Finanical Overview:
Technically the S&P managed a classic big range down reversal and while there doesn't appear to have been a major fundamental development to give credence to the reversal yesterday, one has to give the bulls a technical edge off the action Thursday afternoon. It is possible that news of an Apple 4 for 1 stock split provided a boost to stocks (just after mid session Thursday) and if that was the primary source of the recovery effort that would seem to carry little in the way of shelf life for the bull case. However, strength in Bank shares and some mining issues also provided some lift to the equity markets yesterday and that would seem to broaden the bull's case a bit. With news late Thursday that some US Senators were urging the US Administration for action against China for currency manipulation, the threat of a trade issues could be something that serves to undermine sentiment today. In other concerning developments for the Obama Administration, Construction Unions late Thursday afternoon warned the Administration that the EPA wasn't aware of the economic severe impact of proposed CO2 Rules on the US construction industry. However, at least in the early going today, the markets seem to have shaken off the negatives but we would think that the stock market will have very little tolerance for disappointment from the US scheduled data flow.
DOW:
Like the rest of the market the Mini Dow managed an impressive reversal of a big range down thrust yesterday afternoon and that gives the bull camp the technical edge. However, since we didn't see a definitive fundamental development to clear the decks, we remain skeptical of the bull's case. In fact, the failure to hold above 10,300 could easily rekindle some selling pressure. At least in the early going today the potential for deterioration in the Greece situation has been discounted but the bears are probably willing to bet on increased protests as the call for a doubling of austerity efforts is absorbed. To alter our bearish short term fundamental trend views, probably requires a trade back above the 10,380 level in the March Mini Dow.
The market back below the 60-day moving average suggests the longer-term trend could be turning down. 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 market tilt is slightly negative with the close under the pivot. The near-term upside target is at 10474. The next area of resistance is around 10411 and 10474, while 1st support hits today at 10229 and below there at 10109.
S&P:
Typically a classic big range down reversal within a trading session signals some form of key bottom. In some cases the big range down reversal only yields a 2-3 day corrective bounce and since the reversal yesterday afternoon didn't seem to be the result of a tangible fundamental event, we are only willing to predict a fleeting respite from the selling pressure. While it might not be politically correct, the stock market seems to want an end to the health care reform push as that lowers the amount of uncertainty facing employers! With slack numbers from the US, UK and the Euro zone this week, lingering Greek concerns and acrimony in Washington, there still appears to be more risk than reward for longs in the equity markets.
Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. A positive signal for trend short-term was given on a close over the 9-bar moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside target is 1117.12. The next area of resistance is around 1111.75 and 1117.12, while 1st support hits today at 1092.75 and below there at 1079.13.
NASDAQ:
The Nasdaq comes into the session today sitting just under a critical pivot point on the charts of 1820. While a move above 1820 in the March contract would improve the technical position of the Nasdaq, it could take more than a mechanical change in the Apple share price to rekindle optimism and restart the February rally. In fact, it might only take a slide back below 1811 this morning could put momentum back in the hands of the bear camp.
Bonds:
The Treasury market seemingly ran up into the last leg of the US Treasury auction yesterday afternoon. In short, any US debt auction that isn't a disaster is a good thing as the flow of supply continues to be unrelenting. At the end of this week it appeared as if a number of markets were starting to fear a rekindling of the Greece debt crisis, while other markets were simply discouraged by the prospect of slackening US numbers or by the fear of further uncertainty from Washington. If the health care reform effort is fully rekindled and there is a push for a comprehensive and expensive package that could continue to weigh on equities and perhaps even apply some pressure to Treasury prices. Typically the big report of the day would be the GDP report, but because that is an old number it is possible that the real attention will be paid to the US existing home sales report. While early estimates call for a minor rise in the existing home sales reading, the rather shocking under shoot on the new home sales report earlier in the week could mean that some traders are expecting something softer than the expected reading from the existing home sales report. With some regional ISM and PMI readings also due out there will be no shortage of information on the economy. While it might be premature, the ultra weak new home sales report released early in the week and the sharp down move in the equities did prompt some talk in the media of a double dip recession, which means the stronger than expected US Durable Goods report was discounted by some. In short, the bias from the economic front is bullish and that tilt might not be reversed easily. In fact, there are some economists suggesting that severe winter weather in the Northeast might make the February payroll readings weaker than expected. While Asian equities were showing minor gains in the early going today, it seemed as if there was lingering concern for the Greek debt situation, especially since the EU told Greece that the current austerity program wasn't enough and that should leave the debt issue as a positive to US Treasuries through the Friday US trade. In fact, with Greek protests already turning violent early in the week we have to think that US Treasuries will move to insert some type of added flight to quality premium to prices ahead of the weekend. With the EU demanding that Greece cut 4% instead of 2% from their budget that would seem to require them to double the austerity and that should whip up the protests over the weekend. In short, the bias is pointing upward today even if a couple of the scheduled numbers are positive. Near term upside targeting in the June bonds is seen at 117-10, with similar resistance and targeting seen in June Notes up at 117-13. In order to turn the bullish tide around technically probably requires a decline back below 116-25 in June bonds and a trade back below 116-28.
Momentum studies are rising from mid-range, which could accelerate a move higher if resistance levels are penetrated. The market now above the 18-day moving average suggests the intermediate-term trend has turned up. The market setup is supportive for early gains with the close over the 1st swing resistance. The next upside objective is 119-070. The next area of resistance is around 118-300 and 119-070, while 1st support hits today at 118-010 and below there at 117-120.
US Dollar:
The Dollar generally continues to garner the benefit of the doubt on its economic recovery and that tilt is probably made possible because of lingering Greek debt concerns. However, the Dollar was at least partially dented versus the Yen in the wake of the somewhat soft US claims data yesterday. In other words, the markets are growing more concerned about the failure to recover and that means that the Yen will probably continue to be the true leadership currency. We are not sure how to read the impact of the US health care summit yesterday as the two sides appear to have very significant differences and that might result in the Democrats resorting to off floor reconciliation or a cram down push and therefore, significant political turmoil in the US ahead could take some of the favor out of the Dollar. However, we just don't see the Greece turmoil going away, especially with the EU overnight doubling the budget cuts recently proposed by the Greek government. With riots in Greece seen off the initial austerity program and the EU upping the ante rather significantly one probably can't get short the Dollar off the prospect of slowing in the US and the threat of a forced health care reform bill. In other words, the Dollar is getting in its own way and that could leave flight to quality money spilling over into the Yen.
Gold:
In retrospect the gold market seems to have garnered some support from the avalanche of suggestions from the US Fed that interest rates would be left at low levels. Some traders are even suggesting that gold this week saw some renewed flight to quality buying in the wake of intense political wrangling in the US, while others suggested that the stronger than expected US Durable Goods data was responsible for concentrated buying in gold. It is also possible that gold is getting an indirect lift from press reports that center on China's need to buy more gold to back their dramatically expanding international financial footprint. And since the projections of increase Chinese gold holdings were floated by a Chinese quasi-government entity, those reports seem to have been given added credence. With initial weakness in the Dollar and somewhat higher global equity prices, the bull camp in gold initially looks to have the advantage of outside market action. The bear camp on the other hand is probably banking on renewed uncertainty from Greece and perhaps soft US economic readings.
Silver:
The silver market might be poised to get some follow through buying as a result of a favorable shift in outside market action. Some players are also suggesting that a rise above the prior two session's highs is also capable of giving the bull camp some technically based buying interest. In fact, the bull camp might even suggest that favorable Chinese demand news is capable of providing the bulls in silver with some spillover support. However, weak US numbers and residual turmoil in Greece are factors that would seem to leave the bear camp in silver and other physical commodity markets with some potential. In the end, the silver bulls seem to need favorable US equity market action and perhaps a consistently lower US Dollar to maintain a fundamental edge today.
Crude Oil:
Crude oil has seen a choppy two sided trade overnight with lingering doubts about the macro economic recovery being offset a bit by favorable outside market influences. Currency connected support from a weaker Dollar and firmer global equity market trade has helped crude oil edge higher at times. Month end positioning may add to market volatility this session. But trading is likely to remain cautious ahead of a heavy news flow out today which includes a revision of 4th quarter GDP, a regional manufacturing reading, another consumer sentiment measure and existing home sales that will provide additional economic insight and likely be the key driver in oil market direction today. The economic news this week has clearly been disappointing, not only raising doubts about the potential for a recovery in oil demand this year but it is also starting to stir up some concern over a possible double dip recession. In fact, even the head of the IEA said that there is likely more downside risk to demand than upside implying that oil demand in developed countries has peaked. We also suspect that European sovereign debt problems will continue to be a stumbling block for oil market bulls since Greece's problems are far from resolved and the economic news this week clearly shows conditions in the Euro-zone remain soft. A report showing OPEC compliance to quotas has fallen to 53% this month also shows a lack of supply side tightness. April crude oil has been caught in a range with the market clearly showing signs of struggling on moves back above the $80 price level. Overall, the crude oil doesn't seem to have the economic or fundamental backing right now to stage a rally back towards the January high. Fuel supplies remain ample and US fuel demand remains sluggish. The rally off the February low in April crude oil has also lifted daily technical indicators to overbought levels and there seems to be stiff resistance in the $80.34 to $80.80 price range. Market direction today will hinge on the economic news and we certainly can't rule out a rally attempt back towards $80 if the reports come in better than expected. But oil market trading has also been more closely tied to the movements in equities, even more so than the dollar and the stock market's reaction to today's economic news is likely to have the most influence on the oil trade. The demand outlook for oil has been damaged by this week's economic news, particularly a slump in consumer sentiment and the jump in jobless claims and we suspect some big bullish surprises will need to be seen in today's reports to revive macro economic optimism and support a move back over $80. Otherwise, we see April crude oil both fundamentally and technically vulnerable to a break back towards the first retracement of the Feb low/high range at $75.67.
Natural Gas:
Natural gas has been able to bounce a bit in the early overnight action and it won't be surprising to see the market trade a bit higher on end of the month short covering. While we eventually see April natural gas falling below the December low, the market has become short-term oversold following a nearly 40 cent break this week and a nearly 90 cent break from the February high and it won't be surprising to see some traders book month end profits. A slightly larger than expected decline from storage of 172 bcf may also provide some temporary support since it was more than the 90 bcf draw seen last year and larger than the 5 year average decline of 132 bcf. Total storage stands at 1,853 bcf, which is 2.9% below year ago, the first time an annual deficit has been seen in over a year. The Northeast is bracing for another snowstorm and that may also provide a short covering incentive. But while there may be some technical capacity for natural gas to trade a bit higher, we still see the upside limited by the supply/demand outlook which favors the bear case into the spring. The economic news this week has been disappointing and there are concerns that a slow recovery pace could result in natural gas supplies building back towards record levels since industrial fuel demand remains weak while natural gas producers have kicked up output. Natural gas is seeing some early outside market support from a firmer oil and equity trade along with a weaker Dollar. But today's reports on GDP, regional manufacturing, consumer sentiment and home sales will provide additional economic insight that's likely to impact market direction. April natural gas appears to have found some temporary price support near the $4.75 level, but even on a recovery bounce the market may struggle to get back to the $5.00 price level. On the other hand, a move under $4.75 will then target the December low at $4.595.
Friday, February 26, 2010
Thursday, February 25, 2010
RUT Fill
We were just filled on our 690/700 call spread as the market has exploded to the up side.
We are putting in two working order to close this trade. I have them OCOed
Buy 2 Apr 690/700 call spread GTC limit for $0.05 Debit
Buy 2 Apr 690 calls @ market GTC if RUT trades at or above 690.
I will get the tracker up to date shorlty.
We are putting in two working order to close this trade. I have them OCOed
Buy 2 Apr 690/700 call spread GTC limit for $0.05 Debit
Buy 2 Apr 690 calls @ market GTC if RUT trades at or above 690.
I will get the tracker up to date shorlty.
Rut Spread Adjustment
We our closing our open order to sell the Apr 700/710 call spread and we are going to roll that down and put an order to sell the Apr 690/700 call spread for a GTC limit of $0.50.
Market is making a move back to the upside so if we can get a fill the 690/700 gives us a better chance.
Market is making a move back to the upside so if we can get a fill the 690/700 gives us a better chance.
Today’s Market Guidance
Financial Overview:
With US economic numbers disappointing the trade, the Greece situation remaining unsettled and the Obama Administration setting the stage for yet another assault on Health care reform, there are clearly more bearish influences than bullish influences in the marketplace. With Washington aiming its blame gun at health insurers and Congress moving to repeal a Federal Antitrust exemption for health insurers, it would appear that another industry is about to be ransacked. Typically seeing the US Federal Reserve Chairman promise lingering low rates is seen as a positive and at times the stock market yesterday even seemed to rally off the idea that soft US numbers would insure lingering low rates. In other words, the market tried to shift back into a position where soft numbers serves to temper the fear of higher rate. However, the market doesn't even seem to be able to consistently embrace the soft number/higher equities theme, perhaps because some don't believe the Fed, while others are just afraid of further anti growth measures coming from Washington. Mix in what could be a deteriorating Greece situation and there appears to be more risk than reward in the current market.
DOW:
With a pattern of lower highs in the March Mini Dow this week, it would seem like the bear camp has the technical edge. In fact, the market was unable to benefit from potentially supportive corporate headline news and clearly the scheduled macro economic news this week has been discouraging. Today the markets probably won't have as much support off Fed testimony (because it is the second day of testimony) and that could make the mid day auction results a bit of a negative for equity market sentiment. Critical support in the March Mini Dow looks weak at 10,299, with the market potentially unable to avoid a slide down to and below 10,250.
The cross over and close above the 60-day moving average is an indication the longer-term trend has turned positive. 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 close over the pivot swing is a somewhat positive setup. The near-term upside target is at 10456. The next area of resistance is around 10424 and 10456, while 1st support hits today at 10314 and below there at 10237.
S&P:
Critical up trend channel support is seen at 1094.80 today, but we have to think that support levels could be violated, given the docket of political and economic events scheduled for today. In fact, to alter the down trend pattern in the S&P would probably require a rally back above 1105.20. If the durable goods report disappoints early today, we suspect that bearish sentiment will dominate.
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 market has a slightly positive tilt with the close over the swing pivot. The next upside objective is 1114.25. The next area of resistance is around 1110.00 and 1114.25, while 1st support hits today at 1097.00 and below there at 1088.25.
NASDAQ:
Like the Mini Dow, the Nasdaq has a pattern of lower highs on the charts and it is likely that the March Nasdaq will see a slide below the even number 1800 level today. With a lower early US trade this morning being seen despite a series of favorable corporate earnings news items from the European markets it is clear that the trade is still looking at the glass as half empty. Critical up trend channel support is seen today at 1797.65, but we can't argue against a return to the February 23rd low of 1785.
US Dollar:
The Dollar Index continues to maintain a bullish tilt on the charts, despite lingering concerns for the pace of the US recovery. However, ongoing concerns toward the Greece situation has provided the Dollar with a bid in the overnight action. While a sloppy or slack US Durable goods report might restrict the upside in the Dollar today and the Dollar might also be undermined as a result of a marathon televised Washington political debacle, the bias looks to remain up in the Greenback. In other words, the economic and political outlook inside the US isn't overly impressive, but apparently the outlook and condition in the Euro zone is even worse. In fact, overnight the Euro zone saw economic sentiment decline for the first time in 11 months and S&P has warned of a possible downgrade of the Greece debt rating. Some sources are suggesting that a downgrade of the Greek credit rating will cancel out the budget slashing efforts that are already causing violent protests. With a Greek official reportedly lashing out against the Germans and also maligning the EU leadership, it is clear that tensions are running pretty hot. Therefore, the Dollar looks to continue to get the benefit of the doubt on its economy, because of a more powerful flight to quality influence. Critical up trend channel support is seen at 80.36 but a closer in support level is also seen at 80.86.
Gold:
The bears will suggest that April gold managed a fresh new low for the move in the overnight trade, while the bulls will suggest that the market managed to generally hold within striking distance of the even number $1,100 level. With residual strength in the Dollar and ongoing concern toward the Greece situation seen overnight, it appears that some favorable demand news from the World Gold Council was partially lost in the shuffle. Nonetheless, the gold market probably saw some support off predictions from the WGC that Chinese and Indian gold demand was starting out 2010 on a strong footing. The positive demand tilt was probably given an added boost by a rather impressive annual jump in expected February Indian gold imports. In fact, the February Indian import figures put forth from the Bombay Bullion Association of 30 to 35 tons, clearly best the 2009 February import tally, which was under 8 tons. Unfortunately physical demand issues haven't been given a primary role in determining gold prices recently, with big picture macro economic views seemingly taking precedence. In the end, strong demand prospects from Indian and China won't be forgotten, but that news might be discounted until the Dollar gets off the back of the gold market or and the global macro economic outlook improves.
Silver:
At first blush, a higher Dollar and lower equities seems to have applied some minor pressure to silver prices. However, the May silver contract did manage to rise back above the prior session's highs at times overnight and that has to embolden some bulls and discourage some bears. While it seems like silver is generally tracking off outside market forces, there are some analysts who are attempting to play up the prospect of developing tightness in the silver market and that might be helping silver to generally outperform the gold market. However, classic fundamental analysts have to be disappointed with the sharp slide in US new home sales readings in the prior trading session. Furthermore, it would also seem like silver will have to continue to deal with the threat of further debt related turmoil in Greece. Some traders are suggesting that regaining the $16.00 level overnight hints at an improvement in sentiment toward silver, while others suggest that more slack US economic readings this morning could put the bear camp right back in control of silver prices.
