Today’s Market Guidance

Financial Overview:
The stock markets are showing rather impressive gains early this morning and we are not totally sure if that action is the result of a temporary oversold condition from last Friday or if favorable UK bank earnings overnight are actually behind the rally. With better than expected Japanese GDP readings late last week and soft German ZEW readings this morning the international economic data flows still aren't definitively positive. Perhaps the market was cheered by the news that Greece had 30 days to prove they were getting their house in order, but many saw that narrow deadline as a potentially troublesome development in the future. In the end, the favorable Barclays earnings news appeared to be the main catalyst driving sentiment into the US Tuesday morning opening. With a low bar seemingly set for the scheduled US data flows today, the bull camp might be able to retain the edge today. However, one can hardly get overly positive on the outlook for stocks, as economic doubt was clearly present at times last week. In short, the initial bias is pointing upward, but growth expectations don't appear to justify anything more than an isolated technical bounce.

DOW:
With a fresh new high for the move seen early today, the negative bias from last week is at least temporarily tamped down. Clearly favorable Barclays earnings has provided large Cap US stocks with a lift and that could mean little in the way of resistance is seen until the 10,187 level basis the March Mini Dow. The Commitments of Traders Futures and Options report indicates that as of February 9th, the Non-Commercial and Non-reportable combined trader position in Dow Jones index $5 was net long only 11,095 contracts, which means that the specs increased their net long by just 737 contracts since the previous report. We can't argue against a positive session today, but the scheduled numbers will have to add not subtract from the positive tilt.

Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. The market's short-term trend is positive on the close above the 9-day moving average. It is a mildly bullish indicator that the market closed over the pivot swing number. The next upside target is 10270. The next area of resistance is around 10211 and 10270, while 1st support hits today at 10023 and below there at 9893.

S&P:
Like the rest of the markets, the S&P has forged a distinct range up extension, which might be made a little more powerful in the wake of the hard down action seen at times last Friday. With the Commitments of Traders Futures and Options report of February 9th showing the Non-Commercial and Non-reportable combined holding a net short position of 5,758 contracts as of February 9th, it is clear that a large portion of the buying seen over the last week could have been technical short covering. We can't argue with some initial gains today, with little in the resistance seen in the March S&P until the 1090.50 level.

Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. 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 1094.18. The next area of resistance is around 1088.87 and 1094.18, while 1st support hits today at 1069.13 and below there at 1054.69.

NASDAQ:
The Nasdaq has forged a very impressive range up extension this morning and in the process the March contract has managed to reach the highest level since January 28th. With the Commitments of Traders Futures and Options report for Nasdaq Mini as of February 9th showing the Non-Commercial and Non-reportable to be holding a net long position of 12,864 contracts, and that reading representing a decline of 15,340 contracts from the prior report, is was clear that the late January/early February slide balanced the Nasdaq futures contract. Therefore, the technicals would seem to allow for a minor rise ahead and so far the fundamental outlook doesn't look to be set to get in the way of a near term rise in stock prices.

US Dollar:
The Dollar was slightly weaker this morning in the face of minimally favorable economic sentiment and also because of a 30 day pause in the Greece debt situation. Apparently rumors about how much Dubai World is going to offer creditors is of little concern to the markets this morning, as flight to quality sentiment is seemingly running pretty low in the early US currency trade. With the markets also expecting some minimally positive US scheduled economic readings today that could leave the Dollar off balance. In fact, with the Commitments of Traders Futures and Options report for the US dollar showing the Non-Commercial and Non-reportable combined position as of February 9th, to be net long 44,826 contracts it is possible that the Dollar needs some measure of technical selling just to put the Greenback in a more balanced chart standing. However, the Dollar has seemingly built a measure of consolidation support on the charts around the 80.00 level and with the Greece and Dubai World concerns still swirling in the back ground, we doubt that the Dollar will encounter sustained and or aggressive selling pressure directly ahead.

Gold:
With a definitive range up extension this morning on the charts, the April gold contract has managed to reach the highest level since February 3rd. In addition to an improved macro economic condition this morning, the gold trade seems to be somewhat relieved that the situation in Greece might be put on hold for a full month. The gold market might also have garnered some support from a string of favorable US and UK corporate earnings reports this morning, as that news seems to have reversed the patently bearish economic sentiment that seemed to be settling into the markets last Friday. Surprisingly Indian gold market action overnight was mostly unimpressive and that suggests that improvement in developed country economic sentiment is indeed a major component of the bull case this morning. However, with April gold managing to climb back above the 50 day moving average early this morning, that action has fostered some talk that the gold market might be throwing off the downward bias that has periodically dominated the trade since the early December 2009 top. At least in the early going today, it would appear that favorable equity market action means more to the gold bulls, than minor US Dollar weakness.

