3 May 750/760 call spreads for $0.60 Credit
Track will be up to date with all new orders soon.
Wednesday, March 31, 2010
Rut Update
Sorry no guidance this week with the slow holiday trade. We will be back next Monday.
But we will start working a new Rut order.
Sell 3 May 750/760 call spread. Get this for as much credit as you can with a minimum of $0.50.
We are into the new month and will trade up to 3 contracts now. I'd like to get this spread on before the long weekend. To take advatage of theata and with the jobs report out on Friday, if it disapoints, we might see a top and sell off come Monaday.
But we will start working a new Rut order.
Sell 3 May 750/760 call spread. Get this for as much credit as you can with a minimum of $0.50.
We are into the new month and will trade up to 3 contracts now. I'd like to get this spread on before the long weekend. To take advatage of theata and with the jobs report out on Friday, if it disapoints, we might see a top and sell off come Monaday.
Thursday, March 25, 2010
Today's Market Guidance
Financial Overview:
The stock market takes a licking and keeps on ticking. Apparently the market is capable of shaking off downside pressure and remaining within a well defined up trend pattern on the charts. In looking back, the market clearly saw a measure of bullish news yesterday and failed to respond to that news and that sparked talk of lost momentum. However, favorable UK retail sales readings, mostly favorable US Fed rate talk recently and little in the way of anxiety off the Portugal downgrade yesterday would seem to suggest that the bull camp generally remains in control. It did seem as if the Portugal downgrade was the key undermine for the equity market in the prior trading session and therefore the markets will be taking every headline from the EU summit very seriously over the coming 24 hours of trade. While the Chinese/US trade flap continues to bubble in the background, we don't see that issue holding back equity prices from clawing out more new highs for the year ahead. In fact, if the markets can garner anything positive from the US claims data later this morning, that might be enough for more grinding hard fought gains early today.
DOW:
The June Mini Dow sits just below the 2010 highs in the early action today and there doesn't appear to be much in the way of negative anxiety in the marketplace. Up trend channel support in the June Mini Dow contract is seen at 1069.80 today, with that level rising to 1072.25 on Friday morning. While we think the bull camp retains a slight edge, we also think that the market needs a little help from the US data to make another round of fresh yearly highs. We would remain bullish, as long as the June Mini Dow manages to hold above 1077.60.
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 market's close below the pivot swing number is a mildly negative setup. The next upside target is 10859. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 10823 and 10859, while 1st support hits today at 10757 and below there at 10726.
S&P:
Up trend channel support in the June S&P is seen at 1158.60, with that channel support rising to 1162.50 on Friday morning. While the market might be tripped up by negative EU summit news or periodic concerns from the US/China trade situation, the market has been able to limit the negative reactions to those themes this week. Therefore, we have to remain bullish toward the market and would even consider buying a minor break in the wake of the claims figures. In fact, we would remain bullish toward the market as long as the June S&P manages to hold above 1161.20.
A crossover down in the daily stochastics is a bearish signal. Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The market's close above the 9-day moving average suggests the short-term trend remains positive. It is a slightly negative indicator that the close was under the swing pivot. The next downside objective is now at 1156.13. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 1169.25 and 1174.12, while 1st support hits today at 1160.25 and below there at 1156.13.
NASDAQ:
The June Nasdaq remains within a well defined up trend channel on the charts. Up trend channel support today is seen at 1938.20, with that level climbing to 1944.50 on Friday morning. However, the market might have a critical closer-in pivot point on the charts around the even number 1950 level. As suggested in the broad coverage this morning, the Nasdaq probably needs some headline help to extend on the upside, but this market has managed to rise consistently over the last two months, despite the lack of positive economic news.
Bonds:
The Treasury market clearly came under definitive liquidation pressure in the US Wednesday trade but most of the selling took place in the wake of the scheduled US number flow. Some might suggest that a lackluster auction was responsible for the sharp slide, but the market was already down by more than a full point well ahead of the mid day auction results. It is also possible that the combination of a sharp rise in the Dollar served to undermine US Treasuries, as foreign interests were being forced to pay for purchases of Treasuries with falling currency values. Even more surprising is the fact that Treasury prices weren't lifted off news of a Portugal debt downgrade, as increased concern toward EU debt fears should have provided US Treasuries with a flight to quality boost. In retrospect, the US numbers alone weren't overly damaging to Treasuries, but in conjunction with better numbers from the EU PMI and the German Ifo yesterday, the Treasury trade might have been rushing to factor in better US numbers ahead. As we suggested yesterday morning, seeing analysts suggest that early 2010 Euro activity was held back by weather seemed to give a lot of credence to the idea that US activity was also held down in February. Therefore, the market might pay more attention to the weekly claims figures today as opposed to any US data from the February time frame. However, it has been a couple weeks since the Treasury market saw something definitively bearish to Treasury prices from the claims figures. On the other hand, another auction offering today is expected to produce slack results, as some foreign interests are distracted in Asia and the word early in the week was that longer maturities were becoming less attractive. Therefore, we have to leave a slight edge with the bear camp today, but we are not sure that the market is destined to plow through the prior session's low of 115-19 in June bonds and at 115-28 in June Notes unless the ongoing claims reading posts a decline in excess of 50,000. While the sharp slide yesterday might have pushed up yields slightly, we doubt that the auction results are going to provide any noted support to prices later today. On the other hand, the June bonds seem to be sitting in a 'no-mans' land on the charts by settling below the 116-00 level, with little in the way of solid support to underpin the market until the 115-12 level. Even Bill Gross sounded defensive toward bonds and somewhat interested in stocks yesterday and he has been the bond markets biggest cheerleader. As suggested yesterday, the Treasury market looks to remain vulnerable to minimally bearish news, with bullish news probably given only minor attention. However, we would be surprised to see another big range down move today, unless the claims figures foster a distinct wave of recovery talk.
The close under the 60-day moving average indicates the longer-term trend could be turning down. A crossover down in the daily stochastics is a bearish signal. Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The intermediate trend has turned down with the cross over back below the 18-day moving average. The market is in a bearish position with the close below the 2nd swing support number. The next downside target is now at 114-040. The next area of resistance is around 116-250 and 118-090, while 1st support hits today at 114-230 and below there at 114-040.
US Dollar:
Although it has given back some of its gains after making a new 10 month high yesterday, the Dollar is still well above its recent range as the market's focus remains squarely on the E.U. summit beginning today in Brussels. News that the European Central Bank would still accept bonds as collateral with a minimal investment grade rating did little to turn around the capital flight across the Atlantic and that leaves the Dollar generally supported on the charts. The subject of assisting Greece with its sovereign debt problems was not supposed to be the main topic of discussion in the summit, but with yesterday's ratings downgrade of Portugal's debt, the market will be watching out for any details of a possible solution, particularly in regards to whether the IMF will become involved or not. With only a Weekly US Jobless Claims number to impact the market later today, a lack of news out of Europe should be more than enough to maintain the Dollar's generally bullish tone but the severity of yesterday's move could leave the market vulnerable to profit-taking, as the run up yesterday was really aggressive and compacted. We see initial support on the charts at 81.93 and then again down at 81.82. The big thing to watch today, is whether or not the Dollar rallies on good US numbers, as that type of action would really give the bull camp confidence.
EURO:
The Euro has seen some recovery from yesterday's downside blowout, as some shorts are fearful of a solution from the EU summit. However, with more rhetoric than substance in the market regarding the sovereign debt situation, there are very few traders that are actually expecting the summit to provide something that is significantly supportive to the Euro currency. There are many in the markets who feel that the Greece situation may be the beginning of a chain reaction of failures, and that the E.U. will be forced to revisit these issues with the sovereign debt of other countries during the near future. Some even suggest the EU is playing hardball with Greece, because they are attempting to reserve their ammunition for a cavalcade of debt problems. Therefore, assume the worst for the Euro in the near term, but those that are short the Euro might consider the purchase of some cheap near to expiration calls as the Euro is at least temporarily technically oversold.
Gold:
The Indian gold market was slightly higher overnight. The bull camp will suggest that a rejection of the prior session's lows, in the overnight trade is a supportive development, while the bear camp will suggest the market remains vulnerable as long as it lingers below the even number price of $1,100 on the April gold charts. The trade did see news of a rise in Russian gold and currency reserves overnight to $448.2 billion. However, the gold market also saw news of record gold production from a Russian mining company overnight, but that news might have been countervailed by forecasts calling for lower overall 2010 Russian gold production. In retrospect, the gold market was at least temporarily undermined in the wake of the Portugal debt downgrade and that could mean that gold will be watching the headlines from the EU summit very closely.
Silver:
Overnight the silver market saw a minor rise in silver exchange stocks of 141,000 ounces and that news came on top of news of rising silver production from a Canadian based silver miner in the prior trading session. Silver seemed to be undermined off the EU debt situation yesterday and that probably has the silver trade intently focused on the EU summit in the trade today. Silver this week has mostly behaved like a physical commodity market, that is heavily dependant the ebb and flow of the Greenback. The silver market and other physical commodity markets also appear to be searching for a clearer direction on the track of the global economy.
Crude Oil:
May crude oil has recovered some of yesterday's sell off but remains near the middle of this week's trading range. While the Dollar remains well supported going into the E.U. summit in Brussels today, the chances of another commodity washout remain slim unless there is a flat-out negative outcome from that meeting. However, the crude oil market might be held back a little by this week's storage numbers. On the other hand, the May crude oil contract rejected another slide below the $80.00 level again and that should increase the markets respect of that support area. However with EIA crude stocks rising 7.245 million barrels and that news coming in the wake of a similarly large rise in API crude stocks earlier in the week, there is certainly a measure of bearish supply side news in the marketplace. However, EIA crude oil stocks are 10.04 million barrels below year ago levels, but they are also 20.819 million barrels above the five year average. Crude oil imports for the week stood at 9.397 million barrels per day compared to 8.428 million barrels the previous week. The refinery operating rate was 81.11% up, 0.56% from last week compared to 82.01% last year and the five year average of 85.87% and that might be seen as a negative to crude oil demand, but a possible supportive development for product demand. With the Dollar a touch weaker, equities initially positive and the energy market showing some early strength, it is possible that the trade is anticipating some help from the US claims readings. This market is all about demand, supply is secondary and therefore the bull camp needs good data to send May crude oil prices up to resistance today of $81.65.
Natural Gas:
The most bullish thing one can say about the natural gas market this week is that the May contract mostly managed to respect consolidation support of $4.115. While the trade is expecting a minor draw in the weekly natural gas stocks figures later this morning, the market isn't expecting much in the way of a surprise from that report, or from the supply side of the equation. For the near term, the most important factor driving natural gas prices might be the ebb and flow of speculative interest in the crude oil/natural gas spread and the action in the US Dollar. It is our opinion, that more definitive declines in the crude oil market could lend some support to natural gas prices in the coming trading sessions, but without that action it is hard to find a distinctly bullish fundamental theme for natural gas. The bull camp had to be disappointed with the markets failure to benefit from what seemed to be slightly better than expected US numbers yesterday. However, the natural gas trade apparently needs really solid proof of improved US growth to even begin to think about improved natural gas demand. The trend looks to remain down unless May natural gas manages to rise back above resistance of $4.217.
The stock market takes a licking and keeps on ticking. Apparently the market is capable of shaking off downside pressure and remaining within a well defined up trend pattern on the charts. In looking back, the market clearly saw a measure of bullish news yesterday and failed to respond to that news and that sparked talk of lost momentum. However, favorable UK retail sales readings, mostly favorable US Fed rate talk recently and little in the way of anxiety off the Portugal downgrade yesterday would seem to suggest that the bull camp generally remains in control. It did seem as if the Portugal downgrade was the key undermine for the equity market in the prior trading session and therefore the markets will be taking every headline from the EU summit very seriously over the coming 24 hours of trade. While the Chinese/US trade flap continues to bubble in the background, we don't see that issue holding back equity prices from clawing out more new highs for the year ahead. In fact, if the markets can garner anything positive from the US claims data later this morning, that might be enough for more grinding hard fought gains early today.
DOW:
The June Mini Dow sits just below the 2010 highs in the early action today and there doesn't appear to be much in the way of negative anxiety in the marketplace. Up trend channel support in the June Mini Dow contract is seen at 1069.80 today, with that level rising to 1072.25 on Friday morning. While we think the bull camp retains a slight edge, we also think that the market needs a little help from the US data to make another round of fresh yearly highs. We would remain bullish, as long as the June Mini Dow manages to hold above 1077.60.
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 market's close below the pivot swing number is a mildly negative setup. The next upside target is 10859. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 10823 and 10859, while 1st support hits today at 10757 and below there at 10726.
S&P:
Up trend channel support in the June S&P is seen at 1158.60, with that channel support rising to 1162.50 on Friday morning. While the market might be tripped up by negative EU summit news or periodic concerns from the US/China trade situation, the market has been able to limit the negative reactions to those themes this week. Therefore, we have to remain bullish toward the market and would even consider buying a minor break in the wake of the claims figures. In fact, we would remain bullish toward the market as long as the June S&P manages to hold above 1161.20.
A crossover down in the daily stochastics is a bearish signal. Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The market's close above the 9-day moving average suggests the short-term trend remains positive. It is a slightly negative indicator that the close was under the swing pivot. The next downside objective is now at 1156.13. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 1169.25 and 1174.12, while 1st support hits today at 1160.25 and below there at 1156.13.
NASDAQ:
The June Nasdaq remains within a well defined up trend channel on the charts. Up trend channel support today is seen at 1938.20, with that level climbing to 1944.50 on Friday morning. However, the market might have a critical closer-in pivot point on the charts around the even number 1950 level. As suggested in the broad coverage this morning, the Nasdaq probably needs some headline help to extend on the upside, but this market has managed to rise consistently over the last two months, despite the lack of positive economic news.
Bonds:
The Treasury market clearly came under definitive liquidation pressure in the US Wednesday trade but most of the selling took place in the wake of the scheduled US number flow. Some might suggest that a lackluster auction was responsible for the sharp slide, but the market was already down by more than a full point well ahead of the mid day auction results. It is also possible that the combination of a sharp rise in the Dollar served to undermine US Treasuries, as foreign interests were being forced to pay for purchases of Treasuries with falling currency values. Even more surprising is the fact that Treasury prices weren't lifted off news of a Portugal debt downgrade, as increased concern toward EU debt fears should have provided US Treasuries with a flight to quality boost. In retrospect, the US numbers alone weren't overly damaging to Treasuries, but in conjunction with better numbers from the EU PMI and the German Ifo yesterday, the Treasury trade might have been rushing to factor in better US numbers ahead. As we suggested yesterday morning, seeing analysts suggest that early 2010 Euro activity was held back by weather seemed to give a lot of credence to the idea that US activity was also held down in February. Therefore, the market might pay more attention to the weekly claims figures today as opposed to any US data from the February time frame. However, it has been a couple weeks since the Treasury market saw something definitively bearish to Treasury prices from the claims figures. On the other hand, another auction offering today is expected to produce slack results, as some foreign interests are distracted in Asia and the word early in the week was that longer maturities were becoming less attractive. Therefore, we have to leave a slight edge with the bear camp today, but we are not sure that the market is destined to plow through the prior session's low of 115-19 in June bonds and at 115-28 in June Notes unless the ongoing claims reading posts a decline in excess of 50,000. While the sharp slide yesterday might have pushed up yields slightly, we doubt that the auction results are going to provide any noted support to prices later today. On the other hand, the June bonds seem to be sitting in a 'no-mans' land on the charts by settling below the 116-00 level, with little in the way of solid support to underpin the market until the 115-12 level. Even Bill Gross sounded defensive toward bonds and somewhat interested in stocks yesterday and he has been the bond markets biggest cheerleader. As suggested yesterday, the Treasury market looks to remain vulnerable to minimally bearish news, with bullish news probably given only minor attention. However, we would be surprised to see another big range down move today, unless the claims figures foster a distinct wave of recovery talk.
The close under the 60-day moving average indicates the longer-term trend could be turning down. A crossover down in the daily stochastics is a bearish signal. Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The intermediate trend has turned down with the cross over back below the 18-day moving average. The market is in a bearish position with the close below the 2nd swing support number. The next downside target is now at 114-040. The next area of resistance is around 116-250 and 118-090, while 1st support hits today at 114-230 and below there at 114-040.
US Dollar:
Although it has given back some of its gains after making a new 10 month high yesterday, the Dollar is still well above its recent range as the market's focus remains squarely on the E.U. summit beginning today in Brussels. News that the European Central Bank would still accept bonds as collateral with a minimal investment grade rating did little to turn around the capital flight across the Atlantic and that leaves the Dollar generally supported on the charts. The subject of assisting Greece with its sovereign debt problems was not supposed to be the main topic of discussion in the summit, but with yesterday's ratings downgrade of Portugal's debt, the market will be watching out for any details of a possible solution, particularly in regards to whether the IMF will become involved or not. With only a Weekly US Jobless Claims number to impact the market later today, a lack of news out of Europe should be more than enough to maintain the Dollar's generally bullish tone but the severity of yesterday's move could leave the market vulnerable to profit-taking, as the run up yesterday was really aggressive and compacted. We see initial support on the charts at 81.93 and then again down at 81.82. The big thing to watch today, is whether or not the Dollar rallies on good US numbers, as that type of action would really give the bull camp confidence.
