steer weights for the week ending April 10th came in at 814 pounds, up from 813 pounds the previous week but still down from 835 pounds last year at this time. Beef production for the same week came in at 468.8 million pounds, up 0.80% over a year ago. Traders see this afternoon's Cattle on Feed report showing placements at 3-11% above last year, with many estimates centering around a 6-7% jump. However, marketings are also expected to be active at 4-6% above last year. As a result, on-Feed supply as of April 1st is thought to be 1.5% to 3.5% down from last year, with most estimates near a 3% drop. There are still no deliveries against the April contract.
The US stock market looks to be set to start the trade today on a positive footing. While the market might eventually gain momentum and forge a moderate rally today, the initial setup isn't completely favoring the bull camp. For instance, the Chinese equity market action overnight was somewhat troubling, as the trade in that region continued to fear government efforts to restrict Chinese real estate activity. However, the Asian markets were already entrenched in a slightly bearish tilt and therefore didn't get as much of a benefit from the news that the Greeks were officially going to ask for aid. Apparently the markets are viewing the official request as a positive, as asking for the aid could have confirmed to some that the credit crisis is indeed real and potentially the first of other travails in the Euro zone. However, the market is initially taking the latest iteration as a positive and that in conjunction with up beat UK Prime Minister economic comments, a positive German Ifo result and the expectation for positive US scheduled data later this morning, that leaves the bull camp in control. However, we get the feeling that the bull camp isn't totally into the upside tilt and that buying interest might dry up this morning after another run to new highs for the year.
Dow:
The June Mini Dow is poised for a move to new highs for the year but we think that the market is in need of a lot of bullish headline fuel in order to make and sustain gains on the upside. We are a little concerned that the US equity market saw its first disappointing earnings report yesterday, but the reaction to the US durable goods and new home sales reports this morning will be very telling. If minor improvements (as expected) are seen in the data this morning and the Mini Dow manages to forge a small upside extension off that data, we would expect the bull camp to be able to control for the rest of the trading session. Initial resistance today is seen at the old high of 11,103 and we suspect that level will fall early.
The daily stochastics have crossed over up which is a bullish indication. Rising stochastics at overbought levels warrant some caution for bulls. The market's short-term trend is positive on the close above the 9-day moving average. The upside daily closing price reversal gives the market a bullish tilt. It is a mildly bullish indicator that the market closed over the pivot swing number. The near-term upside target is at 11186. The next area of resistance is around 11136 and 11186, while 1st support hits today at 11000 and below there at 10914.
S&P:
The June S&P was showing a positive tilt in the early action today, as the markets were initially embracing the latest EU debt event as a modestly positive event. We get the sense that this market remains skeptical about the EU situation remaining positive through out the day and we also get the sense that this market remains skeptical on the capacity to recover and therefore the bull camp doesn't appear to have much capacity to digest negatives. In short, the bulls control early, but they probably need a perfect storm of favorable US numbers this morning to keep control. Initial resistance is seen at the old high of 1210.40 but also at this week's high of 1209.40.
Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. A positive signal for trend short-term was given on a close over the 9-bar moving average. The daily closing price reversal up is a positive indicator that could support higher prices. It is a mildly bullish indicator that the market closed over the pivot swing number. The next downside target is 1178.44. The next area of resistance is around 1212.12 and 1219.93, while 1st support hits today at 1191.38 and below there at 1178.44.
Nasdaq:
While Microsoft posted positive earnings, the market was apparently expecting the software giant to perform even better in the wake of the stellar performance in the rest of the tech sector. Therefore the bias in the Nasdaq is pointing higher, but there are some detractors that are worried about valuations. However, in the event that the Greek debt request is allowed to remain a positive in marketplace into the US opening today and given positive readings from both US reports this morning, we suspect that the prior session's high will be taken out and the market might attempt to retest the 2050 level.
Bonds:
The Treasury market enters the Friday trade right around the prior session's lows and roughly 23 ticks below the prior session's highs. While the anxiety toward the Greece situation appears to be down shifted this morning, a statement from the Greek Finance Minister this morning has some markets frozen in place. However, the UK Prime Minister this morning suggested that the UK recovery was 'definitively Under way' and that in conjunction with an official request for aid from the Greeks might allow for an overall improvement in global economic psychology. While credit spreads seem to have fallen back in their initial response to this morning's news, there is no way to determine if the Greece debt situation is going to remain under control. In the short term, it would appear that flight to quality interest in Treasuries is set to wane a bit and that could leave the focus of the market on the pace of the US economy. However, it should also be noted that the Ifo overnight noted a rise in German expectations and suggested that German companies were much more confident than in their prior survey. In short, the Treasuries are seeing a general improvement in global economic sentiment and since the US economic report slate this week has been very thin, that could make this morning's US Durable goods reading even more important. Expectations generally call for a modest rise in both Durables and new home sales and as long as the readings are positive, we suspect that the trade will see them as bearish to Treasury prices. However, as suggested already we aren't sure that the market will be able to migrate away from EU zone flight to quality focus. In an added negative development, the markets have also been presented with news of another record weekly auction supply next week and that might be serving up a bit of pressure on Treasury prices. The bull camp might also attempt to hang onto the idea that inflation remains under control and that the recovery is likely to be uneven. However, we suspect that the bear camp will be able to exert some control today, but unless both scheduled reports this morning from the US are slightly above expectations, we are not sure that June Bonds are going to markedly fall below the 117-00 level, with June Notes potentially seeing some initial support around the 116-18 level. The biggest influence on the magnitude of movement in the Treasury market this morning, might be the equity markets, as a big rally in the US equity markets would accentuate the recovery expectation, while a minor decline in US equities today might serve to fully mitigate the impact of positive scheduled US data flow. Given the lack of initial downside this morning, in the wake of the initial news on Greece we expected more downside movement in bonds and notes and since ranges have been narrow, we are doubtful that June bonds will manage a slide to more significant support down at 116-26 in June bonds and down at 116-15 in June Notes. The bears have the edge, but it still feels like they will need a perfect storm of a smooth Greek aid request, favorable US scheduled numbers and positive equity market action to forge a distinct move lower on the charts today.
Momentum studies are trending higher but have entered overbought levels. The market's close above the 9-day moving average suggests the short-term trend remains positive. The downside closing price reversal on the daily chart is somewhat negative. It is a slightly negative indicator that the close was lower than the pivot swing number. The near-term upside target is at 118-050. The next area of resistance is around 117-210 and 118-050, while 1st support hits today at 116-300 and below there at 116-220.
US Dollar:
News reports that Greece has made a formal request for an EU/IMF aid package this morning has clearly undercut the Dollar's recent strength. Although there are plenty of potential pitfalls still along the way to a final resolution, it is clear that European officials are taking steps to make sure that any agreement is approved, with as few problems as possible, particularly after difficulties produced by the recent volcano-related travel problems in Europe. The clear move in the overnight markets away from risk aversion, shown by overnight recoveries in the Euro and Canada, along with a downturn in the Yen, could also help to keep the Dollar somewhat on the defensive this morning. However, it could take a definitively strong US Durable Goods number today to lend even more support to US equity markets, which in turn could add to the Dollar's weakness. If the substance of the announcement this morning fails to match the initial market reaction, we may see a Dollar revival later today but the severity of the overnight move shows that the market clearly now is leaning in a Dollar bearish position.
Euro:
After the June Euro traded at its lowest levels for nearly a year, the news that Greece has asked for the EU/IMF aid mechanism to be triggered has been the catalyst for an overnight recovery attempt. Considering that negotiations between the two sides were expected to go on for at least another week, and there are serious potential difficulties with the aid package being approved by Germany and Belgium, the June Euro may have gotten ahead of itself with the initial bounce. While the June Euro has not shaken off all of the potential problems with sovereign debt, the market euphoria produced by today's events should be able to keep prices supported for the balance of the morning. However as in the Dollar, the Euro trade will need to see something helpful from the US numbers and from the US equity market to make the events this morning stick.
Yen:
Much of the pressure on the June Yen has come from the Greece aid package announcement, as the Yen was benefiting from the recent risk aversion phase in the markets. Even with the additional support from the impending Chinese Yuan revaluation, prices have fallen back towards the 107.00 level, as the market is leaning towards lower Japanese interest rates, as a stimulus for their economy. If the Euro hoopla continues, look for the June Yen to extend its move below 107.00 during the rest of today's trading.
