Today’s Market Guidance

Financial Overview:
We are somewhat surprised in the magnitude of the recovery effort yesterday in the wake of rumors that the Greek debt situation might have been solved. In fact, the market acted as if the economic decks had been cleared of negative sentiment and that was certainly a surprise. However, some market players are suggesting that the Greece bailout wasn't a done deal and even if it is, we have to wonder if that news will actually prompt a transition to more global optimism. In fact, with Coke earnings yesterday coming in at expectations and the typical flow of US scheduled data virtually non existent at the beginning of this week, the market really doesn't have the benefit of vastly improving economic views. While a few hardy Congressmen apparently slept in their offices, in an attempt to 'be around' for a vote on a jobs bill, the snow on the East Coast does seem to have slowed movement in Washington. If one looks back to the key reversal action of February 5th, today would technically be the 3rd day up, but technically that potentially major bottoming signal was negated with a lower close on Monday. Therefore, we find it fundamentally and technically difficult to leave the bull camp with the edge in the marketplace after the initial opening rally.

DOW:
While anxiety might be down because of Greek debt hopes, we still don't get the sense that investors are going to move back into stocks in great numbers. In fact, while we can't deny the capacity to push up stock prices today, we still think that bulls are facing more risk than reward. With the only scheduled US data point today, coming from the Trade Balance report, the bull camp will have to use somewhat favorable Disney earnings as the main bullish catalyst today. Critical support in the March Mini Dow is seen at even number 10,000, with resistance today pegged up at 10,104. Initially the bulls have the floor, but the impetus is still more of a short covering impetus than a fresh outright buying pattern.

The daily stochastics have crossed over up which is a bullish indication. Rising from oversold levels, daily momentum studies would support higher prices, especially on a close above resistance. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market setup is supportive for early gains with the close over the 1st swing resistance. The next upside target is 10227. The next area of resistance is around 10124 and 10227, while 1st support hits today at 9898 and below there at 9775.

S&P:
Initial resistance is seen up at 1076.50 in the March S&P, but the 100 day moving average in the S&P is not seen until 1087.00. The bulls will point to a pattern of higher lows and higher highs, as a sign that the short term trend is pointing upward. We can't argue against some minor upside follow through buying this morning, but we just don't get the sense that investors are poised to come in aggressively for stocks off the current flow of economic news.

The daily stochastics have crossed over up which is a bullish indication. Daily stochastics are showing positive momentum from oversold levels, which should reinforce a move higher if near term resistance is taken out. The market's close below the 9-day moving average is an indication the short-term trend remains negative. Market positioning is positive with the close over the 1st swing resistance. The near-term upside target is at 1088.87. The next area of resistance is around 1077.75 and 1088.87, while 1st support hits today at 1054.75 and below there at 1042.88.

NASDAQ:
The Nasdaq had to be partially cheered by favorable Disney earnings, as that can sometimes point to favorable conditions ahead for the tech sector. However, as suggested already the market overall continues to suspect that economic growth will remain anemic. Support in the March Nasdaq is seen at 1750 today and initial resistance is seen up at 1768. However, with the 100 day moving average in the March Nasdaq not seen until 1776, classic tech traders probably remain convinced that the overall trend remains down in the Nasdaq. Prices might extend the rally slightly today, but there doesn't appear to be a definitive improvement in the global recovery expectation.

US Dollar:
Like the equity markets, the Dollar trade continues to see the lingering impact of the Greece developments as a positive. In other words, flight to quality instruments, (like the Dollar) have remained off balance but we still don't think the markets can embrace an upbeat forward economic outlook. On the other hand, there is enough relief in the marketplace to leave the Dollar off balance in the early Wednesday trade. In fact, looking at comments made from the BOE overnight, one comes away with a somewhat disappointing forward view on the UK economy. Our opinion is that the Dollar bulls generally have an edge and that up trend channel support should offer solid support down at 79.62 today. In fact, with a US Trade balance report due out this morning, one should expect a bit of volatility in the Greenback. Expectations call for an expansion of the US Trade deficit again and that could be seen by some traders as a sign of positive growth and that in turn might temporarily undermine the Dollar further but we don't see an overall end to the upward trend pattern that has been in place in the Dollar since the January lows.

Gold:
At least for the time being, the trade is cheered by the potential improvement in the Greek debt situation. Unfortunately for the bull camp in gold, the trade was also presented with unusually downbeat economic dialogue from a Bank of England official overnight and that could temper the optimism of getting beyond the primary EU debt issue. On the other hand, the bear camp in gold is suggesting that settling the Greece situation doesn't alleviate the potential for trouble in Spain and other beleaguered EU members. In fact, with an EU summit scheduled directly ahead, it might be premature to assume that the EU debt situation is going to remain fixed. Clearly the gold market remains hostage to outside market action, with the bulls apparently needing a distinctly favorable recovery hope to consistently control prices. It doesn't seem like investment interest has been rekindled fully and that isn't surprising considering the rather fickle two sided action seen in the equity markets this week. With the US economic report slate this week also very thin and some upcoming reports delayed because of weather, the gold trade might continue to take more cues from the equities, than from the action in the currency markets.