EURO:
The Euro has seen some recovery from yesterday's downside blowout, as some shorts are fearful of a solution from the EU summit. However, with more rhetoric than substance in the market regarding the sovereign debt situation, there are very few traders that are actually expecting the summit to provide something that is significantly supportive to the Euro currency. There are many in the markets who feel that the Greece situation may be the beginning of a chain reaction of failures, and that the E.U. will be forced to revisit these issues with the sovereign debt of other countries during the near future. Some even suggest the EU is playing hardball with Greece, because they are attempting to reserve their ammunition for a cavalcade of debt problems. Therefore, assume the worst for the Euro in the near term, but those that are short the Euro might consider the purchase of some cheap near to expiration calls as the Euro is at least temporarily technically oversold.
Gold:
The Indian gold market was slightly higher overnight. The bull camp will suggest that a rejection of the prior session's lows, in the overnight trade is a supportive development, while the bear camp will suggest the market remains vulnerable as long as it lingers below the even number price of $1,100 on the April gold charts. The trade did see news of a rise in Russian gold and currency reserves overnight to $448.2 billion. However, the gold market also saw news of record gold production from a Russian mining company overnight, but that news might have been countervailed by forecasts calling for lower overall 2010 Russian gold production. In retrospect, the gold market was at least temporarily undermined in the wake of the Portugal debt downgrade and that could mean that gold will be watching the headlines from the EU summit very closely.
Silver:
Overnight the silver market saw a minor rise in silver exchange stocks of 141,000 ounces and that news came on top of news of rising silver production from a Canadian based silver miner in the prior trading session. Silver seemed to be undermined off the EU debt situation yesterday and that probably has the silver trade intently focused on the EU summit in the trade today. Silver this week has mostly behaved like a physical commodity market, that is heavily dependant the ebb and flow of the Greenback. The silver market and other physical commodity markets also appear to be searching for a clearer direction on the track of the global economy.
Crude Oil:
May crude oil has recovered some of yesterday's sell off but remains near the middle of this week's trading range. While the Dollar remains well supported going into the E.U. summit in Brussels today, the chances of another commodity washout remain slim unless there is a flat-out negative outcome from that meeting. However, the crude oil market might be held back a little by this week's storage numbers. On the other hand, the May crude oil contract rejected another slide below the $80.00 level again and that should increase the markets respect of that support area. However with EIA crude stocks rising 7.245 million barrels and that news coming in the wake of a similarly large rise in API crude stocks earlier in the week, there is certainly a measure of bearish supply side news in the marketplace. However, EIA crude oil stocks are 10.04 million barrels below year ago levels, but they are also 20.819 million barrels above the five year average. Crude oil imports for the week stood at 9.397 million barrels per day compared to 8.428 million barrels the previous week. The refinery operating rate was 81.11% up, 0.56% from last week compared to 82.01% last year and the five year average of 85.87% and that might be seen as a negative to crude oil demand, but a possible supportive development for product demand. With the Dollar a touch weaker, equities initially positive and the energy market showing some early strength, it is possible that the trade is anticipating some help from the US claims readings. This market is all about demand, supply is secondary and therefore the bull camp needs good data to send May crude oil prices up to resistance today of $81.65.
Natural Gas:
The most bullish thing one can say about the natural gas market this week is that the May contract mostly managed to respect consolidation support of $4.115. While the trade is expecting a minor draw in the weekly natural gas stocks figures later this morning, the market isn't expecting much in the way of a surprise from that report, or from the supply side of the equation. For the near term, the most important factor driving natural gas prices might be the ebb and flow of speculative interest in the crude oil/natural gas spread and the action in the US Dollar. It is our opinion, that more definitive declines in the crude oil market could lend some support to natural gas prices in the coming trading sessions, but without that action it is hard to find a distinctly bullish fundamental theme for natural gas. The bull camp had to be disappointed with the markets failure to benefit from what seemed to be slightly better than expected US numbers yesterday. However, the natural gas trade apparently needs really solid proof of improved US growth to even begin to think about improved natural gas demand. The trend looks to remain down unless May natural gas manages to rise back above resistance of $4.217.
Wednesday, March 24, 2010
Rut Fill
Buy to close Apr 530/520 put spread for 0.05.
Well we just got our first nickel buy back. Cancel all orders that involve the 530/520 spread.
Tracker will be up to date soon.
Well we just got our first nickel buy back. Cancel all orders that involve the 530/520 spread.
Tracker will be up to date soon.
Today's Market Guidance
Financial Overview:
After seeing another round of new highs in some market measures yesterday the equity market comes into the trade today sitting just below the recent highs. While prices are showing initial weakness in the early US trade, the German and European markets at times overnight were showing minor gains. While the Euro zone saw a better than expected PMI result and the German Ifo readings were also better than expected, there is also some concern about a US/Chinese trade battle and that would seem to leave prospects mixed to slightly negative in the early action. However, a Fed member overnight seemed to reiterate the need to leave US interest rates low and that probably provides a bit of a support to stock prices. While the market would seem to need something positive from the durables and or new home sales to justify the upward track, this market has been able to grind upward even in the face of slack numbers for most of the last two months! With the Fed's Yellen overnight suggesting that now is not the time to tighten, it is possible that stocks will be able to shake off a slight negative reaction to the US data this morning and attempt to claw out more gains.
DOW:
The June Mini Dow sits just below the high forged in the prior trading session. While we suspect that prices will see a bit of a dip in the wake of the scheduled data this morning, we expect the market to discount that weakness as a result of the weather. As suggested already, Fed comments overnight and ideas that Yellen (a policy Dove in some minds) could be offered the Vice Chairmanship at the Fed, would seem to give the bull camp some news to offset any disappointment that might arise in the wake of the US data flows. It is also possible that the trade will see the data today, as the last of the ultra soft data and therefore expectations for better March data ahead could become some sort of carrot for the bull camp. Certainly the market is becoming more overbought especially after the big range up extension yesterday, but there might be little in the way of close in support on the charts until the 10,807 level.
The market made a new contract high on the rally. Momentum studies are trending higher but have entered overbought levels. The close above the 9-day moving average is a positive short-term indicator for trend. Market positioning is positive with the close over the 1st swing resistance. The next upside objective is 10917. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 10889 and 10917, while 1st support hits today at 10775 and below there at 10689.
S&P:
Despite the impressive range up extension in the prior trading session, the June S&P would seem to have little in the way of close-in support on the charts until the 1164.80 old high level. Ordinarily the S&P would have distinctly benefited from dovish Fed comments and favorable Euro zone data news overnight, but the market seems to be either partially overbought technically, or perhaps a little concerned about this morning's new home sales figures. We ultimately think the market will be able to shake off the data this morning, but we can't rule out some weakness into and perhaps through the data. Therefore we would look to the 1162 to 1164 level as a key pivot point this morning.
The market made a new contract high on the rally. The daily stochastics have crossed over up which is a bullish indication. Momentum studies are trending higher but have entered overbought levels. 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 near-term upside target is at 1178.62. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 1175.25 and 1178.62, while 1st support hits today at 1163.75 and below there at 1155.63.
NASDAQ:
With the June Nasdaq easily the most overbought (based on COT position readings) and the market already sitting well above the level where the last COT report was measured, one should expect the Nasdaq to lag behind the rest of the market on rallies and lead the rest of the market on any breaks directly ahead. Given the steep upward track in the Nasdaq recently, close-in support isn't seen until the 1955 level on the charts. With up trend channel resistance not seen until the 1967.85 level.
Bonds:
While we might be giving too much credence to the European economic news overnight, the numbers from that area were markedly better than some expectations and notably better than prior readings and that led some analysts overnight to conclude that adverse weather did serve to weaken activity earlier this year. In other words, adverse weather seemed to hold back the European economy in February and data after that period showed a noted recovery. Therefore, that could lead some to conclude a similar potential economic recovery could be seen in the US, where the Eastern portion of the country (particularly the biggest source of hiring the US government) was impacted by a series of winter storms. Note: Today's Durable goods and New Home sales reports are still for February and not for March! With a couple Fed members recently suggesting that employment would improve this spring, one begins to get the impression that the next Non-farm payroll, or certainly the one for April will post a noted gain and therefore the recent bullish tilt in Treasuries looks to be challenged in the coming trading sessions. After a tight consolidation around both sides of 118-00 in the June bond contract recently, that would seem to hint at a slight loss of upside momentum. While we continue to think that residual uncertainty off the US economic outlook in the near term will generally provide the bull camp with ongoing support, we also think that the market is already finding it difficult to put together enough buying fuel to definitively extend the rally that has basically been in place since late December. However, with the market facing another auction leg today and the market yesterday not getting its typical lift off the auction that could mean longer maturities will have to provide even more support prices in the wake of the coming auctions, or some more distinct downside work might be seen on the charts. On the other hand, after seeing the third straight monthly US existing home sales decline in a row yesterday and seeing muted inflation readings last week, one might have expected the bulls to have displayed more dominance over the Treasury market this week. With $42 billion in 5 Year Notes to be auctioned later today and the poor market reaction to the auction yesterday, the bull camp is in bad need of something weak in the durable goods or new home sales figures or Treasuries could knuckle under and in the process send June bonds back below the 117-00 level. Furthermore, we think that June Notes could easily fall back below 116-24 in the event that any of the US numbers today are better than expected. Certainly seeing patently weak scheduled data today would catch some players pressing the downside early, but given any additional ammunition from decent data, that could really result in bonds and notes falling back toward the March lows!
Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The close above the 9-day moving average is a positive short-term indicator for trend. The market's close below the 1st swing support number suggests a moderately negative setup for today. The near-term upside objective is at 118-100. The next area of resistance is around 117-280 and 118-100, while 1st support hits today at 117-100 and below there at 117-050.
US Dollar:
The Dollar seems to be getting a distinct bid off renewed concerns that the EU summit that begins on Thursday won't provide tangible support to Greece. It is also possible that the Dollar is catching a bid because of renewed US/Chinese trade war dialogue. However, in the wake of the initial US/China rift over the vale of the Chinese currency, the Dollar didn't seem to be at all interested in the trade war threat. Therefore, we suspect that most of the Dollar gains this morning are the result of EU debt issues. In fact, the Euro is very weak against the Dollar this morning, despite Euro zone PMI readings and German Ifo readings that could have been considered supportive of the Euro. Perhaps a downgrade of Portugal overnight is another element adding into the Dollar bulls case. In short, the bear items in the Dollar are being shunted to the sidelines and the bullish items are being fully embraced and that is the hallmark of a bull trending market. In fact, the Dollar might rally today even in the face of slack US economic readings. A big range up extension in the Dollar would seem to leave support on the charts today at 81.60. Perhaps the trade is happy with ideas that the US Fed remains content with low rates and that ultimately a recovery will be entrenched before they pull back on the reins.
Gold:
April gold overnight fell back below the $1,095 level at times overnight, as the weight of weakness in the Euro seemed to give the bear camp confidence. Apparently the gold market is discounting news of potential declines in Russian gold output overnight and perhaps gold is simply tracking early US equity market weakness.
Silver:
While silver exchange stocks fell by 641,000 ounces yesterday afternoon and equity prices have been consistently higher recently the silver market comes into the Wednesday action under pressure. At least in the early going today, May silver fell back below the even number $17.00 level overnight on the charts with that slide thought to be mainly the result of surging gains in the US Dollar.
Crude Oil:
May crude oil has been hit by a double-whammy, first by weaker API numbers after the close yesterday and then by the sharp Dollar rally this morning. Last night's numbers, which were well above industry estimates for crude oil stocks, could prove to be a one-week aberration, but that might be only be determined by the EIA data released later on this morning. In any case, net outflows in the products last night would seem to indicate that there is some demand out there, particularly as we head towards the 'Spring break' driving season. Any benefit from the move in the U.S. stock market towards new highs this week has been offset this morning by Dollar strength against the European currencies. Apparently an upcoming E.U. summit is not expected to fix the ongoing problem with Greece sovereign debt and that has many physical commodity markets under pressure this morning. The energy complex certainly managed an impressive rejection of the weakness that was seen in the Monday trade, but it will be on ongoing battle to justify prices above the $80.00 level in the face of an ultra strong Dollar. Apparently the energy complex was partially lifted because of optimism generated in the wake of US economic readings Tuesday, that weren't as bad as expected. In other words, the bull camp seems to be capable of spinning some news into its favor. We continue to think that crude oil prices below $80.00 basis May crude oil are considered cheap, while prices above the $82.50 level are possibly considered a little expensive versus the current view on the economy. In fact, to mount a rise above the early March highs and in effect reach the highest level since early January, might require a tightening of product stocks, a weaker US dollar, rising equities and a noted improvement in scheduled US data flows. Unfortunately the trade today looks to get the opposite of bullish needs and that could allow for another temporary violation of the $80.00 level in May crude oil.
Natural Gas:
May natural gas has consolidated within its range of the past few days, but still sits squarely at multi-year lows in the early Wednesday action. As the sentiment here has been so negative, there is a possibility that a short-covering rally may take prices out of their current range, but only if noted weakness in crude oil prompts long crude oil/short natural gas spread players to liquidate. With the winter heating season finishing up, the natural gas market now needs to see clear indications that both household and industrial demand will be picking up to even begin to chew down excess supply levels. In fact, it might take some kind of political shift in Washington toward increased Natural gas use to effectively throw off the downtrend pattern. The only other major bottoming source we see in natural gas, would be for the outlook on the economy to improve distinctly.
After seeing another round of new highs in some market measures yesterday the equity market comes into the trade today sitting just below the recent highs. While prices are showing initial weakness in the early US trade, the German and European markets at times overnight were showing minor gains. While the Euro zone saw a better than expected PMI result and the German Ifo readings were also better than expected, there is also some concern about a US/Chinese trade battle and that would seem to leave prospects mixed to slightly negative in the early action. However, a Fed member overnight seemed to reiterate the need to leave US interest rates low and that probably provides a bit of a support to stock prices. While the market would seem to need something positive from the durables and or new home sales to justify the upward track, this market has been able to grind upward even in the face of slack numbers for most of the last two months! With the Fed's Yellen overnight suggesting that now is not the time to tighten, it is possible that stocks will be able to shake off a slight negative reaction to the US data this morning and attempt to claw out more gains.
DOW:
The June Mini Dow sits just below the high forged in the prior trading session. While we suspect that prices will see a bit of a dip in the wake of the scheduled data this morning, we expect the market to discount that weakness as a result of the weather. As suggested already, Fed comments overnight and ideas that Yellen (a policy Dove in some minds) could be offered the Vice Chairmanship at the Fed, would seem to give the bull camp some news to offset any disappointment that might arise in the wake of the US data flows. It is also possible that the trade will see the data today, as the last of the ultra soft data and therefore expectations for better March data ahead could become some sort of carrot for the bull camp. Certainly the market is becoming more overbought especially after the big range up extension yesterday, but there might be little in the way of close in support on the charts until the 10,807 level.
The market made a new contract high on the rally. Momentum studies are trending higher but have entered overbought levels. The close above the 9-day moving average is a positive short-term indicator for trend. Market positioning is positive with the close over the 1st swing resistance. The next upside objective is 10917. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 10889 and 10917, while 1st support hits today at 10775 and below there at 10689.
S&P:
Despite the impressive range up extension in the prior trading session, the June S&P would seem to have little in the way of close-in support on the charts until the 1164.80 old high level. Ordinarily the S&P would have distinctly benefited from dovish Fed comments and favorable Euro zone data news overnight, but the market seems to be either partially overbought technically, or perhaps a little concerned about this morning's new home sales figures. We ultimately think the market will be able to shake off the data this morning, but we can't rule out some weakness into and perhaps through the data. Therefore we would look to the 1162 to 1164 level as a key pivot point this morning.
The market made a new contract high on the rally. The daily stochastics have crossed over up which is a bullish indication. Momentum studies are trending higher but have entered overbought levels. 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 near-term upside target is at 1178.62. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 1175.25 and 1178.62, while 1st support hits today at 1163.75 and below there at 1155.63.
NASDAQ:
With the June Nasdaq easily the most overbought (based on COT position readings) and the market already sitting well above the level where the last COT report was measured, one should expect the Nasdaq to lag behind the rest of the market on rallies and lead the rest of the market on any breaks directly ahead. Given the steep upward track in the Nasdaq recently, close-in support isn't seen until the 1955 level on the charts. With up trend channel resistance not seen until the 1967.85 level.
Bonds:
While we might be giving too much credence to the European economic news overnight, the numbers from that area were markedly better than some expectations and notably better than prior readings and that led some analysts overnight to conclude that adverse weather did serve to weaken activity earlier this year. In other words, adverse weather seemed to hold back the European economy in February and data after that period showed a noted recovery. Therefore, that could lead some to conclude a similar potential economic recovery could be seen in the US, where the Eastern portion of the country (particularly the biggest source of hiring the US government) was impacted by a series of winter storms. Note: Today's Durable goods and New Home sales reports are still for February and not for March! With a couple Fed members recently suggesting that employment would improve this spring, one begins to get the impression that the next Non-farm payroll, or certainly the one for April will post a noted gain and therefore the recent bullish tilt in Treasuries looks to be challenged in the coming trading sessions. After a tight consolidation around both sides of 118-00 in the June bond contract recently, that would seem to hint at a slight loss of upside momentum. While we continue to think that residual uncertainty off the US economic outlook in the near term will generally provide the bull camp with ongoing support, we also think that the market is already finding it difficult to put together enough buying fuel to definitively extend the rally that has basically been in place since late December. However, with the market facing another auction leg today and the market yesterday not getting its typical lift off the auction that could mean longer maturities will have to provide even more support prices in the wake of the coming auctions, or some more distinct downside work might be seen on the charts. On the other hand, after seeing the third straight monthly US existing home sales decline in a row yesterday and seeing muted inflation readings last week, one might have expected the bulls to have displayed more dominance over the Treasury market this week. With $42 billion in 5 Year Notes to be auctioned later today and the poor market reaction to the auction yesterday, the bull camp is in bad need of something weak in the durable goods or new home sales figures or Treasuries could knuckle under and in the process send June bonds back below the 117-00 level. Furthermore, we think that June Notes could easily fall back below 116-24 in the event that any of the US numbers today are better than expected. Certainly seeing patently weak scheduled data today would catch some players pressing the downside early, but given any additional ammunition from decent data, that could really result in bonds and notes falling back toward the March lows!
Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The close above the 9-day moving average is a positive short-term indicator for trend. The market's close below the 1st swing support number suggests a moderately negative setup for today. The near-term upside objective is at 118-100. The next area of resistance is around 117-280 and 118-100, while 1st support hits today at 117-100 and below there at 117-050.
US Dollar:
The Dollar seems to be getting a distinct bid off renewed concerns that the EU summit that begins on Thursday won't provide tangible support to Greece. It is also possible that the Dollar is catching a bid because of renewed US/Chinese trade war dialogue. However, in the wake of the initial US/China rift over the vale of the Chinese currency, the Dollar didn't seem to be at all interested in the trade war threat. Therefore, we suspect that most of the Dollar gains this morning are the result of EU debt issues. In fact, the Euro is very weak against the Dollar this morning, despite Euro zone PMI readings and German Ifo readings that could have been considered supportive of the Euro. Perhaps a downgrade of Portugal overnight is another element adding into the Dollar bulls case. In short, the bear items in the Dollar are being shunted to the sidelines and the bullish items are being fully embraced and that is the hallmark of a bull trending market. In fact, the Dollar might rally today even in the face of slack US economic readings. A big range up extension in the Dollar would seem to leave support on the charts today at 81.60. Perhaps the trade is happy with ideas that the US Fed remains content with low rates and that ultimately a recovery will be entrenched before they pull back on the reins.
Gold:
April gold overnight fell back below the $1,095 level at times overnight, as the weight of weakness in the Euro seemed to give the bear camp confidence. Apparently the gold market is discounting news of potential declines in Russian gold output overnight and perhaps gold is simply tracking early US equity market weakness.
Silver:
While silver exchange stocks fell by 641,000 ounces yesterday afternoon and equity prices have been consistently higher recently the silver market comes into the Wednesday action under pressure. At least in the early going today, May silver fell back below the even number $17.00 level overnight on the charts with that slide thought to be mainly the result of surging gains in the US Dollar.
Crude Oil:
May crude oil has been hit by a double-whammy, first by weaker API numbers after the close yesterday and then by the sharp Dollar rally this morning. Last night's numbers, which were well above industry estimates for crude oil stocks, could prove to be a one-week aberration, but that might be only be determined by the EIA data released later on this morning. In any case, net outflows in the products last night would seem to indicate that there is some demand out there, particularly as we head towards the 'Spring break' driving season. Any benefit from the move in the U.S. stock market towards new highs this week has been offset this morning by Dollar strength against the European currencies. Apparently an upcoming E.U. summit is not expected to fix the ongoing problem with Greece sovereign debt and that has many physical commodity markets under pressure this morning. The energy complex certainly managed an impressive rejection of the weakness that was seen in the Monday trade, but it will be on ongoing battle to justify prices above the $80.00 level in the face of an ultra strong Dollar. Apparently the energy complex was partially lifted because of optimism generated in the wake of US economic readings Tuesday, that weren't as bad as expected. In other words, the bull camp seems to be capable of spinning some news into its favor. We continue to think that crude oil prices below $80.00 basis May crude oil are considered cheap, while prices above the $82.50 level are possibly considered a little expensive versus the current view on the economy. In fact, to mount a rise above the early March highs and in effect reach the highest level since early January, might require a tightening of product stocks, a weaker US dollar, rising equities and a noted improvement in scheduled US data flows. Unfortunately the trade today looks to get the opposite of bullish needs and that could allow for another temporary violation of the $80.00 level in May crude oil.
Natural Gas:
May natural gas has consolidated within its range of the past few days, but still sits squarely at multi-year lows in the early Wednesday action. As the sentiment here has been so negative, there is a possibility that a short-covering rally may take prices out of their current range, but only if noted weakness in crude oil prompts long crude oil/short natural gas spread players to liquidate. With the winter heating season finishing up, the natural gas market now needs to see clear indications that both household and industrial demand will be picking up to even begin to chew down excess supply levels. In fact, it might take some kind of political shift in Washington toward increased Natural gas use to effectively throw off the downtrend pattern. The only other major bottoming source we see in natural gas, would be for the outlook on the economy to improve distinctly.
ZB Swing Update
ZB is making a nice push lower for us this morning. This trade has been long in the making almost stopping us out two different times. We are going to move our take profit target up in hopes that this is the move lower we have been waiting for.
New Target @ 115'01
New Target @ 115'01
Tuesday, March 23, 2010
Today's Market Guidance
Financial Overview:
After a moderate corrective dip most equity prices have returned to the vicinity of the 2010 highs. Apparently relief over the end of the intense debate over health care reform is enough to rekindle the bullish track in equity prices. Generally positive dialogue on the economy from the Fed overnight seems to be hinting at a coming improvement in the US jobs market and that might also have added into the recovery action that was seen in the prior trading session. With news overnight of a huge monthly Chinese trade deficit reading, some traders might actually discount the prospect of a US/Chinese trade war. The markets might also have been lifted by a rather noted improvement in French Business Survey reading overnight as the French economy lately hasn't been throwing off much in the way of positive economic news. In looking ahead we have to leave the bull camp with the edge, as the February and March up trend pattern looks to have come back into power once again.
DOW:
Like the rest of the market, the June Mini Dow this morning sits right on fresh new highs for the year. Apparently ideas that the jobs market is about to improve and relief over the practical end to the intense health care reform debate is capable of boosting investor sentiment. While the market might see a little choppy action in the wake of the existing home sales report later this morning, the market recently has been able to discount slack US economic data. Therefore, the June Mini Dow looks to respect support today of 10,727 and in turn the market will probably forge even higher highs for the year during the trading session today.
The daily stochastics have crossed over up which is a bullish indication. 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 daily closing price reversal up on the daily chart is somewhat positive. The close over the pivot swing is a somewhat positive setup. The next upside objective is 10846. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 10811 and 10846, while 1st support hits today at 10679 and below there at 10582.
S&P:
The June S&P has managed a definitive rebound in the overnight trade and is seemingly poised to rise into new high ground despite what could be sloppy existing home sales figures. We would note that equities have generally managed to rally on the charts over the last two months despite a litany of slack US scheduled readings. In the end, less uncertainty and anxiety gives the bull camp ongoing control over prices. Near term support in the June S&P should be respected today at 1162, with very little resistance seen at the old high of 1165.
Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The market's close above the 9-day moving average suggests the short-term trend remains positive. The daily closing price reversal up is a positive indicator that could support higher prices. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside target is now at 1142.00. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 1170.25 and 1175.00, while 1st support hits today at 1153.75 and below there at 1142.00.
NASDAQ:
With the June Nasdaq sitting right on the 1950 level early in the trade it is clear that sentiment generally continues to favor the bull camp. We suspect that the February through March up trend pattern is set to control prices, with the trade generally hopeful of better conditions and earnings ahead. Critical support in the June Nasdaq is seen at 1947.75 and there is only thin resistance at yesterday's high of 1955.00. With the Nasdaq more overbought than other market measures in the latest COT figures, trades might expect to see more volatility in the Nasdaq than in other market sectors.
Bonds:
The Treasury market mostly waffled around both sides of unchanged throughout the Monday trading session, with the 118-00 level in June bonds offering up some type of weak resistance. The markets in general still seem to be seeking a clearer picture on where the US economy is headed and with some housing data due out over the coming two trading sessions, it is possible that Treasury prices might begin to take a little more direction from classic fundamental developments. However, with the market also facing $44 Billion in Two Year Note supply at mid session today and the trade getting those existing home sales figures ahead of the auction, we suspect that trading ranges will be expanded today. We also expect that the shorter end of the market will continue to see relatively more pressure than the rest of the Treasury market, as the trade might feel more comfortable pressing the front end of the Yield curve. With the Fed's Bullard predicting a US jobs gain in March and also suggesting that the US will see its unemployment rate downtick modestly in the 'spring', the US economy would appear to be on the cusp of showing the type of improvement that is expected to put the Fed on a track to raise interest rates. In fact, a Fed Member yesterday even suggested that the policy of low rates for an extended period of time, was painting the Fed into a corner and that type of dialogue should serve to limit the upside capacity of the Treasury market in the near term. However, the market will probably see some type of soft readings from the Existing Home sales figures and perhaps from new home sales figures later this week and that could give the bull camp in bonds the capacity to make the highest highs since early December. Seeing the equity market rebound in the wake of the health care reform passage, highlights how intense debate in Washington over the last two months might have served to keep overall sentiment in the gutter. If the US is able to go forward without Washington headlines dominating the news cycle, then perhaps psychology can begin to improve. With a number of sources and potentially the Treasury market probably set to anticipate something positive from the next monthly Non Farm payroll report, we suspect that the market is once again poised for a minor rally, that could end up being the last thrust to the vicinity of 119-00 in June bonds and to 118-00 in June Notes. In fact, we think the best chance of a rally, over the next two weeks, is in the coming 2-3 trading sessions and that the Treasury market will quickly find that the bull camp will lose its resolve fairly quickly on coming rallies. For the action today, we suspect that the market will be lifted early by the Existing home sales report but we also suspect that the 2 Year Note auction results will barely manage to lift prices further. Critical support in June bonds is seen at 117-24, with similar support in June Notes pegged at 117-06.
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. The market has a slightly positive tilt with the close over the swing pivot. The next upside objective is 118-110. The next area of resistance is around 118-050 and 118-110, while 1st support hits today at 117-250 and below there at 117-180.
US Dollar:
The Dollar is holding above the prior closing value in the early Tuesday trade but a big Chinese trade deficit reading released overnight, that would seem to tamp down some support for the Dollar. We also think that a better than expected French business survey and up beat dialogue from a US Fed Member late yesterday, have served to take some of the bid out of the Dollar. We also think that reduced political anxiety in the US has allowed global economic sentiment to improve and that in turn takes some of the flight to quality buying interest away from the Dollar. However, if the Dollar is in fact a true bull market, it should be able to transition from a flight to quality driven currency, to a currency being lifted by either the macro economic differential, or by the interest rate differential argument. On the other hand, just because a US Fed member predicts an improvement in the US jobs situation, in the 'spring' doesn't mean that a recovery is assured. The Fed also suggested that the Fed's promise of low rates lingering for a long period of time, is painting the Fed into a corner and that could prompt some to speculate over the prospect of rising US rates. With the Fed's Plosser this morning suggesting that a mis-measured Output gap can hide the need for rate hikes, one gets the impression that sentiment at the US Fed is in the process of change, but the economy would still seem to lack the proof of recovery. For now, unless the Dollar has changed its focus, it should fall back slightly in the face of an improvement in economic psychology.
Gold:
April gold comes into the Tuesday action right around the prior closing value but almost all of the overnight trade was forged above the prior close. The bull camp in gold might be a little disappointed with the lack of renewed buying interest in the Euro this morning, in the wake of better Euro zone numbers overnight. Furthermore, the bull camp in gold might also be a little bit disappointed in the lack of strength in gold prices in the face of generally higher equity prices, especially since Indian gold prices were mostly positive overnight. Perhaps hawkish dialogue from the Fed's Plosser early today and residual strength in the US Dollar have put off some would-be gold buyers this morning. It is also possible that some traders are fearful of a weak US existing home sales report later this morning, as adverse weather was thought to have held back the US economy in the month of February. Apparently news that Zimbabwe gold mines were running well below their capacity because of power related issues was of limited interest to the early Tuesday gold trade and that would seem to suggest that outside market fundamentals, not inside market fundamentals continue to hold sway in the gold market.
Silver:
While the bull camp will point out the overnight attempt to regain the $17.00 level in the May silver contract, the trade wasn't initially able to sustain that rally. While China noted an impressive increase in February silver imports overnight, the silver trade didn't seem to give that news much attention. In fact, the silver market continues to see a number of very bullish private price forecasts this week, but even that hasn't managed to dramatically shift sentiment away from the downward tilt that was generally seen in the prior two trading sessions. Apparently strength in the equity markets isn't providing silver with a lift from its physical commodity market standing, perhaps because the trade hasn't bought into the idea of a solid US recovery yet. With a US Fed member floating what could be considered slightly hawkish dialogue early this morning it is possible that some physical commodity markets like silver, remain concerned about higher US interest rates. While the silver market saw another minor silver exchange warehouse stock decline yesterday afternoon, the silver market doesn't seem to be in a position to embrace talk of tighter supply. The bull camp hopes that favorable equity prices will offset the prospect of weak US data later today, while the bear camp hopes to see the Dollar remain firm.
Crude Oil:
Although close to unchanged levels going into the opening today, May crude oil has held at levels well above yesterday's lows as the market looks to have survived the threat of a long liquidation rout again. The market may be waiting for this week's storage numbers to gain further direction, as demand news may play a key role in getting prices to move out of their recent trading ranges. Quiet action in the Dollar today has helped to consolidate prices within close proximity to yesterday's close and that might give the bulls a slight technical edge. Furthermore, the recovery in U.S. equity prices could help to underpin energy prices, as an extension of that rally could help to take crude oil prices along with it. Once again May crude oil showed extended weakness but it was also clear again that the trade was unable to sustain May crude oil prices below the $80.00 level. It is possible that energy prices were initially concerned Monday about anti speculation regulations but since the Senate AG committee delayed the release of their draft legislation through the end of this week, it is possible that bargain hunting buyers were enticed back into crude oil yesterday. While many trade and Press outlets continue to think that oil prices are too expensive for current economic conditions and for internal supply factors, it would seem like the market is having trouble sustaining pressure on the energy complex. In fact, it is even possible that mild US temps are serving to partly undermine demand views today and it is also possible that uncertainty over the direction of the Dollar is spooking out some traders. However, reports of lower US highway travel in the month of January released Monday, doesn't even seem to be capable of putting crude oil prices down sharply today. Therefore, the action in equity prices directly ahead and the pace of scheduled US economic readings should not be discounted in the coming trading sessions, as that might serve to mitigate what seems to be negative internal oil market fundamentals. We think the path of least resistance is pointing down initially but that the bear camp won't be able to push May crude oil below $80.00 without some extremely negative economic development.
Natural Gas:
While May natural gas has been able to hold a small gain going into the open today, it remains solidly near multi-year lows as the fundamentals continue to remain mostly bearish. Weak demand continues to weigh on this market, and will probably continue to do so until there is a widespread recovery view embraced in the U.S. economy. Near term temps also seem to favor the bear camp today, as the prospect of a sustained late winter cool down are declining with every new weather forecast. While the overall macro economic outlook looks to have improved in the wake of the end of the intense US health care reform debate, that doesn't appear to be enough of a change to alter an entrenched down trend in the natural gas market. We think it will take robust optimism in the US equity markets, a sharply weaker Dollar and perhaps a wide spread wave of buying of physical commodity markets JUST to shut off the downtrend in this market.
After a moderate corrective dip most equity prices have returned to the vicinity of the 2010 highs. Apparently relief over the end of the intense debate over health care reform is enough to rekindle the bullish track in equity prices. Generally positive dialogue on the economy from the Fed overnight seems to be hinting at a coming improvement in the US jobs market and that might also have added into the recovery action that was seen in the prior trading session. With news overnight of a huge monthly Chinese trade deficit reading, some traders might actually discount the prospect of a US/Chinese trade war. The markets might also have been lifted by a rather noted improvement in French Business Survey reading overnight as the French economy lately hasn't been throwing off much in the way of positive economic news. In looking ahead we have to leave the bull camp with the edge, as the February and March up trend pattern looks to have come back into power once again.
DOW:
Like the rest of the market, the June Mini Dow this morning sits right on fresh new highs for the year. Apparently ideas that the jobs market is about to improve and relief over the practical end to the intense health care reform debate is capable of boosting investor sentiment. While the market might see a little choppy action in the wake of the existing home sales report later this morning, the market recently has been able to discount slack US economic data. Therefore, the June Mini Dow looks to respect support today of 10,727 and in turn the market will probably forge even higher highs for the year during the trading session today.
The daily stochastics have crossed over up which is a bullish indication. 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 daily closing price reversal up on the daily chart is somewhat positive. The close over the pivot swing is a somewhat positive setup. The next upside objective is 10846. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 10811 and 10846, while 1st support hits today at 10679 and below there at 10582.
S&P:
The June S&P has managed a definitive rebound in the overnight trade and is seemingly poised to rise into new high ground despite what could be sloppy existing home sales figures. We would note that equities have generally managed to rally on the charts over the last two months despite a litany of slack US scheduled readings. In the end, less uncertainty and anxiety gives the bull camp ongoing control over prices. Near term support in the June S&P should be respected today at 1162, with very little resistance seen at the old high of 1165.
Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The market's close above the 9-day moving average suggests the short-term trend remains positive. The daily closing price reversal up is a positive indicator that could support higher prices. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside target is now at 1142.00. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 1170.25 and 1175.00, while 1st support hits today at 1153.75 and below there at 1142.00.
NASDAQ:
With the June Nasdaq sitting right on the 1950 level early in the trade it is clear that sentiment generally continues to favor the bull camp. We suspect that the February through March up trend pattern is set to control prices, with the trade generally hopeful of better conditions and earnings ahead. Critical support in the June Nasdaq is seen at 1947.75 and there is only thin resistance at yesterday's high of 1955.00. With the Nasdaq more overbought than other market measures in the latest COT figures, trades might expect to see more volatility in the Nasdaq than in other market sectors.
Bonds:
The Treasury market mostly waffled around both sides of unchanged throughout the Monday trading session, with the 118-00 level in June bonds offering up some type of weak resistance. The markets in general still seem to be seeking a clearer picture on where the US economy is headed and with some housing data due out over the coming two trading sessions, it is possible that Treasury prices might begin to take a little more direction from classic fundamental developments. However, with the market also facing $44 Billion in Two Year Note supply at mid session today and the trade getting those existing home sales figures ahead of the auction, we suspect that trading ranges will be expanded today. We also expect that the shorter end of the market will continue to see relatively more pressure than the rest of the Treasury market, as the trade might feel more comfortable pressing the front end of the Yield curve. With the Fed's Bullard predicting a US jobs gain in March and also suggesting that the US will see its unemployment rate downtick modestly in the 'spring', the US economy would appear to be on the cusp of showing the type of improvement that is expected to put the Fed on a track to raise interest rates. In fact, a Fed Member yesterday even suggested that the policy of low rates for an extended period of time, was painting the Fed into a corner and that type of dialogue should serve to limit the upside capacity of the Treasury market in the near term. However, the market will probably see some type of soft readings from the Existing Home sales figures and perhaps from new home sales figures later this week and that could give the bull camp in bonds the capacity to make the highest highs since early December. Seeing the equity market rebound in the wake of the health care reform passage, highlights how intense debate in Washington over the last two months might have served to keep overall sentiment in the gutter. If the US is able to go forward without Washington headlines dominating the news cycle, then perhaps psychology can begin to improve. With a number of sources and potentially the Treasury market probably set to anticipate something positive from the next monthly Non Farm payroll report, we suspect that the market is once again poised for a minor rally, that could end up being the last thrust to the vicinity of 119-00 in June bonds and to 118-00 in June Notes. In fact, we think the best chance of a rally, over the next two weeks, is in the coming 2-3 trading sessions and that the Treasury market will quickly find that the bull camp will lose its resolve fairly quickly on coming rallies. For the action today, we suspect that the market will be lifted early by the Existing home sales report but we also suspect that the 2 Year Note auction results will barely manage to lift prices further. Critical support in June bonds is seen at 117-24, with similar support in June Notes pegged at 117-06.
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. The market has a slightly positive tilt with the close over the swing pivot. The next upside objective is 118-110. The next area of resistance is around 118-050 and 118-110, while 1st support hits today at 117-250 and below there at 117-180.
US Dollar:
The Dollar is holding above the prior closing value in the early Tuesday trade but a big Chinese trade deficit reading released overnight, that would seem to tamp down some support for the Dollar. We also think that a better than expected French business survey and up beat dialogue from a US Fed Member late yesterday, have served to take some of the bid out of the Dollar. We also think that reduced political anxiety in the US has allowed global economic sentiment to improve and that in turn takes some of the flight to quality buying interest away from the Dollar. However, if the Dollar is in fact a true bull market, it should be able to transition from a flight to quality driven currency, to a currency being lifted by either the macro economic differential, or by the interest rate differential argument. On the other hand, just because a US Fed member predicts an improvement in the US jobs situation, in the 'spring' doesn't mean that a recovery is assured. The Fed also suggested that the Fed's promise of low rates lingering for a long period of time, is painting the Fed into a corner and that could prompt some to speculate over the prospect of rising US rates. With the Fed's Plosser this morning suggesting that a mis-measured Output gap can hide the need for rate hikes, one gets the impression that sentiment at the US Fed is in the process of change, but the economy would still seem to lack the proof of recovery. For now, unless the Dollar has changed its focus, it should fall back slightly in the face of an improvement in economic psychology.
Gold:
April gold comes into the Tuesday action right around the prior closing value but almost all of the overnight trade was forged above the prior close. The bull camp in gold might be a little disappointed with the lack of renewed buying interest in the Euro this morning, in the wake of better Euro zone numbers overnight. Furthermore, the bull camp in gold might also be a little bit disappointed in the lack of strength in gold prices in the face of generally higher equity prices, especially since Indian gold prices were mostly positive overnight. Perhaps hawkish dialogue from the Fed's Plosser early today and residual strength in the US Dollar have put off some would-be gold buyers this morning. It is also possible that some traders are fearful of a weak US existing home sales report later this morning, as adverse weather was thought to have held back the US economy in the month of February. Apparently news that Zimbabwe gold mines were running well below their capacity because of power related issues was of limited interest to the early Tuesday gold trade and that would seem to suggest that outside market fundamentals, not inside market fundamentals continue to hold sway in the gold market.
Silver:
While the bull camp will point out the overnight attempt to regain the $17.00 level in the May silver contract, the trade wasn't initially able to sustain that rally. While China noted an impressive increase in February silver imports overnight, the silver trade didn't seem to give that news much attention. In fact, the silver market continues to see a number of very bullish private price forecasts this week, but even that hasn't managed to dramatically shift sentiment away from the downward tilt that was generally seen in the prior two trading sessions. Apparently strength in the equity markets isn't providing silver with a lift from its physical commodity market standing, perhaps because the trade hasn't bought into the idea of a solid US recovery yet. With a US Fed member floating what could be considered slightly hawkish dialogue early this morning it is possible that some physical commodity markets like silver, remain concerned about higher US interest rates. While the silver market saw another minor silver exchange warehouse stock decline yesterday afternoon, the silver market doesn't seem to be in a position to embrace talk of tighter supply. The bull camp hopes that favorable equity prices will offset the prospect of weak US data later today, while the bear camp hopes to see the Dollar remain firm.
Crude Oil:
Although close to unchanged levels going into the opening today, May crude oil has held at levels well above yesterday's lows as the market looks to have survived the threat of a long liquidation rout again. The market may be waiting for this week's storage numbers to gain further direction, as demand news may play a key role in getting prices to move out of their recent trading ranges. Quiet action in the Dollar today has helped to consolidate prices within close proximity to yesterday's close and that might give the bulls a slight technical edge. Furthermore, the recovery in U.S. equity prices could help to underpin energy prices, as an extension of that rally could help to take crude oil prices along with it. Once again May crude oil showed extended weakness but it was also clear again that the trade was unable to sustain May crude oil prices below the $80.00 level. It is possible that energy prices were initially concerned Monday about anti speculation regulations but since the Senate AG committee delayed the release of their draft legislation through the end of this week, it is possible that bargain hunting buyers were enticed back into crude oil yesterday. While many trade and Press outlets continue to think that oil prices are too expensive for current economic conditions and for internal supply factors, it would seem like the market is having trouble sustaining pressure on the energy complex. In fact, it is even possible that mild US temps are serving to partly undermine demand views today and it is also possible that uncertainty over the direction of the Dollar is spooking out some traders. However, reports of lower US highway travel in the month of January released Monday, doesn't even seem to be capable of putting crude oil prices down sharply today. Therefore, the action in equity prices directly ahead and the pace of scheduled US economic readings should not be discounted in the coming trading sessions, as that might serve to mitigate what seems to be negative internal oil market fundamentals. We think the path of least resistance is pointing down initially but that the bear camp won't be able to push May crude oil below $80.00 without some extremely negative economic development.
Natural Gas:
While May natural gas has been able to hold a small gain going into the open today, it remains solidly near multi-year lows as the fundamentals continue to remain mostly bearish. Weak demand continues to weigh on this market, and will probably continue to do so until there is a widespread recovery view embraced in the U.S. economy. Near term temps also seem to favor the bear camp today, as the prospect of a sustained late winter cool down are declining with every new weather forecast. While the overall macro economic outlook looks to have improved in the wake of the end of the intense US health care reform debate, that doesn't appear to be enough of a change to alter an entrenched down trend in the natural gas market. We think it will take robust optimism in the US equity markets, a sharply weaker Dollar and perhaps a wide spread wave of buying of physical commodity markets JUST to shut off the downtrend in this market.
Monday, March 22, 2010
Today's Market Guidance
Financial Overview:
The stock market is showing corrective action in the early Monday trade but the source of the slide in prices is difficult to pin down. With a surprise Indian rate hike over the weekend serving to rekindle global growth fears and the Chinese suggesting they would retaliate against any aggressive US trade penalties there are plenty of international negatives facing equities today. With Health Care reform passing the US House one could also suggest that economic and political uncertainty from inside the US are serving to push investors out of the market. We also think that a lack of forward progress on the US recovery track is another element prompting long liquidation in equities. While some traders think that US drug related stocks will be under pressure because of the reform push, the selling pressure this morning seems to be arising from weakness in natural resources and physical commodity related shares. In short, the market just hasn't seen enough evidence of forward progress on the recovery front and therefore stocks seem to have fallen back toward up trend channel support levels on the charts. In the end, health care reform and the uncertainty off that issue might facilitate the downward bias, but the bias initially comes from ideas that stock prices are simply running ahead of economic reality.
DOW:
Up trend channel support in the June Mini Dow comes in at 10,551, with that support level rising to 10,577 on Tuesday. While we don't see much in the way of anxiety or severe uncertainty driving stock prices downward, the lack of distinctly upbeat economic sentiment clearly facilitates selling interest. The Commitments of Traders Futures and Options report as of March 16th for Dow Jones Index $5 showed Non-Commercial traders were net long 22,754 contracts, a decrease of -4,816 contracts. The Non-reportable traders were net short 884 contracts, an increase of -1,052 contracts which represents a change from a net long to net short position. Non-Commercial and Non-reportable combined traders held a net long position of 21,870 contracts. This represents a decrease of 5,868 contracts in the net long position held by these traders. Therefore, the Mini Dow is certainly vulnerable to classic technical long liquidation selling and that might allow for a slide in the June Mini Dow down to a critical pivot point of 10,573 later this week.
The market made a new contract high on the rally. The daily stochastics gave a bearish indicator with a crossover down. Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. A positive signal for trend short-term was given on a close over the 9-bar moving average. The daily closing price reversal down is a negative indicator for prices. The market tilt is slightly negative with the close under the pivot. The next downside objective is 10569. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 10754 and 10818, while 1st support hits today at 10630 and below there at 10569.
S&P:
Technically the June S&P has little in the way of classic up trend channel support until the 1135.75 level. Fortunately that up trend channel support line rises to 1139.00 on Tuesday and that could culminate a 3 day corrective slide in stock prices. However, the Commitments of Traders Futures and Options report as of March 16th for S&P 500 Stock Index still showed a Non-Commercial and Non-reportable combined net short position of 6,671 contracts and that should mean that the S&P could encounter less aggressive long liquidation pressure. While we don't want to directly attach the vote on health care reform, to the slide in equity prices this morning, that news on top of slack economic data seems to leave more risk than reward for would-be longs. Initial downside targeting is seen at 1144.80 basis the June S&P.
Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The market's close above the 9-day moving average suggests the short-term trend remains positive. The downside closing price reversal on the daily chart is somewhat negative. The market's close below the 1st swing support number suggests a moderately negative setup for today. The next downside target is 1142.32. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 1163.87 and 1171.81, while 1st support hits today at 1149.13 and below there at 1142.32.
NASDAQ:
Like the rest of the market, the Nasdaq has also seen a downside extension on the charts this morning and that would seem to leave little in the way of support until the up trend channel support line at 1913.75. The Commitments of Traders Futures and Options report as of March 16th for Nasdaq Mini showed Non-Commercial traders were net long 48,776 contracts, a decrease of -215 contracts. The Non-reportable traders were net long 12,855 contracts, an increase of 9,224 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 61,631 contracts. This represents an increase of 9,009 contracts in the net long position held by these traders. With a relatively larger COT net spec and fund long position than the Mini Dow and S&P, the Nasdaq looks to be the most vulnerable to further long liquidation selling and that could put the market on a track to test lower support of 1906.00 later this week.
Bonds:
The Treasury market enters a new week sitting within relatively close proximity to the last four months highs and that positioning is made even more important by the fact that the market is facing another debt auction. With the Commitments of Traders Futures and Options report as of March 16th for U.S. Treasury Bonds showing the Non-Commercial and Non-reportable traders combined traders holding a net short position of 127,884 contracts there would appear to be the potential for more short covering gains ahead. However, the 10 Year Notes were showing a Non-Commercial and Non-reportable combined net short position of only 44,635 contracts, which means that the net short position in the market saw a decrease of 39,507 contracts from the last COT report. Therefore, one might assume that bonds have more technical short covering capacity left, than does the Note market. On the other hand, we continue to think that recent economic data has been soft enough to leave the bull camp generally in control, especially when one considers that inflation is widely thought to be under solid control. While the market has recently established a pattern of 10 to 16 tick gains in bonds and notes in the wake of recent auction results, the presence of another $118 billion in US Treasury supply this week on top of fresh debt fears off the massive US health care reform push, should serve to limit the upside in Treasuries directly ahead. With a Chicago National Activity Index reading the only scheduled US release today we would expect generally narrow trading ranges ahead, with fairly solid support in June Bonds seen at 119-04, with similar support in June Notes seen at 116-25. In addition to the Fed National Activity Index reading the Treasury market will also see a couple Fed Reserve speeches, which could also impact Treasury prices. Apparently news that the House passed a health care reform bill over the weekend wasn't a major story for Treasuries and it also doesn't seem like news that China might retaliate against the US, if the US enacts unfair trade measures, is being seen as a definitive undermine for Treasury prices. We get the feeling that the market is still in need of more direction from the scheduled numbers, but that the path of least resistance is pointing upward in Treasury prices because of the slack pace of recent numbers. We do think that the market will eventually fear the next set of Non Farm payroll readings, which aren't due out until the beginning of April. In conclusion, the bulls have control, with initial resistance today pegged at 118-11 in June bonds and initial resistance in June Notes seen at 117-09. As mentioned before, the Note market might have less upside capacity due to its relatively smaller net spec short positioning in the latest COT report. With very little respect for the recovery pace and a weaker equity market, we see fairly solid close-in support on the charts today and therefore we have to leave the bulls in control into the Monday morning trade.
The upside crossover (9 above 18) of the moving averages suggests a developing short-term uptrend. 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 upside closing price reversal on the daily chart is somewhat bullish. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The near-term upside objective is at 118-250. The next area of resistance is around 118-110 and 118-250, while 1st support hits today at 117-140 and below there at 116-300.
US Dollar:
The Dollar Index managed another range up extension on the charts and in the process the Dollar reached the highest level since March 2nd. Apparently the Dollar is seeing some spillover Dollar buying from ongoing Greece debt concerns, which in turn seemed to be the result of suggestions from a key German official overnight that a debt relief solution would not be seen this week. With global equity prices showing weakness and recent economic guidance on the US economy at best slack, we have to leave the edge with the Dollar bulls. The Commitments of Traders Futures and Options report as of March 16th for US Dollar showed Non-Commercial traders were net long 28,793 contracts, a decrease of -7,237 contracts. The Non-reportable traders were net long 2,488 contracts, a decrease of -744 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 31,281 contracts. This represents a decrease of 7,981 contracts in the net long position held by these traders. Therefore, the technical condition of the Dollar is somewhat overbought but not so overbought that the upside will be quickly limited. Initial upside targeting is seen at 81.33 basis the June Dollar Index.
Gold:
April gold comes into the opening today under modest pressure, but still above last week's lows. While there were reports of record gold production from a smaller gold producer overnight, the weakness in gold prices this morning appears to be the result of outside market influences, instead of classic internal supply and demand side developments. Therefore, the gold market probably might not see much in the way of fresh selling interest, from overnight news of higher Indian gold production in the ten months following April of 2009, perhaps because that news was offset by news of higher February gold output from Peru. However, the bear camp looks to benefit from weakness in equities, from the Indian rate hike late last week and also from ideas that the Euro and other Non Dollar currencies have remained weak. The bull camp might try to play up the potential for flight to quality buying off the US/Chinese trade front, or perhaps even from residual Greece debt fears. With the lack of scheduled US data flow today, the gold trade is likely to take a large measure of direction from either the currency markets or from US equities. The Commitments of Traders Futures and Options report as of March 16th for Gold showed Non-Commercial traders were net long 217,280 contracts, a decrease of -6,357 contracts. The Non-reportable traders were net long 44,140 contracts, a decrease of -1,896 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 261,420 contracts. This represents a decrease of 8,253 contracts in the net long position held by these traders.