Silver:
As in the gold market, the silver market bulls appear to be cheered by the idea that Greece has been given a 30 day grace period. It is also likely that favorable UK bank earnings news from Barclays is adding into the positive macro economic tilt this morning in silver. In short, silver appears to be deriving most of its upward action off an improvement in macro economic sentiment and not necessarily from minor declines in the US Dollar. Unlike the gold market, the silver market hasn't been able to regain its 50 day moving average, which surprisingly sits all the way up at $17.19 in the May silver contract. For the time being, silver appears to be acting like a physical commodity market, that is seeing a modest improvement in overall psychology but it is also possible that distinctly favorable US equity market action will be the key to the silver bull's near term control over prices. Unfortunately for the bull camp, the silver market was once again presented with news of a rather sharp gain in physical silver production from Pan American silver over the weekend but apparently the silver trade is discounting bearish supply side news in favor of an improvement in overall physical commodity demand expectations

Crude Oil:
Crude oil has been able to make solid gains in the early overnight trade with part of the price rise coming from currency connected price support, a slightly better macro economic view and perhaps escalating geopolitical concerns. Oil has gained in response to a recovery bounce in the Euro on what looks to be a relief rally from the aggressive selling seen in the currency last week. Gains in global equity markets overnight also seem to be raising investor's risk appetite for oil. In fact, the February 9th COT report with options for crude oil showed the net long position held by Non-Commercial and Nonreportable fell by 31,682 contracts as of early last week to 139,490 contracts. And with the crude oil no longer overbought, this setup likely gives the the market some additional buying capacity. A better macro economic view has been stoked by a stronger than expected rise in Japan's 4th quarter GDP which rose 1.1% from the previous quarter and up 4.5% annualized rate and this news may be improving sentiment toward global oil demand a bit. It also looks as if part of the price strength in oil is tied to escalating geopolitical tensions with Iran as the US imposes some unilateral sanctions and as Western powers move towards imposing new UN sanctions as Iran peruses its nuclear agenda. April crude oil push above $75.59 also looks to be providing the market with some technical momentum and a move above last week's highs will leave little in the way of resistance until the $76.95 to $77.38 price range. With only a housing index and regional manufacturing reading out this session, we suspect oil markets will be closely influenced by the ebb and flow in the equity and currency markets. Given the price action overnight, the bull camp clearly has the upper hand. But it remains to be seen if Greece can impose deeper deficit cuts wanted by European finance ministers before aid is given. And with a variety of issues still unresolved for Greece's debt problem and the risk of sovereign debt default risk in the Euro-zone still a possibility, we are skeptical that currency based support for oil will hold. In fact, it shouldn't be surprising to see the oil market's reverse course to the downside if the Dollar starts to gain upside traction later in the session. We are also suspect of the market's upside sustainability given last week's bearish EIA inventory report which showed a 2.4 million barrel rise in oil stocks, a still low refinery operating rate and weak fuel demand. The next EIA report will be delayed until Thursday due to the holiday and therefore, oil markets are likely to be more influenced early in the week by bigger macro economic issues and technical signals than the market's own internal fundamental setup.

Natural Gas:
Natural gas has seen a firmer trade overnight and while the market may be able to temporarily trade a bit higher off the weather and outside market influences, we don't see a sustainable rally in natural gas holding until industrial demand returns. Natural gas looks to be getting some lingering price support from last Friday's storage report showing a draw of 191 bcf which was more than expected and higher than last year's 164 bcf draw and bigger than the 5 year average draw of 155 bcf. While the temperature outlook in the Northeast looks a bit less cold over the balance of the month, natural gas may still see some additional price support since forecasters are predicting below normal temperatures in the Midwest and that could raise expectations to see some sizable storage draws over the next two weeks. Also, for today's trade April natural gas may see some spill over support from the strength in the oil markets and the equity/currency action that looks to be raising investor risk appetite which could attract some additional buyers to natural gas. The Feb 9th COT report with options for natural gas showed the combined Non-Commercial and Nonreportable net short position was reduced by 11,366 contract to 32,939 contracts and more aggressive fund short covering could be seen if resistance levels fail to hold. But while April natural gas may have the capacity to trade back towards the February high, we also suspect a move back towards $5.75 area is likely to attract fresh sellers. The winter season is winding down and with industrial fuel demand still weak and the number of gas rigs in operation rising to an 11 month high, expectations for natural gas supplies to start to rebuild this spring will be a major hurdle for the bull camp to overcome. The market looks to have an upward leaning to day, but the potential is limited.