Today’s Market Guidance

Financial Overview:
While the markets are showing some rebound action in the early going, we don't get the sense that the market has pivoted off a deck clearing fundamental development. In other words, the recovery effort this morning seems to be mostly a technical anomaly, with the trade still generally concerned about the EU debt situation. About the most positive development, is that severe weather in Washington has effectively eliminated the flow of political uncertainty temporarily but even that lucky break isn't expected to last for long, especially with Bernanke scheduled for a grilling on Wednesday. With the US economic report slate today somewhat inactive, with only a Wholesale trade release, one shouldn't expect a sudden improvement in overall psychology. We do think that the equity markets might derive a small measure of support from the first leg of US Treasury auctions later today, as high demand for US 3 Year notes might send a message that rates are likely to stay low for the foreseeable future. In fact, with a Fed member yesterday suggesting that the Fed would wait until the 2nd half of the year to begin asset sales and also suggesting that they would wait until after the asset sales begin before hiking rates, the market should be confident that rates for now are destined to remain low. In short, the market can periodically bounce, but we don't get a sense that the bear tilt has been discarded yet.

DOW:
While the March Mini Dow is showing signs of returning to the 10,000 level in the action this morning, we continue to see more risk to longs than potential reward. As suggested already, we wouldn't be surprised to see a bit of a bounce into mid session today, in the wake of the US Treasury auction, but we ultimately think that prices are destined to work even lower. While some bulls might be banking on a key low in the face of a Senate jobs bill announcement, the market wasn't upbeat toward that prospect when it was initially announced. While traders and investors aren't overly negative toward prospects, we aren't sure that a single economic report or some statement from Washington is capable of suddenly shifting the trend securely back to the upside. We would be a seller of rallies in the March Mini Dow to 10,000 perhaps even after a knee jerk reaction to Coke earnings today.

Daily stochastics declining into oversold territory suggest the selling may be drying up soon. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market's close below the pivot swing number is a mildly negative setup. The next downside target is now at 9783. The 9-day RSI under 30 indicates the market is approaching oversold levels. The next area of resistance is around 9960 and 10042, while 1st support hits today at 9830 and below there at 9783.

S&P:
Until the March S&P manages to regain and hold above 1070.40 we will assume that the trend is pointing down. As suggested already the trade continues to fret over the prospect of EU debt problems under the surface and the trade also seems to think that the pace of the US recovery remains in question. Perhaps the market will get a temporary lift from the US Treasury auction or perhaps the market will get a fleeting lift off the promise of another US jobs bill, but we are not sure that the market will find the news to fully throw off the negative bias that has dominated the trade since the middle of January.

Daily stochastics are trending lower but have declined into oversold territory. The close below the 9-day moving average is a negative short-term indicator for trend. The downside closing price reversal on the daily chart is somewhat negative. It is a slightly negative indicator that the close was lower than the pivot swing number. The next downside target is 1042.88. The market is approaching oversold levels on an RSI reading under 30. The next area of resistance is around 1063.75 and 1073.87, while 1st support hits today at 1048.25 and below there at 1042.88.

NASDAQ:
Like the rest of the marketplace, the March Nasdaq has forged a recovery attempt in the early action today and we would not be surprised to see an additional lift provided by corporate earnings news, but we just don't think that corporate earnings or a third tier US economic reading is capable of taking the negative tilt completely out of the equity markets. However, those looking to get short this market, might wait until after mid day to step into short side positions. In fact, one should probably wait for a bounce back above 1756 in the March Nasdaq to re-enter a short side trade.

US Dollar:
Not surprisingly the Dollar is lower this morning as concerns toward EU debt are apparently being temporarily pushed to a back burner position. However, the debt concerns haven't dissipated they are just a little stale or perhaps temporarily over exposed. It does seem as if the recovery bounce in equities is serving to undermine the Dollar this morning, as higher equity price action gives off the impression of a trade that is going to be interested in slightly riskier investments. It is possible that favorable Coke earnings, a favorable US Treasury auction result and hope for the Senate Jobs bills could add to the downside tilt in the Dollar throughout the trade today. However, we doubt that traders will want to remain negative toward the Dollar beyond the US trading session today. Apparently the markets are currently of a mind that recent Greek maneuvers are capable of staving off more near term concerns and that also is prompting some long liquidation of the Dollar. We see the 80.00 level as a critical support zone, with longer term up trend channel support seen down at 79.46, but that up trend channel support line climbs up to 79.62 on Wednesday.