Silver:
Apparently the silver market wasn't able to garner much support from news of a decline in February silver production from Peru, as May silver prices in the early Monday morning trade reached the lowest level since March 11th. Like gold, the silver market seems to be partially undermined from residual concern that a recent Indian interest rate hike will serve to slow growth and demand for silver. Given the downside action on the charts this morning, the silver market also doesn't seem to be gathering much support from the news that silver exchange stocks at the end of last week declined by 829,000 ounces. At least in the early trade action May silver in the early Monday action fell down to the 50 day moving average of $16.85. The Commitments of Traders Futures and Options report as of March 16th for Silver showed Non-Commercial traders were net long 34,851 contracts, a decrease of -186 contracts. The Non-reportable traders were net long 14,101 contracts, an increase of 2,544 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 48,952 contracts. This represents an increase of 2,358 contracts in the net long position held by these traders.
Crude Oil:
May crude oil has extended Friday's weakness, and has now moved back to the $80 level for the first time since early last week. The rate hike in India on Friday has continued to keep many physical commodity markets under pressure this morning, as the market continues to look for strong demand from that part of the world to underpin prices. The lack a resolution on the Greece sovereign debt crisis has also had undermined energy prices again this morning, as that news contributes to a stronger Dollar. Like a number of physical commodity markets, the energy complex recently seems to have become a little expensive versus classic fundamental readings. Furthermore, the Commitments of Traders Futures and Options report as of March 16th for Crude Oil showed that Non-Commercial and Non-reportable combined traders held a net long position of 217,859 contracts as of early last week and that would seem to suggest that the energy complex is clearly overbought. After a February low to March high rally of roughly $13 a barrel, the crude oil market managed to post a fresh record net spec and fund long positioning in the COT figures and that in conjunction with residual strength in the Dollar and suspect economic views puts the onus on the bulls to justify crude oil prices above the $80.00 level. While the bull camp could point out the fact that US crude oil stocks sit just under 15 million barrels below year ago levels, the expectation of favorable demand ahead has been at least temporarily lost and prices are vulnerable. Initial downside targeting is seen at $79.59 and perhaps even $79.20 in the event that US equities come under aggressive pressure.
Natural Gas:
Although Natural Gas has lifted off of last weeks lows, May natural gas remains weak this morning, as the market doesn't have internal or external news to alter the down trend pattern. With the market in such an extended downtrend, prices could eventually see a sharp short-covering rally but only if we can see a move back above last Friday's highs. In short, the bearish fundamentals for this market make it difficult to believe that any rally can be sustained yet. The natural gas market is fresh off a week of very aggressive selling pressure, which seemed to be accentuated by weakness in the regular energy complex. Clearly a strong Dollar and residual concern for the pace of the US recovery are additive issues that amplify the burden of high physical gas supplies. While the Commitments of Traders Futures and Options report as of March 16th for Natural Gas showed Non-Commercial traders were net short 89,552 contracts, for an increase of -10,941 contracts, the combined spec short was just 55,942 contracts as of early last week and that is a long way from the record spec short of 242,712 contracts that was posted back in July of 2008.
Soy:
The sharp sell-off in energy and metal markets overnight and weakness in the stock market are factors which could weigh on grain futures this morning. November soybeans closed in the 940-942 range for the past three trading sessions as traders see the longer-term buying from China for new crop as supportive. However, more and more estimates are coming out for producer plantings for the March 31st report with estimates more than 1 million acres above last year as compared with the USDA Outlook Forum estimates that producers would plant just 77 million acres, down 500,000 from last year. Two key estimates were out on Friday at 78.6 million and 79.1 million vs. 77.5 million last year. At a trend yield and 79.1 million acres planted, total supply would come in near 3.59 billion bushels. Traders see lower demand for the coming season due to massive South American crops so if we assume usage near 3.175 billion bushels, ending stocks would swell to over 400 million bushels from 190 million this year and 138 million last year. South America harvest is progressing well and Argentina drier weather this week will help dry out fields from last week and prepare fields for harvest. Heavy rains are expected in Rio Grande do Sul area of Brazil for the next few days which might help late maturing soybeans but should slow harvest. In the end, traders see all of South America production near 130 million tonnes, up 23% from last year. Weakness in crude oil and gold and strength in the dollar kept the soybean complex under pressure during most of the session on Friday until a late surge in buying pushed the market higher on the day late. The USDA announced a sale of 106,000 tonnes of soybeans to an unknown destination on Friday with delivery scheduled in the 2010/11 crop marketing year. The Commitments of Traders Futures and Options report as of March 16th for Soybeans showed non-commercial traders were net short 1,427 contracts, an increase of 4,794 contracts for the week. Shifting from a net long to a net short position is sometimes considered negative. Commodity Index traders held a net long position of 170,207 contracts, down 1,513 contracts for the week. For meal, non-commercial traders were net long 7,372 contracts, up 380 contracts. For oil, non-commercial traders were net long 24,773 contracts, down 969 contracts for the week. Commodity Index traders reduced their net long position by 5,841 contracts to 100,731. The selling trend of funds in oil is considered somewhat negative. China's food safety watchdog group has ordered inspections of cooking oil nationwide on reports that up to 10% of oil were illegally made and could contain cancer-causing agents. In the end, this is likely a positive force for vegoil demand. China imported 2.949 million tonnes of soybeans in January which was down 9.5% from last year. This pushed cumulative imports for the year to 7.025 million tonnes, up 11.7% from last year's pace.
The stock market is showing corrective action in the early Monday trade but the source of the slide in prices is difficult to pin down. With a surprise Indian rate hike over the weekend serving to rekindle global growth fears and the Chinese suggesting they would retaliate against any aggressive US trade penalties there are plenty of international negatives facing equities today. With Health Care reform passing the US House one could also suggest that economic and political uncertainty from inside the US are serving to push investors out of the market. We also think that a lack of forward progress on the US recovery track is another element prompting long liquidation in equities. While some traders think that US drug related stocks will be under pressure because of the reform push, the selling pressure this morning seems to be arising from weakness in natural resources and physical commodity related shares. In short, the market just hasn't seen enough evidence of forward progress on the recovery front and therefore stocks seem to have fallen back toward up trend channel support levels on the charts. In the end, health care reform and the uncertainty off that issue might facilitate the downward bias, but the bias initially comes from ideas that stock prices are simply running ahead of economic reality.
DOW:
Up trend channel support in the June Mini Dow comes in at 10,551, with that support level rising to 10,577 on Tuesday. While we don't see much in the way of anxiety or severe uncertainty driving stock prices downward, the lack of distinctly upbeat economic sentiment clearly facilitates selling interest. The Commitments of Traders Futures and Options report as of March 16th for Dow Jones Index $5 showed Non-Commercial traders were net long 22,754 contracts, a decrease of -4,816 contracts. The Non-reportable traders were net short 884 contracts, an increase of -1,052 contracts which represents a change from a net long to net short position. Non-Commercial and Non-reportable combined traders held a net long position of 21,870 contracts. This represents a decrease of 5,868 contracts in the net long position held by these traders. Therefore, the Mini Dow is certainly vulnerable to classic technical long liquidation selling and that might allow for a slide in the June Mini Dow down to a critical pivot point of 10,573 later this week.
The market made a new contract high on the rally. The daily stochastics gave a bearish indicator with a crossover down. Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. A positive signal for trend short-term was given on a close over the 9-bar moving average. The daily closing price reversal down is a negative indicator for prices. The market tilt is slightly negative with the close under the pivot. The next downside objective is 10569. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 10754 and 10818, while 1st support hits today at 10630 and below there at 10569.
S&P:
Technically the June S&P has little in the way of classic up trend channel support until the 1135.75 level. Fortunately that up trend channel support line rises to 1139.00 on Tuesday and that could culminate a 3 day corrective slide in stock prices. However, the Commitments of Traders Futures and Options report as of March 16th for S&P 500 Stock Index still showed a Non-Commercial and Non-reportable combined net short position of 6,671 contracts and that should mean that the S&P could encounter less aggressive long liquidation pressure. While we don't want to directly attach the vote on health care reform, to the slide in equity prices this morning, that news on top of slack economic data seems to leave more risk than reward for would-be longs. Initial downside targeting is seen at 1144.80 basis the June S&P.
Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The market's close above the 9-day moving average suggests the short-term trend remains positive. The downside closing price reversal on the daily chart is somewhat negative. The market's close below the 1st swing support number suggests a moderately negative setup for today. The next downside target is 1142.32. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 1163.87 and 1171.81, while 1st support hits today at 1149.13 and below there at 1142.32.
NASDAQ:
Like the rest of the market, the Nasdaq has also seen a downside extension on the charts this morning and that would seem to leave little in the way of support until the up trend channel support line at 1913.75. The Commitments of Traders Futures and Options report as of March 16th for Nasdaq Mini showed Non-Commercial traders were net long 48,776 contracts, a decrease of -215 contracts. The Non-reportable traders were net long 12,855 contracts, an increase of 9,224 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 61,631 contracts. This represents an increase of 9,009 contracts in the net long position held by these traders. With a relatively larger COT net spec and fund long position than the Mini Dow and S&P, the Nasdaq looks to be the most vulnerable to further long liquidation selling and that could put the market on a track to test lower support of 1906.00 later this week.
Bonds:
The Treasury market enters a new week sitting within relatively close proximity to the last four months highs and that positioning is made even more important by the fact that the market is facing another debt auction. With the Commitments of Traders Futures and Options report as of March 16th for U.S. Treasury Bonds showing the Non-Commercial and Non-reportable traders combined traders holding a net short position of 127,884 contracts there would appear to be the potential for more short covering gains ahead. However, the 10 Year Notes were showing a Non-Commercial and Non-reportable combined net short position of only 44,635 contracts, which means that the net short position in the market saw a decrease of 39,507 contracts from the last COT report. Therefore, one might assume that bonds have more technical short covering capacity left, than does the Note market. On the other hand, we continue to think that recent economic data has been soft enough to leave the bull camp generally in control, especially when one considers that inflation is widely thought to be under solid control. While the market has recently established a pattern of 10 to 16 tick gains in bonds and notes in the wake of recent auction results, the presence of another $118 billion in US Treasury supply this week on top of fresh debt fears off the massive US health care reform push, should serve to limit the upside in Treasuries directly ahead. With a Chicago National Activity Index reading the only scheduled US release today we would expect generally narrow trading ranges ahead, with fairly solid support in June Bonds seen at 119-04, with similar support in June Notes seen at 116-25. In addition to the Fed National Activity Index reading the Treasury market will also see a couple Fed Reserve speeches, which could also impact Treasury prices. Apparently news that the House passed a health care reform bill over the weekend wasn't a major story for Treasuries and it also doesn't seem like news that China might retaliate against the US, if the US enacts unfair trade measures, is being seen as a definitive undermine for Treasury prices. We get the feeling that the market is still in need of more direction from the scheduled numbers, but that the path of least resistance is pointing upward in Treasury prices because of the slack pace of recent numbers. We do think that the market will eventually fear the next set of Non Farm payroll readings, which aren't due out until the beginning of April. In conclusion, the bulls have control, with initial resistance today pegged at 118-11 in June bonds and initial resistance in June Notes seen at 117-09. As mentioned before, the Note market might have less upside capacity due to its relatively smaller net spec short positioning in the latest COT report. With very little respect for the recovery pace and a weaker equity market, we see fairly solid close-in support on the charts today and therefore we have to leave the bulls in control into the Monday morning trade.
The upside crossover (9 above 18) of the moving averages suggests a developing short-term uptrend. 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 upside closing price reversal on the daily chart is somewhat bullish. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The near-term upside objective is at 118-250. The next area of resistance is around 118-110 and 118-250, while 1st support hits today at 117-140 and below there at 116-300.
US Dollar:
The Dollar Index managed another range up extension on the charts and in the process the Dollar reached the highest level since March 2nd. Apparently the Dollar is seeing some spillover Dollar buying from ongoing Greece debt concerns, which in turn seemed to be the result of suggestions from a key German official overnight that a debt relief solution would not be seen this week. With global equity prices showing weakness and recent economic guidance on the US economy at best slack, we have to leave the edge with the Dollar bulls. The Commitments of Traders Futures and Options report as of March 16th for US Dollar showed Non-Commercial traders were net long 28,793 contracts, a decrease of -7,237 contracts. The Non-reportable traders were net long 2,488 contracts, a decrease of -744 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 31,281 contracts. This represents a decrease of 7,981 contracts in the net long position held by these traders. Therefore, the technical condition of the Dollar is somewhat overbought but not so overbought that the upside will be quickly limited. Initial upside targeting is seen at 81.33 basis the June Dollar Index.
Gold:
April gold comes into the opening today under modest pressure, but still above last week's lows. While there were reports of record gold production from a smaller gold producer overnight, the weakness in gold prices this morning appears to be the result of outside market influences, instead of classic internal supply and demand side developments. Therefore, the gold market probably might not see much in the way of fresh selling interest, from overnight news of higher Indian gold production in the ten months following April of 2009, perhaps because that news was offset by news of higher February gold output from Peru. However, the bear camp looks to benefit from weakness in equities, from the Indian rate hike late last week and also from ideas that the Euro and other Non Dollar currencies have remained weak. The bull camp might try to play up the potential for flight to quality buying off the US/Chinese trade front, or perhaps even from residual Greece debt fears. With the lack of scheduled US data flow today, the gold trade is likely to take a large measure of direction from either the currency markets or from US equities. The Commitments of Traders Futures and Options report as of March 16th for Gold showed Non-Commercial traders were net long 217,280 contracts, a decrease of -6,357 contracts. The Non-reportable traders were net long 44,140 contracts, a decrease of -1,896 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 261,420 contracts. This represents a decrease of 8,253 contracts in the net long position held by these traders.
Silver:
Apparently the silver market wasn't able to garner much support from news of a decline in February silver production from Peru, as May silver prices in the early Monday morning trade reached the lowest level since March 11th. Like gold, the silver market seems to be partially undermined from residual concern that a recent Indian interest rate hike will serve to slow growth and demand for silver. Given the downside action on the charts this morning, the silver market also doesn't seem to be gathering much support from the news that silver exchange stocks at the end of last week declined by 829,000 ounces. At least in the early trade action May silver in the early Monday action fell down to the 50 day moving average of $16.85. The Commitments of Traders Futures and Options report as of March 16th for Silver showed Non-Commercial traders were net long 34,851 contracts, a decrease of -186 contracts. The Non-reportable traders were net long 14,101 contracts, an increase of 2,544 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 48,952 contracts. This represents an increase of 2,358 contracts in the net long position held by these traders.
Crude Oil:
May crude oil has extended Friday's weakness, and has now moved back to the $80 level for the first time since early last week. The rate hike in India on Friday has continued to keep many physical commodity markets under pressure this morning, as the market continues to look for strong demand from that part of the world to underpin prices. The lack a resolution on the Greece sovereign debt crisis has also had undermined energy prices again this morning, as that news contributes to a stronger Dollar. Like a number of physical commodity markets, the energy complex recently seems to have become a little expensive versus classic fundamental readings. Furthermore, the Commitments of Traders Futures and Options report as of March 16th for Crude Oil showed that Non-Commercial and Non-reportable combined traders held a net long position of 217,859 contracts as of early last week and that would seem to suggest that the energy complex is clearly overbought. After a February low to March high rally of roughly $13 a barrel, the crude oil market managed to post a fresh record net spec and fund long positioning in the COT figures and that in conjunction with residual strength in the Dollar and suspect economic views puts the onus on the bulls to justify crude oil prices above the $80.00 level. While the bull camp could point out the fact that US crude oil stocks sit just under 15 million barrels below year ago levels, the expectation of favorable demand ahead has been at least temporarily lost and prices are vulnerable. Initial downside targeting is seen at $79.59 and perhaps even $79.20 in the event that US equities come under aggressive pressure.
Natural Gas:
Although Natural Gas has lifted off of last weeks lows, May natural gas remains weak this morning, as the market doesn't have internal or external news to alter the down trend pattern. With the market in such an extended downtrend, prices could eventually see a sharp short-covering rally but only if we can see a move back above last Friday's highs. In short, the bearish fundamentals for this market make it difficult to believe that any rally can be sustained yet. The natural gas market is fresh off a week of very aggressive selling pressure, which seemed to be accentuated by weakness in the regular energy complex. Clearly a strong Dollar and residual concern for the pace of the US recovery are additive issues that amplify the burden of high physical gas supplies. While the Commitments of Traders Futures and Options report as of March 16th for Natural Gas showed Non-Commercial traders were net short 89,552 contracts, for an increase of -10,941 contracts, the combined spec short was just 55,942 contracts as of early last week and that is a long way from the record spec short of 242,712 contracts that was posted back in July of 2008.