Gold:
Indian gold prices were slightly lower this morning, as that market was simply marking time ahead of the rumored Greek debt request. However, after it became clear that the Greeks were officially requesting help, the gold market wasn't lifted markedly and of this writing the trade didn't appear to have carved out a distinct reaction to this morning's news flow. It does appear as if the gold market is watching the equity market action closely and given the action in gold over the last 48 hours, some traders are suggesting that gold needs something positive from the US scheduled data flow this morning to keep the fears of a weaker Euro from undermining gold prices again. Fundamentally gold continues to show marked strength in various currencies, but some longs are afraid to come in off the sidelines until the EU situation is under more control. Comex Gold Stocks were 10.152 million ounces up 1,173 ounces.
Silver:
With initially softer silver prices this morning, it would not seem like the initial news flow from the Greece situation has provided an all clear signal. With platinum prices showing some weakness this morning, after a stellar week of gains, that would seem to present a marketplace in a profit taking posture. However, silver, platinum and copper have taken a lot of direction from the equity markets this week and that pattern might continue today. Given the choppy nature of the early price action in silver, it is also possible that the scheduled report flow from the US will be given a little added amount of attention later this morning. Comex Silver Stocks were 115.333 million ounces down 68,183 ounces and some in the bull camp might say that silver stock changes at the end of this week were slightly supportive, especially since silver stocks have now declined in 11 of the last 20 days.
Crude Oil:
With most of today's market ranges occurring in the wake of this morning EU/IMF debt aid announcement, it is clear that the market needs to see continued positive news from the demand side of the equation in order to sustain June crude oil prices close to the $84 level. With the energy market still trying to cope with the high storage levels indicated by this week's inventory reports, the turnaround in equity markets on both sides of the Atlantic should provide decent support to the market. Less weakness in European currencies could also take some pressure off energy prices, but to see currencies help crude today would mean that the Euro would have to drive up into positive ground. In the end, the outside market influence on energy prices today will be determined by the action in the US equity markets. In order to get back into a positive demand posture, the energy complex will need good US numbers and positive equity market action, or we suspect that this week's high of $84.64 will serve to cap off rallies. In fact, the failure to hold above $83.31 in the first hours of trade today could undermine sentiment and reduce the prospect of a demand led rally. Internal fundamentals in oil are slightly negative and without a distraction from that view early today, the bear camp might prevail.
Natural Gas:
June natural gas was able to rally sharply yesterday off of a lower-than-expected build in EIA storage, but the total inventory amount is still close to a record high for this time of the year and therefore the rally might have been partly the result of spread action with the crude oil market. The improvement in sentiment created by a stronger US equity market this morning should see gas prices remain well above the recent lows, but the underlying sentiment for this market needs to turn around aggressively before we see prices exit their recent trading range on the upside. However, seeing the July Natural gas contract manage a rise above the $4.25 level could be cause for additional short covering buying, as the last COT report, adjusted to the recent lows, might have put the net spec short positioning above 80,000 contracts. The weekly EIA natural gas storage report showed an injection of 73 bcf. Total EIA storage stands at 1829 bcf, or 18.5% above the 5 year average. Over the last four weeks EIA natural gas storage has increased 203 bcf.
Cattle:
The demand news was very strong this week, with a jump in weekly export sales and declining cold storage stocks. Traders also believe that imports are slow, and this should help keep US supply relatively tight. There are some concerns that too many cattle will move onto feedlots in March and April and cause an increase in supply into the summer. June cattle experienced an early setback yesterday due to weakness in the stock market and a strong US dollar, but support held above Wednesday's lows and the market closed slightly higher on the session with another new contract high close. Weekly U.S. beef export sales came in at 20,300 metric tonnes, compared with the prior 4-week average of 10,325. This is the highest weekly sales total since August 2008. Cumulative sales for 2010 have reached 228,600 metric tonnes, up 30% from last year's pace. The monthly cold storage report, released after the close, showed frozen beef stocks at the end of March at 390.5 million pounds, which is down 8% from last year and down from 404.5 million pounds in February. Cash cattle in the Southern Plains traded at $99.00, down $1.00 from the highs last week and up $1.00 from the lows last week. The estimated cattle slaughter came in at 126,000 head yesterday. This brings the total for the week so far to 507,000 head, up from 499,000 last week at this time and up from 504,000 a year ago. Boxed beef cutout values were down 9 cents at mid-session yesterday and closed 27 cents lower at $167.35. This was up from $166.96 the prior week. Average dressed steer weights for the week ending April 10th came in at 814 pounds, up from 813 pounds the previous week but still down from 835 pounds last year at this time. Beef production for the same week came in at 468.8 million pounds, up 0.80% over a year ago. Traders see this afternoon's Cattle on Feed report showing placements at 3-11% above last year, with many estimates centering around a 6-7% jump. However, marketings are also expected to be active at 4-6% above last year. As a result, on-Feed supply as of April 1st is thought to be 1.5% to 3.5% down from last year, with most estimates near a 3% drop. There are still no deliveries against the April contract.
Rut Update
Well we got a break for a few days but the market is now back at it. Rut made new highs yesterday and the futures are pointing to a higher open this morning. So we are going to start working 2 new orders. 1st we need to try and open a new put spread.
Sell 3 May 660/650 put spread @ GTC limit 0.50 Credit
Then we need to buy and IWM debit spread to protect our up side.
Buy May 75/76 call spread 3/3 @ 0.28 - 0.30 Debit. (Price might need to be worked to get filled.)
I will post all fill updates, and get the tracker sorted today.
Sell 3 May 660/650 put spread @ GTC limit 0.50 Credit
Then we need to buy and IWM debit spread to protect our up side.
Buy May 75/76 call spread 3/3 @ 0.28 - 0.30 Debit. (Price might need to be worked to get filled.)
I will post all fill updates, and get the tracker sorted today.
Thursday, April 22, 2010
Wednesday, April 21, 2010
Today's Market Guidance
Financial Overview:
While many US measures managed to make higher high moves overnight, the bull camp isn't firmly in control of prices into the Wednesday US trade. Surprisingly there were rather robust gains in many Asian equity markets overnight but that hasn't translated into a distinctly bullish sentiment around the globe. The bull camp has to be disappointed with the markets initial reaction this morning, especially given the significantly better than expected Apple earnings last night and the mostly positive UK jobless results that were released this morning. We suspect that the market is fearful of upcoming negotiations between Greece, EU Ministers and the IMF, as certain parties within the EU are postured to restrict their input into the Greek bailout. It is also likely that many market participants are unwilling to step back into the equity markets, until it is safe to assume that a world wide witch hunt on banks and financial institutions has been averted. One should expect the tech sector to remain in favor, in the wake of the Apple news and the new all time high in Apple shares and it would also appear as if the market can count of ongoing strength from oil and natural resource related shares. Therefore the bulls have a slight edge, but many are looking over their shoulders to the EU debt crisis.
Dow:
The June Mini Dow has managed a fresh new high for the move (even though the move is technically only in its third day) and that should give the bull camp a slight edge. Unfortunately the Mini Dow comes into the action today sitting almost at the middle of the up trend channel and that means up trend channel support is seen all the way down at 10,960, with that support level rising to 10,983 on Thursday. The top of the up trend channel today is seen up at 11,158. In order to propagate the upward march in the Mini Dow the market needs to see calm on the Euro zone debt issue front and perhaps the market also needs to see confirmation from the US numbers Thursday that the US economy continues to recover, despite the big anxiety elements present in the marketplace.
Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The market's close above the 9-day moving average suggests the short-term trend remains positive. It is a mildly bullish indicator that the market closed over the pivot swing number. The next downside objective is 10996. The next area of resistance is around 11109 and 11135, while 1st support hits today at 11039 and below there at 10996.
S&P:
While the S&P did manage a new high for the move overnight, the S&P was unable to hold the overnight attempt to rally and that in turn would seem to leave a critical pivot point on the charts at the 1205.40 level. It would seem like slack to weak action in European financial shares is in turn serving to undermine the early US trade in the S&P. In other words, good news in the market is being countervailed by ongoing concerns from either Goldman or Greece. The inability to hold the 1205.40 level, could leave little in the way of support on the charts until the 1201.30 level in the June S&P. The trend is expected to remain up, but we get the sense that the upward track in prices will take place within a very choppy two sided market.
Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market setup is supportive for early gains with the close over the 1st swing resistance. The next downside objective is 1190.94. The next area of resistance is around 1211.37 and 1214.43, while 1st support hits today at 1199.63 and below there at 1190.94.