Crude Oil:
Crude oil has given back a portion of yesterday's gains in the early overnight trade with prices under some pressure from weaker global equity markets and a slightly firmer Dollar tied to lingering concerns over the pace of the global economic recovery. Macro economic optimism for a recovery in oil demand seems to have been undermined overnight after a ratings agencies warned that Greece's debt rating could be downgraded again raising fears that European sovereign debt problems will impede growth in that region while Bernanke weak assessment of the US economy may also have thrown oil markets a bit off balance. While oil markets rallied yesterday on relief the Fed plans to keep rates low for some time, the low rate environment hasn't been able to significantly revive fuel demand so far and this week's data showing a slump in consumer confidence and a sharp drop in new home sales isn't a particularly strong fundamental backdrop for a recovery in fuel demand. The market may also be rethinking yesterday's EIA report given that crude oil stocks shot up 3 million barrels despite a higher refinery operating rate and despite the drop in gasoline stocks, fuel supplies still remain high. We suspect the relatively unfavorable supply/demand setup is making it difficult for April crude oil to hold rally attempts above the $80 price level. The market may also be getting a bit jittery over the CFTC starting to become stricter in enforcing position limits in oil markets with news yesterday the regulatory agency had fined a brokerage firm for exceeding position limits in energy markets. Oil markets could be negatively impacted if funds start to feel more pressure from the CFTC. The rally in April crude oil from the February low has now lifted daily technical indicators to overbought levels and there seems to be strong overhead resistance around the $80.30 price level. We suspect today's economic reports on jobless claims and durable goods will set the market tone and crude oil looks to be sufficiently overbought that bearish indicators may be enough to pressure the market back towards support in the $78.52 to $78.20 price range. On the other hand, the rally in oil has been mostly based on a revival in macro economic optimism improving sentiment for a recovery in oil demand. While the oil markets are starting out weaker, they have also shown impressive resiliency and if today's economic news is bullish or equities start to recover, it also won't be surprising to see April crude oil retest this week's highs. While April crude oil looks technically vulnerable up near $80, we also don't see a lot of downside potential unless equity markets break sharply or the Dollar shoots higher. But with the big debate over healthcare reform on Capital Hill today, equity market jitters will certainly spill over into energy markets today.
Natural Gas:
Natural gas has edged lower in the early overnight trade as the market can't seem to find any follow through on rally attempts which is certainly a characteristic of a bear market. Natural gas bounced yesterday partly finding support from a sharp rally in crude oil, gains in equities and a weaker Dollar, but strong outside market support is lacking this morning. It also seemed as if some traders wanted to book profits following a 74 cent break from last week's high ahead of today's inventory report which is expected to show a larger than average draw from storage. With April natural gas becoming a bit short-term oversold on the last leg down, it won't be surprising to see more of a technical bounce if today's storage report shows natural gas supplies declining by over 169 bcf expected by most traders since the drop would be significantly more than the 90 bcf draw seen last year and the 5 year average decline of 132 bcf. Another snowstorm headed for the Northeast may also provide some temporary price support to natural gas. But rally attempts in natural gas should continue to be seen as selling opportunities since the supply/demand outlook is turning bearish for this spring and we suspect April natural gas could eventually break below the December low. Bernanke's weak assessment of the US economy and the economic news this week suggests a recovery in industrial fuel demand is likely to be anemic leaving the market at risk to see fuel supplies build since natural gas producers appear to be raising output. Today's reports on durable goods and jobless claims will provide more economic insight, but price gains off the economic or inventory news should be seen as a selling opportunity. The market's trend is down and it's a bearish indication to see open interest in natural gas rise on the price break over the past two weeks suggesting traders are adding to short positions, which was evident in the last COT report. Since the last COT report with options for natural gas also showed small traders were net long 34,578 contracts, it seems as if this market will still have ample selling capacity if support levels fail to hold.
With US economic numbers disappointing the trade, the Greece situation remaining unsettled and the Obama Administration setting the stage for yet another assault on Health care reform, there are clearly more bearish influences than bullish influences in the marketplace. With Washington aiming its blame gun at health insurers and Congress moving to repeal a Federal Antitrust exemption for health insurers, it would appear that another industry is about to be ransacked. Typically seeing the US Federal Reserve Chairman promise lingering low rates is seen as a positive and at times the stock market yesterday even seemed to rally off the idea that soft US numbers would insure lingering low rates. In other words, the market tried to shift back into a position where soft numbers serves to temper the fear of higher rate. However, the market doesn't even seem to be able to consistently embrace the soft number/higher equities theme, perhaps because some don't believe the Fed, while others are just afraid of further anti growth measures coming from Washington. Mix in what could be a deteriorating Greece situation and there appears to be more risk than reward in the current market.
DOW:
With a pattern of lower highs in the March Mini Dow this week, it would seem like the bear camp has the technical edge. In fact, the market was unable to benefit from potentially supportive corporate headline news and clearly the scheduled macro economic news this week has been discouraging. Today the markets probably won't have as much support off Fed testimony (because it is the second day of testimony) and that could make the mid day auction results a bit of a negative for equity market sentiment. Critical support in the March Mini Dow looks weak at 10,299, with the market potentially unable to avoid a slide down to and below 10,250.
The cross over and close above the 60-day moving average is an indication the longer-term trend has turned positive. 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 close over the pivot swing is a somewhat positive setup. The near-term upside target is at 10456. The next area of resistance is around 10424 and 10456, while 1st support hits today at 10314 and below there at 10237.
S&P:
Critical up trend channel support is seen at 1094.80 today, but we have to think that support levels could be violated, given the docket of political and economic events scheduled for today. In fact, to alter the down trend pattern in the S&P would probably require a rally back above 1105.20. If the durable goods report disappoints early today, we suspect that bearish sentiment will dominate.
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 market has a slightly positive tilt with the close over the swing pivot. The next upside objective is 1114.25. The next area of resistance is around 1110.00 and 1114.25, while 1st support hits today at 1097.00 and below there at 1088.25.
NASDAQ:
Like the Mini Dow, the Nasdaq has a pattern of lower highs on the charts and it is likely that the March Nasdaq will see a slide below the even number 1800 level today. With a lower early US trade this morning being seen despite a series of favorable corporate earnings news items from the European markets it is clear that the trade is still looking at the glass as half empty. Critical up trend channel support is seen today at 1797.65, but we can't argue against a return to the February 23rd low of 1785.
US Dollar:
The Dollar Index continues to maintain a bullish tilt on the charts, despite lingering concerns for the pace of the US recovery. However, ongoing concerns toward the Greece situation has provided the Dollar with a bid in the overnight action. While a sloppy or slack US Durable goods report might restrict the upside in the Dollar today and the Dollar might also be undermined as a result of a marathon televised Washington political debacle, the bias looks to remain up in the Greenback. In other words, the economic and political outlook inside the US isn't overly impressive, but apparently the outlook and condition in the Euro zone is even worse. In fact, overnight the Euro zone saw economic sentiment decline for the first time in 11 months and S&P has warned of a possible downgrade of the Greece debt rating. Some sources are suggesting that a downgrade of the Greek credit rating will cancel out the budget slashing efforts that are already causing violent protests. With a Greek official reportedly lashing out against the Germans and also maligning the EU leadership, it is clear that tensions are running pretty hot. Therefore, the Dollar looks to continue to get the benefit of the doubt on its economy, because of a more powerful flight to quality influence. Critical up trend channel support is seen at 80.36 but a closer in support level is also seen at 80.86.
Gold:
The bears will suggest that April gold managed a fresh new low for the move in the overnight trade, while the bulls will suggest that the market managed to generally hold within striking distance of the even number $1,100 level. With residual strength in the Dollar and ongoing concern toward the Greece situation seen overnight, it appears that some favorable demand news from the World Gold Council was partially lost in the shuffle. Nonetheless, the gold market probably saw some support off predictions from the WGC that Chinese and Indian gold demand was starting out 2010 on a strong footing. The positive demand tilt was probably given an added boost by a rather impressive annual jump in expected February Indian gold imports. In fact, the February Indian import figures put forth from the Bombay Bullion Association of 30 to 35 tons, clearly best the 2009 February import tally, which was under 8 tons. Unfortunately physical demand issues haven't been given a primary role in determining gold prices recently, with big picture macro economic views seemingly taking precedence. In the end, strong demand prospects from Indian and China won't be forgotten, but that news might be discounted until the Dollar gets off the back of the gold market or and the global macro economic outlook improves.
Silver:
At first blush, a higher Dollar and lower equities seems to have applied some minor pressure to silver prices. However, the May silver contract did manage to rise back above the prior session's highs at times overnight and that has to embolden some bulls and discourage some bears. While it seems like silver is generally tracking off outside market forces, there are some analysts who are attempting to play up the prospect of developing tightness in the silver market and that might be helping silver to generally outperform the gold market. However, classic fundamental analysts have to be disappointed with the sharp slide in US new home sales readings in the prior trading session. Furthermore, it would also seem like silver will have to continue to deal with the threat of further debt related turmoil in Greece. Some traders are suggesting that regaining the $16.00 level overnight hints at an improvement in sentiment toward silver, while others suggest that more slack US economic readings this morning could put the bear camp right back in control of silver prices.
Crude Oil:
Crude oil has given back a portion of yesterday's gains in the early overnight trade with prices under some pressure from weaker global equity markets and a slightly firmer Dollar tied to lingering concerns over the pace of the global economic recovery. Macro economic optimism for a recovery in oil demand seems to have been undermined overnight after a ratings agencies warned that Greece's debt rating could be downgraded again raising fears that European sovereign debt problems will impede growth in that region while Bernanke weak assessment of the US economy may also have thrown oil markets a bit off balance. While oil markets rallied yesterday on relief the Fed plans to keep rates low for some time, the low rate environment hasn't been able to significantly revive fuel demand so far and this week's data showing a slump in consumer confidence and a sharp drop in new home sales isn't a particularly strong fundamental backdrop for a recovery in fuel demand. The market may also be rethinking yesterday's EIA report given that crude oil stocks shot up 3 million barrels despite a higher refinery operating rate and despite the drop in gasoline stocks, fuel supplies still remain high. We suspect the relatively unfavorable supply/demand setup is making it difficult for April crude oil to hold rally attempts above the $80 price level. The market may also be getting a bit jittery over the CFTC starting to become stricter in enforcing position limits in oil markets with news yesterday the regulatory agency had fined a brokerage firm for exceeding position limits in energy markets. Oil markets could be negatively impacted if funds start to feel more pressure from the CFTC. The rally in April crude oil from the February low has now lifted daily technical indicators to overbought levels and there seems to be strong overhead resistance around the $80.30 price level. We suspect today's economic reports on jobless claims and durable goods will set the market tone and crude oil looks to be sufficiently overbought that bearish indicators may be enough to pressure the market back towards support in the $78.52 to $78.20 price range. On the other hand, the rally in oil has been mostly based on a revival in macro economic optimism improving sentiment for a recovery in oil demand. While the oil markets are starting out weaker, they have also shown impressive resiliency and if today's economic news is bullish or equities start to recover, it also won't be surprising to see April crude oil retest this week's highs. While April crude oil looks technically vulnerable up near $80, we also don't see a lot of downside potential unless equity markets break sharply or the Dollar shoots higher. But with the big debate over healthcare reform on Capital Hill today, equity market jitters will certainly spill over into energy markets today.
Natural Gas:
Natural gas has edged lower in the early overnight trade as the market can't seem to find any follow through on rally attempts which is certainly a characteristic of a bear market. Natural gas bounced yesterday partly finding support from a sharp rally in crude oil, gains in equities and a weaker Dollar, but strong outside market support is lacking this morning. It also seemed as if some traders wanted to book profits following a 74 cent break from last week's high ahead of today's inventory report which is expected to show a larger than average draw from storage. With April natural gas becoming a bit short-term oversold on the last leg down, it won't be surprising to see more of a technical bounce if today's storage report shows natural gas supplies declining by over 169 bcf expected by most traders since the drop would be significantly more than the 90 bcf draw seen last year and the 5 year average decline of 132 bcf. Another snowstorm headed for the Northeast may also provide some temporary price support to natural gas. But rally attempts in natural gas should continue to be seen as selling opportunities since the supply/demand outlook is turning bearish for this spring and we suspect April natural gas could eventually break below the December low. Bernanke's weak assessment of the US economy and the economic news this week suggests a recovery in industrial fuel demand is likely to be anemic leaving the market at risk to see fuel supplies build since natural gas producers appear to be raising output. Today's reports on durable goods and jobless claims will provide more economic insight, but price gains off the economic or inventory news should be seen as a selling opportunity. The market's trend is down and it's a bearish indication to see open interest in natural gas rise on the price break over the past two weeks suggesting traders are adding to short positions, which was evident in the last COT report. Since the last COT report with options for natural gas also showed small traders were net long 34,578 contracts, it seems as if this market will still have ample selling capacity if support levels fail to hold.
Swing Futures Triggered & Guidance.
Short 1 ZB @ 116-30
Here is the guidance,
Bonds:
The Treasury market had the benefit of Bernanke comments in the prior trading session, as slack auction results could have sunk prices, but apparently the promise of holding US rates down ruled the trade. With Bernanke pointing to a stubborn job market and low inflation as justification for the Fed's on-hold strategy, the market was able to reach up to the highest level since February 10th. Treasury prices have remained just below the prior session's highs through the overnight action, with residual Greece concerns and marginally lower global equity prices providing the bulls with the edge. With a Greek official lashing out against the German people and questioning the intelligence of EU leadership, one gets the impression that the negotiations between the two entities is on the rocks again. With protests continuing in Greece, a major ratings agency has suggested that a downgrade could be forth coming. Therefore, Treasuries are poised to get some residual flight to quality support, which comes on top of a very disappointing US new home sales report on Wednesday morning. In short, the outlook for the US recovery is suspect again and support from flight to quality angles is expected to continue to surface. However, the market will be presented with the last round of Treasury auctions later today, with $32 billion in 7 Year notes to be floated and that could take away some of the early gains in prices. Ultimately, we suspect that ongoing concern for the slow pace of the recovery is capable of offsetting what is expected to be slack demand for the longest maturity in the current auction cycle. With residual slowing fears seen from international economic readings, ongoing Chinese tightening fears and the recent flow of slack US numbers, it is possible that the fear of supply will simply be glossed over today. In fact, the Durable Goods report might be discounted this morning, especially if the report shows an as expected modest gain of only +1% to +1.5%. In other words, it will take a definitively stronger than expected US Durable Goods report or something favorable from the claims data just to alter the upward tilt in Treasury prices. We suspect that Bernanke testimony today will carry less weight because his views were presented in the prior trading session. However, one should not expect to see aggressive gains in US Treasuries unless that action is prompted by a severe breakdown in the Greece situation or by a very hard slide in US equities. In the end, one has to concede to a slow grinding rise in Treasury prices in the early action today, with the gains tempered into and through the mid day auction results. Given the economic setup today, June bonds might see little in the way of resistance until the 117-00 level, with similar resistance in June Notes not seen until 117-10. For the time being, close-in support looks to present itself at 116-20 in June bonds and at 116-27 in June Notes. In general, expect slow grinding gains on the charts ahead.
Here is the guidance,
Bonds:
The Treasury market had the benefit of Bernanke comments in the prior trading session, as slack auction results could have sunk prices, but apparently the promise of holding US rates down ruled the trade. With Bernanke pointing to a stubborn job market and low inflation as justification for the Fed's on-hold strategy, the market was able to reach up to the highest level since February 10th. Treasury prices have remained just below the prior session's highs through the overnight action, with residual Greece concerns and marginally lower global equity prices providing the bulls with the edge. With a Greek official lashing out against the German people and questioning the intelligence of EU leadership, one gets the impression that the negotiations between the two entities is on the rocks again. With protests continuing in Greece, a major ratings agency has suggested that a downgrade could be forth coming. Therefore, Treasuries are poised to get some residual flight to quality support, which comes on top of a very disappointing US new home sales report on Wednesday morning. In short, the outlook for the US recovery is suspect again and support from flight to quality angles is expected to continue to surface. However, the market will be presented with the last round of Treasury auctions later today, with $32 billion in 7 Year notes to be floated and that could take away some of the early gains in prices. Ultimately, we suspect that ongoing concern for the slow pace of the recovery is capable of offsetting what is expected to be slack demand for the longest maturity in the current auction cycle. With residual slowing fears seen from international economic readings, ongoing Chinese tightening fears and the recent flow of slack US numbers, it is possible that the fear of supply will simply be glossed over today. In fact, the Durable Goods report might be discounted this morning, especially if the report shows an as expected modest gain of only +1% to +1.5%. In other words, it will take a definitively stronger than expected US Durable Goods report or something favorable from the claims data just to alter the upward tilt in Treasury prices. We suspect that Bernanke testimony today will carry less weight because his views were presented in the prior trading session. However, one should not expect to see aggressive gains in US Treasuries unless that action is prompted by a severe breakdown in the Greece situation or by a very hard slide in US equities. In the end, one has to concede to a slow grinding rise in Treasury prices in the early action today, with the gains tempered into and through the mid day auction results. Given the economic setup today, June bonds might see little in the way of resistance until the 117-00 level, with similar resistance in June Notes not seen until 117-10. For the time being, close-in support looks to present itself at 116-20 in June bonds and at 116-27 in June Notes. In general, expect slow grinding gains on the charts ahead.