Soy:
The sharp sell-off in energy and metal markets overnight and weakness in the stock market are factors which could weigh on grain futures this morning. November soybeans closed in the 940-942 range for the past three trading sessions as traders see the longer-term buying from China for new crop as supportive. However, more and more estimates are coming out for producer plantings for the March 31st report with estimates more than 1 million acres above last year as compared with the USDA Outlook Forum estimates that producers would plant just 77 million acres, down 500,000 from last year. Two key estimates were out on Friday at 78.6 million and 79.1 million vs. 77.5 million last year. At a trend yield and 79.1 million acres planted, total supply would come in near 3.59 billion bushels. Traders see lower demand for the coming season due to massive South American crops so if we assume usage near 3.175 billion bushels, ending stocks would swell to over 400 million bushels from 190 million this year and 138 million last year. South America harvest is progressing well and Argentina drier weather this week will help dry out fields from last week and prepare fields for harvest. Heavy rains are expected in Rio Grande do Sul area of Brazil for the next few days which might help late maturing soybeans but should slow harvest. In the end, traders see all of South America production near 130 million tonnes, up 23% from last year. Weakness in crude oil and gold and strength in the dollar kept the soybean complex under pressure during most of the session on Friday until a late surge in buying pushed the market higher on the day late. The USDA announced a sale of 106,000 tonnes of soybeans to an unknown destination on Friday with delivery scheduled in the 2010/11 crop marketing year. The Commitments of Traders Futures and Options report as of March 16th for Soybeans showed non-commercial traders were net short 1,427 contracts, an increase of 4,794 contracts for the week. Shifting from a net long to a net short position is sometimes considered negative. Commodity Index traders held a net long position of 170,207 contracts, down 1,513 contracts for the week. For meal, non-commercial traders were net long 7,372 contracts, up 380 contracts. For oil, non-commercial traders were net long 24,773 contracts, down 969 contracts for the week. Commodity Index traders reduced their net long position by 5,841 contracts to 100,731. The selling trend of funds in oil is considered somewhat negative. China's food safety watchdog group has ordered inspections of cooking oil nationwide on reports that up to 10% of oil were illegally made and could contain cancer-causing agents. In the end, this is likely a positive force for vegoil demand. China imported 2.949 million tonnes of soybeans in January which was down 9.5% from last year. This pushed cumulative imports for the year to 7.025 million tonnes, up 11.7% from last year's pace.
Thursday, March 18, 2010
ZM Swing Update
ZM railled in the last 15mins of trading and closed just over 270 so will will look to exit the position when the market reopens at 6pm this evening for about a 2 point loss if we move any higher.
Set stop loss @ 271.3 above today's high.
Set stop loss @ 271.3 above today's high.
Swing Futures Entry
We are going short 1 Soymeal contract (ZM) @ 268.8
Stop is a close above 269.8
Target is @ 244.8
The short-term positive news in the market appears to be temporary in nature and traders see the possibility of larger than expected plantings for all crops this spring if the weather permits. July soybean selling resistance comes in at 966 with 940 3/4 and 893 as support. July meal selling resistance comes in at 265.90 and with 246.60 as next downside objective. July oil buying support is back at 38.58.
The outlook for a steady flow of new crop soybeans on the world market along with weakness in the energy markets helped to pressure soybeans overnight. Traders were surprised with the strong gains in soybeans and the complex yesterday with July soybeans jumping 40 cents off of Monday's lows. Some shipping concerns in Brazil and ideas that Argentina producers may be unwilling to sell soybeans at a cheap level helped to spark aggressive short-covering and new fund buying yesterday. Southern Brazil looks wet over the near-term but dryness from Parana north should help boost harvest activity into early next week. Argentina rains should slow early harvest but could be seen as beneficial to late filling crops. There was more discussion about shipping delays at Brazilian ports but some sources are indicating that the delays are minimal at the port of Santos and well within the normal range at the port of Paranagua. Basis levels at the Gulf were mostly steady to lower yesterday due to slowing demand. Meal posted a moderate gain on oil, continuing the sharp correction that began on Monday. Key growing areas in Malaysia are expected to see lower palm oil production ahead due to dry weather with production cuts of 10-15% noted as a possibility in the impacted areas. Traders are also keeping a close eye on dry conditions in parts of China. Japan has turned more to China for meal imports due to higher prices and a tighter supply out of India this year. Massive imports of soybeans by China have left meal supply high. Traders continue to discuss snowmelt flooding issues in the northern Midwest and the early melt may give the ground time to dry ahead of planting season. However, cold and wet weather returns to the Midwest early next week and again later next week and an active weather pattern looks to persist through the end of the month. Traders will keep a close eye on weekly export sales news today after last weeks 8-year low in soybean sales due to cancellations from China.
Stop is a close above 269.8
Target is @ 244.8
The short-term positive news in the market appears to be temporary in nature and traders see the possibility of larger than expected plantings for all crops this spring if the weather permits. July soybean selling resistance comes in at 966 with 940 3/4 and 893 as support. July meal selling resistance comes in at 265.90 and with 246.60 as next downside objective. July oil buying support is back at 38.58.
The outlook for a steady flow of new crop soybeans on the world market along with weakness in the energy markets helped to pressure soybeans overnight. Traders were surprised with the strong gains in soybeans and the complex yesterday with July soybeans jumping 40 cents off of Monday's lows. Some shipping concerns in Brazil and ideas that Argentina producers may be unwilling to sell soybeans at a cheap level helped to spark aggressive short-covering and new fund buying yesterday. Southern Brazil looks wet over the near-term but dryness from Parana north should help boost harvest activity into early next week. Argentina rains should slow early harvest but could be seen as beneficial to late filling crops. There was more discussion about shipping delays at Brazilian ports but some sources are indicating that the delays are minimal at the port of Santos and well within the normal range at the port of Paranagua. Basis levels at the Gulf were mostly steady to lower yesterday due to slowing demand. Meal posted a moderate gain on oil, continuing the sharp correction that began on Monday. Key growing areas in Malaysia are expected to see lower palm oil production ahead due to dry weather with production cuts of 10-15% noted as a possibility in the impacted areas. Traders are also keeping a close eye on dry conditions in parts of China. Japan has turned more to China for meal imports due to higher prices and a tighter supply out of India this year. Massive imports of soybeans by China have left meal supply high. Traders continue to discuss snowmelt flooding issues in the northern Midwest and the early melt may give the ground time to dry ahead of planting season. However, cold and wet weather returns to the Midwest early next week and again later next week and an active weather pattern looks to persist through the end of the month. Traders will keep a close eye on weekly export sales news today after last weeks 8-year low in soybean sales due to cancellations from China.
Today's Market Guidance
Financial Overview:
Most markets are showing a bit of corrective action in the early going today and that weakness is thought to be the result of fresh Greece debt concerns. Apparently some Greek officials are concerned that debt payments will be so high, that austerity efforts will be unable to return Greece to a steady fiscal condition and that news serves to send some bulls to the sidelines. However, the equity markets were cheered by the news of muted inflation in the US from the prior trading session, as that could allow the US to stick with a low rate environment for a longer period of time. Apparently the market isn't overly concerned about the lack of forward progress in the US economy, as patently weak data earlier this week was largely discounted. However, the market will be presented with a long list of US data today and given the breadth of the data flows today, one might expect a series of back and forth gyrations on the charts. Given the persistent upward bias on the charts recently, one has to leave the bull camp with the edge, unless the brunt of the data comes out weak and then one might expect a nominal corrective setback on the charts.
DOW:
The June Mini Dow comes into the Thursday morning trade in a slight corrective posture. Up trend channel support in the June Mini Dow is seen all the way down at 10,499 today and that support rises to 10,525 on Friday. Closer-in support in the June Mini Dow is seen at 10,632 and we would expect that level to support prices today, unless there is a definitively weak reading from the scheduled report front. Traders might also begin to watch for the markets reaction to the health care reform end game, as that issue could cause a noted reaction in equity prices.
The rally brought the market to a new contract high. 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 over the 1st swing resistance number, the market is in a moderately positive position. The near-term upside target is at 10760. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 10724 and 10760, while 1st support hits today at 10634 and below there at 10580.
S&P:
The S&P comes into the early morning action today with some moderate technical damage on the charts. Unfortunately the June S&P doesn't have solid chart support until 1154.80 because of the sharp compacted gains forged at the beginning of the week. We would suggest that the S&P really needs something positive from the early data today just to shift the bias away from the downside. In fact, we would suggest that the S&P needs an ongoing claims decline in excess of 30,000 just to erase fresh concerns off the Greek debt issue.
A new contract high was made on the rally. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The close above the 9-day moving average is a positive short-term indicator for trend. The market setup is supportive for early gains with the close over the 1st swing resistance. The near-term upside target is at 1171.87. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 1166.75 and 1171.87, while 1st support hits today at 1155.25 and below there at 1148.88.
NASDAQ:
Not surprisingly the June Nasdaq is also starting the Thursday morning trade off in a choppy posture. Critical support in the June Nasdaq today is seen at 1928.50, with up trend channel support not seen until 1906.75. Since the Nasdaq has not seen the typical flow of favorable tech sector news this week, it really needs some help from the US claims data in order to throw off what could be the beginning of a weak 2-3 day corrective setback.
Bonds:
Equities are showing some initial weakness today off reports that Greek officials are doubtful of any aid coming from fellow EU members and that in turn has provided a slight flight to quality lift for US Treasury prices. With the Treasury market basking in the news of muted inflation from the PPI report yesterday, the fear of rates rising in the US is temporarily put on the back shelf and that leaves an upward price bias in place. In looking forward, the market will be faced with another US inflation reading this morning, this time from the consumer level (CPI) but that report has tended to be less volatile than the PPI report. Estimates for the US CPI call for a minimal up tick and unless there is a surprise result, the CPI data should be overshadowed by initial and ongoing claims readings. With Treasury bonds managing another new high for the move overnight and in turn reaching the highest level since December 8th, one could suggest that trade now needs definitively supportive data to 'markedly' add to this week's gains. While some estimates are calling for a minor improvement in the Philly Fed Manufacturing survey this morning, we suspect that data will be of limited importance unless the readings come in well off expectations. All things considered, the bull camp does look to retain a slight edge off Greek uncertainty and also because of the muted US inflation track. Therefore, to take control away from the bull camp, probably requires a big decline in ongoing claims, which in turn prompts the trade to begin to fear the next monthly payroll reading. However, with the Philly Fed, Chicago Fed and Conference Board all scheduled to come out with data this morning in the wake of the US claims data, the trade could be over exposed to 2nd and 3rd tier data and that in turn could reduce the magnitude of price reactions today. We suspect that the net impact of the avalanche of US data this morning, will leave the trade with the opinion that the US economy lacks definitive direction and that should leave the bulls with minimal control. In fact, with the Fed reiterating their intention to leave interest rates low earlier this week, the bull camp will continue to get the benefit of the doubt in the face of non descript data. If there is a surprise number today, it will likely come from either the CPI or ongoing claims and therefore the trade should take the early numbers as the primary indicators of the Thursday trading session. While two Fed members are scheduled to participate in a panel discussion this morning, we doubt that the Fed will change its stance so soon after the most recent FOMC statement release. Close-in support in June bonds is seen at 117-28 and at 117-05 in June Notes. In order to break down below close-in support, probably requires a bigger than expected ongoing claims decline!
US Dollar:
The Dollar is seeing a weak initial bid off renewed Greece debt concerns. However, seeing a rise in Gross UK borrowings and partially upbeat economic views from Japan have served to tamp down global slowing fears and that has served to temper the upward bias in the Dollar. However, it would seem like the Non Dollar currencies and a host of physical commodity markets are coming off a euphoria wave that seemed to be fostered by the US Fed stance, anecdotal global growth talk and because of benign US inflation readings. If the US numbers today rekindle some uncertainty toward the US recovery pace, that could in turn tamp down optimism for 'risk' associated trades (Non Dollar currencies) and that logically leaves the Dollar with a fresh bid. In short, slowing and uncertainty favor the Dollar and in the early Thursday action, the Dollar would seem to be set up for at least a modest short covering bounce. On the other hand, we suspect that the Dollar will be unable to generate much in the way of aggressive upside momentum and that could mean that resistance of 80.50 could be fairly solid.
Gold:
April gold comes into the opening today close to unchanged levels, but still well above the level where the market was earlier this week. Overnight ranges have been small, as many players may be waiting for U.S. economic numbers later this morning. The trade expects some spillover guidance from the currency markets, in the wake of the US data flows this morning. However, seeing renewed Greek debt concerns overnight might leave the Dollar well bid this morning and that has led some gold traders to suggest that something positive is needed from the US numbers this morning or the bear camp in gold might be able to regain a foothold. The gold market is probable seeing some support from World Gold Council statements overnight, which touted 'strong demand' for gold ahead. The WGC also suggested that they expected Central Banks to be players in their strong demand forecast and that is likely to be seen as a fresh bull argument. The WGC didn't leave out many demand sectors in their rosy outlook, as they also hinted at improved jewelry demand. While the gold market hasn't paid that much attention to classic demand side stories lately, the WGC dialogue probably gives the bull camp some fresh confidence into what could be a fairly active trading session ahead.
Silver:
The May silver contract comes into the action this morning mostly sitting on unchanged levels. It is possible that silver is garnering some support from up beat World Gold Council gold demand forecasts, but it is also clear that silver and other physical commodity markets are being put off balance somewhat because of renewed Dollar strength. It goes without saying, that renewed Greek debt concerns have rekindled currency related pressure in silver and with an extremely active US report slate today, traders should be braced for some increased silver price volatility. One might point to another rise in silver exchange stocks overnight as a negative development, but given the breadth of outside market news ahead and the favorable World Gold Council predictions of solid gold demand, it is possible that minimally negative supply side news in silver will be given limited credence today. With the markets seemingly questioning the pace of the US recovery, the heavy flow of US scheduled news today is likely to take on added importance to the silver trade.
Crude Oil:
Crude oil has seen a lower trade overnight with the market giving back a good portion of the previous day's gains on profit taking tied to a stronger Dollar, macro economic doubts and concerns that china will take further steps to tighten monetary conditions that could undermine the global recovery in oil demand. The price direction in crude oil has been closely tied to the ebb and flow in the dollar and most of the selling in crude oil this morning looks to be currency connected. Oil markets have fallen back as the Dollar gained upside traction on fresh concerns that Greece will have difficulty securing an aid package from the European Union. Safe haven demand for the dollar jumped as it still appears that European leaders are in disagreement on whether to provide funding to Greece and investors have scaled back risk at crude oil's expense. As long as the Greece situation remains unresolved, doubts about the pace of the global economic recovery could undercut optimism for a recovery in oil demand. In fact, it looks as if oil demand confidence has also been undermined by reports that the government has instructed banks in China to stop lending to property developers which further raises concerns that tightening liquidity conditions in China could slow the global recovery in oil demand. Oil market sentiment may have also been dented by reports that a major Russian oil company is continuing to supply oil despite an ongoing legal battle that threatened to prevent oil exports to Western countries. Profit taking in crude oil may have also been inspired by the EIA reporting crude oil stocks rose for the seventh straight week and May crude oil stalling out near the upper end of the market's recent price range. With speculators already holding near a record net long position in this market, we suspect a stronger optimistic view toward a recovery in oil demand will need to take hold and perhaps more importantly a weaker move in the Dollar in order to raises investor risk appetite and provide a fresh incentive to buy crude oil up at these high levels. Today's reports on consumer inflation and jobless claims will provide fresh economic insight. Since oil prices are being so strongly influenced by the direction in the dollar, oil markets will need the economic or political news flow to undermine the strength in the dollar in order to avoid additional profit taking and reverse the oil market's course to the upside. Despite the price weakness overnight, oil markets have generally had an upward price bias as profit taking breaks have so far lacked any follow through while lower oil price have continued to attract fresh buyers. If the currency connected pressure subsides, we suspect bullish confidence in the oil markets could quickly return since yesterday's EIA report showing a decline in gasoline stocks, total product demand up 3.5% and refinery operations edging lower certainly improves the market's fundamental setup. But oil market direction continues to hinge on the Dollar. If yesterday's low fails to hold in crude oil, look for more aggressive chart based selling that could pressure May crude oil back towards $81.16. On the other hand, don't be surprise to see May crude oil reverse course to the upside if the Dollar starts to back peddle.
Natural Gas:
May natural gas has edged lower overnight as the market continues on its stair step decline towards a test of the $4.00 price level. The market's extreme oversold condition leaves natural gas vulnerable to a technical correction. But any price bounce in natural gas would likely be short lived since weak demand and rising supply expectations also leaves the market without a bullish catalyst right now that would be strong enough to create a solid price floor. With winter heating demand fading, the natural gas market needs to see stronger industrial fuel demand in order to offset signs of higher domestic production being reflected in the steady rise in the US drilling rig count. But a patchy economic recovery suggests industrial fuel use will be slow to recover. Today's reports on consumer price inflation and jobless claims will provide more economic insight, but we suspect the storage report is likely to have more of an impact on market direction. Natural gas remains under pressure from a mild temperature outlook for the rest of the month and concerns that an early start to spring could quickly build natural gas storage back to burdensome levels. In fact, a lack of heating demand last week has most traders expecting to see a 28 bcf decline in storage which would be less than the 42 bcf draw seen last year and significantly below the 5 year average draw of 65 bcf. Unless the demand outlook for natural gas starts to improve, downside price risk will remain in place.
Most markets are showing a bit of corrective action in the early going today and that weakness is thought to be the result of fresh Greece debt concerns. Apparently some Greek officials are concerned that debt payments will be so high, that austerity efforts will be unable to return Greece to a steady fiscal condition and that news serves to send some bulls to the sidelines. However, the equity markets were cheered by the news of muted inflation in the US from the prior trading session, as that could allow the US to stick with a low rate environment for a longer period of time. Apparently the market isn't overly concerned about the lack of forward progress in the US economy, as patently weak data earlier this week was largely discounted. However, the market will be presented with a long list of US data today and given the breadth of the data flows today, one might expect a series of back and forth gyrations on the charts. Given the persistent upward bias on the charts recently, one has to leave the bull camp with the edge, unless the brunt of the data comes out weak and then one might expect a nominal corrective setback on the charts.
