Today’s Market Guidance (From Profit Source Futures & FX Research)

Financial Overview:
With the Chinese posting another impressive PMI reading overnight and the US Fed Chairman over the weekend suggesting that the US economy has entered a recovery phase, the bullish tilt from 2009 has been pulled forward into 2010. Many markets continue to look back to the noted improvement in the US initial and ongoing claims figures last week and that has seemingly fostered ideas that the upcoming US payroll report this Friday will bring proof that the US is getting closer to producing positive job growth. While we think it is premature to think that the December jobs report will show positive growth, we do think that another minimal decline in Non Farm payrolls, that is similar to the small job loss in the prior report, will reduce anxiety toward the jobless recovery and that in turn should leave the bull camp in control. Some traders and investors will look to the first 15 days trade in January as a gauge for the entire year ahead and therefore getting off to a positive start today, would seem to give the bulls an added edge. We suspect that the market will pay a little more attention to the ISM readings, than to the US Construction Spending figures and that in turn should highlight the fact that this market is currently viewing the glass as half full instead of half empty.

DOW:
After the somewhat noted corrective dip at the end of last week, one could suggest that up trend channel support line of 10,371 is very critical in the action today. However, given the rather steep corrective setback that was seen at the end of last week, that could set the stage for a compacted technically fueled rally directly ahead. We see little in the way of resistance on the charts until the 10,477 level in the March Mini Dow contract.

S&P:
With the March S&P respecting the up trend channel support line drawn off the July and November lows, that would seem to leave support at 1105.60 today and at 1107.60 on Tuesday. Initial resistance in the March S&P today is seen at 1121.60 and then again at the old high of 1122.60. While we will get a fresh COT positioning report this afternoon, the last COT positioning did not show a market that was technically overbought.
 
NASDAQ:
With the March Nasdaq bordering on a fresh upside breakout on the charts in the early action today, it would appear that the bull camp is set to pick up where they left off at the end of 2009. At least in the early going today, the March Nasdaq will see initial resistance at the 1881.75 level and then again up at the 1882 level. In short, there would not seem to be a reason to take control of this market away from the bull camp this morning. There would seem to be little resistance in the Nasdaq on the weekly charts, until the even number 1900 level.
 
GOLD:
The gold trade continues to take a large measure of direction from the weaker action in the US Dollar. The trade also seems to have discounted news of rising physical gold production from a gold producer overnight, perhaps because the trade also saw favorable demand in the Indian gold market. There appears to be talk of New Year fund buying interest in a number of markets this morning and with the distinct range up move seen early in the session today, it is also possible that some technically orientated buying interest is also being seen. In fact, with the February gold contract in the early going today, managing to regain the 50 day moving average of $1,117.00 the prospect of technically based buying is difficult to rule out. However, given the recent intense focus on currency market action, some gold traders are suggesting that the Dollar needs to close below 78.00 today to truly shift the trend in the gold market back to the upside.
 
SILVER:
Clearly a weaker Dollar and definitive gains in gold prices is giving silver prices a distinct lift early today. As in the gold market, strong equities and higher oil prices are seem to be lifting silver prices. As in a number of physical commodity markets, there seems to be a bullish 'New Year' fund buying expectation in the marketplace and until that is proven not to be the case, it is possible that the silver trade will buy the rumor of favorable fund allocation action ahead. Unlike the gold market, March Silver hasn't been able to regain the 50 day moving average, which comes in up at $17.63 today. It is also possible that a sharp range up move in copper prices is in turn providing the silver market with some spillover buying support this morning. Technical traders could suggest that March silver prices have only managed to return to the middle of the last month's trading range, with the sharply higher opening probe this morning. As in the gold market, the silver bulls seem to be mostly driven by the weakness in the Dollar.
 
CRUDE:
February crude oil has traded sharply higher overnight and with a variety of issues behind the move the market looks well positioned for an eventual rally back toward the October 2009 high. Perhaps some caution is warranted since the oil market is likely becoming a bit overbought following the steep rally from the December low. But the market's uptrend also looks to be well entrenched right now and price dips should be considered buying opportunities. Part of the strong price gains overnight can certainly be tied to a Russian oil pricing dispute with Belarus that could end up impacting European oil supplies if not resolved soon. But the majority of strength in the oil complex is likely stemming from an extended bitter cold forecast that will certainly boost winter fuel demand into the second half of January. The oil market has been rallying over the last two and a half weeks as oil and product stocks across the complex have seen sizable declines significantly trimming the supply glut into the end of last year. Part of the oil stock drain was likely due to refiners adjusting supplies for tax reasons and there is the risk that oil supplies may start to build again this month. But we suspect the oil market will likely be able to shrug off an oil stock build if the extended cold temperature forecast continues to reduce distillate stock levels. The oil market is also being supported by rising macro economic optimism lifting the outlook for fuel demand after the data last month showed signs of improving conditions. Today's reports on ISM-manufacturing and construction spending will provide further economic insight that is likely to impact oil prices. It also seems as if part of the gains in oil overnight may be tied to expectations for the employment report released on Friday to show US payrolls only dropped by a 1,000, which would be the smallest decline in about 2 years and would further support the view that an economic recovery will boost fuel demand this year. The global outlook for fuel demand is also being supported by reports of higher Chinese and Indian factory output in December. And that could be one reason why the oil markets seem unconcerned over reports of OPEC overproduction. Part of the gain in the oil market can be tied to a higher geopolitical risk factor being priced in due to escalating internal and external Iranian tensions and rising terrorist risks in other Middle East areas. February crude oil is certainly being propelled higher by the market's bullish technical momentum on the move through the $80 per barrel resistance level. With oil prices already up sharply overnight, the market may need to be fed a steady stream of bullish news to avoid profit taking up at these price levels. But with the outside market action providing a bullish environment for commodities and given the variety of positives backing this market, we suspect February crude oil is on course to challenge the October high at $83.19.
 
NATURAL GAS:
The natural gas market has snapped back higher in the overnight trade after selling off sharply late last week with price support coming from an extended cold weather forecast, an improving macro economic outlook and spill over strength from the rest of the energy complex. With natural gas recovering a sizable portion of last Thursday's losses overnight, it looks as if the market has been able to shrug off last week's disappointing storage report and instead focus on expectations for the cold weather outlook to extend into the second half of January. Last week's storage report showing a lower than expected decline of 124 bcf compared to expectations for a 149 bcf draw raised concerns that the cold weather may not be enough to trim excess supplies this winter. But with the latest 11 to 15 day temperature outlook by some private forecasters still showing below normal temperatures in the US heating region through January 17th and at times even frigid conditions, the boost in heating demand over the next two week should help underpin natural gas prices. However, to make a sustained push over the critical $6.00 price level in February natural gas it may take more evidence that industrial fuel demand will begin to recover this year. Therefore, today's reports on ISM-Manufacturing and construction spending could influence trading this session and give the bull camp an added buying incentive if the data comes in above expectations. With crude oil up sharply in connection with the Russian/Belarus supply dispute, to a certain extent natural gas appears to be riding on the coattails of the oil market's strength. While it is certainly very risky to be short natural gas in the midst of the winter season, funds still hold a large net short position in this market and they will likely need further convincing before exiting those positions. Therefore, in order for February natural gas to build on overnight gains a more optimistic demand outlook will need to take hold and of course a rally beyond the $6.00 price level will likely depend on the weather. Close overhead resistance for February natural gas comes in at $5.873 then near $5.93 with support in the $5.70 to $5.66 range then near $5.50.