Wednesday, February 24, 2010
Time to regroup
Ok, so overall the system is now down about 10%. That's not a major disaster but after being up 50-70% it is a major pull back. So I'm going to step back this next month and try to see what can be improved going forward. I feel there is no since blowing out this department at the moment. So going foward till April we will keep the Swing Fututres department open. This depatment has only had one trade. So maybe we can get something working there. And we will be running our RUT credit spreads as well. And then in April I will look to relaunch the Futues or the FX department I have been working on. Thanks for following. To your trading success.
Crude Short Entry & Triggered
Symbol: CL
Chart: 15m
Entry: Sell stop @ 78.81
Stop: 79.07
Target 1: 78.32
Target 2: 77.89
Target 3: 77.19
Short 3 @ 78.80
Chart: 15m
Entry: Sell stop @ 78.81
Stop: 79.07
Target 1: 78.32
Target 2: 77.89
Target 3: 77.19
Short 3 @ 78.80
Tuesday, February 23, 2010
System Review
Well druing the last two months our futures system has proved two things. It can get on a roll and make a ton of money and then it can go dead cold and give all those profits back.
Two things jump out at me that I will look to address going forward. First is market condition. As volitity has increased we have been getting stopped out much more. So going forward I will be looking to move up a time frame and trade the 15m chart. The 5m chart has done us no favors in this enviroment. All our stops are being hit.
My 2nd issue is our ROI on the trades. Overall we still have a winning record but our lossers have been bigger than our winners. So I will tighten the ROI going forward.
I still believe in this system having tested it and seen it work. Draw down is tough and tests your charater. So we will look to make adjustments and try and filter some noise out of the market and get on the right side of things again.
Two things jump out at me that I will look to address going forward. First is market condition. As volitity has increased we have been getting stopped out much more. So going forward I will be looking to move up a time frame and trade the 15m chart. The 5m chart has done us no favors in this enviroment. All our stops are being hit.
My 2nd issue is our ROI on the trades. Overall we still have a winning record but our lossers have been bigger than our winners. So I will tighten the ROI going forward.
I still believe in this system having tested it and seen it work. Draw down is tough and tests your charater. So we will look to make adjustments and try and filter some noise out of the market and get on the right side of things again.
ES Stopped Out
Short @ 1091.75
Stop @ 1095.25
Took a shot there and like everything else it went the other way.
Stop @ 1095.25
Took a shot there and like everything else it went the other way.
ES Short Entry
Symbol: ES
Chart: 5m
Entry: 1092
Stop: 1095.25
Target 1: 1090.25
Target 2: 1087.75
Target 3: 1078.00
Final trade of the day only because I just got word from the pit that sell stops have built @ 1091 through 1088. Keeping it tight.
Chart: 5m
Entry: 1092
Stop: 1095.25
Target 1: 1090.25
Target 2: 1087.75
Target 3: 1078.00
Final trade of the day only because I just got word from the pit that sell stops have built @ 1091 through 1088. Keeping it tight.
TF Short Entry
Symbol: TF
Chart: 5m
Entry: Sell Stop @ 622.2
Stop: 623.4
Target 1: 621.5
Target 2: 620.4
Target 3: 618.6
Chart: 5m
Entry: Sell Stop @ 622.2
Stop: 623.4
Target 1: 621.5
Target 2: 620.4
Target 3: 618.6
GC Stopped Out
Febuary has just been a beat down on our system. So disapointing after such a good start. Going to try and see what I can do to change things going foward. Seems either we are just having a run of bad luck on the setups or the current market conditions are just not giving us the follow through like before.
Out @ 1107.10
Well we were just too early on that one. Its rolling over now as the dollar breaks out.
Out @ 1107.10
Well we were just too early on that one. Its rolling over now as the dollar breaks out.
Gold Short Entry
Symbol: GC
Chart: 5m
Entry: Sell Stop @ 1103.5
Stop: 1106.8
Target 1: 1102.5
Target 2: 1099.9
Target 3: 1095.7
Chart: 5m
Entry: Sell Stop @ 1103.5
Stop: 1106.8
Target 1: 1102.5
Target 2: 1099.9
Target 3: 1095.7
RUT dept up and running!
Alright, market is off the chain to the downside this morning after the CC report. So we will be waiting for a new setup. So I took this time to get or Russell doc all setup. Please take a quick look its on the left hand side with our other docs. I will be getting the tracker set up later today.
We had 1 of our 2 working RUT orders fill this morning on the down move.
We sold 2 Apr 530/520 put spreads for $0.50 credit.
Please enter these two orders to cover the spread. I have them OCOed to each other.
Buy GTC 2 Apr 530/520 put spreads for limit $0.05 debit.
Buy GTC 2 Apr 530 puts for market price if RUT trades at or below 530
We had 1 of our 2 working RUT orders fill this morning on the down move.
We sold 2 Apr 530/520 put spreads for $0.50 credit.
Please enter these two orders to cover the spread. I have them OCOed to each other.
Buy GTC 2 Apr 530/520 put spreads for limit $0.05 debit.
Buy GTC 2 Apr 530 puts for market price if RUT trades at or below 530
Today’s Market Guidance
Financial Overview:
The S&P seems to have forged a quasi double top with the overnight highs and the prior session's highs. In looking forward today, we see a market in need of freshly supportive fundamental headline news. We are not sure if the markets are going to be lifted by news of progress on a US Jobs bill, even if the latest bill has some semblance of economic principles in it. One could suggest that it took this Congress and the President almost $1 trillion in spending before they decided to try a few billion in stimulus that was actually based in classic economic theory. With the BOE overnight indicating the need to extend quantitative easing and global equity prices mostly off balance overnight, the market is facing some adversity into the Tuesday morning trade. We suspect that the trade will take a large measure of direction from the Case-Shiller home price survey and the Consumer Confidence readings, but there are also a number of potentially critical cyclical earnings reports due out from the US early in the session today. While one would think that stocks will be lifted by coming testimony from Bernanke, on why last week's rate hike wasn't a rate hike, the market will first have to avoid a corrective action in the face of the home price news and the first leg of a record US Treasury auction cycle. We see no reason to derail the February rally yet but the bull camp will have to weave its way through the information of the next 2 hours, in order to avoid a temporary setback to 1100 in the S&P.
DOW:
The March Mini Dow has failed to take out the prior session's highs and looks to start the US Tuesday trade out on a slightly weak footing. A flurry of cyclical earnings news just ahead of the opening today looks to set the tone for the day, but expectations of a decline in the Case-Shiller home price survey look to pull prices downward, if any of the earnings reports are disappointing. We think the Fed has to go the extra mile in supporting the 2 Year note auction at mid session today as the action in the equity markets will be the real measure of what the market thinks about last week's discount rate hike. In short we see the prospect of a slight correction in the March Mini Dow down to 10,327 but we also think the odds are good that the market might respect that level and regain its bullish footing.
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. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside objective is 10468. The next area of resistance is around 10420 and 10468, while 1st support hits today at 10338 and below there at 10304.
S&P:
Upbeat dialogue from Home Depot should help to underpin the market today against what looks to be a somewhat sloppy start. The market seemed to need a back and fill, or a corrective balancing after the progressive gains in early February, but to restart the upward tilt again today, probably requires some type of headline story, which in turn manages to rekindle optimism. Critical pivot point support in the March S&P today is seen at 1103.30. As suggested in other comments, the coming 36 hours of trade are going to be a lot more important than many traders realize. In our view, the economy needs to show itself to be growing again, the Fed needs to successfully convince the market that rates are still on hold, and lastly the Treasury needs to successfully auction off a lot of US debt supply!
Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside target is at 1117.06. The next area of resistance is around 1112.12 and 1117.06, while 1st support hits today at 1102.88 and below there at 1098.57.
NASDAQ:
The March Nasdaq looks to start the Tuesday session out on a weaker footing but the selling looks to be simple profit taking and not anxiety based selling. In fact, we suspect that the March Nasdaq will find support at 1812 today, even in the face of some discouraging news from the home price front. In the event that the private home price report is shaped into anything positive, that could shift sentiment 180 degrees and send the Nasdaq to the highest level since January 22nd.
US Dollar:
After a sharp range down probe was rejected, the Dollar enters the action today within close proximity to the prior session's high. We think that the Dollar is poised for even more gains ahead as the US Fed and Treasury are pulling the right knobs and pushing the right buttons. In fact, the Fed's Yellen recently suggested that massive inflows of capital into the US Dollar would not be a favorable development and that suggests the Fed sees the prospect of further Dollar gains ahead. In fact, we suspect that the Fed and the Treasury are preparing to stand on their heads, in order to place the coming Treasury supply. We also think that the latest Congressional effort on the jobs front is a positive to the Dollar, even though Congress seemed to throw away the first Trillion in stimulus. As suggested in other markets, today could be a very critical junction for a host of financial and physical commodity markets and the Dollar will be no exception. We have to favor the upside tilt in the Dollar, especially after the overnight corrective action served to balance the technicals. Up trend channel support in the March Dollar index is seen at 80.27 and that trend support rises to 80.41 on Wednesday. The Dollar looks to firm, but bulls should not tolerate a return to the early lows of 80.14.
Gold:
The gold market in retrospect handled the surprise rise in the US discount rate rather impressively with April gold at times yesterday sitting as much as $33 an ounce above pre-hike price levels. However, persistent strength in the US Dollar seems to have resulted in April gold prices stalling around the $1,127 level on the charts. One might have expected the gold market to see some support off news overnight that Gold Fields 3rd quarter 2010 gold production will come in below their initial expectations, but recently physical supply side news hasn't been given a dominating status in the gold trade. With the trade seeing a record US Treasury auction supply flow this week and the US Fed Chairman scheduled to testify to Congress on Wednesday, it would appear that many physical commodity markets are potentially facing a critical fundamental decision point directly ahead. At least in February, the gold market appears to have needed favorable equity market action and perhaps even up beat growth views to rally and therefore the markets reactions to critical events in the coming 36 hours, might be rather important to gold prices. The 100 day moving average in April gold is seen down at $1,103.30 today.
Silver:
The silver market overnight tried to return to the vicinity of the prior session's highs but in retrospect it would seem like the even number level of $16.50 in the May silver contract limited the trade. At least in the early going today, a number of physical commodity markets are showing early weakness and that would seem to suggest that overall macro economic sentiment is sagging somewhat. Perhaps seeing the BOE call for an extension of their quantitative easing program has undermined sentiment, or perhaps seeing a series of soft Euro zone numbers is serving to pressure physical commodities. Since the Dollar was moderately weaker early (before it recovered) it would not seem like the currency impact is the main cause of the initial weakness in silver and other physical commodity prices. Since silver seems to be tracking tightly with copper and equity prices recently, it would seem like classic industrial or physical demand potentials are influencing the silver trade, perhaps even more than the financial or flight to quality themes. With May silver prices sitting just above the even number $16.00 level this morning, it is possible that silver prices are facing a key trend decision in the wake of a number of potentially critical economic events directly ahead.
Crude Oil:
Crude oil has pulled back sharply in the early overnight action with traders take profits as meetings today may end a refinery strike in France and as traders adjust positions ahead of this week's inventory reports. Crude oil has sold off and isn't seeing the price support from the French refinery strike that it has in previous sessions even though the strike is entering its seventh day and has shut all six of Total's refineries cutting French refining capacity in half. However, news that the strike action at two Exxon refineries in France has been postponed hints that that strike situation at Total may be resolved soon. Since crude oil has been pulled higher by gains in gasoline on supply side strike related jitters, oil markets could give back a portion of those gains once the French refinery strike is resolved. In fact, crude oil above $80 per barrel looks a bit fundamentally pricey considering the low US refinery operating rate suggests weak refinery demand for oil could result in another hefty build up in crude stocks in this week's inventory report. Since most traders are looking for crude oil stocks to climb by about 2 million barrels per day in this week's reports following a 3.4 million barrel gain the previous week, some of the early selling in crude oil can be tied to profit taking. Part of the gains in crude oil has been on expectations that global oil demand will recover this year and a report overnight showing a nearly 20% drop in South Korea's crude oil imports last month may have undermined sentiment. Another report showing an unexpected drop in German business confidence seems to have triggered a strong recovery bounce in the dollar from overnight lows and that also looks to be putting some currency connected pressure on the oil markets this morning. With equities also starting to turn weaker, seeing investors scale back risk aggressively could escalate the selling interest in oil this session. April crude oil has seen a nearly $11 per barrel rally from the February low and with the market becoming short-term overbought, it's not too surprising to see some traders want to book profits ahead of Fed Chairman Bernanke's testimony on Wednesday. The weak price action in oil this morning is likely a reflection of the oil market's jitters regarding how aggressive the Fed will be in extracting the excessive liquidity added to the economy during the financial crisis. The Treasury will start to auction off a record amount of debt scheduled to be sold this week and that could have a spillover effect on the oil markets as well. With crude oil down sharply in the early going, it looks as if the market has fully priced in the French refinery strike for now and instead has shifted focus to US fundamental issues which seem to favor the bear camp. With April crude oil falling below support at $79.16, the next critical area of support doesn't come into play until the $78.34 (100 day moving average) to $78.14 (40 day moving average) price range and below there not until $77.50. And unfortunately for the bull camp, the first retracement of the February low to high range is back at $76.58.
Natural Gas:
While April natural gas is tentatively holding above yesterday's low in the early overnight trade, the weak price action and bearish chart setup leaves the market on course to eventually retest the December low. The next critical level on the chart will be the December gap at $4.83 to $4.803. But we doubt this support area will hold because it's apparent the market is already looking beyond the winter season since April natural gas hasn't been supported at all by a forecast for gas heating demand to be up 8.7% this week. Instead, the market is anticipating a hefty build up in natural gas supplies this spring. Supplies of natural gas have been trimmed from record levels last fall by strong heating demand this winter. But there are growing concerns that natural gas storage levels could quickly build up again once heating demand fades since industrial fuel demand remains weak while the number of drilling rigs in operation has climbed 34% from last July and since shipments of liquefied natural gas to the US are expected to rise this year. With the fundamental outlook starting to turn bearish again, the path of least resistance should remain down. Therefore, bouts of short covering in natural gas should be considered selling opportunities.
The S&P seems to have forged a quasi double top with the overnight highs and the prior session's highs. In looking forward today, we see a market in need of freshly supportive fundamental headline news. We are not sure if the markets are going to be lifted by news of progress on a US Jobs bill, even if the latest bill has some semblance of economic principles in it. One could suggest that it took this Congress and the President almost $1 trillion in spending before they decided to try a few billion in stimulus that was actually based in classic economic theory. With the BOE overnight indicating the need to extend quantitative easing and global equity prices mostly off balance overnight, the market is facing some adversity into the Tuesday morning trade. We suspect that the trade will take a large measure of direction from the Case-Shiller home price survey and the Consumer Confidence readings, but there are also a number of potentially critical cyclical earnings reports due out from the US early in the session today. While one would think that stocks will be lifted by coming testimony from Bernanke, on why last week's rate hike wasn't a rate hike, the market will first have to avoid a corrective action in the face of the home price news and the first leg of a record US Treasury auction cycle. We see no reason to derail the February rally yet but the bull camp will have to weave its way through the information of the next 2 hours, in order to avoid a temporary setback to 1100 in the S&P.
DOW:
The March Mini Dow has failed to take out the prior session's highs and looks to start the US Tuesday trade out on a slightly weak footing. A flurry of cyclical earnings news just ahead of the opening today looks to set the tone for the day, but expectations of a decline in the Case-Shiller home price survey look to pull prices downward, if any of the earnings reports are disappointing. We think the Fed has to go the extra mile in supporting the 2 Year note auction at mid session today as the action in the equity markets will be the real measure of what the market thinks about last week's discount rate hike. In short we see the prospect of a slight correction in the March Mini Dow down to 10,327 but we also think the odds are good that the market might respect that level and regain its bullish footing.
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. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside objective is 10468. The next area of resistance is around 10420 and 10468, while 1st support hits today at 10338 and below there at 10304.
S&P:
Upbeat dialogue from Home Depot should help to underpin the market today against what looks to be a somewhat sloppy start. The market seemed to need a back and fill, or a corrective balancing after the progressive gains in early February, but to restart the upward tilt again today, probably requires some type of headline story, which in turn manages to rekindle optimism. Critical pivot point support in the March S&P today is seen at 1103.30. As suggested in other comments, the coming 36 hours of trade are going to be a lot more important than many traders realize. In our view, the economy needs to show itself to be growing again, the Fed needs to successfully convince the market that rates are still on hold, and lastly the Treasury needs to successfully auction off a lot of US debt supply!
Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside target is at 1117.06. The next area of resistance is around 1112.12 and 1117.06, while 1st support hits today at 1102.88 and below there at 1098.57.