Nasdaq:
Not surprisingly, the Nasdaq has not only managed a new high for the move but it technically managed to reach a fresh new high for the year overnight. Clearly the out of the park Apple earnings news gave the market the majority of its lift, but we suspect that earnings from E-bay might be a little disappointing, as other tech sector earnings were softened by a pattern of poor advertising activity. At least in the near term, the path of least resistance is expected to remain up, with close in support today seen at 2030.00. In order for the Nasdaq to continue upward, the rest of the market will have to confirm with new highs for the year in the coming two trading sessions.
Bonds:
The Treasury market generally forged a tight trading range yesterday but surprisingly the market managed to forge some gains despite the strength in the US equity markets. Therefore, a bit of bullish flight to quality mentality seems to have remained in place. We suspected that the market would retain its bullish stance, as the Greek debt issue is probably going to remain an issue well through a Thursday IMF/EU meeting. If the bear camp had decent footing, a decline in the UK jobless claimant count of 32,900 for March overnight would have been cheered by the markets as a sign that another country might be poised to turn the corner on the employment front. However, US Treasuries in Asia overnight did so show weakness as a result of rather noted gains in Asian equity markets and that highlights a market that is paying close attention to the ebb and flow of outside markets. In looking ahead to the Wednesday US Treasury market action, the trade isn't seeing definitively strong equity market action from Europe or from the early US trade and that is a little surprising considering the much better than expected earnings from Apple. The US economic report slate remains mostly empty today, with the Fed Beige book this afternoon expected to give a retroactive view from the Fed, which again in testimony indicated that US rates were still going to be held low for an extended period of time. All things considered, we can't argue against more minor hard fought gains on the charts, as the improvement in the economy is apparently being discounted in favor of residual concerns toward Greece and Goldman. One could point to an up trend pattern of sorts on the June Bond chart and that would give up trend channel support at 116-03 today, with that level rising to 116-08 on Thursday. We continue to see initial resistance in June bonds at 116-28 and again at 117-06. The June Notes also seem to be in the midst of a weak upward bias, with up trend channel support today pegged at 116-22 (that is right on the early Wednesday lows). Therefore it is possible that notes are facing a bit of vulnerability on their charts and that in turn could mean that Notes are destined to lose to bonds. While we give the bull camp a minor edge today, we suspect that edge is destined to wane in the Thursday action, as the market is expecting to see some type of gain in existing home sales readings and it is possible that the US claims data will return to a recovery prospect. Furthermore, the market will get some fresh detail on upcoming US Treasury supply and that could be just enough bearish news to result in a downside shift in notes, which we assume would then turn up the selling pressure on Bonds.
Rising stochastics at overbought levels warrant some caution for bulls. A positive signal for trend short-term was given on a close over the 9-bar moving average. The upside daily closing price reversal gives the market a bullish tilt. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside objective is at 117-050. The next area of resistance is around 117-010 and 117-050, while 1st support hits today at 116-180 and below there at 116-060.
US Dollar:
The Dollar has been able to hold onto much of its gains earned over the past few days, but seems to be missing the sort of fuel that resulted in the aggressive early April run up. With the skies over Europe opening up, no fresh news out of the Goldman situation and with a lack of US economic numbers until tomorrow, the April 19th highs might restrict the trade. Risk aversion was a key element of the Dollar's recovery from its recent lows and while a certain amount of risk aversion remains in place, there does appear to be a number of holes in the Dollar bull's case. In addition, strength in the physical commodity markets overnight is an indication that some funds are moving away from the safety of the Dollar and into riskier areas. While a sharp move during the session is not out the realm of possibility, we expect a further consolidation in the Dollar, as the market prepares for tomorrow's US economic numbers and waits for real news from the EU/Greece/IMF negotiations. We also think that weaker US equities have given the Dollar a lift, but with the Pound, Canadian and Yen also higher today, that has clearly removed some of the Dollar bulls thunder. Resistance is seen at 81.40 and support is likely to be solid at 81.20 for a fairly tight expected range today in the Dollar.
Euro:
The June Euro was able to benefit from the reopening of airspace over Europe, but that hasn't allowed the Euro to throw off the downward tilt on the charts. Apparently the EU/IMF mission to Athens is expected to take up to 10 days to negotiate with the Greek government, and that seems to leave fear instead of optimism in place for the Euro. In the wake of the volcano-related problems that have blown into Europe there is probably a good chance that some sort of agreement will be reached. A recent stretch of decent economic numbers from within the Euro Zone, along with some strong global stock market action could lead many in the market to believe that the double-bottom from late March/early April should be able to hold in the Euro over the near-term. Even so, the June Euro would likely need to wait until an agreement is reached in Athens before we see prices make a strong run back up to the 1.36 level.
Yen:
While Japanese officials continue to be cagey in regards to future monetary policy, the June Yen continues to be undercut by ideas that easier Japanese rates are going to come rather quickly. Given how much rhetoric was used over the Chinese Yuan revaluation earlier in the month, it has been interesting to see how that issue faded into the background when other news hit the market. Although the June Yen may find some support near the 106.60 level over the next few days, look for another test of the early April lows when and if the Bank of Japan steps in.
Gold:
The gold bulls are suggesting that gold is capable of rallying further, despite the threats thrown off by the EU debt crisis and from the US financial sector legal wrangling, but that also highlights the importance of outside market action in determining the direction of gold prices. With the Greece situation entering into negotiations between Greek, EU and IMF officials, the headline flow on that subject is likely to intensify. Many traders fear negative headlines initially, as certain EU members work to reduce their contribution and exposure to Greece. However, the market is starting to see potential contributions defined in the Press from France and the IMF does seem to be committed to providing assistance and that could dampen some anxieties. The gold market is seeing talk of the prospect of increased output from a key South African gold mine, but the gold market hasn't recently taken much of a cue from physical supply side news. There are more signs of increased investment interest in precious metals newswires overnight and apparently that is initially countervailing ideas that global growth might continue to be tripped up by volcanic ash, debt turmoil or legal wrangling. Comex Gold Stocks were 10.105 million ounces down 31,159 ounces.
Silver:
Unlike the gold market, the silver market saw news overnight of a decrease in physical silver supply from a prominent silver producer but that type of news recently hasn't been given much credence. In other words, the focus of the silver market seems to remain fixated on the demand side of the equation. Some analysts are suggesting that press coverage of investment interest in silver is on the rise this week and that issue seemed to be in place in the early April rally. The bear camp seems to be confident in some upcoming turmoil from the Greece/EU/IMF negotiations, which are getting underway, especially with some analysts yesterday attempting to ramp up the projected Greece debt shortfall projections. At least in the early action today, the outside market impact on silver prices is mixed, as copper prices are lower and platinum prices are higher. Comex Silver Stocks were 114.637 million ounces down 298,372 ounces.
Crude Oil:
June crude oil has been able to take advantage of the market's re-entry into riskier assets as energy prices continue to recover from last week's washout. The surprisingly larger than expected draw in crude oil stocks shown by a private industry survey released after the close yesterday has helped to underpin this recovery attempt, but will likely need to be 'confirmed' by EIA storage data later this morning, before the market can extend itself back towards the overnight highs. News of a key gasoline pipeline in the US seeing over capacity for the fifth day in a row is an indication of solid demand. The gradual reopening of airspace over Europe should also be a benefit to energy prices, as the ash clouds ended up having a huge effect on worldwide air fuel demand and also on economic sentiment. In addition, Chinese energy demand has once again shown double-digit growth for the seventh month in a row and that growth is reiterated by news of solid gains in Chinese copper concentrate imports. However, the strength in US equity markets so far this week, will likely need to be maintained in order for energy prices to hold onto and add to their gains, as they have shown their vulnerability to bad news over the past few sessions. Also the potential for upset off the Greek debt issue and the next iteration in the Goldman saga leaves the bull camp a little concerned. In short, we think the market is capable of moving higher but it is possible that the June crude oil could see a trading range of $83.00 to $84.50 until the direction of the EU debt issue is resolved. If the EU debt issue is tamped down June crude oil prices could once again entrench in a range bound by $84.00 and $89.00.
Natural Gas:
June natural gas is in desperate need of some positive demand news, as the market remains unable to pull up and away from the $4.00 level. The tendency for large storage builds at this time of the year, before the air conditioning season may continue to weigh on prices over the next few days, but a surprisingly small number later this week could cause a short covering rally. With the gains in the US stock market providing little in the way of support yesterday, it is likely that natural gas prices may remain trapped within their recent trading range. In short, it will take really optimistic economic sentiment, sharply higher crude oil prices or tropical wave activity to send natural gas prices sharply higher. With some tropical activity possible in the month of May (call for a historical chart of tropical activity by month) we just think that the shorts are getting close to wearing out their welcome.
