Today's Market Guidance

Financial Overview:
The stock market comes into the action today well off the recent highs and seemingly giving off the impression of sagging momentum. One might have expected favorable Chinese economic data to have bolstered equity prices this morning but that news was countervailed by suggestions that the outlook for recovery in many countries is currently too upbeat for reality. The market continues to be concerned about the push for health care reform and perhaps some investors are uneasy about the threat of financial reform, but in general we think that market has lost some upside momentum because of the lack of US economic news released so far this week. In looking forward, the bull camp seems to need some fresh favorable news from the US claims data this morning and if various analysts are correct in their assumptions, the severe February weather probably restrained activity. Therefore it is possible that claims figures will now begin to show further improvement, as today's data should be well beyond the influence of last month's weather. In the end, favorable Chinese data this week should provide the bull camp with initial support but apparently the bull camp needs some fresh headline type help to continue the 1 1/2 month old uptrend pattern.

DOW:
Technically the Mini Dow has forged a pattern of lower highs this week. However, solid uptrend channel support in the June contract isn't seen until 10,370 today, with that support rising to 10,396 on Friday morning. Some traders are also suggesting that the failure to sustain above 10,500, hints at the need to correct and balance the technical picture in the marketplace. With only 7 days left before the President's self imposed deadline for passing health care reform, it is possible that rhetoric and political wrangling on Health care reform will serve to increase uncertainty toward large cap stocks in the Dow. Ultimately, we think the Mini Dow can hold close-in support of 10,457 today, especially if the US claims data early today give off a supportive tilt.

Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The market's short-term trend is positive on the close above the 9-day moving average. The close over the pivot swing is a somewhat positive setup. The next downside objective is now at 10447. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 10588 and 10598, while 1st support hits today at 10512 and below there at 10447.

S&P:
The up trend pattern in the S&P appears to remain in place into the opening today, even if upside momentum is waning somewhat. However, the S&P might get a lift from favorable Citi Group guidance due out later today. Like the rest of the market, we think that S&P bulls need some positive news from the US claims figures, as that data will technically be the first important scheduled data flow of the week. Up trend channel support in the S&P today is seen at 1129.80, with close-in support on the charts pegged at 1138.00. The bulls retain an edge because of momentum, but that edge isn't very definitive.

The market made a new contract high on the rally. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. A positive signal for trend short-term was given on a close over the 9-bar moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside target is 1149.68. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 1146.37 and 1149.68, while 1st support hits today at 1136.63 and below there at 1130.19.

NASDAQ:
The Nasdaq comes into the action today just under the prior session's highs and seemingly still within a bullish framework. While the tech sector news continues to provide support to the market, we also get the sense that the market has the appearance of rising without a distinctly bullish fundamental argument. Therefore, seeing something positive from the claims data this morning is probably important to the bull case, especially since the European stocks were showing mixed to slightly lower action in their afternoon trade. In looking back to the action this week, the Nasdaq looks to continue to outperform the rest of the market on the upside and hold up better than the rest of the market in the face of any slide in prices. Critical support in the Nasdaq is seen today at 1912.

Bonds:
The Treasury market managed a fleeting rally yesterday in the wake of a reversal in equities and also because of another acceptable US auction result. However, the market will probably face the biggest test of the auction cycle with $13 billion in 30 year bonds to be sold at mid session today. However, prior to the auction results, the Treasury trade will be forced to digest a series of US claims figures and a US Trade Balance report. While the stock market doesn't seem to have garnered a big benefit from strong Chinese data released again overnight, we suspect that the totality of the Chinese news this week has served to pressure Treasury prices. After seeing periodic concerns that the Chinese real estate bubble was going to pop, or that the economic recovery in China would fizzle, the market was presented with a series of Chinese numbers that showed robust growth and in turn increased the threat of inflation. Therefore, the US Treasury market enters the Thursday morning trade with a slight negative bias and that could be compounded by another favorable result from US claims figures. We have to wonder if the claims data isn't set to improve, as the data should now be well beyond the influence of the February extreme weather pattern. We doubt that the Trade Balance figures will be given that much credence today but a high Dollar in the reporting period might have served to restrain the expansion of the US Trade Deficit. Since the first two legs of Treasury auctions only yielded 11 and 12 ticks respectively on the upside, we suspect that the market will see a generally muted response to the last leg of the auction. Some in the trade want to make the 30 Year auction out to be a bearish event, by suggesting that interest in the longer maturities will be slack. We think the biggest risk to the bull camp today, comes from further improvement in the US claims data, but in the event that equities remain off balance, the amount of downside pressure off the data flow could be restricted. Near term critical support in June Bonds is seen at 115-27, but June Notes come into the early action today, already sitting right on their critical support of 116-22. Therefore, it wouldn't seem to take much in the way of negative news (favorable to the economy) to effective put part of the Treasury markets into a downside breakout on the charts. The failure to hold 116-22 could project the June Notes down to the next lower support zone on the charts of 116-15. All things considered, the bear camp comes into the action today, with the edge, but the biggest threat to the bear position, might be the prospect of reduced or narrowed trading ranges.

US Dollar:
The US Dollar comes into the action today under a slight bit of pressure this morning and that pressure might be the result of lingering interest in risk. There does appear to be a coiling pattern developing on the charts just under the 81.00 level and given the breadth of the consolidation around and following an 8 1/2 month high surge in the Dollar, we would suggest that the bull case in the Dollar is waning. We find it amusing that Chinese numbers this week have rekindled talk of the Chinese economy overheating, as concerns several weeks ago were centered on the prospect of a failure in the Chinese recovery and or the popping of its real estate bubble. In looking ahead to the action today, we have the leave the edge with the bear camp in the Dollar, as anything favorable from the US claims report could foster another minor rise in risk appetites and that could in turn press the June Dollar Index back down toward 80.39 support. In short, favorable US data is likely to create an environment where money will migrate toward oversold or undervalued Non Dollar currencies.