NASDAQ:
The March Nasdaq looks to start the Tuesday session out on a weaker footing but the selling looks to be simple profit taking and not anxiety based selling. In fact, we suspect that the March Nasdaq will find support at 1812 today, even in the face of some discouraging news from the home price front. In the event that the private home price report is shaped into anything positive, that could shift sentiment 180 degrees and send the Nasdaq to the highest level since January 22nd.
US Dollar:
After a sharp range down probe was rejected, the Dollar enters the action today within close proximity to the prior session's high. We think that the Dollar is poised for even more gains ahead as the US Fed and Treasury are pulling the right knobs and pushing the right buttons. In fact, the Fed's Yellen recently suggested that massive inflows of capital into the US Dollar would not be a favorable development and that suggests the Fed sees the prospect of further Dollar gains ahead. In fact, we suspect that the Fed and the Treasury are preparing to stand on their heads, in order to place the coming Treasury supply. We also think that the latest Congressional effort on the jobs front is a positive to the Dollar, even though Congress seemed to throw away the first Trillion in stimulus. As suggested in other markets, today could be a very critical junction for a host of financial and physical commodity markets and the Dollar will be no exception. We have to favor the upside tilt in the Dollar, especially after the overnight corrective action served to balance the technicals. Up trend channel support in the March Dollar index is seen at 80.27 and that trend support rises to 80.41 on Wednesday. The Dollar looks to firm, but bulls should not tolerate a return to the early lows of 80.14.
Gold:
The gold market in retrospect handled the surprise rise in the US discount rate rather impressively with April gold at times yesterday sitting as much as $33 an ounce above pre-hike price levels. However, persistent strength in the US Dollar seems to have resulted in April gold prices stalling around the $1,127 level on the charts. One might have expected the gold market to see some support off news overnight that Gold Fields 3rd quarter 2010 gold production will come in below their initial expectations, but recently physical supply side news hasn't been given a dominating status in the gold trade. With the trade seeing a record US Treasury auction supply flow this week and the US Fed Chairman scheduled to testify to Congress on Wednesday, it would appear that many physical commodity markets are potentially facing a critical fundamental decision point directly ahead. At least in February, the gold market appears to have needed favorable equity market action and perhaps even up beat growth views to rally and therefore the markets reactions to critical events in the coming 36 hours, might be rather important to gold prices. The 100 day moving average in April gold is seen down at $1,103.30 today.
Silver:
The silver market overnight tried to return to the vicinity of the prior session's highs but in retrospect it would seem like the even number level of $16.50 in the May silver contract limited the trade. At least in the early going today, a number of physical commodity markets are showing early weakness and that would seem to suggest that overall macro economic sentiment is sagging somewhat. Perhaps seeing the BOE call for an extension of their quantitative easing program has undermined sentiment, or perhaps seeing a series of soft Euro zone numbers is serving to pressure physical commodities. Since the Dollar was moderately weaker early (before it recovered) it would not seem like the currency impact is the main cause of the initial weakness in silver and other physical commodity prices. Since silver seems to be tracking tightly with copper and equity prices recently, it would seem like classic industrial or physical demand potentials are influencing the silver trade, perhaps even more than the financial or flight to quality themes. With May silver prices sitting just above the even number $16.00 level this morning, it is possible that silver prices are facing a key trend decision in the wake of a number of potentially critical economic events directly ahead.
Crude Oil:
Crude oil has pulled back sharply in the early overnight action with traders take profits as meetings today may end a refinery strike in France and as traders adjust positions ahead of this week's inventory reports. Crude oil has sold off and isn't seeing the price support from the French refinery strike that it has in previous sessions even though the strike is entering its seventh day and has shut all six of Total's refineries cutting French refining capacity in half. However, news that the strike action at two Exxon refineries in France has been postponed hints that that strike situation at Total may be resolved soon. Since crude oil has been pulled higher by gains in gasoline on supply side strike related jitters, oil markets could give back a portion of those gains once the French refinery strike is resolved. In fact, crude oil above $80 per barrel looks a bit fundamentally pricey considering the low US refinery operating rate suggests weak refinery demand for oil could result in another hefty build up in crude stocks in this week's inventory report. Since most traders are looking for crude oil stocks to climb by about 2 million barrels per day in this week's reports following a 3.4 million barrel gain the previous week, some of the early selling in crude oil can be tied to profit taking. Part of the gains in crude oil has been on expectations that global oil demand will recover this year and a report overnight showing a nearly 20% drop in South Korea's crude oil imports last month may have undermined sentiment. Another report showing an unexpected drop in German business confidence seems to have triggered a strong recovery bounce in the dollar from overnight lows and that also looks to be putting some currency connected pressure on the oil markets this morning. With equities also starting to turn weaker, seeing investors scale back risk aggressively could escalate the selling interest in oil this session. April crude oil has seen a nearly $11 per barrel rally from the February low and with the market becoming short-term overbought, it's not too surprising to see some traders want to book profits ahead of Fed Chairman Bernanke's testimony on Wednesday. The weak price action in oil this morning is likely a reflection of the oil market's jitters regarding how aggressive the Fed will be in extracting the excessive liquidity added to the economy during the financial crisis. The Treasury will start to auction off a record amount of debt scheduled to be sold this week and that could have a spillover effect on the oil markets as well. With crude oil down sharply in the early going, it looks as if the market has fully priced in the French refinery strike for now and instead has shifted focus to US fundamental issues which seem to favor the bear camp. With April crude oil falling below support at $79.16, the next critical area of support doesn't come into play until the $78.34 (100 day moving average) to $78.14 (40 day moving average) price range and below there not until $77.50. And unfortunately for the bull camp, the first retracement of the February low to high range is back at $76.58.
Natural Gas:
While April natural gas is tentatively holding above yesterday's low in the early overnight trade, the weak price action and bearish chart setup leaves the market on course to eventually retest the December low. The next critical level on the chart will be the December gap at $4.83 to $4.803. But we doubt this support area will hold because it's apparent the market is already looking beyond the winter season since April natural gas hasn't been supported at all by a forecast for gas heating demand to be up 8.7% this week. Instead, the market is anticipating a hefty build up in natural gas supplies this spring. Supplies of natural gas have been trimmed from record levels last fall by strong heating demand this winter. But there are growing concerns that natural gas storage levels could quickly build up again once heating demand fades since industrial fuel demand remains weak while the number of drilling rigs in operation has climbed 34% from last July and since shipments of liquefied natural gas to the US are expected to rise this year. With the fundamental outlook starting to turn bearish again, the path of least resistance should remain down. Therefore, bouts of short covering in natural gas should be considered selling opportunities.
Crude Short Entry
Symbol: CL
Chart: 5m
Entry: Sell Stop @ 78.84
Stop: 79.15
Target 1: 78.70
Target 2: 78.43
Target 3: 77.99
Chart: 5m
Entry: Sell Stop @ 78.84
Stop: 79.15
Target 1: 78.70
Target 2: 78.43
Target 3: 77.99
Monday, February 22, 2010
NG Stopped Out
Well not the start I had looked for this week. I thought we had a nice looking trade with this one when we got stopped in and made the move lower. But then those big green bars decide to come pushing in and take us the other way. Looks like the market wants to go higher.
Out @ 4.914
Out @ 4.914
RUT Credit Spreads
I know I don't have the doc up yet but I have two GTC working orders.
Sell 2 April 700/710 call spreads for a limit of $0.50 credit
Sell 2 April 530/520 put spreads for a limit of $0.50 credit.
Sell 2 April 700/710 call spreads for a limit of $0.50 credit
Sell 2 April 530/520 put spreads for a limit of $0.50 credit.
NG Short Entry
Symbol: NQ
Chart: 5m
Entry: Sell Stop @ 4.880
Stop: 4.914
Target 1: 4.871
Target 2: 4.845
Target 3: 4.803
Crude moved higher but we have a similar setup with nat gas.
Chart: 5m
Entry: Sell Stop @ 4.880
Stop: 4.914
Target 1: 4.871
Target 2: 4.845
Target 3: 4.803
Crude moved higher but we have a similar setup with nat gas.
Watching Crude
Crude rolled over and is now testing the uder side of the 5m 50sma. So we will look for a short play on a move back to the downside. As we did with Nat Gas last week I'm going to switch to the full Crude Oil future contract going forward. Symbol is CL. I will get the info docs updated later today. I market has had a very chopy start this week so all this plays are going to have to prove to me we are headed in that direction. Crude now peaking over the 50sma so we might not get a setup.
New Department Launch
We will be launching a new trading department this week. It will involve trading credit spreads on the Russell 2000 Index (RUT). I will be posting up more info soon in the document section. So far paper testing as shown good results so we will be taking this live with small size and try and build on it each month.
Crude Long Entry
Symbol: QM
Chart: 30m
Entry: Buy Stop @ 80.550
Stop: 79.850
Target 1: 80.775
Target 2: 81.325
Target 3: 82.225
Chart: 30m
Entry: Buy Stop @ 80.550
Stop: 79.850
Target 1: 80.775
Target 2: 81.325
Target 3: 82.225
Today’s Market Guidance
Financial Overview:
Stock prices come into the action today on a slightly positive tilt, with the gains seemingly the result of rumors that the EU will ultimately offer Greece a $34 billion bailout package. However, some bulls think that the rally today is merely a balancing of stock prices in the wake of last week's overreaction to the Fed's move Discount rate move. Other players are suggesting that a continuation of the EU debt crisis is set to rekindle reserve currency status in the US Dollar again and that in turn is thought to be capable of providing the US equity market with a positive lift. A well known currency trader/fund manager overnight is suggesting that despite a possible Greek bailout plan from the EU, the Euro will remain vulnerable to re-valuation and that type of dialogue means that some economic anxiety is destined to remain in place in the Euro zone. While it is also possible that the market is buying into the promises from the Fed, that a rate hike cycle hasn't begun yet, we wouldn't expect that type of view to consistently support equity prices to higher levels. In fact, given the ongoing pattern of gains in US equities, from the early February lows, we would suggest that the bull camp needs fairly constant support from the scheduled US data flows to extend on the upside.
DOW:
One can't argue with more minor hard fought gains in the Mini Dow today. However, the bull case is rather thin and the outlook for the US economy remains suspect. Perhaps the markets will garner some minor support from a Senate vote on a narrower jobs bills, but only if that action is passed. The Commitments of Traders Futures and Options report as of February 16th for Dow Jones Index $5 showed Non-Commercial traders were net long 4,637 contracts (-5,431). The Non-reportable traders were net long 903 contracts (-124). Non-Commercial and Non-reportable combined traders held a net long position of 5,540 contracts. This represents a 5,555 contract decrease in the net long position held by these traders. As can be seen from the COT positioning reports, the Mini Dow held a modest net spec long position and that means the market could see some upside action without overextending technically.
Momentum studies are trending higher but have entered overbought levels. A positive signal for trend short-term was given on a close over the 9-bar moving average. The close over the pivot swing is a somewhat positive setup. The near-term upside objective is at 10528. The next area of resistance is around 10492 and 10528, while 1st support hits today at 10348 and below there at 10241.
S&P:
At least in the early going today, the March S&P has failed to manage a fresh new high for the move, but prices seem to remain within close proximity to the recent highs. The Commitments of Traders Futures and Options report as of February 16th for S&P 500 Stock Index showed Non-Commercial traders were net short 64,442 contracts (-4,981). The Non-reportable traders were net long 49,227 contracts (-4,476). Non-Commercial and Non-reportable combined traders held a net short position of 15,215 contracts. This represents a 9,457 contract increase in the net short position held by these traders. While we can't argue against more minor gains ahead, we get the sense that the S&P has the less upside momentum than either the Mini Dow or the Nasdaq but it should be noted that the COT positioning would seem to leave the S&P in the best technical buying positive. However, the failure to hold above 1105.60 today could signal a quasi technical failure on the S&P charts.
The cross over and close above the 40-day moving average is an indication the longer-term trend has turned positive. The upside crossover (9 above 18) of the moving averages suggests a developing short-term uptrend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's close above the 9-day moving average suggests the short-term trend remains positive. The daily closing price reversal up on the daily chart is somewhat positive. The market has a slightly positive tilt with the close over the swing pivot. The next upside objective is 1122.50. The next area of resistance is around 1115.50 and 1122.50, while 1st support hits today at 1097.00 and below there at 1085.50.
NASDAQ:
While the Nasdaq didn't initially manage a fresh new high for the move this morning, the path of least resistance appears to be pointing upward. In fact, some fresh buyout news overnight seems to give the bull camp an added lift into the early US trading action. The Commitments of Traders Futures and Options report as of February 16th for Nasdaq Mini showed Non-Commercial traders were net long 18,075 contracts (+2,439). The Non-reportable traders were net short 6,789 contracts (-4,017). Non-Commercial and Non-reportable combined traders held a net long position of 11,286 contracts. This represents a 1,578 contract decrease in the net long position held by these traders. As in the Mini Dow, the Nasdaq remains only modestly net spec long and therefore one can't argue against more minor hard fought gains ahead.
US Dollar:
While concern remains in the air with respect to the Euro zone debt situation, the trade is clearly seeing a tempering of the flight to quality vibe in the Dollar. In fact, given comments from George Soros, that the Euro will remain vulnerable to re-valuation (even after a Greece bailout package is announced) that should have given the Dollar a fresh bid this morning. However, there also appears to be renewed talk about the reviving the Volcker Rule, which could end up pushing capital away from the US, as tight restrictions on US Banks trading has sunk the Dollar in the recent past. In the near term, up trend channel support in the March Dollar Index is seen down at 79.98 and it is possible that the Dollar is poised for a bit of weakness today. In fact, with the US expected to see a Senate vote, on a slimmed down jobs bill and the President promising to start another push on health care reform, it is possible that political anxiety will resurface again and sit on the back of the US Dollar. The Commitments of Traders Futures and Options report as of February 16th for US Dollar showed Non-Commercial traders were net long 37,495 contracts (-3,477). The Non-reportable traders were net long 3,474 contracts (-380). Non-Commercial and Non-reportable combined traders held a net long position of 40,969 contracts. This represents a 3,857 contract decrease in the net long position held by these traders and that could be a sign that the bulls are set to bank some profits in their long Dollar positions.
Gold:
After a lack of definitive direction from the Indian gold market overnight, the US gold trade was showing some minor early gains. Clearly a weaker US Dollar, higher equities and minimally higher energy prices w provided some spillover support for gold, but the bull camp would probably like to see the San Francisco Fed President later today reiterate the stance that the US Fed hasn't shifted into a cycle of higher interest rates. The Commitments of Traders Futures and Options report as of February 16th for Gold showed Non-Commercial traders were net long 193,345 contracts (+4,700). The Non-reportable traders were net long 32,086 contracts (-2,367). Non-Commercial and Non-reportable combined traders held a net long position of 225,431 contracts. This represents a 2,333 contract increase in the net long position held by these traders. The bull camp is probably emboldened by the fact that April gold managed to reach the highest level since January 20th early today, while the bear camp could also continue to point to the prospect of ongoing Euro zone debt issues as a possible fundamental cap on gold prices. At least in the near term, the direction of equity prices might become the primary swing factor for gold prices.
Silver:
Like the gold market, May silver has managed a fresh new high for the move in the early action today, but unfortunately for the bull camp, silver also seemed to fall back from that early attempt to rally. One almost comes away from the recent action with the view, that silver sees the Fed's surprise move on the discount rate late week as a sign that inflation might be presenting itself, but that view is certainly being countervailed by Fed dialogue to the contrary. The Commitments of Traders Futures and Options report as of February 16th for Silver showed Non-Commercial traders were net long 26,228 contracts (+2,100). The Non-reportable traders were net long 14,407 contracts (-1,642). Non-Commercial and Non-reportable combined traders held a net long position of 40,635 contracts. This represents a 458 contract increase in the net long position held by these traders. Initial weakness in the Dollar and slightly higher US equity market action would seem to leave part of the outside market forces in the favor of the silver bulls this morning, but the silver bears might hold out hope that renewed wrangling in Washington will rekindle uncertainty again, which in the past has undermined physical commodity markets.