Cattle:
Another new high in beef prices and a positive tilt to the outside markets may be all that the market needs to see June cattle trade closer to the cash market. Cash cattle are bid at $97.00 in the southern plains but offers are up at the $100-$102 level. Cash is likely to come in at near $99.00, up from $86.00 a year ago, and beef prices are at their highest level since July, 2008. Signals from the cash market remain positive, as demand is better than expected, both export and domestic. June cattle inched lower in quiet trade yesterday. A higher trade in beef prices at mid-session was offset by fears that March and April placements onto feedlots will be higher than normal, which could bring more fed cattle to the market into the summer. Traders see Friday's Cattle on Feed report showing placements at 3-11% above last year, but marketings are also expected to be active at 2-6% above last year. As a result, On-Feed supply as of April 1st is thought to be in the range of 1.5% to 3.5% down from last year. The estimated cattle slaughter came in at 128,000 head yesterday, which was well above trade expectations and suggested strong demand from the packer to own live inventory. This brings the total for the week so far to 253,000 head, up from 251,000 last week at this time but down from 255,000 a year ago. While the cash market has rallied, the surge in beef prices has helped hold packer margins in the black, and this demand from the packer should help keep feedlot marketings active and weights down. In addition, the stiff discount of June cattle to the cash market will also encourage continued movement of lighter weight animals. Boxed beef cutout values were up $1.05 at mid-session yesterday and closed 93 cents higher at $168.03. This was up from $166.92 the prior week and is the highest beef price since July 18th of 2008. There are still no deliveries against the April contract.
While many US measures managed to make higher high moves overnight, the bull camp isn't firmly in control of prices into the Wednesday US trade. Surprisingly there were rather robust gains in many Asian equity markets overnight but that hasn't translated into a distinctly bullish sentiment around the globe. The bull camp has to be disappointed with the markets initial reaction this morning, especially given the significantly better than expected Apple earnings last night and the mostly positive UK jobless results that were released this morning. We suspect that the market is fearful of upcoming negotiations between Greece, EU Ministers and the IMF, as certain parties within the EU are postured to restrict their input into the Greek bailout. It is also likely that many market participants are unwilling to step back into the equity markets, until it is safe to assume that a world wide witch hunt on banks and financial institutions has been averted. One should expect the tech sector to remain in favor, in the wake of the Apple news and the new all time high in Apple shares and it would also appear as if the market can count of ongoing strength from oil and natural resource related shares. Therefore the bulls have a slight edge, but many are looking over their shoulders to the EU debt crisis.
Dow:
The June Mini Dow has managed a fresh new high for the move (even though the move is technically only in its third day) and that should give the bull camp a slight edge. Unfortunately the Mini Dow comes into the action today sitting almost at the middle of the up trend channel and that means up trend channel support is seen all the way down at 10,960, with that support level rising to 10,983 on Thursday. The top of the up trend channel today is seen up at 11,158. In order to propagate the upward march in the Mini Dow the market needs to see calm on the Euro zone debt issue front and perhaps the market also needs to see confirmation from the US numbers Thursday that the US economy continues to recover, despite the big anxiety elements present in the marketplace.
Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The market's close above the 9-day moving average suggests the short-term trend remains positive. It is a mildly bullish indicator that the market closed over the pivot swing number. The next downside objective is 10996. The next area of resistance is around 11109 and 11135, while 1st support hits today at 11039 and below there at 10996.
S&P:
While the S&P did manage a new high for the move overnight, the S&P was unable to hold the overnight attempt to rally and that in turn would seem to leave a critical pivot point on the charts at the 1205.40 level. It would seem like slack to weak action in European financial shares is in turn serving to undermine the early US trade in the S&P. In other words, good news in the market is being countervailed by ongoing concerns from either Goldman or Greece. The inability to hold the 1205.40 level, could leave little in the way of support on the charts until the 1201.30 level in the June S&P. The trend is expected to remain up, but we get the sense that the upward track in prices will take place within a very choppy two sided market.
Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market setup is supportive for early gains with the close over the 1st swing resistance. The next downside objective is 1190.94. The next area of resistance is around 1211.37 and 1214.43, while 1st support hits today at 1199.63 and below there at 1190.94.
Nasdaq:
Not surprisingly, the Nasdaq has not only managed a new high for the move but it technically managed to reach a fresh new high for the year overnight. Clearly the out of the park Apple earnings news gave the market the majority of its lift, but we suspect that earnings from E-bay might be a little disappointing, as other tech sector earnings were softened by a pattern of poor advertising activity. At least in the near term, the path of least resistance is expected to remain up, with close in support today seen at 2030.00. In order for the Nasdaq to continue upward, the rest of the market will have to confirm with new highs for the year in the coming two trading sessions.
Bonds:
The Treasury market generally forged a tight trading range yesterday but surprisingly the market managed to forge some gains despite the strength in the US equity markets. Therefore, a bit of bullish flight to quality mentality seems to have remained in place. We suspected that the market would retain its bullish stance, as the Greek debt issue is probably going to remain an issue well through a Thursday IMF/EU meeting. If the bear camp had decent footing, a decline in the UK jobless claimant count of 32,900 for March overnight would have been cheered by the markets as a sign that another country might be poised to turn the corner on the employment front. However, US Treasuries in Asia overnight did so show weakness as a result of rather noted gains in Asian equity markets and that highlights a market that is paying close attention to the ebb and flow of outside markets. In looking ahead to the Wednesday US Treasury market action, the trade isn't seeing definitively strong equity market action from Europe or from the early US trade and that is a little surprising considering the much better than expected earnings from Apple. The US economic report slate remains mostly empty today, with the Fed Beige book this afternoon expected to give a retroactive view from the Fed, which again in testimony indicated that US rates were still going to be held low for an extended period of time. All things considered, we can't argue against more minor hard fought gains on the charts, as the improvement in the economy is apparently being discounted in favor of residual concerns toward Greece and Goldman. One could point to an up trend pattern of sorts on the June Bond chart and that would give up trend channel support at 116-03 today, with that level rising to 116-08 on Thursday. We continue to see initial resistance in June bonds at 116-28 and again at 117-06. The June Notes also seem to be in the midst of a weak upward bias, with up trend channel support today pegged at 116-22 (that is right on the early Wednesday lows). Therefore it is possible that notes are facing a bit of vulnerability on their charts and that in turn could mean that Notes are destined to lose to bonds. While we give the bull camp a minor edge today, we suspect that edge is destined to wane in the Thursday action, as the market is expecting to see some type of gain in existing home sales readings and it is possible that the US claims data will return to a recovery prospect. Furthermore, the market will get some fresh detail on upcoming US Treasury supply and that could be just enough bearish news to result in a downside shift in notes, which we assume would then turn up the selling pressure on Bonds.
Rising stochastics at overbought levels warrant some caution for bulls. A positive signal for trend short-term was given on a close over the 9-bar moving average. The upside daily closing price reversal gives the market a bullish tilt. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside objective is at 117-050. The next area of resistance is around 117-010 and 117-050, while 1st support hits today at 116-180 and below there at 116-060.
US Dollar:
The Dollar has been able to hold onto much of its gains earned over the past few days, but seems to be missing the sort of fuel that resulted in the aggressive early April run up. With the skies over Europe opening up, no fresh news out of the Goldman situation and with a lack of US economic numbers until tomorrow, the April 19th highs might restrict the trade. Risk aversion was a key element of the Dollar's recovery from its recent lows and while a certain amount of risk aversion remains in place, there does appear to be a number of holes in the Dollar bull's case. In addition, strength in the physical commodity markets overnight is an indication that some funds are moving away from the safety of the Dollar and into riskier areas. While a sharp move during the session is not out the realm of possibility, we expect a further consolidation in the Dollar, as the market prepares for tomorrow's US economic numbers and waits for real news from the EU/Greece/IMF negotiations. We also think that weaker US equities have given the Dollar a lift, but with the Pound, Canadian and Yen also higher today, that has clearly removed some of the Dollar bulls thunder. Resistance is seen at 81.40 and support is likely to be solid at 81.20 for a fairly tight expected range today in the Dollar.