Gold:
The bull camp will probably try to play up news that South African gold production for the month of January forged another noted year over year decline. However, news of sagging South African gold production is not new news and even with the year over year decline in output coming in north of 18%, the gold trade just hasn't given patently bullish supply side news that much credence lately. Some players have suggested that falling gold production will be given more credence when the trade begins to accept the prospect of sustainable global growth. Seeing talk of a possible overheating Chinese economy and a slightly weaker US Dollar would seem to leave the bull camp with a classic fundamental edge early today, but given the lingering weakness in gold prices early today, it would not seem like the early gold trade is embracing typically bullish angles. In retrospect, the gold market showed some surprising reaction to the ebb and flow of the currency markets in the prior trading session and therefore some players are of a mind, that the focus of the gold market is in a state of flux. Typically the gold market would be expected to benefit in the face of favorable US claims figures later this morning, especially if that news causes the Dollar to weaken, but the action yesterday calls that relationship into question.

Silver:
The silver market this morning has already managed a quasi downside extension on the charts, with the May silver contract falling to the lowest level since March 2nd. The bull camp might be slightly disappointed with a modest rise in daily silver exchange stocks overnight, but it is also possible that the trade will give that news very little attention. The bull camp continues to suggest that silver is holding up better than gold on its charts and therefore it is possible that the silver trade will see the Tuesday low of $16.875 as some form of pivot point price. However, weakness in copper and platinum prices early today, would seem to rob the silver market of the support that was seen from those markets earlier in the week. The silver bulls probably hope for something supportive from the US claims data this morning, especially if that data serves to push up the Euro and weaken the US Dollar. The May silver contract comes into the early Thursday trade, right on its 50 day moving average of $16.89.

Crude Oil:
Crude oil prices pulled back a bit in the overnight trade with the market under some pressure tied to concerns over Chinese fuel demand and worries about OPEC over production. Crude oil fell back from eight week highs after data from China showed a higher than expected inflation rate and robust industrial output rekindling jitters that China's central bank will begin to tighten monetary policy more aggressively which could undercut oil demand in the world's second largest oil consumer. Oil markets are also under a bit of pressure on indications OPEC will leave production levels unchanged at next week's meeting while cartel compliance to quotas slipped to 53% last month and production reached a 14 month high. But so far the selling conviction in the oil market hasn't been that strong since oil prices have been able to bounce from overnight lows and have even traded higher at times. So far, worries over China demand and OPEC supply haven't inspired aggressive selling in oil despite the market being technically overbought up at these price levels. In fact, the need for China to do more incremental monetary tightening could also be seen as confirmation that the global economic recovery is starting to take hold. It also appears that concerns over tighter Chinese monetary policy are being offset to a certain degree by news this week that china's oil imports in February were the second highest on record and that China's refinery crude oil throughput rose to a record high last month. It also looks as if yesterday's bullish inventory report is underpinning oil prices to a certain degree since the EIA reported a 1.4 million barrel rise in crude oil which was lower than expected while total product demand rose 3.8% and gasoline stocks unexpectedly fell. Given yesterday's market action, it is clear that trading up at these price levels could continue to be volatile. The oil market's resiliency to negative news suggests a strong upward price bias remains in place. But current conditions also suggest oil prices have moved a bit ahead of their fundamentals. With daily indicators at overbought extremes and funds likely holding close to a record net long position in this market suggest the bull camp's resolve will be tested. If today's weekly jobless claims data provides more good news on the economy that also supports gains in equities, we suspect April crude oil could make another run at yesterday's high. A close over $82.50 would set the market up for a test of the January high. However, we also see the rally in crude oil a bit fragile up at these price levels which will leave oil vulnerable to bouts of profit taking unless the economic news and key outside market influences (particularly equities and the dollar) provide steady price support and give traders a fresh buying incentive. While the market's momentum still appears to favor the bull camp, the so called 'easy money' may have already been made and we suspect oil price gains above $82.50 will continue to be hard fought.

Natural Gas:
Natural gas has edged lower in the early overnight trade and seeing the market unable to follow through higher after yesterday's technical bounce leaves downside price risk in place. Daily indicators for natural gas remain at an oversold extreme so we can't completely rule out the possibility of a more significant short covering bounce. In fact, today's storage report may provide a short covering incentive if natural gas supplies decline more than the 110 bcf expected by most traders, especially if the draw was larger than last year's 111 bcf drop and more than the 5 year average decline of 109 bcf. But any move higher seen in natural gas is likely to be purely technical and therefore short lived since the combination of a warmer temperature outlook, declining winter heating demand, indications of rising supplies from producers and weak industrial fuel demand leaves the fundamental backdrop for this market bearish. Goldman Sachs, a major trader in energies, revised down their price forecast for natural gas due to increasing supplies from lower cost shale production. While natural gas may get a temporary lift if today's storage report shows a larger than expected supply drain, we also suspect higher natural gas prices will attract fresh sellers on ideas that today's storage decline may be the last triple digit decline of the winter season. April natural gas has stiff overhead resistance between $4.60 and $4.62 with support at $4.45. Eventually we see this market heading back towards the $4.00 price level.