Crude Oil:
April pushed to a new high for the move overnight following last week's sharp gains with price support still coming from a better macro economic view improving the demand outlook for oil along with strike related supply side concerns and Iranian geopolitical risk uncertainty. Although crude oil still appears to have a strong upward bias, trading today could become more two sided and volatile, but price dips will likely end up being buying opportunities. April crude oil was initially pushed to a five week high in the early overnight action with price support coming from an extended labor strike at Total refineries in France. The threat that refinery strikes could spread to other oil companies and further threaten supplies has been a key factor behind part of the oil market rally over the past week. Therefore, any fresh news relating to the strike issue will have the potential of pushing oil prices in both directions since once the strike is resolved, a portion of the supply risk premium is likely to be extracted. But if a pull back in oil is tied to the French refinery strike, it may end up being short lived since a part of the strength in the oil market has been due to a much better macro economic view taking hold last week off the economic news. In fact, even the Fed's discount rate hike was seen as a sign that economic conditions are improving. In fact, positive oil demand sentiment was further supported by news that Chinese refiners processed 29% more crude oil in January than a year ago. Fed chairman Bernanke speaks today and if he gives a more positive economic view but also leaves the market with the impression that key US rates are still likely to stay low even as the Fed drains excess liquidity, then we suspect April crude oil could retest overnight highs. But the oil markets will still be influenced by the action in the Dollar and the currency's reaction to Bernanke's comments are likely to have a spill over effect on the direction in oil this session. An article in a German newspaper has also given financial markets the impression that a European bailout plan for Greece may be close at hand, and if this sentiment gains traction, it could support oil by weakening the dollar. Last week the International Atomic energy Agency warned that Iran could be developing a nuclear weapon and this uncertainly will remain a bullish wildcard in the oil market. The expiration of the March contract today could also turn the price action in crude oil more two sided. Daily indicators are starting to approach short-term overbought levels in April crude oil following a nearly $11 per barrel price rise from the February low. But there has also been a clear shift in sentiment back to the bull camp mostly based on a low refinery operating rate and improving economic conditions to result in a tighter fuel supply/demand setup this spring. Positive price sentiment has been further supported by a major investment banking firm who is a big player in the energy sector predicting oil prices to rise as high as $95 per barrel this year. The latest traders report also shows funds becoming aggressive buyers of oil over the last week. The February 16th Commitments of Traders report with options for crude oil showed non-commercial traders increasing their net long position by nearly 19,000 contracts to 148,182 contracts while Nonreportable traders shifted to a net short position of 1,845 contracts after being net long the previous week which is a bullish setup since small traders may be forced to short cover if resistance levels fail to hold. While crude oil may encounter some profit taking this session, the market's price bias is up and it is clear by the price action that the bull camp has regained control of sentiment. Therefore, profit taking dips in April crude oil back to support levels should be considered a buying opportunity.
Natural Gas:
April natural gas fell below the $5.00 price level in the overnight trade for the first time since December as a milder temperature outlook and expectations for supplies to rebuild this spring weigh on prices. Natural gas prices fell as some private forecasters are predicting mostly 40 degree temperatures in the key Northeast locations into early March, although the Midwest still looks to stay mostly below normal over the next two weeks. With the winter season coming to a close, natural gas is being pressured by expectations that storage declines tied to winter heating demand have likely peaked for the season. Market sentiment has turned bearish since industrial fuel demand still appears to be weak, despite signs of improving economic conditions while there are growing concerns that fuel storage could quickly rebuild since natural gas production has been rising since last July. Last week's report showed the number of working natural gas rigs in operation to be at an 11 1/2 month high. As a result, it looks as if April natural gas is on course to be pressured back towards the December low. The February 16th COT report with options for natural gas showed managed money funds increasing their net short position by 3,830 contracts. With non-commercials increasing their net short position in natural gas to 68,764 contract and nonreportable traders still net long 34,578 contracts as of early last week leaves the market vulnerable to small spec liquidation if support levels fail to hold. In fact, with April natural gas falling below $4.9710 it leaves a lack of support until $4.858. Bernanke speaks today and that may provide some temporary price support to natural gas if he gives a positive economic outlook. But given the bearish supply outlook, rally attempts in natural gas should end up being selling opportunities.
Stock prices come into the action today on a slightly positive tilt, with the gains seemingly the result of rumors that the EU will ultimately offer Greece a $34 billion bailout package. However, some bulls think that the rally today is merely a balancing of stock prices in the wake of last week's overreaction to the Fed's move Discount rate move. Other players are suggesting that a continuation of the EU debt crisis is set to rekindle reserve currency status in the US Dollar again and that in turn is thought to be capable of providing the US equity market with a positive lift. A well known currency trader/fund manager overnight is suggesting that despite a possible Greek bailout plan from the EU, the Euro will remain vulnerable to re-valuation and that type of dialogue means that some economic anxiety is destined to remain in place in the Euro zone. While it is also possible that the market is buying into the promises from the Fed, that a rate hike cycle hasn't begun yet, we wouldn't expect that type of view to consistently support equity prices to higher levels. In fact, given the ongoing pattern of gains in US equities, from the early February lows, we would suggest that the bull camp needs fairly constant support from the scheduled US data flows to extend on the upside.
DOW:
One can't argue with more minor hard fought gains in the Mini Dow today. However, the bull case is rather thin and the outlook for the US economy remains suspect. Perhaps the markets will garner some minor support from a Senate vote on a narrower jobs bills, but only if that action is passed. The Commitments of Traders Futures and Options report as of February 16th for Dow Jones Index $5 showed Non-Commercial traders were net long 4,637 contracts (-5,431). The Non-reportable traders were net long 903 contracts (-124). Non-Commercial and Non-reportable combined traders held a net long position of 5,540 contracts. This represents a 5,555 contract decrease in the net long position held by these traders. As can be seen from the COT positioning reports, the Mini Dow held a modest net spec long position and that means the market could see some upside action without overextending technically.
Momentum studies are trending higher but have entered overbought levels. A positive signal for trend short-term was given on a close over the 9-bar moving average. The close over the pivot swing is a somewhat positive setup. The near-term upside objective is at 10528. The next area of resistance is around 10492 and 10528, while 1st support hits today at 10348 and below there at 10241.
S&P:
At least in the early going today, the March S&P has failed to manage a fresh new high for the move, but prices seem to remain within close proximity to the recent highs. The Commitments of Traders Futures and Options report as of February 16th for S&P 500 Stock Index showed Non-Commercial traders were net short 64,442 contracts (-4,981). The Non-reportable traders were net long 49,227 contracts (-4,476). Non-Commercial and Non-reportable combined traders held a net short position of 15,215 contracts. This represents a 9,457 contract increase in the net short position held by these traders. While we can't argue against more minor gains ahead, we get the sense that the S&P has the less upside momentum than either the Mini Dow or the Nasdaq but it should be noted that the COT positioning would seem to leave the S&P in the best technical buying positive. However, the failure to hold above 1105.60 today could signal a quasi technical failure on the S&P charts.
The cross over and close above the 40-day moving average is an indication the longer-term trend has turned positive. The upside crossover (9 above 18) of the moving averages suggests a developing short-term uptrend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's close above the 9-day moving average suggests the short-term trend remains positive. The daily closing price reversal up on the daily chart is somewhat positive. The market has a slightly positive tilt with the close over the swing pivot. The next upside objective is 1122.50. The next area of resistance is around 1115.50 and 1122.50, while 1st support hits today at 1097.00 and below there at 1085.50.
NASDAQ:
While the Nasdaq didn't initially manage a fresh new high for the move this morning, the path of least resistance appears to be pointing upward. In fact, some fresh buyout news overnight seems to give the bull camp an added lift into the early US trading action. The Commitments of Traders Futures and Options report as of February 16th for Nasdaq Mini showed Non-Commercial traders were net long 18,075 contracts (+2,439). The Non-reportable traders were net short 6,789 contracts (-4,017). Non-Commercial and Non-reportable combined traders held a net long position of 11,286 contracts. This represents a 1,578 contract decrease in the net long position held by these traders. As in the Mini Dow, the Nasdaq remains only modestly net spec long and therefore one can't argue against more minor hard fought gains ahead.
US Dollar:
While concern remains in the air with respect to the Euro zone debt situation, the trade is clearly seeing a tempering of the flight to quality vibe in the Dollar. In fact, given comments from George Soros, that the Euro will remain vulnerable to re-valuation (even after a Greece bailout package is announced) that should have given the Dollar a fresh bid this morning. However, there also appears to be renewed talk about the reviving the Volcker Rule, which could end up pushing capital away from the US, as tight restrictions on US Banks trading has sunk the Dollar in the recent past. In the near term, up trend channel support in the March Dollar Index is seen down at 79.98 and it is possible that the Dollar is poised for a bit of weakness today. In fact, with the US expected to see a Senate vote, on a slimmed down jobs bill and the President promising to start another push on health care reform, it is possible that political anxiety will resurface again and sit on the back of the US Dollar. The Commitments of Traders Futures and Options report as of February 16th for US Dollar showed Non-Commercial traders were net long 37,495 contracts (-3,477). The Non-reportable traders were net long 3,474 contracts (-380). Non-Commercial and Non-reportable combined traders held a net long position of 40,969 contracts. This represents a 3,857 contract decrease in the net long position held by these traders and that could be a sign that the bulls are set to bank some profits in their long Dollar positions.
Gold:
After a lack of definitive direction from the Indian gold market overnight, the US gold trade was showing some minor early gains. Clearly a weaker US Dollar, higher equities and minimally higher energy prices w provided some spillover support for gold, but the bull camp would probably like to see the San Francisco Fed President later today reiterate the stance that the US Fed hasn't shifted into a cycle of higher interest rates. The Commitments of Traders Futures and Options report as of February 16th for Gold showed Non-Commercial traders were net long 193,345 contracts (+4,700). The Non-reportable traders were net long 32,086 contracts (-2,367). Non-Commercial and Non-reportable combined traders held a net long position of 225,431 contracts. This represents a 2,333 contract increase in the net long position held by these traders. The bull camp is probably emboldened by the fact that April gold managed to reach the highest level since January 20th early today, while the bear camp could also continue to point to the prospect of ongoing Euro zone debt issues as a possible fundamental cap on gold prices. At least in the near term, the direction of equity prices might become the primary swing factor for gold prices.
Silver:
Like the gold market, May silver has managed a fresh new high for the move in the early action today, but unfortunately for the bull camp, silver also seemed to fall back from that early attempt to rally. One almost comes away from the recent action with the view, that silver sees the Fed's surprise move on the discount rate late week as a sign that inflation might be presenting itself, but that view is certainly being countervailed by Fed dialogue to the contrary. The Commitments of Traders Futures and Options report as of February 16th for Silver showed Non-Commercial traders were net long 26,228 contracts (+2,100). The Non-reportable traders were net long 14,407 contracts (-1,642). Non-Commercial and Non-reportable combined traders held a net long position of 40,635 contracts. This represents a 458 contract increase in the net long position held by these traders. Initial weakness in the Dollar and slightly higher US equity market action would seem to leave part of the outside market forces in the favor of the silver bulls this morning, but the silver bears might hold out hope that renewed wrangling in Washington will rekindle uncertainty again, which in the past has undermined physical commodity markets.
Crude Oil:
April pushed to a new high for the move overnight following last week's sharp gains with price support still coming from a better macro economic view improving the demand outlook for oil along with strike related supply side concerns and Iranian geopolitical risk uncertainty. Although crude oil still appears to have a strong upward bias, trading today could become more two sided and volatile, but price dips will likely end up being buying opportunities. April crude oil was initially pushed to a five week high in the early overnight action with price support coming from an extended labor strike at Total refineries in France. The threat that refinery strikes could spread to other oil companies and further threaten supplies has been a key factor behind part of the oil market rally over the past week. Therefore, any fresh news relating to the strike issue will have the potential of pushing oil prices in both directions since once the strike is resolved, a portion of the supply risk premium is likely to be extracted. But if a pull back in oil is tied to the French refinery strike, it may end up being short lived since a part of the strength in the oil market has been due to a much better macro economic view taking hold last week off the economic news. In fact, even the Fed's discount rate hike was seen as a sign that economic conditions are improving. In fact, positive oil demand sentiment was further supported by news that Chinese refiners processed 29% more crude oil in January than a year ago. Fed chairman Bernanke speaks today and if he gives a more positive economic view but also leaves the market with the impression that key US rates are still likely to stay low even as the Fed drains excess liquidity, then we suspect April crude oil could retest overnight highs. But the oil markets will still be influenced by the action in the Dollar and the currency's reaction to Bernanke's comments are likely to have a spill over effect on the direction in oil this session. An article in a German newspaper has also given financial markets the impression that a European bailout plan for Greece may be close at hand, and if this sentiment gains traction, it could support oil by weakening the dollar. Last week the International Atomic energy Agency warned that Iran could be developing a nuclear weapon and this uncertainly will remain a bullish wildcard in the oil market. The expiration of the March contract today could also turn the price action in crude oil more two sided. Daily indicators are starting to approach short-term overbought levels in April crude oil following a nearly $11 per barrel price rise from the February low. But there has also been a clear shift in sentiment back to the bull camp mostly based on a low refinery operating rate and improving economic conditions to result in a tighter fuel supply/demand setup this spring. Positive price sentiment has been further supported by a major investment banking firm who is a big player in the energy sector predicting oil prices to rise as high as $95 per barrel this year. The latest traders report also shows funds becoming aggressive buyers of oil over the last week. The February 16th Commitments of Traders report with options for crude oil showed non-commercial traders increasing their net long position by nearly 19,000 contracts to 148,182 contracts while Nonreportable traders shifted to a net short position of 1,845 contracts after being net long the previous week which is a bullish setup since small traders may be forced to short cover if resistance levels fail to hold. While crude oil may encounter some profit taking this session, the market's price bias is up and it is clear by the price action that the bull camp has regained control of sentiment. Therefore, profit taking dips in April crude oil back to support levels should be considered a buying opportunity.
Natural Gas:
April natural gas fell below the $5.00 price level in the overnight trade for the first time since December as a milder temperature outlook and expectations for supplies to rebuild this spring weigh on prices. Natural gas prices fell as some private forecasters are predicting mostly 40 degree temperatures in the key Northeast locations into early March, although the Midwest still looks to stay mostly below normal over the next two weeks. With the winter season coming to a close, natural gas is being pressured by expectations that storage declines tied to winter heating demand have likely peaked for the season. Market sentiment has turned bearish since industrial fuel demand still appears to be weak, despite signs of improving economic conditions while there are growing concerns that fuel storage could quickly rebuild since natural gas production has been rising since last July. Last week's report showed the number of working natural gas rigs in operation to be at an 11 1/2 month high. As a result, it looks as if April natural gas is on course to be pressured back towards the December low. The February 16th COT report with options for natural gas showed managed money funds increasing their net short position by 3,830 contracts. With non-commercials increasing their net short position in natural gas to 68,764 contract and nonreportable traders still net long 34,578 contracts as of early last week leaves the market vulnerable to small spec liquidation if support levels fail to hold. In fact, with April natural gas falling below $4.9710 it leaves a lack of support until $4.858. Bernanke speaks today and that may provide some temporary price support to natural gas if he gives a positive economic outlook. But given the bearish supply outlook, rally attempts in natural gas should end up being selling opportunities.
Friday, February 19, 2010
Today’s Market Guidance
Financial Overview:
The stock market has to be somewhat deflated as a result of the Fed's move to hike interest rates. With the markets also seeing reports of cyber attacks, there is an added measure of anxiety in the marketplace. With the cyber attacks taking place shortly after the US President met with the Dalai Lama and the attacks rumored to be traced back inside China, there is certainly the potential for a war of words. On the other hand, it would seem like most global equity markets weathered the initial storm, of what many think is a premature rate hike move. While the Fed claims that the move won't raise rates to the consumer that view would seem to be a bit naive, especially in the mortgage area where lenders will probably fully embrace the opportunity to squeeze out some additional profits on some loans. While the market appears to be shaking off the impact of the Fed move, we suspect the market will still see the move as an excuse to bank profits off of the February run up. We don't expect to see hard down action today but the need for positive data and positive corporate news has been pushed upward. Traders might look to the prior sessions lows as an important pivot point for sentiment, a slide below those levels later today might serve to increase technical selling pressure, while a hold above those levels into the close today would signal that the first rate hike move is already behind the market.
DOW:
So far the March Mini Dow has weathered the Fed move but we aren't convinced that the market is capable of extending the rally off the news that will be presented today. As suggested already, the bull camp will need some type of headline help of some impressive foot work from the Fed just to get back in control of the market. Initial critical support in the March Mini Dow is seen at 10,296 and then again down at 10,250. In fact, the ability to close above 10,300 today would be considered a major victory for the bull camp, but unfortunately the best window to recover will be very early in the session today in the aftermath of the early Fed speech.
The cross over and close above the 60-day moving average is an indication the longer-term trend has turned positive. The upside crossover of the 9 and 18 bar moving average is a positive signal. 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. There could be more upside follow through since the market closed above the 2nd swing resistance. The next upside objective is 10488. The next area of resistance is around 10452 and 10488, while 1st support hits today at 10312 and below there at 10209.
S&P:
Close-in critical support in the March S&P is pegged at 1093.60 and then again down at 1092.60 but the initial edge has to be with the bear camp. However, as suggested already, the markets best chance for a bounce might come right after the Fed's 6:00 AM cst speech, but only if the New York Fed manages to sooth concerns about the hike being part of a rising rate wave. As we mentioned in the broad coverage, the markets are handling the rate hike rather well but we still think that the odds are greater for a profit taking slide today as opposed to a 'buy the fact rally'. What the Fed might have done, is simply reduced the expectations of reward for the longs.
The cross over and close above the 60-day moving average indicates the longer-term trend has turned up. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market's close above the 2nd swing resistance number is a bullish indication. The next upside objective is 1116.68. The next area of resistance is around 1112.87 and 1116.68, while 1st support hits today at 1099.13 and below there at 1089.19.
NASDAQ:
In addition to the Fed move, the Nasdaq is also being confronted with news of cyber attacks that appear to have been launched from inside China. Furthermore, it would also seem like Google shares could be under attack from cyber attacks and also from investors as the go ahead was given to a Microsoft/Yahoo advertising venture and that could serve to dent Google shares. Close in pivot point support is seen at 1804.50 and then again down at 1800, but it will be difficult to see a noted and sustained push back up in equity prices today.