Euro:
The June Euro was able to benefit from the reopening of airspace over Europe, but that hasn't allowed the Euro to throw off the downward tilt on the charts. Apparently the EU/IMF mission to Athens is expected to take up to 10 days to negotiate with the Greek government, and that seems to leave fear instead of optimism in place for the Euro. In the wake of the volcano-related problems that have blown into Europe there is probably a good chance that some sort of agreement will be reached. A recent stretch of decent economic numbers from within the Euro Zone, along with some strong global stock market action could lead many in the market to believe that the double-bottom from late March/early April should be able to hold in the Euro over the near-term. Even so, the June Euro would likely need to wait until an agreement is reached in Athens before we see prices make a strong run back up to the 1.36 level.
Yen:
While Japanese officials continue to be cagey in regards to future monetary policy, the June Yen continues to be undercut by ideas that easier Japanese rates are going to come rather quickly. Given how much rhetoric was used over the Chinese Yuan revaluation earlier in the month, it has been interesting to see how that issue faded into the background when other news hit the market. Although the June Yen may find some support near the 106.60 level over the next few days, look for another test of the early April lows when and if the Bank of Japan steps in.
Gold:
The gold bulls are suggesting that gold is capable of rallying further, despite the threats thrown off by the EU debt crisis and from the US financial sector legal wrangling, but that also highlights the importance of outside market action in determining the direction of gold prices. With the Greece situation entering into negotiations between Greek, EU and IMF officials, the headline flow on that subject is likely to intensify. Many traders fear negative headlines initially, as certain EU members work to reduce their contribution and exposure to Greece. However, the market is starting to see potential contributions defined in the Press from France and the IMF does seem to be committed to providing assistance and that could dampen some anxieties. The gold market is seeing talk of the prospect of increased output from a key South African gold mine, but the gold market hasn't recently taken much of a cue from physical supply side news. There are more signs of increased investment interest in precious metals newswires overnight and apparently that is initially countervailing ideas that global growth might continue to be tripped up by volcanic ash, debt turmoil or legal wrangling. Comex Gold Stocks were 10.105 million ounces down 31,159 ounces.
Silver:
Unlike the gold market, the silver market saw news overnight of a decrease in physical silver supply from a prominent silver producer but that type of news recently hasn't been given much credence. In other words, the focus of the silver market seems to remain fixated on the demand side of the equation. Some analysts are suggesting that press coverage of investment interest in silver is on the rise this week and that issue seemed to be in place in the early April rally. The bear camp seems to be confident in some upcoming turmoil from the Greece/EU/IMF negotiations, which are getting underway, especially with some analysts yesterday attempting to ramp up the projected Greece debt shortfall projections. At least in the early action today, the outside market impact on silver prices is mixed, as copper prices are lower and platinum prices are higher. Comex Silver Stocks were 114.637 million ounces down 298,372 ounces.
Crude Oil:
June crude oil has been able to take advantage of the market's re-entry into riskier assets as energy prices continue to recover from last week's washout. The surprisingly larger than expected draw in crude oil stocks shown by a private industry survey released after the close yesterday has helped to underpin this recovery attempt, but will likely need to be 'confirmed' by EIA storage data later this morning, before the market can extend itself back towards the overnight highs. News of a key gasoline pipeline in the US seeing over capacity for the fifth day in a row is an indication of solid demand. The gradual reopening of airspace over Europe should also be a benefit to energy prices, as the ash clouds ended up having a huge effect on worldwide air fuel demand and also on economic sentiment. In addition, Chinese energy demand has once again shown double-digit growth for the seventh month in a row and that growth is reiterated by news of solid gains in Chinese copper concentrate imports. However, the strength in US equity markets so far this week, will likely need to be maintained in order for energy prices to hold onto and add to their gains, as they have shown their vulnerability to bad news over the past few sessions. Also the potential for upset off the Greek debt issue and the next iteration in the Goldman saga leaves the bull camp a little concerned. In short, we think the market is capable of moving higher but it is possible that the June crude oil could see a trading range of $83.00 to $84.50 until the direction of the EU debt issue is resolved. If the EU debt issue is tamped down June crude oil prices could once again entrench in a range bound by $84.00 and $89.00.
Natural Gas:
June natural gas is in desperate need of some positive demand news, as the market remains unable to pull up and away from the $4.00 level. The tendency for large storage builds at this time of the year, before the air conditioning season may continue to weigh on prices over the next few days, but a surprisingly small number later this week could cause a short covering rally. With the gains in the US stock market providing little in the way of support yesterday, it is likely that natural gas prices may remain trapped within their recent trading range. In short, it will take really optimistic economic sentiment, sharply higher crude oil prices or tropical wave activity to send natural gas prices sharply higher. With some tropical activity possible in the month of May (call for a historical chart of tropical activity by month) we just think that the shorts are getting close to wearing out their welcome.
Cattle:
Another new high in beef prices and a positive tilt to the outside markets may be all that the market needs to see June cattle trade closer to the cash market. Cash cattle are bid at $97.00 in the southern plains but offers are up at the $100-$102 level. Cash is likely to come in at near $99.00, up from $86.00 a year ago, and beef prices are at their highest level since July, 2008. Signals from the cash market remain positive, as demand is better than expected, both export and domestic. June cattle inched lower in quiet trade yesterday. A higher trade in beef prices at mid-session was offset by fears that March and April placements onto feedlots will be higher than normal, which could bring more fed cattle to the market into the summer. Traders see Friday's Cattle on Feed report showing placements at 3-11% above last year, but marketings are also expected to be active at 2-6% above last year. As a result, On-Feed supply as of April 1st is thought to be in the range of 1.5% to 3.5% down from last year. The estimated cattle slaughter came in at 128,000 head yesterday, which was well above trade expectations and suggested strong demand from the packer to own live inventory. This brings the total for the week so far to 253,000 head, up from 251,000 last week at this time but down from 255,000 a year ago. While the cash market has rallied, the surge in beef prices has helped hold packer margins in the black, and this demand from the packer should help keep feedlot marketings active and weights down. In addition, the stiff discount of June cattle to the cash market will also encourage continued movement of lighter weight animals. Boxed beef cutout values were up $1.05 at mid-session yesterday and closed 93 cents higher at $168.03. This was up from $166.92 the prior week and is the highest beef price since July 18th of 2008. There are still no deliveries against the April contract.
Tuesday, April 20, 2010
Today's Market Guidance
Financial Overview:
At first glance today things seem to be a little better. However, despite extremely favorable German ZEW readings, favorable Diamler news overnight and a re-opening of European airspace, there are still a number of potentially troubling issues hanging over the equity markets. At this point, it would seem like the Greece situation will be easier to solve than the Goldman situation and that could mean that the Greece situation is likely to get less Press and could perhaps improve slightly over the coming 36 hours. The market has also generally seen favorable corporate earnings overnight and that has given international markets a positive bid this morning. While the S&P technically managed a big range down reversal recovery move yesterday, that formation wasn't a classic exhaustion move that could have signaled a full end to the corrective tilt. In other words, the market might be able to mount a bounce this morning, but the bull camp still seems to need a lot of very favorable news to begin to unseat the idea that one of the biggest US financial firms is being targeted. Unfortunately, there isn't much in the way of scheduled data due out from the US today and that leaves the earnings parade and Fed Chairman testimony from the financial reform effort as the primary driving forces in the marketplace. We suspect that earnings will be positive but we can't see the Fed testimony as a positive to tock prices.
Dow:
While the June Mini Dow was able to make and reject a new low for the move on Monday, we don't get the sense that the sellers were exhausted and that prices are poised for anything other than a simple compacted recovery bounce. In fact, given the thin economic news slate and the news that the UK has started its probe of Goldman, the positives of a very favorable German ZEW reading and favorable cyclical news from a car and truck manufacturer, are probably going to be given little attention today. While one could suggest that the June Mini Dow will be able to respect up trend channel support of 10,937, we just have to wonder how the bull camp will muster widespread optimism in the current environment. Perhaps the re-opening of the European airspace will give the Mini Dow the capacity to climb up to close-in resistance on the charts of 11,080.
Rising stochastics at overbought levels warrant some caution for bulls. The close above the 9-day moving average is a positive short-term indicator for trend. The downside closing price reversal on the daily chart is somewhat negative. The market tilt is slightly negative with the close under the pivot. The next upside objective is 117-190. The next area of resistance is around 117-040 and 117-190, while 1st support hits today at 116-160 and below there at 116-105.