Silver:
The silver market has managed to make a fresh new high for the move in the early going today and that would seem to suggest that the bull camp in silver has retained some of the edge that was acquired in the prior trading session. With the Greek debt issue seemingly set to improve, that has apparently degraded the Dollar's flight to quality standing and at the same that news has apparently served to modestly improve the global economic outlook. However, many traders are suggesting that solving the Greek debt situation doesn't patently improve overall global economic prospects, but it might reduce the drag on the recovery effort. Some bulls might try to play up another decline in daily silver exchange stocks, but unfortunately the silver market hasn't been attuned to minor physical supply side developments. As in the gold market, the silver trade looks to the equity markets and to the ebb and flow of economic sentiment for its direction today, with the action in the Dollar potentially a secondary consideration. While silver prices have forged a nice corrective bounce this week, it would seem like silver remains a physical commodity market in need of patently up beat economic views to fully reverse recently bearish sentiment.
 
Crude Oil:
Crude oil has recovered from overnight losses to trade higher as early price pressures tied to a jump in US inventory supplies has been offset by a weaker trade in the dollar. The selling conviction in the oil market overnight wasn't that strong despite the bearish supply news and given the early price action, it looks as if the direction in the oil market will be more closely tied to the ebb and flow of the dollar and equity markets today, especially since the EIA has delayed their inventory report until Friday. Oil prices initially fell overnight after API reported a much larger than expected 7.2 million barrel rise in oil stocks due to lower imports and a 1% drop in the refinery operating rate. And with gasoline stocks rising by more than expected despite a decline in production, it is clear from the report that US oil demand remains weak. But concerns over weak US oil demand may have been offset to a certain extent by news that Japan's refinery runs hit an 11 month high and that China's oil imports were still 33% higher in January from a year ago although down from the previous month. Since Chinese refiners are expected to continue to process oil near record levels due to new refinery capacity coming on line, oil demand is likely to stay robust despite tightening credit conditions. Also, the oil market has started to gain some upside traction on a weaker dollar trade overnight tied to hopes that European governments will soon agree on an aid package for Greece. The newswire headlines regarding a bailout for Greece have been a bit conflicting and that could result in a volatile choppy trade in oil depending on the movements in the dollar. But it does appear that Germany may be close to providing an unilateral support to Greece which is weighing on the dollar and supporting oil. If aid to Greece is confirmed, more of a relief rally in April crude oil seems possible since a part of the liquidation selling seen last week was certainly tied to concerns that a credit crisis was taking hold in the Euro-zone region. Early gains in Equities following yesterday's strong run also has crude oil benefiting from the rise in investor risk appetite. Oil price support is also coming from frigid and snowy weather conditions in the US heating region boosting heating demand and escalating geopolitical tensions with Iran. But key to price direction in the oil market today could be the news flow regarding European sovereign debt problems. If news on this issue continues to pressure the Dollar, we suspect April crude oil could test the next area of critical resistance which comes in between $74.84 (200 day moving average) and $75.20 (key retracement of the February high/low range). However, the bull camp in oil may still have to face some headwinds today since Bernanke's written testimony on his plan to withdraw monetary stimulus may test the market's resolve. The bull camp looks to be starting out with a slight edge and technically April crude oil may have more short covering capacity. But we don't think tempering the debt problems in Europe will ultimately end up significantly improving the demand outlook for oil. Therefore, given the bearish fundamental setup in the US, we suspect it may prove difficult for April crude oil to sustain a rally much beyond the $75 price level unless US demand starts to recover. Also, crude oil could quickly back peddle if the Dollar starts to strengthen. In fact, seeing OPEC slightly trim its outlook for world oil demand growth this year may be another limiting factor for the bull camp to overcome. In today's trade, the price direction in oil will mostly key off the Dollar and that could easily end up pushing oil prices in both directions.
 
Natural Gas:
Natural gas has been able to recover a bit in the early overnight trade, but it's clear from the price action this week that concerns over a build up in fuel supplies this spring and weak industrial fuel use are more than offsetting a temporary rise in winter heating demand. Natural gas is still likely to see bouts of strength tied to another winter storm hitting the Northeast this week and frigid temperatures expected in parts of the Midwest over the next two weeks that will boost winter fuel consumption and likely result in some hefty storage withdrawals. But the season is transitioning out of winter and once heating demand fades, it doesn't appear that industrial fuel demand has recovered enough yet despite signs that economic conditions are improving. As a result, there are growing concerns that natural gas storage levels will quickly build since post winter demand may not keep pace with supplies, especially since producers have started to bring production back on line with the number of working gas rigs in operation rising by 32% since last July. Producer hedging is also likely to limit rally attempts in this market. Therefore, weather related rallies in natural gas look like selling opportunities. And with April natural gas in a down trending price pattern from the December high, it sets the market up for an eventual test of the $5.00 price level. Overhead resistance is near $5.43 then $5.545 with support near $5.25 then near $5.11.