US Dollar:
The Dollar is clearly getting the biggest impact from the Fed's move to hike rates. We suspect that the November through present rally in the Dollar was already an assumption that the US would be the first to hike interest rates. It is possible that the US CPI report this morning could justify the Fed move yesterday, which they seem to suggest wasn't actually 'tightening'. While the Fed is seemingly attempting to suggest that the move was to put conditions back to normal, the markets in general take the move as a sign that the US is showing signs of returning to a more normal term structure of interest rates. With the Euro already mired in political and financial turmoil, the Fed's move clearly turns up the pressure on the euro and in turn gives the recent Dollar rally credibility. We see little to prevent the March Dollar index from trading up to the 82.00 level and perhaps even to the 83.00 level next week if the US auctions go off well and Greece sees more internal conflict off the forced austerity program. We doubt that the March Dollar will see sustained trading activity back below the 80.83 level.
Gold:
One has to give the Fed credit for the timing of the move yesterday, as it clearly caught the markets off guard and might have been timed to have the least amount of impact. With the Chinese on holiday and the US markets mostly closed in the wake of the announcement the impact has so far been muted. While the Fed has suggested that the move was needed to bring conditions back to normal, it will be very difficult for the gold market to totally discount the rise in the discount rate. With the Dollar also managing a range up move overnight, the gold trade is clearly undermined by the initial currency market action. Unfortunately the gold market might be undermined by news of higher gold production forecasts from Turkey, for 2010 overnight, but it would also appear that gold has recently been infinitely more interested in demand, as opposed to supply side news. All things considered, the gold market appears to be facing classically bearish fundamental news flow this morning, but the shock value of the Fed's action could wane quickly if crude oil, energies and other physical commodity markets manage to hold up in today's trade. Traders should probably attempt to determine whether equities or the Dollar have become the primary outside market influence for gold prices.
Silver:
The bull camp is hoping that the Fed's move will go quietly into the night. However, it is really difficult to make the Fed's move and the upside extension in the US Dollar, into a positive for silver prices. In fact, seeing a hot US CPI report later this morning, could actually serve to justify the Fed's move as necessary, even though the Fed has initially suggested that the move was mechanical in nature and not indicative of a policy trend. On the other hand, very few traders would have expected silver to enter the early morning Friday trade, sitting close to the Thursday closing value. In fact, some traders are suggesting that the action this morning hints at a limited impact from the rate change. The Thursday close in May silver was $16.08 and that could be considered a very critical pivot point in the silver trade today. As in the gold market, it will be interesting to see which outside market influence is set to dominate silver, equities or the Dollar?
Crude Oil:
Crude oil has fallen back in the overnight trade as a surprise hike in the US discount rate by the Fed has triggered a sharp rally in the Dollar and has undercut yesterday's optimism for a recovery in fuel demand. The initial reaction to the Fed starting to remove the excessive amount of monetary liquidity added during the financial crisis certainly seems to be dampening sentiment toward commodities including oil on expectations that a rising interest rate environment could prolong or even impede demand for oil that currently remains weak despite signs that economic conditions are starting to improve. Yesterday's steep price gains in oil were partly tied to more signs of improvements in regional manufacturing and another rise in leading indicators providing a more optimistic macro economic view. In fact, the bullish reaction in the oil market seemed a bit overblown considering the EIA reported a nearly 3.1 million barrel rise in crude oil stocks and higher gasoline supplies while the decline in distillate stocks still left supplies at a record level for this time of year. Certainly other factors were behind the gains in oil yesterday including escalating concerns over Iran's nuclear program after the IAEA warned that Iran could be working toward making nuclear weapons and that has the market jittery that any further sanctions against Iran could possibly disrupt supplies from the region. A refinery strike in France and problems at an a large oilfield in the UK have also raised supply side concerns and may be helping to limit the selling in the product markets so far. Still, the Fed's action has certainly shaken the confidence of the oil market bulls and with investor risk appetite being dampened, oil is under pressure since the spike higher in the Dollar and weaker equity market trade diminishes the oil market's appeal as an alternative investment. Today's CPI report could provide another selling incentive in the oil market if the inflation reading comes in higher than expected and further lifts the Dollar on concerns the Fed may become more aggressive in tightening rates. Fundamentally, crude oil near $80 per barrel in a rising rate slow growth environment seems a bit pricy. But crude oil has also shown resiliency to bearish news over the past two weeks and April crude oil holding above $78 leaves the uptrend from the February low in tact. The oil market's reversal to the upside in yesterday's trade was impressive. But in order for that to occur this session either supply side issues would need to become more threatening or the market would need to quickly shake off concerns over rising rates impacting oil demand which may be difficult unless the dollar starts to give back a portion of its gains. Otherwise, with both the US and China starting to tighten, April crude oil may end up trading in a $80 to $75 price range for now.
Natural Gas:
Natural gas edged lower overnight following yesterday's steep fall with the market now adding concerns of rising US interest rates to expectations for fuel supplies to build this spring. Natural gas was pushed to a new low for the move overnight as the Fed's surprise discount rate hike yesterday has triggered a sharp move higher in the dollar reducing investor risk appetite for commodities while also dampening the demand outlook. A major weight on the natural gas market has been the slide in industrial fuel demand which has yet to recover despite signs that economic conditions are improving. As the Fed removes its stimulus measures and tightens liquidity, a recovery in industrial fuel demand may be drawn out. Given yesterday's bearish reaction to the storage report which showed a 190 bcf draw and was in line with expectations, it's clear the market is already looking beyond the winter season and anticipating a hefty build in fuel supplies this spring. Storage declines may have already peaked and supply side concerns have the market jittery with some forecasters predicting milder temperatures ahead for the Northeast. With the number of US natural gas rigs in operation up over 30% since bottoming out last July and liquefied natural gas imports expected to be higher this year certainly leaves the supply outlook with a bearish tilt once winter heating demand starts to fade. Therefore, we see natural gas maintaining a downward trend bias and bouts of short covering should be considered selling opportunities. Below $5.11 price level, support for April natural gas comes in between $5.056 to $4.97 and below there at $4.82 with resistance at $5.19 then $5.267 and above there near $5.40.
The stock market has to be somewhat deflated as a result of the Fed's move to hike interest rates. With the markets also seeing reports of cyber attacks, there is an added measure of anxiety in the marketplace. With the cyber attacks taking place shortly after the US President met with the Dalai Lama and the attacks rumored to be traced back inside China, there is certainly the potential for a war of words. On the other hand, it would seem like most global equity markets weathered the initial storm, of what many think is a premature rate hike move. While the Fed claims that the move won't raise rates to the consumer that view would seem to be a bit naive, especially in the mortgage area where lenders will probably fully embrace the opportunity to squeeze out some additional profits on some loans. While the market appears to be shaking off the impact of the Fed move, we suspect the market will still see the move as an excuse to bank profits off of the February run up. We don't expect to see hard down action today but the need for positive data and positive corporate news has been pushed upward. Traders might look to the prior sessions lows as an important pivot point for sentiment, a slide below those levels later today might serve to increase technical selling pressure, while a hold above those levels into the close today would signal that the first rate hike move is already behind the market.
DOW:
So far the March Mini Dow has weathered the Fed move but we aren't convinced that the market is capable of extending the rally off the news that will be presented today. As suggested already, the bull camp will need some type of headline help of some impressive foot work from the Fed just to get back in control of the market. Initial critical support in the March Mini Dow is seen at 10,296 and then again down at 10,250. In fact, the ability to close above 10,300 today would be considered a major victory for the bull camp, but unfortunately the best window to recover will be very early in the session today in the aftermath of the early Fed speech.
The cross over and close above the 60-day moving average is an indication the longer-term trend has turned positive. The upside crossover of the 9 and 18 bar moving average is a positive signal. 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. There could be more upside follow through since the market closed above the 2nd swing resistance. The next upside objective is 10488. The next area of resistance is around 10452 and 10488, while 1st support hits today at 10312 and below there at 10209.
S&P:
Close-in critical support in the March S&P is pegged at 1093.60 and then again down at 1092.60 but the initial edge has to be with the bear camp. However, as suggested already, the markets best chance for a bounce might come right after the Fed's 6:00 AM cst speech, but only if the New York Fed manages to sooth concerns about the hike being part of a rising rate wave. As we mentioned in the broad coverage, the markets are handling the rate hike rather well but we still think that the odds are greater for a profit taking slide today as opposed to a 'buy the fact rally'. What the Fed might have done, is simply reduced the expectations of reward for the longs.
The cross over and close above the 60-day moving average indicates the longer-term trend has turned up. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market's close above the 2nd swing resistance number is a bullish indication. The next upside objective is 1116.68. The next area of resistance is around 1112.87 and 1116.68, while 1st support hits today at 1099.13 and below there at 1089.19.
NASDAQ:
In addition to the Fed move, the Nasdaq is also being confronted with news of cyber attacks that appear to have been launched from inside China. Furthermore, it would also seem like Google shares could be under attack from cyber attacks and also from investors as the go ahead was given to a Microsoft/Yahoo advertising venture and that could serve to dent Google shares. Close in pivot point support is seen at 1804.50 and then again down at 1800, but it will be difficult to see a noted and sustained push back up in equity prices today.
US Dollar:
The Dollar is clearly getting the biggest impact from the Fed's move to hike rates. We suspect that the November through present rally in the Dollar was already an assumption that the US would be the first to hike interest rates. It is possible that the US CPI report this morning could justify the Fed move yesterday, which they seem to suggest wasn't actually 'tightening'. While the Fed is seemingly attempting to suggest that the move was to put conditions back to normal, the markets in general take the move as a sign that the US is showing signs of returning to a more normal term structure of interest rates. With the Euro already mired in political and financial turmoil, the Fed's move clearly turns up the pressure on the euro and in turn gives the recent Dollar rally credibility. We see little to prevent the March Dollar index from trading up to the 82.00 level and perhaps even to the 83.00 level next week if the US auctions go off well and Greece sees more internal conflict off the forced austerity program. We doubt that the March Dollar will see sustained trading activity back below the 80.83 level.
Gold:
One has to give the Fed credit for the timing of the move yesterday, as it clearly caught the markets off guard and might have been timed to have the least amount of impact. With the Chinese on holiday and the US markets mostly closed in the wake of the announcement the impact has so far been muted. While the Fed has suggested that the move was needed to bring conditions back to normal, it will be very difficult for the gold market to totally discount the rise in the discount rate. With the Dollar also managing a range up move overnight, the gold trade is clearly undermined by the initial currency market action. Unfortunately the gold market might be undermined by news of higher gold production forecasts from Turkey, for 2010 overnight, but it would also appear that gold has recently been infinitely more interested in demand, as opposed to supply side news. All things considered, the gold market appears to be facing classically bearish fundamental news flow this morning, but the shock value of the Fed's action could wane quickly if crude oil, energies and other physical commodity markets manage to hold up in today's trade. Traders should probably attempt to determine whether equities or the Dollar have become the primary outside market influence for gold prices.
Silver:
The bull camp is hoping that the Fed's move will go quietly into the night. However, it is really difficult to make the Fed's move and the upside extension in the US Dollar, into a positive for silver prices. In fact, seeing a hot US CPI report later this morning, could actually serve to justify the Fed's move as necessary, even though the Fed has initially suggested that the move was mechanical in nature and not indicative of a policy trend. On the other hand, very few traders would have expected silver to enter the early morning Friday trade, sitting close to the Thursday closing value. In fact, some traders are suggesting that the action this morning hints at a limited impact from the rate change. The Thursday close in May silver was $16.08 and that could be considered a very critical pivot point in the silver trade today. As in the gold market, it will be interesting to see which outside market influence is set to dominate silver, equities or the Dollar?
Crude Oil:
Crude oil has fallen back in the overnight trade as a surprise hike in the US discount rate by the Fed has triggered a sharp rally in the Dollar and has undercut yesterday's optimism for a recovery in fuel demand. The initial reaction to the Fed starting to remove the excessive amount of monetary liquidity added during the financial crisis certainly seems to be dampening sentiment toward commodities including oil on expectations that a rising interest rate environment could prolong or even impede demand for oil that currently remains weak despite signs that economic conditions are starting to improve. Yesterday's steep price gains in oil were partly tied to more signs of improvements in regional manufacturing and another rise in leading indicators providing a more optimistic macro economic view. In fact, the bullish reaction in the oil market seemed a bit overblown considering the EIA reported a nearly 3.1 million barrel rise in crude oil stocks and higher gasoline supplies while the decline in distillate stocks still left supplies at a record level for this time of year. Certainly other factors were behind the gains in oil yesterday including escalating concerns over Iran's nuclear program after the IAEA warned that Iran could be working toward making nuclear weapons and that has the market jittery that any further sanctions against Iran could possibly disrupt supplies from the region. A refinery strike in France and problems at an a large oilfield in the UK have also raised supply side concerns and may be helping to limit the selling in the product markets so far. Still, the Fed's action has certainly shaken the confidence of the oil market bulls and with investor risk appetite being dampened, oil is under pressure since the spike higher in the Dollar and weaker equity market trade diminishes the oil market's appeal as an alternative investment. Today's CPI report could provide another selling incentive in the oil market if the inflation reading comes in higher than expected and further lifts the Dollar on concerns the Fed may become more aggressive in tightening rates. Fundamentally, crude oil near $80 per barrel in a rising rate slow growth environment seems a bit pricy. But crude oil has also shown resiliency to bearish news over the past two weeks and April crude oil holding above $78 leaves the uptrend from the February low in tact. The oil market's reversal to the upside in yesterday's trade was impressive. But in order for that to occur this session either supply side issues would need to become more threatening or the market would need to quickly shake off concerns over rising rates impacting oil demand which may be difficult unless the dollar starts to give back a portion of its gains. Otherwise, with both the US and China starting to tighten, April crude oil may end up trading in a $80 to $75 price range for now.
Natural Gas:
Natural gas edged lower overnight following yesterday's steep fall with the market now adding concerns of rising US interest rates to expectations for fuel supplies to build this spring. Natural gas was pushed to a new low for the move overnight as the Fed's surprise discount rate hike yesterday has triggered a sharp move higher in the dollar reducing investor risk appetite for commodities while also dampening the demand outlook. A major weight on the natural gas market has been the slide in industrial fuel demand which has yet to recover despite signs that economic conditions are improving. As the Fed removes its stimulus measures and tightens liquidity, a recovery in industrial fuel demand may be drawn out. Given yesterday's bearish reaction to the storage report which showed a 190 bcf draw and was in line with expectations, it's clear the market is already looking beyond the winter season and anticipating a hefty build in fuel supplies this spring. Storage declines may have already peaked and supply side concerns have the market jittery with some forecasters predicting milder temperatures ahead for the Northeast. With the number of US natural gas rigs in operation up over 30% since bottoming out last July and liquefied natural gas imports expected to be higher this year certainly leaves the supply outlook with a bearish tilt once winter heating demand starts to fade. Therefore, we see natural gas maintaining a downward trend bias and bouts of short covering should be considered selling opportunities. Below $5.11 price level, support for April natural gas comes in between $5.056 to $4.97 and below there at $4.82 with resistance at $5.19 then $5.267 and above there near $5.40.
Thursday, February 18, 2010
GC Canceled
The market has flatlined. Passing on this now. I don't want to get stopped in and just drift around.
GC Long Entry
Symbol: GC
Chart: 5m
Entry: Buy Stop @ 1119.4
Stop: 1115.5
Target 1: 1121.0
Target 2: 1124.3
Target 3: 1129.7
Chart: 5m
Entry: Buy Stop @ 1119.4
Stop: 1115.5
Target 1: 1121.0
Target 2: 1124.3
Target 3: 1129.7
Today’s Market Guidance
Financial Overview:
The stock market generally remains right on the prior session's highs into the US Thursday morning opening. Apparently the market generally remains up beat toward near term US economic prospects and apparently the impact of Washington is still thought to be waning. With some critical Wal-Mart news expected early this morning, the equity markets could be presented with a number of different readings on the economy. While the trade will go over the Wal-Mart news in search of information on the US consumer, we suspect that the initial and ongoing claims data will still be seen as the most critical news of the day. However, it is possible that the US PPI reading could end up being a slight negative for stocks, as the initial expectations are calling for a gain of just under 1% and that might fan the talk of the start of tightening moves by the US Fed. However, if the recent pattern of favorable numbers holds, and the European trading session ends without fresh incendiary charges against Greece, we suspect that the bull camp is destined to remain in control. However, it would appear as if upside momentum has narrowed somewhat, perhaps because the market is no longer oversold and as undervalued as it was at the beginning of February. In order to push up in a noted fashion again today probably requires claims data that prompts headline chatter of an improvement in the US jobs sector.
DOW:
The March Mini Dow has seemingly entrenched itself above the quasi even number level of 10,250 on the charts. There would seem to be little resistance in the March Mini Dow until the 10,591 level but we detect a slight waning of upside momentum. As mentioned already, the market seems to need ongoing help from the data and perhaps even from Wal-Mart earnings to forge anything beyond slow grinding gains today. There is some forward movement on financial market oversight push that seems to favor the Fed as the overlord in charge of monitoring systematic risk, but that news doesn't seem to be undermining sentiment in the equity markets. In conclusion, the path of least resistance is pointing upward and critical support in the March Mini Dow is now seen down at 10,266.