S&P:
As suggested already, the S&P gave off a bottoming signal of sorts yesterday but we don't think that the range down action yesterday was severe enough to suggest that the sellers fully exhausted themselves. We do think that a reopening of European airspace, favorable earnings news and up beat German economic data should give the bull camp temporary control over prices this morning. However, looming in the wings, just ahead of mid session is a Fed Chairman testimony and there is the chance that the Greece debt issue will resume throwing off headlines later today, ahead of a Wednesday morning EU meeting. In short, the market can bounce but we are not sure that the bear threat can be consistently held off. Initial resistance in the June S&P is seen at 1201.30 and then again up at 1204.00.
Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The market's close above the 9-day moving average suggests the short-term trend remains positive. The daily closing price reversal up is a positive indicator that could support higher prices. The market has a slightly positive tilt with the close over the swing pivot. The next downside target is now at 1175.69. The next area of resistance is around 1205.12 and 1209.18, while 1st support hits today at 1188.38 and below there at 1175.69.
Nasdaq:
Favorable tech sector news overnight seems to give the Nasdaq a positive early bid today, but we aren't sure that the Nasdaq and the tech sector stocks are going to be allowed to focus exclusively on their own fundamentals. Evidence of skepticism was seen with the markets partially negative reaction to IBM earnings yesterday afternoon as some players pointed out some disappointment in gross operating margins. While the market is showing positive early action, the Nasdaq has only managed to return to the middle of the last three trading session's trading range. With both Yahoo and Apple reporting earnings after the close today, it is possible that this market will wait for confirmation of favorable tech sector earnings news before attempting to push the June Nasdaq up to the first resistance zone on the charts of 2020.
Bonds:
The Treasury market should have been able to extend on the upside in the prior trading session, as anxiety toward the Euro zone and the Goldman situation on Monday morning was clearly present. However, a rather significant up tick in the US Conference Board Leading Indicators report served up a measure of economic confidence and that in turn dampened interest in a market that was fresh off a series of decent daily gains. With the German ZEW readings jumping up aggressively overnight, the Greek debt situation not producing any fresh concerning headlines and equities showing some positive action in many international measures overnight, the initial bias in Treasury prices could have been pointing to the downside this morning. However, while bonds came into the early Tuesday action sitting right on the prior session's lows, we get the sense the bullish capacity remains just under the surface. One might even suggest that a reopening of the European airspace is an issue that could allow for some minor weakness in Treasury prices. With the US economic report slate empty today, the trade will be forced to glean its direction from the action in the equity markets and perhaps by a lesser degree from the flow of US corporate earnings reports. With Diamler posting favorable earnings and in the process raising its 2010 sales forecasts for autos and trucks, the earnings news overnight has generally giving off ideas that the recovery is continuing, even if the markets are still doubtful of the sustainability of the recovery. Furthermore, with the UK FSA supposedly announcing a probe of Goldman, it would appear that regulators are poised to pile on Goldman and that might mean as a group, that they intend to attempt to drive the firm out of business and that in turn seems to suggest that the Goldman headline is going to remain a factor for quite some time. In the event that the Goldman news flow calms down, it is possible that Treasury prices might slide back on the charts, especially with a much hotter than expected Inflation reading seen out of the UK overnight. In our opinion, an economy doesn't usually produce hot inflationary readings unless there is some forward progress in that economy. In short, the bear camp might have a slight edge today but the lack of scheduled data and Fed Chairman testimony to a Congressional panel might serve to lock the price action in an early tight trading range. In conclusion, it might be possible to see a slide down to 116-09 in June bonds early, with a similar dip down to 116-18 in June Notes. The Note market recently has shown more sensitivity than the Bonds and one could argue that Notes were more short term overbought into the Monday high than the Bond market and therefore a decline to secondary support of 116-14 in June notes is possible if the equity market gains in the US become more significant. However, as can be seen from our narrow downside support predictions, we aren't expecting wide gyrations in prices. In fact, it won't take much to rekindle the bull's interest in this market, as the Greece and the Goldman situations haven't been resolved fully and both remain highly fluid. In order to turn the Treasury market definitively lower, will probably require a lot of very good economic readings to drown out the rumor mill in the financial sector.
Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's short-term trend is positive on the close above the 9-day moving average. The daily closing price reversal down puts the market on the defensive. The market's close below the pivot swing number is a mildly negative setup. The near-term upside target is at 117-130. The next area of resistance is around 116-290 and 117-130, while 1st support hits today at 116-070 and below there at 116-000.
US Dollar:
A lack of fresh news from Goldman or Athens has helped to deflate the risk aversion Dollar rally, although prices have held much of their gains from the past few sessions. It would appear that not everyone is convinced that the danger has passed, as the Dollar has held some support levels going into the opening today. With little in the way of US economic numbers until Thursday morning, there will be little in the way of specific news to change ideas that US economy continues to make a slow but steady recovery. There is likely to be some pressure put on the Dollar today as the European airspace reopens and also because of a much stronger than expected German ZEW reading last night, as that news will likely provide European currencies with a bit of a relief rally at the expense of the Dollar. As long as the US stock market continues to hold yesterday's turnaround and the Goldman issue remains quiet, the Dollar should be expected to give some ground. In short, it is all up to overall global macro economic sentiment where the Dollar heads from here. In order to press the Dollar throughout the trade today and into the Wednesday action, the bear camp has to think that the EU is going to come forward with something positive on the Greece debt situation! Near term downside targeting is seen at 80.80 and perhaps down at 80.69 today.
Euro:
The June Euro has been able to build on a strong German ZEW survey and continue to recover above the 1.35 level this morning. There is also a sense that the market may get an additional benefit when European airspace becomes fully operational within the next few days. With officials from the EU & the IMF now scheduled to have a meeting in Athens on Thursday, it appears more likely than Greece will tap into the aid package proposed earlier in the month. While this may give the June Euro a relief rally, we probably have not seen the last one of these aid packages going to an EU nation. While there is plenty of room for the June Euro to run towards the upside near-term, any spike rally will likely be capped off once prices move above the 1.36 level.
Yen:
The June Yen has already begun to follow through on yesterday's reversal and head back towards the 107.00 level, as quieter outside markets and an easing of risk aversion seem to have undercut some of the Yen's recent strength. Although comments by a Bank of Japan official indicating that they have no 'preset' idea regarding upcoming monetary policy, a deflationary Japanese economy makes it fairly clear which direction interest rates are likely to be going. Look for an initial move towards the 107.00 level, with a test of the recent lows if the Bank of Japan does take action.
Gold:
Since the market didn't give much attention to the initial news of a closure of an Australian gold mine in the wake of recent quake, the gold trade is not likely to see the reopening of that mine as an influential factor for gold prices today. However, it would seem like the outside market forces have shifted by 180 degrees from those present Monday morning. The bull camp will probably point out the high to low break in June gold this month of $46 an ounce, as an overdone move, while the bear camp will probably continue to assert that the Greece debt situation is far from being resolved. With June gold to the early highs this morning, sitting as much as $20 an ounce above the prior session's lows, there would seem to be some evidence of renewed physical buying interest, or perhaps simple technical short covering. With an expected Indian interest rate hike seen overnight there might be some concerns that Indian gold demand is likely to be limited somewhat but the other side of that coin is the argument that the Indian economy is evidently strong enough that the Indian government felt the need to meter economic activity. Comex Gold Stocks were 10.136 million ounces up 44,306 ounces.
Silver:
Apparently the silver market isn't overly concerned about overnight news of higher silver supply, as the silver market is showing somewhat noted recovery action into the early US Tuesday trade. With higher silver production noted from both the USGS and Pan American silver over the last 36 hours, there was certainly some supply side evidence to favor the bear camp. However, the silver market seems to be focused on the demand side of the equation in silver, instead of on the supply side of the equation. As in the gold market, the silver market is probably seeing some technically orientated buying interest this morning, especially when one considers that the July silver contract from the April highs was down as much as $1.14 an ounce to yesterday's lows. With some players circulating talk of renewed investment interest in gold overnight, that type of mentality might have fed into the bull's case in the silver market this morning. However, the US economic report slate is thin today and silver is likely to be dominating by the action in the currency markets and perhaps to some lesser degree by the flow of US corporate earnings. Some traders suggested that the reopening of European airspace is being seen as a positive for silver, but that would seem to be a bullish stretch. Comex Silver Stocks were 114.935 million ounces down 663,972 ounces.