Gold:
The bear camp is suggesting that gains in gold prices off last week's lows are mostly technical short covering in nature. However, the bull camp thinks that a slight tempering of Greek debt concerns and the prospect of a US jobs bill directly ahead is justification for the recent recovery effort. In fact, the bull camp probably garners some addition confidence from the initial gains in the equity markets overnight and also because of the slide in the US Dollar. Some gold bears are suggesting that it could take a Dollar trade consistently back below the 80.00 level to consider the currency situation patently bullish to gold prices. Clearly gold and other physical commodities are in need of a definitive improvement in the macro economic outlook and with a US Wholesale Trade reading, the only scheduled US data point today, the focus of the gold trade is likely to remain fixated on the direction of stock prices. Certainly the jobs bill could lend some addition support to gold prices, but progress on that front might be impeded by adverse weather conditions and political wrangling. At least into the opening today, gold prices look to be tracking tightly with US equities.

Silver:
The silver market has remained just below the prior session's highs in the early action today. Certainly silver and other physical commodity markets are benefiting from a slightly weaker Dollar, but many traders think that up beat equity market action is the real catalyst behind the attempt to rally silver prices. Apparently news of strong January Chinese auto sales figures overnight were given little attention in the silver overnight trade, but it is possible that favorable Chinese economic activity is indirectly adding into the slightly improved macro economic tilt that seems to be in place this morning. The bull camp in silver could be emboldened by the ability to sustain above the $15.00 level early this week, while the bear camp is pointing out that the silver market still hasn't been able to return to even the first retracement level off the sharp January/February slide. In the end, silver looks to take a large amount of direction from ebb and flow of risk appetites, with silver apparently needing increasing risk interest to support silver prices. Therefore one might suggest that silver continues to behave like a classic physical commodity market, which continues to face an uncertain economic outlook.

Crude Oil:
Crude oil has traded higher in the early overnight action with part of the price support currency connected but also as investor risk appetite seemed to be returning a bit as concerns over European sovereign debt default risk begin to ease somewhat. Oil markets have gained as the Dollar edged lower on hopes European Union leaders will soon come up with a bailout plan for countries struggling with huge debt problems such as Greece, Portugal and Spain. Part of the selling in crude oil since the January high has been on fear that spreading debt problems across the Euro-zone will hinder the economic recovery in the region and keep oil demand sluggish. With European leaders meeting at a special summit this week, it is not too surprising to see the oil market supported by the prospects of a bailout for Greece. In fact, rising investor risk appetite and a slightly better macro economic view being thrown off by the gains in equities overnight may be enough to support a recovery bounce in April crude oil back towards last Friday's high. But in order to support a move to higher price levels in crude oil a much weaker Dollar would need to be seen and that's likely to require greater optimism for the European debt crisis to be quelled. In fact, given that the fundamental setup for crude oil is still weak, crude oil could quickly retreat if jitters over the European sovereign debt default risk surfaces again. Crude oil may also be garnering some price support this morning from forecast of another winter storm in the Northeast and Midwest raising winter heating demand this week. News that offshore storage of crude oil on supertankers has fallen to under 26 million barrels at the end of January compare to around nearly 41 million barrels at the end of December may also be providing a measure of support to the market. The oil market's oversold condition may be encouraging some additional short covering ahead of this week's inventory report. But we also suspect it may be a struggle for April crude oil to trade higher without strong outside market price support, especially since most traders are looking for about a 1.3 million barrel gain in crude oil stocks. The bull camp in oil has the edge based on the early price action and April crude oil's move above $73.14 could certainly give the market some addition technical upside traction that puts the next retracement targets of the February high/low range at $74.17 then $75.20. But since a good portion of the price gains seem to be currency based, April crude oil could easily start to slip back towards $70 unless the Dollar and equity market action stays positive.

Natural Gas:
While natural gas seems to have regained some footing after yesterday's sell off, it's clear that expectations for fuel supplies to more than meet demand will be a limiting factor for the bull camp. The longer-term view that natural gas could quickly build up storage levels again this spring once winter heating demand ebbs seemed to be behind yesterday's losses since industrial fuel demand hasn't shown signs of recovery. Therefore, gains in April natural gas are likely to be hard fought and limited to the $5.75 to $6.00 price range. But despite this negative fundamental view we suspect April natural gas will still find some price support from the forecast of another winter storm expected to hit the US heating region this week. Predictions of below normal temperatures in the Northeast and even frigid temperatures expected in parts of the Midwest over the next two weeks should boost heating demand that will help drain surplus fuel supplies and that should underpin natural gas to a certain degree and perhaps support a move back to test yesterday's high. In the short-run, the bull camp will likely have the edge given the weather outlook, but gains could end up being short lived once the winter heating demand begins to fade.