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 close over the pivot swing is a somewhat positive setup. The near-term upside objective is at 10351. The next area of resistance is around 10334 and 10351, while 1st support hits today at 10266 and below there at 10215.
S&P:
While other sectors of the market managed to make fresh new highs for the move overnight, the S&P has not only failed to make a new high for the move but it also seems as if the March S&P is being held back by the even number 1100 level. However, there would appear to be enough scheduled data flows and residual optimism from corporate earnings prospects to leave the bull camp with the edge. On the other hand, as suggested before the market does appear to be losing upside momentum and that could mean slow grinding gains are ahead.
Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The market's short-term trend is positive on the close above the 9-day moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside target is 1105.62. The next area of resistance is around 1103.75 and 1105.62, while 1st support hits today at 1096.25 and below there at 1090.63.
NASDAQ:
While the Wal-Mart earnings look to dominate the equity markets early today, the Nasdaq is already benefiting from better than expected tech sector results from HP late yesterday. In fact, with HP numbers coming in stronger than expected off of favorable server and printer business activity, that would seem to be a slightly positive macro economic signal for the broader economy. The March Nasdaq has close-in support at 1805.75, with little in the way of resistance seen on the charts until the 1819.75 level.
US Dollar:
The March Dollar Index attempted to make a fresh new high for the move overnight, but failed and for the skeptics of the Dollar bull trend, that might present a quasi triple top formation. However, we have to leave the edge with the bull camp, as the Dollar seems to be getting buying interest off signs of US growth and also from any signs of ongoing global slowing. With Greece overnight suggesting that government austerity efforts might result in violent protests, the Dollar is probably getting some minor flight to quality buying interest this morning. With the markets scheduled to see a somewhat hot US PPI report and US claims data, we have to leave the edge with the bull camp, but it will be very important to the bull trend to see the Dollar rally today in the face of decent US numbers. If the Dollar rallies in the face of decent US numbers today, that would give a lot of fundamental credence to the bull case. In conclusion, seeing the Dollar rally off flight to quality issues and also from favorable US number flow would seem to suggest that the Dollar bulls have the two extremes in their court. Initial support in the March Dollar Index is seen at 80.41 today.
Gold:
With the outside market forces seeming negative this morning, it is difficult to determine the magnitude of the bearish impact from the news of further IMF gold sales. On one hand, the gold market has seen IMF gold sales in the past and the size of the remaining sale of 191.1 tons isn't an oppressive tally. However, the bear camp can suggest that a sale of physical gold by any central bank or quasi governmental entity is a negative to gold prices, especially in an environment where investment interest for gold has seemingly waned. Surprisingly the gold market did see an improvement in demand dialogue from the Indian gold market overnight, but with the lower US opening projections today, signs of gold demand are seemingly being swallowed up by the bearish forces. In fact, the Indian news overnight is probably more than offset by suggestions from Barrick that they have completed the lifting of their gold hedges. Even news from the BBC that famed speculator George Soros might have increased his gold holdings failed to alter the bearish overnight tilt in the gold market.
Silver:
The silver market appears to be under some pressure from outside market forces this morning. It is also possible that silver is seeing spillover selling pressure from the IMF gold sale news overnight and also from residual EU/Greece debt issue concerns. However, silver has continued to see a pattern of declining daily silver warehouse stock figures, but that news may not be important enough to overcome the outside market information. At least initially, Wal-Mart earnings news didn't seem to be positive to the US equity markets and that could mean that the silver trade will look to the initial and ongoing claims data as the most important economic news of the Thursday trade. In the end, the silver market continues to behave like a physical commodity market in need of fairly constant macro economic support from the US data front. On the other hand, if favorable US economic data prompts the US Dollar to rise to the highest level since last July, the silver bulls could be cheated out of support from good US numbers. Unfortunately, the silver market appears to be facing a conundrum from various outside market forces.
Crude Oil:
Crude oil has fallen back in the early going with the market under some pressure from a report showing higher fuel supplies along with a firmer dollar reducing investor's risk appetite for oil. With global equity markets trading flat to lower and throwing off a slightly less optimistic macro economic view, a selling bias in crude oil has taken hold. Profit taking in crude oil has surfaced following yesterday's API report showing gains in both gasoline and distillate stocks which more than offset the unexpected 63,000 barrel decline in crude oil supplies. It was particularly bearish to see that a rise in refinery operations quickly outpaced fuel demand even as cold temperatures should have boosted winter heating needs. With the API report clearly showing the internal fundamentals of the oil market remains bearish, April crude oil could give back a good portion of this week's gains if today's EIA report (released at 10:00 am central) backs the readings given by API. Most traders expect the EIA report to show a 2 million barrel rise in crude oil stocks and higher gasoline supplies and this combination could certainly provide an additional selling incentive. In yesterday's trade, oil markets were able to hold onto gains since firm equity markets seemed to offset the strength in the Dollar which rose on stronger than expected economic news. But with the minutes from the Fed meeting showing the Fed to be on the verge of starting to extract the emergency liquidity added during the economic crisis, oil markets may be coming more concerned that firming US interest rates ahead could hinder a recovery in oil demand. Today's economic reports on jobless claims, inflation, leading indicators and regional manufacturing will provide additional economic insight that is likely to impact oil trading. But if the Dollar gains on more good economic news in anticipation that the Fed will raise rates sooner than expected, oil could certainly come under more currency connected selling unless equity markets can provide a strong bullish offset. If today's EIA report continues to show oil demand to be weak, it's clear that the pace of the economic recovery in the US could leave fuel consumption anemic for some time. And if that's the case, then April crude oil above $75 would seem to be above its fundamental value. We suspect there is a good chance that the EIA and economic news could work against the oil markets today. Unfortunately for the bull camp the next significant support level for April crude oil isn't until $75.60 and below there at $75.23 (200 day moving average) while overhead resistance is at $78.00 then $78.54.
Natural Gas:
The natural gas market is under some pressure in the early going weighed down by the weak price action in crude oil overnight. Despite mostly cold weather, April natural gas has been contained within a well defined range this month mostly between $5.55 and $5.20. But unless industrial fuel demand starts to recover, eventually we see the market heading back to the January and December lows this spring. It is already apparent that the market is starting to look beyond the winter season since the rally off last week's bigger than expected storage draw couldn't hold. With below normal temperatures being forecasted through month end, we certainly can't rule out seeing more temporary weather related rally attempts in natural gas. And in fact, April natural gas could certainly be lifted if today's report shows a bigger than expected storage decline of 191 bcf since it would be significantly larger than the 44 bcf draw seen last year and more than the 5 year average draw of 129 bcf. Better economic news seemed to underpin natural gas prices yesterday and if today's reports also point to better economic conditions, it may provide some price support to natural gas. But we also suspect selling in April natural gas will continue to surface in the $5.50 to $5.64 price range as traders seem to be anticipating natural gas storage levels to quickly rebuild once winter demand starts to fade. If industrial fuel demand stays weak, the rising number of natural gas rigs in operation will leave the supply outlook for natural gas bearish in the months ahead. Therefore, rallies in April natural gas back to $5.50 to $5.55 range look to be selling opportunities.
The stock market generally remains right on the prior session's highs into the US Thursday morning opening. Apparently the market generally remains up beat toward near term US economic prospects and apparently the impact of Washington is still thought to be waning. With some critical Wal-Mart news expected early this morning, the equity markets could be presented with a number of different readings on the economy. While the trade will go over the Wal-Mart news in search of information on the US consumer, we suspect that the initial and ongoing claims data will still be seen as the most critical news of the day. However, it is possible that the US PPI reading could end up being a slight negative for stocks, as the initial expectations are calling for a gain of just under 1% and that might fan the talk of the start of tightening moves by the US Fed. However, if the recent pattern of favorable numbers holds, and the European trading session ends without fresh incendiary charges against Greece, we suspect that the bull camp is destined to remain in control. However, it would appear as if upside momentum has narrowed somewhat, perhaps because the market is no longer oversold and as undervalued as it was at the beginning of February. In order to push up in a noted fashion again today probably requires claims data that prompts headline chatter of an improvement in the US jobs sector.
DOW:
The March Mini Dow has seemingly entrenched itself above the quasi even number level of 10,250 on the charts. There would seem to be little resistance in the March Mini Dow until the 10,591 level but we detect a slight waning of upside momentum. As mentioned already, the market seems to need ongoing help from the data and perhaps even from Wal-Mart earnings to forge anything beyond slow grinding gains today. There is some forward movement on financial market oversight push that seems to favor the Fed as the overlord in charge of monitoring systematic risk, but that news doesn't seem to be undermining sentiment in the equity markets. In conclusion, the path of least resistance is pointing upward and critical support in the March Mini Dow is now seen down at 10,266.
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 close over the pivot swing is a somewhat positive setup. The near-term upside objective is at 10351. The next area of resistance is around 10334 and 10351, while 1st support hits today at 10266 and below there at 10215.
S&P:
While other sectors of the market managed to make fresh new highs for the move overnight, the S&P has not only failed to make a new high for the move but it also seems as if the March S&P is being held back by the even number 1100 level. However, there would appear to be enough scheduled data flows and residual optimism from corporate earnings prospects to leave the bull camp with the edge. On the other hand, as suggested before the market does appear to be losing upside momentum and that could mean slow grinding gains are ahead.
Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The market's short-term trend is positive on the close above the 9-day moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside target is 1105.62. The next area of resistance is around 1103.75 and 1105.62, while 1st support hits today at 1096.25 and below there at 1090.63.
NASDAQ:
While the Wal-Mart earnings look to dominate the equity markets early today, the Nasdaq is already benefiting from better than expected tech sector results from HP late yesterday. In fact, with HP numbers coming in stronger than expected off of favorable server and printer business activity, that would seem to be a slightly positive macro economic signal for the broader economy. The March Nasdaq has close-in support at 1805.75, with little in the way of resistance seen on the charts until the 1819.75 level.
US Dollar:
The March Dollar Index attempted to make a fresh new high for the move overnight, but failed and for the skeptics of the Dollar bull trend, that might present a quasi triple top formation. However, we have to leave the edge with the bull camp, as the Dollar seems to be getting buying interest off signs of US growth and also from any signs of ongoing global slowing. With Greece overnight suggesting that government austerity efforts might result in violent protests, the Dollar is probably getting some minor flight to quality buying interest this morning. With the markets scheduled to see a somewhat hot US PPI report and US claims data, we have to leave the edge with the bull camp, but it will be very important to the bull trend to see the Dollar rally today in the face of decent US numbers. If the Dollar rallies in the face of decent US numbers today, that would give a lot of fundamental credence to the bull case. In conclusion, seeing the Dollar rally off flight to quality issues and also from favorable US number flow would seem to suggest that the Dollar bulls have the two extremes in their court. Initial support in the March Dollar Index is seen at 80.41 today.
Gold:
With the outside market forces seeming negative this morning, it is difficult to determine the magnitude of the bearish impact from the news of further IMF gold sales. On one hand, the gold market has seen IMF gold sales in the past and the size of the remaining sale of 191.1 tons isn't an oppressive tally. However, the bear camp can suggest that a sale of physical gold by any central bank or quasi governmental entity is a negative to gold prices, especially in an environment where investment interest for gold has seemingly waned. Surprisingly the gold market did see an improvement in demand dialogue from the Indian gold market overnight, but with the lower US opening projections today, signs of gold demand are seemingly being swallowed up by the bearish forces. In fact, the Indian news overnight is probably more than offset by suggestions from Barrick that they have completed the lifting of their gold hedges. Even news from the BBC that famed speculator George Soros might have increased his gold holdings failed to alter the bearish overnight tilt in the gold market.
Silver:
The silver market appears to be under some pressure from outside market forces this morning. It is also possible that silver is seeing spillover selling pressure from the IMF gold sale news overnight and also from residual EU/Greece debt issue concerns. However, silver has continued to see a pattern of declining daily silver warehouse stock figures, but that news may not be important enough to overcome the outside market information. At least initially, Wal-Mart earnings news didn't seem to be positive to the US equity markets and that could mean that the silver trade will look to the initial and ongoing claims data as the most important economic news of the Thursday trade. In the end, the silver market continues to behave like a physical commodity market in need of fairly constant macro economic support from the US data front. On the other hand, if favorable US economic data prompts the US Dollar to rise to the highest level since last July, the silver bulls could be cheated out of support from good US numbers. Unfortunately, the silver market appears to be facing a conundrum from various outside market forces.
Crude Oil:
Crude oil has fallen back in the early going with the market under some pressure from a report showing higher fuel supplies along with a firmer dollar reducing investor's risk appetite for oil. With global equity markets trading flat to lower and throwing off a slightly less optimistic macro economic view, a selling bias in crude oil has taken hold. Profit taking in crude oil has surfaced following yesterday's API report showing gains in both gasoline and distillate stocks which more than offset the unexpected 63,000 barrel decline in crude oil supplies. It was particularly bearish to see that a rise in refinery operations quickly outpaced fuel demand even as cold temperatures should have boosted winter heating needs. With the API report clearly showing the internal fundamentals of the oil market remains bearish, April crude oil could give back a good portion of this week's gains if today's EIA report (released at 10:00 am central) backs the readings given by API. Most traders expect the EIA report to show a 2 million barrel rise in crude oil stocks and higher gasoline supplies and this combination could certainly provide an additional selling incentive. In yesterday's trade, oil markets were able to hold onto gains since firm equity markets seemed to offset the strength in the Dollar which rose on stronger than expected economic news. But with the minutes from the Fed meeting showing the Fed to be on the verge of starting to extract the emergency liquidity added during the economic crisis, oil markets may be coming more concerned that firming US interest rates ahead could hinder a recovery in oil demand. Today's economic reports on jobless claims, inflation, leading indicators and regional manufacturing will provide additional economic insight that is likely to impact oil trading. But if the Dollar gains on more good economic news in anticipation that the Fed will raise rates sooner than expected, oil could certainly come under more currency connected selling unless equity markets can provide a strong bullish offset. If today's EIA report continues to show oil demand to be weak, it's clear that the pace of the economic recovery in the US could leave fuel consumption anemic for some time. And if that's the case, then April crude oil above $75 would seem to be above its fundamental value. We suspect there is a good chance that the EIA and economic news could work against the oil markets today. Unfortunately for the bull camp the next significant support level for April crude oil isn't until $75.60 and below there at $75.23 (200 day moving average) while overhead resistance is at $78.00 then $78.54.
Natural Gas:
The natural gas market is under some pressure in the early going weighed down by the weak price action in crude oil overnight. Despite mostly cold weather, April natural gas has been contained within a well defined range this month mostly between $5.55 and $5.20. But unless industrial fuel demand starts to recover, eventually we see the market heading back to the January and December lows this spring. It is already apparent that the market is starting to look beyond the winter season since the rally off last week's bigger than expected storage draw couldn't hold. With below normal temperatures being forecasted through month end, we certainly can't rule out seeing more temporary weather related rally attempts in natural gas. And in fact, April natural gas could certainly be lifted if today's report shows a bigger than expected storage decline of 191 bcf since it would be significantly larger than the 44 bcf draw seen last year and more than the 5 year average draw of 129 bcf. Better economic news seemed to underpin natural gas prices yesterday and if today's reports also point to better economic conditions, it may provide some price support to natural gas. But we also suspect selling in April natural gas will continue to surface in the $5.50 to $5.64 price range as traders seem to be anticipating natural gas storage levels to quickly rebuild once winter demand starts to fade. If industrial fuel demand stays weak, the rising number of natural gas rigs in operation will leave the supply outlook for natural gas bearish in the months ahead. Therefore, rallies in April natural gas back to $5.50 to $5.55 range look to be selling opportunities.
Wednesday, February 17, 2010
NG Stopped Out
2nd targets are still proving to be very tough to get to, at least without retracements first.
Out @ 5.382
Out @ 5.382
NG 1st Target Hit
Nice little move up there.
Out @ 5.395
Move stop to breakeven @ 5.383
2nd Target @ 5.417
Out @ 5.395
Move stop to breakeven @ 5.383
2nd Target @ 5.417
Nat Gas Long Entry
Symbol: NQ
Chart: 5m
Entry: Buy Stop @ 5.381
Stop: 5.359
Target 1: 5.395
Target 2: 5.417
Target 3: 5.452
Chart: 5m
Entry: Buy Stop @ 5.381
Stop: 5.359
Target 1: 5.395
Target 2: 5.417
Target 3: 5.452
Watching Nat Gas
I'm looking at a long in Nat Gas taking shape on the 5m. Keep an eye.
***I'm also changing the nat gas product. Going forward I will be trading the full contract (NG). We have not had success trading the mini. It doesn't seem to get the same setups. The fills are not as good. And our targets have to be too far out. I will update the contract info doc. The NG trades at .001 = $10.00. If you still wish to trade the mini that is fine. Just round the entry and exit point to .005.