DOW:
The June Mini Dow comes into the Thursday morning trade in a slight corrective posture. Up trend channel support in the June Mini Dow is seen all the way down at 10,499 today and that support rises to 10,525 on Friday. Closer-in support in the June Mini Dow is seen at 10,632 and we would expect that level to support prices today, unless there is a definitively weak reading from the scheduled report front. Traders might also begin to watch for the markets reaction to the health care reform end game, as that issue could cause a noted reaction in equity prices.
The rally brought the market to a new contract high. 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 over the 1st swing resistance number, the market is in a moderately positive position. The near-term upside target is at 10760. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 10724 and 10760, while 1st support hits today at 10634 and below there at 10580.
S&P:
The S&P comes into the early morning action today with some moderate technical damage on the charts. Unfortunately the June S&P doesn't have solid chart support until 1154.80 because of the sharp compacted gains forged at the beginning of the week. We would suggest that the S&P really needs something positive from the early data today just to shift the bias away from the downside. In fact, we would suggest that the S&P needs an ongoing claims decline in excess of 30,000 just to erase fresh concerns off the Greek debt issue.
A new contract high was made on the rally. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The close above the 9-day moving average is a positive short-term indicator for trend. The market setup is supportive for early gains with the close over the 1st swing resistance. The near-term upside target is at 1171.87. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 1166.75 and 1171.87, while 1st support hits today at 1155.25 and below there at 1148.88.
NASDAQ:
Not surprisingly the June Nasdaq is also starting the Thursday morning trade off in a choppy posture. Critical support in the June Nasdaq today is seen at 1928.50, with up trend channel support not seen until 1906.75. Since the Nasdaq has not seen the typical flow of favorable tech sector news this week, it really needs some help from the US claims data in order to throw off what could be the beginning of a weak 2-3 day corrective setback.
Bonds:
Equities are showing some initial weakness today off reports that Greek officials are doubtful of any aid coming from fellow EU members and that in turn has provided a slight flight to quality lift for US Treasury prices. With the Treasury market basking in the news of muted inflation from the PPI report yesterday, the fear of rates rising in the US is temporarily put on the back shelf and that leaves an upward price bias in place. In looking forward, the market will be faced with another US inflation reading this morning, this time from the consumer level (CPI) but that report has tended to be less volatile than the PPI report. Estimates for the US CPI call for a minimal up tick and unless there is a surprise result, the CPI data should be overshadowed by initial and ongoing claims readings. With Treasury bonds managing another new high for the move overnight and in turn reaching the highest level since December 8th, one could suggest that trade now needs definitively supportive data to 'markedly' add to this week's gains. While some estimates are calling for a minor improvement in the Philly Fed Manufacturing survey this morning, we suspect that data will be of limited importance unless the readings come in well off expectations. All things considered, the bull camp does look to retain a slight edge off Greek uncertainty and also because of the muted US inflation track. Therefore, to take control away from the bull camp, probably requires a big decline in ongoing claims, which in turn prompts the trade to begin to fear the next monthly payroll reading. However, with the Philly Fed, Chicago Fed and Conference Board all scheduled to come out with data this morning in the wake of the US claims data, the trade could be over exposed to 2nd and 3rd tier data and that in turn could reduce the magnitude of price reactions today. We suspect that the net impact of the avalanche of US data this morning, will leave the trade with the opinion that the US economy lacks definitive direction and that should leave the bulls with minimal control. In fact, with the Fed reiterating their intention to leave interest rates low earlier this week, the bull camp will continue to get the benefit of the doubt in the face of non descript data. If there is a surprise number today, it will likely come from either the CPI or ongoing claims and therefore the trade should take the early numbers as the primary indicators of the Thursday trading session. While two Fed members are scheduled to participate in a panel discussion this morning, we doubt that the Fed will change its stance so soon after the most recent FOMC statement release. Close-in support in June bonds is seen at 117-28 and at 117-05 in June Notes. In order to break down below close-in support, probably requires a bigger than expected ongoing claims decline!
US Dollar:
The Dollar is seeing a weak initial bid off renewed Greece debt concerns. However, seeing a rise in Gross UK borrowings and partially upbeat economic views from Japan have served to tamp down global slowing fears and that has served to temper the upward bias in the Dollar. However, it would seem like the Non Dollar currencies and a host of physical commodity markets are coming off a euphoria wave that seemed to be fostered by the US Fed stance, anecdotal global growth talk and because of benign US inflation readings. If the US numbers today rekindle some uncertainty toward the US recovery pace, that could in turn tamp down optimism for 'risk' associated trades (Non Dollar currencies) and that logically leaves the Dollar with a fresh bid. In short, slowing and uncertainty favor the Dollar and in the early Thursday action, the Dollar would seem to be set up for at least a modest short covering bounce. On the other hand, we suspect that the Dollar will be unable to generate much in the way of aggressive upside momentum and that could mean that resistance of 80.50 could be fairly solid.
Gold:
April gold comes into the opening today close to unchanged levels, but still well above the level where the market was earlier this week. Overnight ranges have been small, as many players may be waiting for U.S. economic numbers later this morning. The trade expects some spillover guidance from the currency markets, in the wake of the US data flows this morning. However, seeing renewed Greek debt concerns overnight might leave the Dollar well bid this morning and that has led some gold traders to suggest that something positive is needed from the US numbers this morning or the bear camp in gold might be able to regain a foothold. The gold market is probable seeing some support from World Gold Council statements overnight, which touted 'strong demand' for gold ahead. The WGC also suggested that they expected Central Banks to be players in their strong demand forecast and that is likely to be seen as a fresh bull argument. The WGC didn't leave out many demand sectors in their rosy outlook, as they also hinted at improved jewelry demand. While the gold market hasn't paid that much attention to classic demand side stories lately, the WGC dialogue probably gives the bull camp some fresh confidence into what could be a fairly active trading session ahead.
Silver:
The May silver contract comes into the action this morning mostly sitting on unchanged levels. It is possible that silver is garnering some support from up beat World Gold Council gold demand forecasts, but it is also clear that silver and other physical commodity markets are being put off balance somewhat because of renewed Dollar strength. It goes without saying, that renewed Greek debt concerns have rekindled currency related pressure in silver and with an extremely active US report slate today, traders should be braced for some increased silver price volatility. One might point to another rise in silver exchange stocks overnight as a negative development, but given the breadth of outside market news ahead and the favorable World Gold Council predictions of solid gold demand, it is possible that minimally negative supply side news in silver will be given limited credence today. With the markets seemingly questioning the pace of the US recovery, the heavy flow of US scheduled news today is likely to take on added importance to the silver trade.
Crude Oil:
Crude oil has seen a lower trade overnight with the market giving back a good portion of the previous day's gains on profit taking tied to a stronger Dollar, macro economic doubts and concerns that china will take further steps to tighten monetary conditions that could undermine the global recovery in oil demand. The price direction in crude oil has been closely tied to the ebb and flow in the dollar and most of the selling in crude oil this morning looks to be currency connected. Oil markets have fallen back as the Dollar gained upside traction on fresh concerns that Greece will have difficulty securing an aid package from the European Union. Safe haven demand for the dollar jumped as it still appears that European leaders are in disagreement on whether to provide funding to Greece and investors have scaled back risk at crude oil's expense. As long as the Greece situation remains unresolved, doubts about the pace of the global economic recovery could undercut optimism for a recovery in oil demand. In fact, it looks as if oil demand confidence has also been undermined by reports that the government has instructed banks in China to stop lending to property developers which further raises concerns that tightening liquidity conditions in China could slow the global recovery in oil demand. Oil market sentiment may have also been dented by reports that a major Russian oil company is continuing to supply oil despite an ongoing legal battle that threatened to prevent oil exports to Western countries. Profit taking in crude oil may have also been inspired by the EIA reporting crude oil stocks rose for the seventh straight week and May crude oil stalling out near the upper end of the market's recent price range. With speculators already holding near a record net long position in this market, we suspect a stronger optimistic view toward a recovery in oil demand will need to take hold and perhaps more importantly a weaker move in the Dollar in order to raises investor risk appetite and provide a fresh incentive to buy crude oil up at these high levels. Today's reports on consumer inflation and jobless claims will provide fresh economic insight. Since oil prices are being so strongly influenced by the direction in the dollar, oil markets will need the economic or political news flow to undermine the strength in the dollar in order to avoid additional profit taking and reverse the oil market's course to the upside. Despite the price weakness overnight, oil markets have generally had an upward price bias as profit taking breaks have so far lacked any follow through while lower oil price have continued to attract fresh buyers. If the currency connected pressure subsides, we suspect bullish confidence in the oil markets could quickly return since yesterday's EIA report showing a decline in gasoline stocks, total product demand up 3.5% and refinery operations edging lower certainly improves the market's fundamental setup. But oil market direction continues to hinge on the Dollar. If yesterday's low fails to hold in crude oil, look for more aggressive chart based selling that could pressure May crude oil back towards $81.16. On the other hand, don't be surprise to see May crude oil reverse course to the upside if the Dollar starts to back peddle.
Natural Gas:
May natural gas has edged lower overnight as the market continues on its stair step decline towards a test of the $4.00 price level. The market's extreme oversold condition leaves natural gas vulnerable to a technical correction. But any price bounce in natural gas would likely be short lived since weak demand and rising supply expectations also leaves the market without a bullish catalyst right now that would be strong enough to create a solid price floor. With winter heating demand fading, the natural gas market needs to see stronger industrial fuel demand in order to offset signs of higher domestic production being reflected in the steady rise in the US drilling rig count. But a patchy economic recovery suggests industrial fuel use will be slow to recover. Today's reports on consumer price inflation and jobless claims will provide more economic insight, but we suspect the storage report is likely to have more of an impact on market direction. Natural gas remains under pressure from a mild temperature outlook for the rest of the month and concerns that an early start to spring could quickly build natural gas storage back to burdensome levels. In fact, a lack of heating demand last week has most traders expecting to see a 28 bcf decline in storage which would be less than the 42 bcf draw seen last year and significantly below the 5 year average draw of 65 bcf. Unless the demand outlook for natural gas starts to improve, downside price risk will remain in place.
Rut Tracker Up to Date
Ok, the tracker is all up to date. It has been a tough start to the system. We have had to make two adjustments within the first month of launch. This is outside what is to be expected, but will happen when the market makes a strong move in one direction. We will start chipping away at those losses when the market gets back to a regular up and down flow. This is a neutral system that works best with some push and pull. So when the market trends with no pull back all we can do is play defense till the get a chance. Hang in there and we'll start getting those nickle buy back soon.
Rut Roll Update
Just bought the Apr 710/720 call spread back for 1.95 Debit.
Sold 2 Apr 730/740 @ 0.50 Credit
Sold IWM Apr 67/68 call spread @ 0.62 Credit
I will have the tracker will all orders updated soon.
Sold 2 Apr 730/740 @ 0.50 Credit
Sold IWM Apr 67/68 call spread @ 0.62 Credit
I will have the tracker will all orders updated soon.
Rut Open Update
As we get closer to the open the futures are looking weaker so I am going to wait and see how we open. If we begin to sell off I will hold off on the roll. We are right at the point were if we go higher we need the roll but if we back off we don't. I'd like to get through ex tomorrow without rolling to bank that weekend theta. So we will hold for the first 30mins to 1 hour and see how the day looks moving forward.
Rut Roll
Good morning, we will be rolling our Apr 710/720 call spread up this morning to the 730/740 layer. I will let you know the prices I get. We will also place a limit order to sell our IWM debit spread for 0.70 which is half the max profit. IF the RUT continues to move higher we will open a new debit spread to hedge off additional risk.
Wednesday, March 17, 2010
RUT Updates
Our Apr 710/720 call spread is now under pressure so if we close at these levels look to make a rolling adjustment tomorrow. Our IWM debit spread is now in the money so we will look to sell this at the same time we make the roll.
In addition I am working 2 Apr 620/610 put spreads for $0.50. This is just a day order at the moment. Waiting to see the close to change it to GTC.
And still out lower put spreads will not fill for 0.05. VIX is now in the 16 handle.
In addition I am working 2 Apr 620/610 put spreads for $0.50. This is just a day order at the moment. Waiting to see the close to change it to GTC.
And still out lower put spreads will not fill for 0.05. VIX is now in the 16 handle.
Today's Market Guidance
Financial Overview:
Another new high for the move in the overnight action reconfirms a classic technical uptrend pattern in the stock market. Surprisingly the equity markets weren't the least bit concerned about contractionary US housing starts and permits figures yesterday. Also surprising is the fact that most equity markets don't seem to be too concerned about the prospect of a US/China trade battle. In other words, the market isn't getting evidence of forward progress on the US economy and there are some potential negatives facing the trade and yet investment continues to flow toward the market. Apparently seeing the Fed on hold and seeing anecdotal evidence of international growth yesterday leaves the market with the view that conditions are ripe for an eventual recovery. While the markets shouldn't see the US PPI readings this morning as a big surprise and there isn't much discussion about hiking rates, to strike an early blow against inflation, we suspect that the market will attempt to shape the PPI result into another positive. In the end, we don't see much in the way of positive momentum but the bull camp should retain the edge. Be bullish but be on the look out for potentially undermining developments from Congress on the Chinese currency front.
DOW:
As in the S&P, the June Mini Dow has managed another new high for the move and more importantly the June Mini Dow has managed to climb above the January high, which some will suggest is necessary confirmation of the bull trend. Up trend channel resistance is now seen up at 10,716, with up trend channel support today seen at 10,474. With another financial institution announcing plans to pay back the US government overnight, there could be some early weakness in the financial sector shares, but as suggested previously there just doesn't appear to be a definitive reason to go against the up trend bias and traders should continue to be skeptical bulls.
Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's short-term trend is positive on the close above the 9-day moving average. With the close over the 1st swing resistance number, the market is in a moderately positive position. The next upside objective is 10684. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 10663 and 10684, while 1st support hits today at 10591 and below there at 10539.
S&P:
The S&P looks to start the US Wednesday action out on a positive footing and into another new high for the year. In fact, the June S&P has also managed to rise to the highest level since the week of September 2008. Uptrend channel resistance in the June S&P is now seen at 1161.25, with that level rising to 1164.30 on Thursday. We would remain bullish toward the S&P as long as the June contract manages to hold above 1154.20.
The daily stochastics gave a bullish indicator with a crossover up. 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 has a bullish tilt coming into today's trade with the close above the 2nd swing resistance. The next upside target is 1163.93. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 1160.87 and 1163.93, while 1st support hits today at 1149.63 and below there at 1141.44.
NASDAQ:
Apparently the stock market likes a low growth, low interest rate and low inflation environment, as stock prices remain poised to claw out more new highs for the year directly ahead. Surprisingly the Nasdaq has managed its gains this week without much help from the tech sector headline front and that suggests the move this week is off broad market perceptions. Uptrend channel support in the June Nasdaq is seen at 1918.85, with uptrend channel resistance not seen until 1945.20. While we concede to an initial bullish tilt, we doubt the Nasdaq has the capacity to rise to up trend channel resistance today off the expected news track.
Bonds:
The Treasury market has managed to hold the gains that were forged in the wake of slack US housing starts and permits, as well as the FOMC statement that left interest rates unchanged. We are somewhat surprised that the market was able to forge noted gains in the face of a statement that was mostly unchanged with respect to the extended period of time language, but the statement also seemed to contain some upbeat dialogue on jobs! In other words, most traders expected the Fed to stand pat, but seeing something even slightly upbeat toward jobs stabilizing would seem to play into the idea that tightening is on the horizon, even if that horizon is still off in the distance. In overnight action, equities were mostly positive and that probably restricts the upward tilt in Treasuries somewhat in the early action today. We suspect that the market will want to make the PPI release into a minor positive, as a small dip in inflationary readings would seem to facilitate the idea that rates are still on hold. However, the relative benefit of low inflation should be limited as there just hasn't been much inflationary pressure in the marketplace for the last month and few players are fearful of that in the near future. With the S&P affirming Greece's rating overnight and equities generally trading higher this morning, that should remove a measure of flight to quality support from Treasuries, but again that hasn't been a major market moving force for Treasuries lately. With a Senior Chinese Diplomat overnight expressing concern about a recent US Congressional push for some type of action against China on the currency manipulation front that could dredge up the prospect of a trade war and it might also prompt the Chinese to fire back with some type of investment diversification threat. However, the market also hasn't been that concerned with the prospect of a trade war recently, perhaps because the bull tilt seems to generally be in control of Treasury prices and bearish threats are being discounted. While we don't see the fundamental justification for June Bonds to rise to the next solid chart resistance zone of 118-02, we can't rule that out in the wake of a thin US scheduled report slate ahead. We continue to think that the bull camp is working on borrowed time, but as long as the numbers fail to depict forward progress on the economy, it could be difficult to erase a weak upward bias in prices. As mentioned before, there are a number of potential undermines facing the Treasury market, with suspect US/Chinese relations and some improvement in the Greece situation issues that favor the bear camp, but unless there are significant headline developments from those areas, the negatives might continue to be background items. In order to technically damage June bonds on the charts, might require a slide back below a critical pivot point of 117-16 on a close basis, with a similar technical reversal point seen in June Notes down at 116-21.