Crude Oil:
June crude oil continues to recover from yesterday's spike lows, gaining even further ground during overnight trading off of the news that airspace over Europe was beginning to open up to commercial flights. The recovery in US equities has also lent some support this morning, and as long as the marketplace is no longer having such a strong aversion to risk, as it did during Friday and early yesterday, energy prices could continue to see a move further away from the recent lows. Although sentiment is improving, the market will cautiously be turning its attention to this week's storage numbers and to the threat that more negative news could be seen from either the Goldman situation or from the Greece debt situation. In the midst of the all the flap over the last several trading sessions, the energy markets seemed to miss or mostly discount a US military assertion that the world was likely its surplus dry up by 2012 and that there could be a significant oil shortage by 2015. While the market will likely focus on the shorter term ebb and flow of the global economy, we think prices are going to be underpinned by the idea that global demand for oil is going to remain robust! However, the onus will be on the bull camp to prove that US oil supply conditions are set to tighten and in the current environment the trade will hardly be able to discount news of a build in crude oil stocks or the failure to discharge relatively high gasoline stock levels. In short, to make the $82.50 spike low a key low for the rest of this week, the internal fundamentals can't weigh on crude oil prices. In the end, the primary driving force in the market will continue to be the big picture macro economic ebb and flow and today the bulls look to have an initial but suspect edge.
Natural Gas:
June natural gas can't seem to get out of its own way, as the market failed to hold any sort of recovery action overnight. A meeting between some of the world's top non-US natural gas producers yesterday in Algiers agreed that they should be doing something to raise prices, but apparently any sort of coordinated output reduction is not one of their ideas or the market simply remains focused on the demand side of the equation. With the current supply glut here and overseas, it may take a while for prices to make a major decisive move out of this trading range to the upside and that might only come in the event that nearby crude oil prices rise back above $90.00 or the outlook for a stronger global recovery is a widely accepted viewpoint again. Critical support remains at the $4.00 level on the June chart, but we can't rule out temporary probes below that level in the on again, off again financial turmoil environment.
Cattle:
Cash markets are near $99.00, up from $86.00 last year, and beef prices are at their highest level since July, 2008. Signals from the cash market remain positive, as demand is better than expected, both export and domestic. The discount of June cattle to the cash market is encouraging more aggressive selling in the cash market by producers, and this is helping to keep feedlots current with marketings as well as also helping to keep weights well below normal. June cattle saw choppy and two-sided trade for much of the session yesterday, as the early rally failed to provide much support to prices with outside markets providing enough pressure to push futures lower on the day into the close. Weakness in the US and Chinese stock markets along with strength in the US dollar were seen as bearish forces, and some selling emerged after the weekend COT report showed a record high net long position from fund traders. High open interest suggests volatile trade ahead. The estimated cattle slaughter came in at 125,000 head yesterday. This was unchanged from last week but down from 127,000 a year ago at this time. Boxed beef cutout values were up 21 cents at mid-session yesterday and closed 20 cents higher at $167.10. This was up from $166.31 the prior week and was the highest beef price since July 21, 2008. Cash markets are offered at $100-$102 this week after trading $100 early last week and $98 later in the week. The firm beef market is allowing packer profit margins to hold steady, even with the higher cash cattle market. The COT reports on the weekend showed a record high speculative net long position which is a caution flag. However, the report also showed a buying trend from the funds, which is usually a supportive short term force.
At first glance today things seem to be a little better. However, despite extremely favorable German ZEW readings, favorable Diamler news overnight and a re-opening of European airspace, there are still a number of potentially troubling issues hanging over the equity markets. At this point, it would seem like the Greece situation will be easier to solve than the Goldman situation and that could mean that the Greece situation is likely to get less Press and could perhaps improve slightly over the coming 36 hours. The market has also generally seen favorable corporate earnings overnight and that has given international markets a positive bid this morning. While the S&P technically managed a big range down reversal recovery move yesterday, that formation wasn't a classic exhaustion move that could have signaled a full end to the corrective tilt. In other words, the market might be able to mount a bounce this morning, but the bull camp still seems to need a lot of very favorable news to begin to unseat the idea that one of the biggest US financial firms is being targeted. Unfortunately, there isn't much in the way of scheduled data due out from the US today and that leaves the earnings parade and Fed Chairman testimony from the financial reform effort as the primary driving forces in the marketplace. We suspect that earnings will be positive but we can't see the Fed testimony as a positive to tock prices.
Dow:
While the June Mini Dow was able to make and reject a new low for the move on Monday, we don't get the sense that the sellers were exhausted and that prices are poised for anything other than a simple compacted recovery bounce. In fact, given the thin economic news slate and the news that the UK has started its probe of Goldman, the positives of a very favorable German ZEW reading and favorable cyclical news from a car and truck manufacturer, are probably going to be given little attention today. While one could suggest that the June Mini Dow will be able to respect up trend channel support of 10,937, we just have to wonder how the bull camp will muster widespread optimism in the current environment. Perhaps the re-opening of the European airspace will give the Mini Dow the capacity to climb up to close-in resistance on the charts of 11,080.
Rising stochastics at overbought levels warrant some caution for bulls. The close above the 9-day moving average is a positive short-term indicator for trend. The downside closing price reversal on the daily chart is somewhat negative. The market tilt is slightly negative with the close under the pivot. The next upside objective is 117-190. The next area of resistance is around 117-040 and 117-190, while 1st support hits today at 116-160 and below there at 116-105.
S&P:
As suggested already, the S&P gave off a bottoming signal of sorts yesterday but we don't think that the range down action yesterday was severe enough to suggest that the sellers fully exhausted themselves. We do think that a reopening of European airspace, favorable earnings news and up beat German economic data should give the bull camp temporary control over prices this morning. However, looming in the wings, just ahead of mid session is a Fed Chairman testimony and there is the chance that the Greece debt issue will resume throwing off headlines later today, ahead of a Wednesday morning EU meeting. In short, the market can bounce but we are not sure that the bear threat can be consistently held off. Initial resistance in the June S&P is seen at 1201.30 and then again up at 1204.00.
Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The market's close above the 9-day moving average suggests the short-term trend remains positive. The daily closing price reversal up is a positive indicator that could support higher prices. The market has a slightly positive tilt with the close over the swing pivot. The next downside target is now at 1175.69. The next area of resistance is around 1205.12 and 1209.18, while 1st support hits today at 1188.38 and below there at 1175.69.
Nasdaq:
Favorable tech sector news overnight seems to give the Nasdaq a positive early bid today, but we aren't sure that the Nasdaq and the tech sector stocks are going to be allowed to focus exclusively on their own fundamentals. Evidence of skepticism was seen with the markets partially negative reaction to IBM earnings yesterday afternoon as some players pointed out some disappointment in gross operating margins. While the market is showing positive early action, the Nasdaq has only managed to return to the middle of the last three trading session's trading range. With both Yahoo and Apple reporting earnings after the close today, it is possible that this market will wait for confirmation of favorable tech sector earnings news before attempting to push the June Nasdaq up to the first resistance zone on the charts of 2020.
Bonds:
The Treasury market should have been able to extend on the upside in the prior trading session, as anxiety toward the Euro zone and the Goldman situation on Monday morning was clearly present. However, a rather significant up tick in the US Conference Board Leading Indicators report served up a measure of economic confidence and that in turn dampened interest in a market that was fresh off a series of decent daily gains. With the German ZEW readings jumping up aggressively overnight, the Greek debt situation not producing any fresh concerning headlines and equities showing some positive action in many international measures overnight, the initial bias in Treasury prices could have been pointing to the downside this morning. However, while bonds came into the early Tuesday action sitting right on the prior session's lows, we get the sense the bullish capacity remains just under the surface. One might even suggest that a reopening of the European airspace is an issue that could allow for some minor weakness in Treasury prices. With the US economic report slate empty today, the trade will be forced to glean its direction from the action in the equity markets and perhaps by a lesser degree from the flow of US corporate earnings reports. With Diamler posting favorable earnings and in the process raising its 2010 sales forecasts for autos and trucks, the earnings news overnight has generally giving off ideas that the recovery is continuing, even if the markets are still doubtful of the sustainability of the recovery. Furthermore, with the UK FSA supposedly announcing a probe of Goldman, it would appear that regulators are poised to pile on Goldman and that might mean as a group, that they intend to attempt to drive the firm out of business and that in turn seems to suggest that the Goldman headline is going to remain a factor for quite some time. In the event that the Goldman news flow calms down, it is possible that Treasury prices might slide back on the charts, especially with a much hotter than expected Inflation reading seen out of the UK overnight. In our opinion, an economy doesn't usually produce hot inflationary readings unless there is some forward progress in that economy. In short, the bear camp might have a slight edge today but the lack of scheduled data and Fed Chairman testimony to a Congressional panel might serve to lock the price action in an early tight trading range. In conclusion, it might be possible to see a slide down to 116-09 in June bonds early, with a similar dip down to 116-18 in June Notes. The Note market recently has shown more sensitivity than the Bonds and one could argue that Notes were more short term overbought into the Monday high than the Bond market and therefore a decline to secondary support of 116-14 in June notes is possible if the equity market gains in the US become more significant. However, as can be seen from our narrow downside support predictions, we aren't expecting wide gyrations in prices. In fact, it won't take much to rekindle the bull's interest in this market, as the Greece and the Goldman situations haven't been resolved fully and both remain highly fluid. In order to turn the Treasury market definitively lower, will probably require a lot of very good economic readings to drown out the rumor mill in the financial sector.
Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's short-term trend is positive on the close above the 9-day moving average. The daily closing price reversal down puts the market on the defensive. The market's close below the pivot swing number is a mildly negative setup. The near-term upside target is at 117-130. The next area of resistance is around 116-290 and 117-130, while 1st support hits today at 116-070 and below there at 116-000.
US Dollar:
A lack of fresh news from Goldman or Athens has helped to deflate the risk aversion Dollar rally, although prices have held much of their gains from the past few sessions. It would appear that not everyone is convinced that the danger has passed, as the Dollar has held some support levels going into the opening today. With little in the way of US economic numbers until Thursday morning, there will be little in the way of specific news to change ideas that US economy continues to make a slow but steady recovery. There is likely to be some pressure put on the Dollar today as the European airspace reopens and also because of a much stronger than expected German ZEW reading last night, as that news will likely provide European currencies with a bit of a relief rally at the expense of the Dollar. As long as the US stock market continues to hold yesterday's turnaround and the Goldman issue remains quiet, the Dollar should be expected to give some ground. In short, it is all up to overall global macro economic sentiment where the Dollar heads from here. In order to press the Dollar throughout the trade today and into the Wednesday action, the bear camp has to think that the EU is going to come forward with something positive on the Greece debt situation! Near term downside targeting is seen at 80.80 and perhaps down at 80.69 today.
Euro:
The June Euro has been able to build on a strong German ZEW survey and continue to recover above the 1.35 level this morning. There is also a sense that the market may get an additional benefit when European airspace becomes fully operational within the next few days. With officials from the EU & the IMF now scheduled to have a meeting in Athens on Thursday, it appears more likely than Greece will tap into the aid package proposed earlier in the month. While this may give the June Euro a relief rally, we probably have not seen the last one of these aid packages going to an EU nation. While there is plenty of room for the June Euro to run towards the upside near-term, any spike rally will likely be capped off once prices move above the 1.36 level.
Yen:
The June Yen has already begun to follow through on yesterday's reversal and head back towards the 107.00 level, as quieter outside markets and an easing of risk aversion seem to have undercut some of the Yen's recent strength. Although comments by a Bank of Japan official indicating that they have no 'preset' idea regarding upcoming monetary policy, a deflationary Japanese economy makes it fairly clear which direction interest rates are likely to be going. Look for an initial move towards the 107.00 level, with a test of the recent lows if the Bank of Japan does take action.
Gold:
Since the market didn't give much attention to the initial news of a closure of an Australian gold mine in the wake of recent quake, the gold trade is not likely to see the reopening of that mine as an influential factor for gold prices today. However, it would seem like the outside market forces have shifted by 180 degrees from those present Monday morning. The bull camp will probably point out the high to low break in June gold this month of $46 an ounce, as an overdone move, while the bear camp will probably continue to assert that the Greece debt situation is far from being resolved. With June gold to the early highs this morning, sitting as much as $20 an ounce above the prior session's lows, there would seem to be some evidence of renewed physical buying interest, or perhaps simple technical short covering. With an expected Indian interest rate hike seen overnight there might be some concerns that Indian gold demand is likely to be limited somewhat but the other side of that coin is the argument that the Indian economy is evidently strong enough that the Indian government felt the need to meter economic activity. Comex Gold Stocks were 10.136 million ounces up 44,306 ounces.
Silver:
Apparently the silver market isn't overly concerned about overnight news of higher silver supply, as the silver market is showing somewhat noted recovery action into the early US Tuesday trade. With higher silver production noted from both the USGS and Pan American silver over the last 36 hours, there was certainly some supply side evidence to favor the bear camp. However, the silver market seems to be focused on the demand side of the equation in silver, instead of on the supply side of the equation. As in the gold market, the silver market is probably seeing some technically orientated buying interest this morning, especially when one considers that the July silver contract from the April highs was down as much as $1.14 an ounce to yesterday's lows. With some players circulating talk of renewed investment interest in gold overnight, that type of mentality might have fed into the bull's case in the silver market this morning. However, the US economic report slate is thin today and silver is likely to be dominating by the action in the currency markets and perhaps to some lesser degree by the flow of US corporate earnings. Some traders suggested that the reopening of European airspace is being seen as a positive for silver, but that would seem to be a bullish stretch. Comex Silver Stocks were 114.935 million ounces down 663,972 ounces.
Crude Oil:
June crude oil continues to recover from yesterday's spike lows, gaining even further ground during overnight trading off of the news that airspace over Europe was beginning to open up to commercial flights. The recovery in US equities has also lent some support this morning, and as long as the marketplace is no longer having such a strong aversion to risk, as it did during Friday and early yesterday, energy prices could continue to see a move further away from the recent lows. Although sentiment is improving, the market will cautiously be turning its attention to this week's storage numbers and to the threat that more negative news could be seen from either the Goldman situation or from the Greece debt situation. In the midst of the all the flap over the last several trading sessions, the energy markets seemed to miss or mostly discount a US military assertion that the world was likely its surplus dry up by 2012 and that there could be a significant oil shortage by 2015. While the market will likely focus on the shorter term ebb and flow of the global economy, we think prices are going to be underpinned by the idea that global demand for oil is going to remain robust! However, the onus will be on the bull camp to prove that US oil supply conditions are set to tighten and in the current environment the trade will hardly be able to discount news of a build in crude oil stocks or the failure to discharge relatively high gasoline stock levels. In short, to make the $82.50 spike low a key low for the rest of this week, the internal fundamentals can't weigh on crude oil prices. In the end, the primary driving force in the market will continue to be the big picture macro economic ebb and flow and today the bulls look to have an initial but suspect edge.
Natural Gas:
June natural gas can't seem to get out of its own way, as the market failed to hold any sort of recovery action overnight. A meeting between some of the world's top non-US natural gas producers yesterday in Algiers agreed that they should be doing something to raise prices, but apparently any sort of coordinated output reduction is not one of their ideas or the market simply remains focused on the demand side of the equation. With the current supply glut here and overseas, it may take a while for prices to make a major decisive move out of this trading range to the upside and that might only come in the event that nearby crude oil prices rise back above $90.00 or the outlook for a stronger global recovery is a widely accepted viewpoint again. Critical support remains at the $4.00 level on the June chart, but we can't rule out temporary probes below that level in the on again, off again financial turmoil environment.
Cattle:
Cash markets are near $99.00, up from $86.00 last year, and beef prices are at their highest level since July, 2008. Signals from the cash market remain positive, as demand is better than expected, both export and domestic. The discount of June cattle to the cash market is encouraging more aggressive selling in the cash market by producers, and this is helping to keep feedlots current with marketings as well as also helping to keep weights well below normal. June cattle saw choppy and two-sided trade for much of the session yesterday, as the early rally failed to provide much support to prices with outside markets providing enough pressure to push futures lower on the day into the close. Weakness in the US and Chinese stock markets along with strength in the US dollar were seen as bearish forces, and some selling emerged after the weekend COT report showed a record high net long position from fund traders. High open interest suggests volatile trade ahead. The estimated cattle slaughter came in at 125,000 head yesterday. This was unchanged from last week but down from 127,000 a year ago at this time. Boxed beef cutout values were up 21 cents at mid-session yesterday and closed 20 cents higher at $167.10. This was up from $166.31 the prior week and was the highest beef price since July 21, 2008. Cash markets are offered at $100-$102 this week after trading $100 early last week and $98 later in the week. The firm beef market is allowing packer profit margins to hold steady, even with the higher cash cattle market. The COT reports on the weekend showed a record high speculative net long position which is a caution flag. However, the report also showed a buying trend from the funds, which is usually a supportive short term force.
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