***I'm also changing the nat gas product. Going forward I will be trading the full contract (NG). We have not had success trading the mini. It doesn't seem to get the same setups. The fills are not as good. And our targets have to be too far out. I will update the contract info doc. The NG trades at .001 = $10.00. If you still wish to trade the mini that is fine. Just round the entry and exit point to .005.
SOH so far.
Nothing doing yet today. I've been watching for setups but nothing too good coming our way. We have options expiration Friday so I have just been managing my open Febuary postions and waiting for the market to make a move. Seems like everyone might be waiting for the FOMC meeting minutes coming out at 1:00cst. So I expect things quiet until then.
Today’s Market Guidance
Financial Overview:
The stock market forged a very impressive extension of its recent upward track yesterday and is seemingly set to add to that effort early today. We continue to see the 1100 level in the March S&P as a critical resistance zone but for the next few trading sessions, it would seem like the bull camp is capable of extending its control. We are not sure if the continuing shift in political power in the US is behind the recently improved sentiment, or if the improvement in sentiment is being derived from favorable corporate earnings or from the 30 day grace period for Greece, but the trade does seem to be spinning the headlines into mostly favorable stories. At least in the early action today we saw financial/bank sector stocks mounting gains in the early European trade and that looks to start the US action out on a slightly positive tilt. However, sentiment isn't definitively positive and the bull camp in stocks probably needs distinct help from both the US Housing starts and permits reports and also from the US Industrial Production/Capacity Utilization readings. So far, it is unclear how the markets will react to news of another 'bi-partisan' debt reducing effort from Washington, mostly because cooperation in Washington has become a very rare event. In conclusion, we suspect that the numbers will be partially acceptable today, but that gains today will probably be smaller than yesterday.
DOW:
With the March Mini Dow managing to post some positive early action this morning and in the process managing to forge a quasi upside breakout on the charts, one has to leave the edge with the bull camp. Unfortunately, we doubt that the first set of scheduled US data will provide a conclusively bullish reading from the US housing front and that could diffuse a portion of the early bullish tilt. At least into the opening today, support in the March Mini Dow moves up to 10,241, with initial resistance pegged up at 10,310.
Positive momentum studies in the neutral zone will tend to reinforce higher price action. The close above the 9-day moving average is a positive short-term indicator for trend. The market has a bullish tilt coming into today's trade with the close above the 2nd swing resistance. The near-term upside target is at 10377. The next area of resistance is around 10333 and 10377, while 1st support hits today at 10163 and below there at 10038.
S&P:
Unlike other sectors of the market, the March S&P hasn't managed an upside breakout on the charts. However, the S&P has managed to extend the recent pattern of gains and did forge a higher high for the move this morning. Initial support is seen at 1093.90, with initial resistance seen up at 1101.50. At least into the opening today, we concede to a bullish edge in the market, but we are not sure if a negative US housing permits reading will fully take the edge away from the bull camp.
Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The intermediate trend could be turning up with the close back above the 18-day moving average. There could be more upside follow through since the market closed above the 2nd swing resistance. The next upside objective is 1107.93. The next area of resistance is around 1103.12 and 1107.93, while 1st support hits today at 1084.38 and below there at 1070.44.
NASDAQ:
Like the Mini Dow, the Nasdaq has also managed an overnight extension of the recent bull track, with the March Nasdaq reaching the highest level since January 28th. Apparently the smaller cap stocks are being pulled higher by favorable views toward financial and large cap stocks and that leaves the bull camp with a slight edge into the US opening today. Initial support in the March Nasdaq is currently seen at 1797.75, with resistance today pegged at 1808. For the time being, the broad macro economic view looks to be the main factor driving stock prices.
US Dollar:
With the US Dollar Index managing a fresh new low for the move overnight, it is clear that the flight to quality concerns in the marketplace are currently minimal. However, we suspect that the Dollar might be poised to see a bit of a lift in the wake of the US Housing Permits release, as that reading is expected to be soft and that reading is sometimes considered a leading indicator for the US housing sector. We are not sure if the US Dollar is poised to react to the shifting political scene in the US and we are also not sure if the Dollar is going to be impacted by talk that China might be taking measures to lower their US debt holdings. However, seeing even a slight tempering of Chinese interest for US Treasuries, in the face of historic supply flow of US debt, can't be a good thing for the US Dollar in the long run! At least in the near term, we see the prospect of further minor weakness in the Dollar, off a slight improvement in macro economic sentiment, but we really doubt that the overall pattern of strength seen in the US Dollar since the late November low is set to come to an end, especially since the Greece situation is apparently far from being resolved.
Gold:
While US equities are showing initial follow through strength this morning, a slightly higher Dollar and lingering Greece currency swap concerns have left gold chopping around both sides of unchanged in the early US trade. The gold market was presented with a number of World Gold Council demand readings for 2009 and some of those readings seemed to favor the bear camp. However, looking back to 2009 demand figures in gold might be considered old news to the market, with most of the trade more interested in what 2010 demand will be. With the World Gold Council also pointing to an improvement in 4th quarter 2009 gold demand patterns and suggesting that 2010 'western' investment demand for gold will be solid, the trade appears to have gotten some good news from the WGC. However, the bull camp has to hope that the trade continues to discount Greece concerns and the bull camp also has to hope for ongoing gains in US equities. The bear camp on the other hand, probably wants to see some disappointment in the US scheduled numbers this morning, but the really big news for the bear camp in gold could come from the effort to force disclosure of the Greece currency swaps maneuvering by the end of this week! In the end, gold appears to be tracking its physical or classic commodity market fundamentals and that might leave equity market action as the primary driving force for the gold trade.
Silver:
The May silver contract has managed another new high for the move in the early Wednesday trade. Not surprisingly, the silver trade seems to be giving more credence to positive equity market action, than it does to a higher Dollar trade. Overall, it would seem like macro economic optimism has managed to remain positive, despite ongoing rumors of financial irregularities within the Euro zone admissions process. With so many outside market developments surfacing recently, the silver trade probably hasn't benefited from a recent pattern of minor declines in daily silver exchange warehouse stocks. In fact, silver and gold both appear to be infinitely more concerned with demand prospects, as opposed to minor supply side potentials. With the copper and energy prices forging very strong upside moves in the prior trading session that could leave silver with some positive industrial market influences in the early trade today. On the other hand, it would appear that silver still needs constant help from the economic outlook front and that could mean that silver will take a large measure of direction from the scheduled US data flows.
Crude Oil:
April crude oil has been able to follow through higher overnight after posting hefty gains in yesterday's trade. With the market able to push above some key technical levels, April crude oil looks to be on course for a move back to the $79.16 to $80.00 price range. But the gains in crude oil are mostly being based on a more optimistic macro economic outlook and that means the bull camp's resolve will likely be tested since this week's inventory reports are expected to show a nearly 2 million barrel rise oil stocks and another hefty build in gasoline supplies. But for now the bull camp still appears to have the upper hand with crude oil being underpinned by a better macro economic view being thrown off by the strength in equities, reports of good corporate and bank earnings and yesterday's report showing regional manufacturing growth which is raising optimism for a recovery in fuel demand. A respite in the anxiety over the European sovereign debt problems and expectations for now that European finance ministers will be able to help Greece manage its debt has also been a factor raising investor risk appetite to the oil market's benefit. But we are skeptical that the optimism will hold for the European debt problems to be resolve and that will leave oil markets vulnerable to disappointment on this issue. Oil markets have also been underpinned to a certain degree by the escalating geopolitical tensions with Iran over its nuclear program as the comments between Iran and the Western powers have become more threatening. Still, we suspect in order for the oil prices to gain more upside traction from current levels the market will need to see both a steady stream of bullish news along with outside market support. But with the dollar starting to gain some ground in the early going, the currency action may end up being a limiting factor for the oil bulls, especially if the Euro ends up giving back a sizable portion of yesterday's gains. Oil markets have been closely following the ebb and flow of the equity markets and so seeing equities add onto gains will be critical in keeping oil prices on an upward track. As a result, today's reports on housing and industrial production will provide some additional economic insight and certainly influence sentiment and price direction in both markets. The bull camp in oil continues to have the edge in the morning trade, but the gains in oil look fragile since the fundamentals remain weak. Crude oil clearly has an upward bias, but it also won't be surprising to see oil prices start to back track if outside market support begins to fade.
Natural Gas:
Natural gas has bounced a bit in the early overnight trade, but with the winter season winding down we see limited upside potential while downside price risk will remain in place. With weather forecasters predicting below normal temperatures for the US heating region through month end still gives April natural gas some upside potential. In fact, natural gas could get a price boost if today's reports on housing and industrial production come in better than expected. But the upside in April natural gas is still likely to be limited to the $5.55 to $5.64 price range. We suspect fresh selling will continue to be seen at these price levels since once winter fuel demand begins to fade, storage supplies could quickly rebuild. There are growing concerns that the supply side in natural gas will become burdensome again this spring since industrial fuel demand remains weak and the number of natural gas rigs in operation have been steadily climbing reaching an 11 month high last week. Therefore, traders should consider rallies back to the upper end of the February range as a selling opportunity.
The stock market forged a very impressive extension of its recent upward track yesterday and is seemingly set to add to that effort early today. We continue to see the 1100 level in the March S&P as a critical resistance zone but for the next few trading sessions, it would seem like the bull camp is capable of extending its control. We are not sure if the continuing shift in political power in the US is behind the recently improved sentiment, or if the improvement in sentiment is being derived from favorable corporate earnings or from the 30 day grace period for Greece, but the trade does seem to be spinning the headlines into mostly favorable stories. At least in the early action today we saw financial/bank sector stocks mounting gains in the early European trade and that looks to start the US action out on a slightly positive tilt. However, sentiment isn't definitively positive and the bull camp in stocks probably needs distinct help from both the US Housing starts and permits reports and also from the US Industrial Production/Capacity Utilization readings. So far, it is unclear how the markets will react to news of another 'bi-partisan' debt reducing effort from Washington, mostly because cooperation in Washington has become a very rare event. In conclusion, we suspect that the numbers will be partially acceptable today, but that gains today will probably be smaller than yesterday.
DOW:
With the March Mini Dow managing to post some positive early action this morning and in the process managing to forge a quasi upside breakout on the charts, one has to leave the edge with the bull camp. Unfortunately, we doubt that the first set of scheduled US data will provide a conclusively bullish reading from the US housing front and that could diffuse a portion of the early bullish tilt. At least into the opening today, support in the March Mini Dow moves up to 10,241, with initial resistance pegged up at 10,310.
Positive momentum studies in the neutral zone will tend to reinforce higher price action. The close above the 9-day moving average is a positive short-term indicator for trend. The market has a bullish tilt coming into today's trade with the close above the 2nd swing resistance. The near-term upside target is at 10377. The next area of resistance is around 10333 and 10377, while 1st support hits today at 10163 and below there at 10038.
S&P:
Unlike other sectors of the market, the March S&P hasn't managed an upside breakout on the charts. However, the S&P has managed to extend the recent pattern of gains and did forge a higher high for the move this morning. Initial support is seen at 1093.90, with initial resistance seen up at 1101.50. At least into the opening today, we concede to a bullish edge in the market, but we are not sure if a negative US housing permits reading will fully take the edge away from the bull camp.
Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The intermediate trend could be turning up with the close back above the 18-day moving average. There could be more upside follow through since the market closed above the 2nd swing resistance. The next upside objective is 1107.93. The next area of resistance is around 1103.12 and 1107.93, while 1st support hits today at 1084.38 and below there at 1070.44.
NASDAQ:
Like the Mini Dow, the Nasdaq has also managed an overnight extension of the recent bull track, with the March Nasdaq reaching the highest level since January 28th. Apparently the smaller cap stocks are being pulled higher by favorable views toward financial and large cap stocks and that leaves the bull camp with a slight edge into the US opening today. Initial support in the March Nasdaq is currently seen at 1797.75, with resistance today pegged at 1808. For the time being, the broad macro economic view looks to be the main factor driving stock prices.
US Dollar:
With the US Dollar Index managing a fresh new low for the move overnight, it is clear that the flight to quality concerns in the marketplace are currently minimal. However, we suspect that the Dollar might be poised to see a bit of a lift in the wake of the US Housing Permits release, as that reading is expected to be soft and that reading is sometimes considered a leading indicator for the US housing sector. We are not sure if the US Dollar is poised to react to the shifting political scene in the US and we are also not sure if the Dollar is going to be impacted by talk that China might be taking measures to lower their US debt holdings. However, seeing even a slight tempering of Chinese interest for US Treasuries, in the face of historic supply flow of US debt, can't be a good thing for the US Dollar in the long run! At least in the near term, we see the prospect of further minor weakness in the Dollar, off a slight improvement in macro economic sentiment, but we really doubt that the overall pattern of strength seen in the US Dollar since the late November low is set to come to an end, especially since the Greece situation is apparently far from being resolved.
Gold:
While US equities are showing initial follow through strength this morning, a slightly higher Dollar and lingering Greece currency swap concerns have left gold chopping around both sides of unchanged in the early US trade. The gold market was presented with a number of World Gold Council demand readings for 2009 and some of those readings seemed to favor the bear camp. However, looking back to 2009 demand figures in gold might be considered old news to the market, with most of the trade more interested in what 2010 demand will be. With the World Gold Council also pointing to an improvement in 4th quarter 2009 gold demand patterns and suggesting that 2010 'western' investment demand for gold will be solid, the trade appears to have gotten some good news from the WGC. However, the bull camp has to hope that the trade continues to discount Greece concerns and the bull camp also has to hope for ongoing gains in US equities. The bear camp on the other hand, probably wants to see some disappointment in the US scheduled numbers this morning, but the really big news for the bear camp in gold could come from the effort to force disclosure of the Greece currency swaps maneuvering by the end of this week! In the end, gold appears to be tracking its physical or classic commodity market fundamentals and that might leave equity market action as the primary driving force for the gold trade.
Silver:
The May silver contract has managed another new high for the move in the early Wednesday trade. Not surprisingly, the silver trade seems to be giving more credence to positive equity market action, than it does to a higher Dollar trade. Overall, it would seem like macro economic optimism has managed to remain positive, despite ongoing rumors of financial irregularities within the Euro zone admissions process. With so many outside market developments surfacing recently, the silver trade probably hasn't benefited from a recent pattern of minor declines in daily silver exchange warehouse stocks. In fact, silver and gold both appear to be infinitely more concerned with demand prospects, as opposed to minor supply side potentials. With the copper and energy prices forging very strong upside moves in the prior trading session that could leave silver with some positive industrial market influences in the early trade today. On the other hand, it would appear that silver still needs constant help from the economic outlook front and that could mean that silver will take a large measure of direction from the scheduled US data flows.
Crude Oil:
April crude oil has been able to follow through higher overnight after posting hefty gains in yesterday's trade. With the market able to push above some key technical levels, April crude oil looks to be on course for a move back to the $79.16 to $80.00 price range. But the gains in crude oil are mostly being based on a more optimistic macro economic outlook and that means the bull camp's resolve will likely be tested since this week's inventory reports are expected to show a nearly 2 million barrel rise oil stocks and another hefty build in gasoline supplies. But for now the bull camp still appears to have the upper hand with crude oil being underpinned by a better macro economic view being thrown off by the strength in equities, reports of good corporate and bank earnings and yesterday's report showing regional manufacturing growth which is raising optimism for a recovery in fuel demand. A respite in the anxiety over the European sovereign debt problems and expectations for now that European finance ministers will be able to help Greece manage its debt has also been a factor raising investor risk appetite to the oil market's benefit. But we are skeptical that the optimism will hold for the European debt problems to be resolve and that will leave oil markets vulnerable to disappointment on this issue. Oil markets have also been underpinned to a certain degree by the escalating geopolitical tensions with Iran over its nuclear program as the comments between Iran and the Western powers have become more threatening. Still, we suspect in order for the oil prices to gain more upside traction from current levels the market will need to see both a steady stream of bullish news along with outside market support. But with the dollar starting to gain some ground in the early going, the currency action may end up being a limiting factor for the oil bulls, especially if the Euro ends up giving back a sizable portion of yesterday's gains. Oil markets have been closely following the ebb and flow of the equity markets and so seeing equities add onto gains will be critical in keeping oil prices on an upward track. As a result, today's reports on housing and industrial production will provide some additional economic insight and certainly influence sentiment and price direction in both markets. The bull camp in oil continues to have the edge in the morning trade, but the gains in oil look fragile since the fundamentals remain weak. Crude oil clearly has an upward bias, but it also won't be surprising to see oil prices start to back track if outside market support begins to fade.
Natural Gas:
Natural gas has bounced a bit in the early overnight trade, but with the winter season winding down we see limited upside potential while downside price risk will remain in place. With weather forecasters predicting below normal temperatures for the US heating region through month end still gives April natural gas some upside potential. In fact, natural gas could get a price boost if today's reports on housing and industrial production come in better than expected. But the upside in April natural gas is still likely to be limited to the $5.55 to $5.64 price range. We suspect fresh selling will continue to be seen at these price levels since once winter fuel demand begins to fade, storage supplies could quickly rebuild. There are growing concerns that the supply side in natural gas will become burdensome again this spring since industrial fuel demand remains weak and the number of natural gas rigs in operation have been steadily climbing reaching an 11 month high last week. Therefore, traders should consider rallies back to the upper end of the February range as a selling opportunity.
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