US Dollar:
The Dollar has forged another new low for the move overnight and in the process the Greenback fell to the lowest level since February 3rd. While the Dollar index filled a gap left in early February with the lower opening today we doubt that the technical condition is going to stop the slide in the Dollar. In fact, even the threat of a US/Chinese trade war has failed to lift the Dollar and that highlights the conclusive downward bias in the Greenback. Perhaps the market doesn't think that the US and China will come to blows, or perhaps the markets are just of a mind that the global economy is working toward recovery and therefore the Dollar no longer holds its allure. With the head of the IMF overnight suggesting that the yuan is undervalued, that would seem to give credence to US calls for a lower Chinese currency, but apparently that view doesn't serve to provide any support to the Dollar and that is another sign of overt bearishness toward the Dollar. In fact, with something that resembles improvement in the UK jobless figures overnight and S&P affirming Greece's credit rating, that would seem to add to the downside tilt in the Dollar. With a potential decline in US PPI readings later this morning, ongoing gains in equities and a continued flow of up beat anecdotal global recovery views flowing, the path of least resistance should remain down in the Dollar. Near term downside targeting in the June Dollar Index is seen at 79.58 and perhaps even down at 79.45.
Gold:
April gold has initially managed another new high for the move but hasn't managed to take out the March 8th highs of $1,138 in the early Wednesday trade. Clearly currency related action is giving the bull camp a definitive edge, but it is also possible that part of the recent gains are the result of anecdotal global recovery views from the prior trading session. Apparently a number of physical commodity markets were lifted yesterday in the wake of talk that global demand for industrial commodities like oil and raw materials was poised to rise and that in turn seemed to help the markets discount the slack US housing starts and permits figures. With the added benefit of the US Fed suggesting that rates were going to be left on hold and with the Fed hinting at a stabilization of the US jobs situation, one could suggest that low rates are going to be allowed to remain in place, even in the face of positive growth! Other traders suggest that the rise in oil prices this week is another element feeding the bull case. Therefore the bear camp is left with the hope that actions from the US Congress will result in some form of US/China trade war, which in turn might serve to lift the Dollar. Some players might even argue that a US/China trade battle would simply add pressure the Dollar. Given the bullish posture in the gold market this morning, the trade probably won't be overly concerned about reports of slack Indian gold demand overnight.
Silver:
The silver market has managed another new high for the move, but as of this hour, the May silver contract had not managed to rise above the March 10th high of $17.665. However, as in the gold market, the silver market was clearly benefiting from additional downside pressure in the US Dollar and ongoing strength in energy prices. With silver and other physical commodity markets managing to quickly shake off disappointing US housing starts and permits data yesterday and in turn embracing anecdotal stories of improving global demand for raw materials, it would seem like silver is garnering some of its upward mobility off classic recovery views. In the end, strength in energy prices and the weakness in the US Dollar appears to be the main forces behind the silver bull's case. At least in the near term, the silver market looks to be taking a large amount of direction from the Dollar, equities and the energy complex. Like the gold market, many silver traders don't expect much of a reaction in silver prices in the wake of the US PPI release later this morning.
Crude Oil:
Crude oil has edged higher in the early overnight trade with the market adding to gains following yesterday's rally which seemed to be mostly currency based. May crude oil has now rallied back to the upper end of the recent trading range. While the market appears to have rejected a price dip below $80, we suspect it could take a combination of bullish outside market influences, including follow through weakness in the Dollar, and perhaps a positive surprise in today's inventory report for crude oil to make a run at last week's high and provide a strong enough buying incentive up at these price levels. Otherwise, there will be the risk of profit taking at the high end of the price range. Oil markets have gained as the Dollar edged lower overnight following yesterday's slide tied to the Fed pledging to keep interest rates ultra low for some time which certainly raises the appeal of commodities such as oil as an alternative asset and as a way to hedge against futures inflation. Oil has also seen a lift from rising investor risk appetite after a rating's agency yesterday decided not to downgrade Greece's sovereign debt rating and as EU finance ministers devised a plan to provide Greece with 'emergency' loans if needed. Some of the gains in crude oil have also been tied to OPEC agreeing to leave output levels unchanged at today's meeting in expectations that global oil demand will pick up in the second half of the year. But oil markets have also been able to add to gains overnight following yesterday's inventory report from API showing a much smaller than expected rise in crude oil stocks and a sharper than expected decline in gasoline stocks along with a higher refinery operating rate which seems to be improving sentiment toward oil demand. Today's EIA report will help set the early market tone with most traders expecting to see oil stocks up nearly 1 million barrels while gasoline stocks are expected to decline by less than 500,000 barrels. Oil markets are clearly starting off with a bullish bias this morning, but with the speculative net long position in crude oil already near the record level, we suspect today's EIA report will need to show a similar reading to the API report in order to attract fresh buying interest up at these price levels and avoid profit taking. But we suspect outside market influences, particularly the Dollar and also equities will end up having a more important impact on the direction in crude oil than the market's current fundamental setup. The Fed's low rate policy is weighing on the Dollar and providing a lift to equities and if these overnight moves gain traction this session, look for oil market's to build on overnight gains. Given the oil market's resiliency to negative news, it is likely crude oil will be able to shrug off any negative EIA inventory surprise if the outside market action remains bullish.
Natural Gas:
While we eventually see May natural gas falling back towards the $4.00 price level, there is also a growing risk for short position holders for the market to stage an over due technical bounce soon since daily indicators have fallen to an oversold extreme. But given the entrenched bearish outlook for this market, even a technical bounce in natural gas would likely end up being shallow and short lived. The market lacks a bullish catalyst right now that could provide a major floor for prices since a mild temperature outlook in March has raised concerns that an early start of spring may mean an early start of the storage injection season. In fact, most traders are expecting this week's storage report to show only a 36 bcf drop in natural gas supply which would be less than the 42 bcf draw seen last year and significantly below the 5 year average draw of 65 bcf. The rising number of rigs in operation now at a one year high, also paints a bearish supply side view since there are growing concerns that once winter heating demand ends high domestic gas production will quickly build storage back to burdensome levels. In order for natural gas to set a major low, the market will need to see the return of industrial fuel demand, but it has been slow to return due to the weak economic recovery in manufacturing. While a chart based bounce in natural gas could be seen at any time, we also suspect a technical rally in natural gas will likely attract fresh fund selling interest since the last COT report with options showed funds were only 78,611 contracts net short, well below the record net short level.
Another new high for the move in the overnight action reconfirms a classic technical uptrend pattern in the stock market. Surprisingly the equity markets weren't the least bit concerned about contractionary US housing starts and permits figures yesterday. Also surprising is the fact that most equity markets don't seem to be too concerned about the prospect of a US/China trade battle. In other words, the market isn't getting evidence of forward progress on the US economy and there are some potential negatives facing the trade and yet investment continues to flow toward the market. Apparently seeing the Fed on hold and seeing anecdotal evidence of international growth yesterday leaves the market with the view that conditions are ripe for an eventual recovery. While the markets shouldn't see the US PPI readings this morning as a big surprise and there isn't much discussion about hiking rates, to strike an early blow against inflation, we suspect that the market will attempt to shape the PPI result into another positive. In the end, we don't see much in the way of positive momentum but the bull camp should retain the edge. Be bullish but be on the look out for potentially undermining developments from Congress on the Chinese currency front.
DOW:
As in the S&P, the June Mini Dow has managed another new high for the move and more importantly the June Mini Dow has managed to climb above the January high, which some will suggest is necessary confirmation of the bull trend. Up trend channel resistance is now seen up at 10,716, with up trend channel support today seen at 10,474. With another financial institution announcing plans to pay back the US government overnight, there could be some early weakness in the financial sector shares, but as suggested previously there just doesn't appear to be a definitive reason to go against the up trend bias and traders should continue to be skeptical bulls.
Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's short-term trend is positive on the close above the 9-day moving average. With the close over the 1st swing resistance number, the market is in a moderately positive position. The next upside objective is 10684. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 10663 and 10684, while 1st support hits today at 10591 and below there at 10539.
S&P:
The S&P looks to start the US Wednesday action out on a positive footing and into another new high for the year. In fact, the June S&P has also managed to rise to the highest level since the week of September 2008. Uptrend channel resistance in the June S&P is now seen at 1161.25, with that level rising to 1164.30 on Thursday. We would remain bullish toward the S&P as long as the June contract manages to hold above 1154.20.
The daily stochastics gave a bullish indicator with a crossover up. 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 has a bullish tilt coming into today's trade with the close above the 2nd swing resistance. The next upside target is 1163.93. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 1160.87 and 1163.93, while 1st support hits today at 1149.63 and below there at 1141.44.
NASDAQ:
Apparently the stock market likes a low growth, low interest rate and low inflation environment, as stock prices remain poised to claw out more new highs for the year directly ahead. Surprisingly the Nasdaq has managed its gains this week without much help from the tech sector headline front and that suggests the move this week is off broad market perceptions. Uptrend channel support in the June Nasdaq is seen at 1918.85, with uptrend channel resistance not seen until 1945.20. While we concede to an initial bullish tilt, we doubt the Nasdaq has the capacity to rise to up trend channel resistance today off the expected news track.
Bonds:
The Treasury market has managed to hold the gains that were forged in the wake of slack US housing starts and permits, as well as the FOMC statement that left interest rates unchanged. We are somewhat surprised that the market was able to forge noted gains in the face of a statement that was mostly unchanged with respect to the extended period of time language, but the statement also seemed to contain some upbeat dialogue on jobs! In other words, most traders expected the Fed to stand pat, but seeing something even slightly upbeat toward jobs stabilizing would seem to play into the idea that tightening is on the horizon, even if that horizon is still off in the distance. In overnight action, equities were mostly positive and that probably restricts the upward tilt in Treasuries somewhat in the early action today. We suspect that the market will want to make the PPI release into a minor positive, as a small dip in inflationary readings would seem to facilitate the idea that rates are still on hold. However, the relative benefit of low inflation should be limited as there just hasn't been much inflationary pressure in the marketplace for the last month and few players are fearful of that in the near future. With the S&P affirming Greece's rating overnight and equities generally trading higher this morning, that should remove a measure of flight to quality support from Treasuries, but again that hasn't been a major market moving force for Treasuries lately. With a Senior Chinese Diplomat overnight expressing concern about a recent US Congressional push for some type of action against China on the currency manipulation front that could dredge up the prospect of a trade war and it might also prompt the Chinese to fire back with some type of investment diversification threat. However, the market also hasn't been that concerned with the prospect of a trade war recently, perhaps because the bull tilt seems to generally be in control of Treasury prices and bearish threats are being discounted. While we don't see the fundamental justification for June Bonds to rise to the next solid chart resistance zone of 118-02, we can't rule that out in the wake of a thin US scheduled report slate ahead. We continue to think that the bull camp is working on borrowed time, but as long as the numbers fail to depict forward progress on the economy, it could be difficult to erase a weak upward bias in prices. As mentioned before, there are a number of potential undermines facing the Treasury market, with suspect US/Chinese relations and some improvement in the Greece situation issues that favor the bear camp, but unless there are significant headline developments from those areas, the negatives might continue to be background items. In order to technically damage June bonds on the charts, might require a slide back below a critical pivot point of 117-16 on a close basis, with a similar technical reversal point seen in June Notes down at 116-21.
US Dollar:
The Dollar has forged another new low for the move overnight and in the process the Greenback fell to the lowest level since February 3rd. While the Dollar index filled a gap left in early February with the lower opening today we doubt that the technical condition is going to stop the slide in the Dollar. In fact, even the threat of a US/Chinese trade war has failed to lift the Dollar and that highlights the conclusive downward bias in the Greenback. Perhaps the market doesn't think that the US and China will come to blows, or perhaps the markets are just of a mind that the global economy is working toward recovery and therefore the Dollar no longer holds its allure. With the head of the IMF overnight suggesting that the yuan is undervalued, that would seem to give credence to US calls for a lower Chinese currency, but apparently that view doesn't serve to provide any support to the Dollar and that is another sign of overt bearishness toward the Dollar. In fact, with something that resembles improvement in the UK jobless figures overnight and S&P affirming Greece's credit rating, that would seem to add to the downside tilt in the Dollar. With a potential decline in US PPI readings later this morning, ongoing gains in equities and a continued flow of up beat anecdotal global recovery views flowing, the path of least resistance should remain down in the Dollar. Near term downside targeting in the June Dollar Index is seen at 79.58 and perhaps even down at 79.45.
Gold:
April gold has initially managed another new high for the move but hasn't managed to take out the March 8th highs of $1,138 in the early Wednesday trade. Clearly currency related action is giving the bull camp a definitive edge, but it is also possible that part of the recent gains are the result of anecdotal global recovery views from the prior trading session. Apparently a number of physical commodity markets were lifted yesterday in the wake of talk that global demand for industrial commodities like oil and raw materials was poised to rise and that in turn seemed to help the markets discount the slack US housing starts and permits figures. With the added benefit of the US Fed suggesting that rates were going to be left on hold and with the Fed hinting at a stabilization of the US jobs situation, one could suggest that low rates are going to be allowed to remain in place, even in the face of positive growth! Other traders suggest that the rise in oil prices this week is another element feeding the bull case. Therefore the bear camp is left with the hope that actions from the US Congress will result in some form of US/China trade war, which in turn might serve to lift the Dollar. Some players might even argue that a US/China trade battle would simply add pressure the Dollar. Given the bullish posture in the gold market this morning, the trade probably won't be overly concerned about reports of slack Indian gold demand overnight.
Silver:
The silver market has managed another new high for the move, but as of this hour, the May silver contract had not managed to rise above the March 10th high of $17.665. However, as in the gold market, the silver market was clearly benefiting from additional downside pressure in the US Dollar and ongoing strength in energy prices. With silver and other physical commodity markets managing to quickly shake off disappointing US housing starts and permits data yesterday and in turn embracing anecdotal stories of improving global demand for raw materials, it would seem like silver is garnering some of its upward mobility off classic recovery views. In the end, strength in energy prices and the weakness in the US Dollar appears to be the main forces behind the silver bull's case. At least in the near term, the silver market looks to be taking a large amount of direction from the Dollar, equities and the energy complex. Like the gold market, many silver traders don't expect much of a reaction in silver prices in the wake of the US PPI release later this morning.
Crude Oil:
Crude oil has edged higher in the early overnight trade with the market adding to gains following yesterday's rally which seemed to be mostly currency based. May crude oil has now rallied back to the upper end of the recent trading range. While the market appears to have rejected a price dip below $80, we suspect it could take a combination of bullish outside market influences, including follow through weakness in the Dollar, and perhaps a positive surprise in today's inventory report for crude oil to make a run at last week's high and provide a strong enough buying incentive up at these price levels. Otherwise, there will be the risk of profit taking at the high end of the price range. Oil markets have gained as the Dollar edged lower overnight following yesterday's slide tied to the Fed pledging to keep interest rates ultra low for some time which certainly raises the appeal of commodities such as oil as an alternative asset and as a way to hedge against futures inflation. Oil has also seen a lift from rising investor risk appetite after a rating's agency yesterday decided not to downgrade Greece's sovereign debt rating and as EU finance ministers devised a plan to provide Greece with 'emergency' loans if needed. Some of the gains in crude oil have also been tied to OPEC agreeing to leave output levels unchanged at today's meeting in expectations that global oil demand will pick up in the second half of the year. But oil markets have also been able to add to gains overnight following yesterday's inventory report from API showing a much smaller than expected rise in crude oil stocks and a sharper than expected decline in gasoline stocks along with a higher refinery operating rate which seems to be improving sentiment toward oil demand. Today's EIA report will help set the early market tone with most traders expecting to see oil stocks up nearly 1 million barrels while gasoline stocks are expected to decline by less than 500,000 barrels. Oil markets are clearly starting off with a bullish bias this morning, but with the speculative net long position in crude oil already near the record level, we suspect today's EIA report will need to show a similar reading to the API report in order to attract fresh buying interest up at these price levels and avoid profit taking. But we suspect outside market influences, particularly the Dollar and also equities will end up having a more important impact on the direction in crude oil than the market's current fundamental setup. The Fed's low rate policy is weighing on the Dollar and providing a lift to equities and if these overnight moves gain traction this session, look for oil market's to build on overnight gains. Given the oil market's resiliency to negative news, it is likely crude oil will be able to shrug off any negative EIA inventory surprise if the outside market action remains bullish.
Natural Gas:
While we eventually see May natural gas falling back towards the $4.00 price level, there is also a growing risk for short position holders for the market to stage an over due technical bounce soon since daily indicators have fallen to an oversold extreme. But given the entrenched bearish outlook for this market, even a technical bounce in natural gas would likely end up being shallow and short lived. The market lacks a bullish catalyst right now that could provide a major floor for prices since a mild temperature outlook in March has raised concerns that an early start of spring may mean an early start of the storage injection season. In fact, most traders are expecting this week's storage report to show only a 36 bcf drop in natural gas supply which would be less than the 42 bcf draw seen last year and significantly below the 5 year average draw of 65 bcf. The rising number of rigs in operation now at a one year high, also paints a bearish supply side view since there are growing concerns that once winter heating demand ends high domestic gas production will quickly build storage back to burdensome levels. In order for natural gas to set a major low, the market will need to see the return of industrial fuel demand, but it has been slow to return due to the weak economic recovery in manufacturing. While a chart based bounce in natural gas could be seen at any time, we also suspect a technical rally in natural gas will likely attract fresh fund selling interest since the last COT report with options showed funds were only 78,611 contracts net short, well below the record net short level.
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