Today’s Market Guidance

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.