Today's Market Guidance

Financial Overview:
The S&P looks to start the trading session today into new highs for the year and at the highest level since September 2008. Similarly the Nasdaq looks to start the session at the highest level since August of 2008. For many traders and investors the equity market appears to be climbing without a definitive means of fundamental support. However, with the Treasury market seemingly poised to 'discount' a weak retail sales reading for February this morning and doing so because of the impact of adverse weather, it certainly seems like more than one market is embracing a bullish economic spin. In fact, a new low for the move in the Dollar index this morning suggests that flight to quality concerns off sovereign debt issues are mostly a non factor today and that seems to leave the fear of Chinese over heating, as the most compelling development of the week. In short, the negatives are being pushed aside and the bulls seem to have the edge. However, in order to spark something more than grinding gains today, might require something slightly better than expected from either retail sales or US sentiment readings later this morning.

DOW:
The June Mini Dow is the odd man out in the early Friday trade, as it has failed to reach new highs for the year. In fact, the Mini Dow hasn't even managed to return to this week's highs and that might be a function of lingering concern off the all out push for US health care reform. The June Mini Dow would seem to have up trend channel support today at 10,396, but closer-in consolidation support is seen at 10,542. Initial resistance would seem to be situated at the Monday high of 10,600, but it would seem like the Dow will have to be dragged higher by the rest of the market.

The daily stochastics have crossed over up which is a bullish indication. Momentum studies are trending higher but have entered overbought levels. A positive signal for trend short-term was given on a close over the 9-bar moving average. A positive signal was given by the outside day up. The market setup is supportive for early gains with the close over the 1st swing resistance. The next upside objective is 10629. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 10603 and 10629, while 1st support hits today at 10497 and below there at 10418.

S&P:
The S&P has also managed a fresh new high for the move overnight and the index would seem to be poised to test the even number 1150 level. Some players are suggesting that the prospect of having a noted policy dove appointed to the Vice chair of the US Federal Reserve is cause for optimism, while others think that the numbers are poised to improve dramatically, after a series of weather impacted February numbers are digested. At least for the early action today, the stock market doesn't seem to be ready to focus on next week's Fed meeting. Critical close-in support in the June S&P is now seen at 1146.50.

The market made a new contract high on the rally. 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. With the close over the 1st swing resistance number, the market is in a moderately positive position. The next upside objective is 1155.56. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 1152.62 and 1155.56, while 1st support hits today at 1140.38 and below there at 1131.07.

NASDAQ:
The June Nasdaq has clearly managed a distinct new high for the move in the early action today and as was suggested already, it also managed to reach the highest level since August of 2008. With the market managing to run up without the benefit of positive scheduled economic data flow it is possible that a portion of the trade is bidding up prices because a slack recovery might allow the Fed to leave easy money policies in place for the anticipated 6 month window. Close-in support in the June Nasdaq is seen at 1920.25 and then again down at 1916.25.

Bonds:
The Treasury market comes into the last trading day of the week sitting almost in the middle of this week's trading range. With retail sales and a consumer sentiment reading capping off an extremely thin week of US economic reports the Treasury market will get some needed direction on the US economy. However, estimates for the reports today would seem to mirror the state of the economy, which seems to be mostly limping very slowly toward recovery. With the Nikkei managing a noted rise overnight and other equity markets making noted early gains the equity market action might end up being the swing factor for US Treasuries prices later today. In fact, with the S&P, in the very early Friday morning action, managing to reach another new high for the year, that could serve to limit Treasury prices in the face of a slightly softer US retail sales reading. In retrospect, the auction results this week were supportive to prices (even the 30 year bonds) and that clearly helped the market bounce up and away from this week's lows, but that residual support probably dissipates today as the trade begins to look ahead to next week's FOMC meeting. While analysts expect the US retail sales reading to post a minor decline, it would seem like the Press and portions of the trade are also poised to discount that decline as another number impacted by adverse February weather. Therefore, the number on its face might provide some initial support, but the capacity to bounce might be limited by ideas that the number doesn't represent the real state of the US economy. We are actually somewhat surprised that the Treasury market has been able to sustain the half point bounce off this week's lows in the face of the new highs for the move in the Nasdaq and S&P in the early Friday morning trade. In the recent past, action in the equity markets seemed to exaggerate views on scheduled data, but unless the retail sales figures come in better than expectations this morning, favorable equity market action could have a difficult time spinning a negative retail sales reading, into a reading that depicts robust recovery action. However, the sentiment figures might take on added importance today, especially if they manage to post an improvement. In short, we can't argue against an initial pulse up to close-in chart resistance of 116-21 in June bonds and to 116-26 in June Notes, but it could take a surprise rekindling of the Greek debt situation and or a major reversal in equities to give the bull camp definitive control over Treasury prices today. In fact, the Asian trade was seemingly trying to foster talk that the Fed meeting next week bring about some hawkish dialogue from the Fed and that would certainly temper recent claims that US policy would be on hold for a full 6 months. For today's action, we have to think that the bull tilt will see its best trade in the lead up to the retail sales report, but given the markets capacity to discount soft readings because of the weather, one gets the feeling that the overall trend in the Treasury market is generally set to remain down.

US Dollar:
With a number of global equity markets showing signs of noted strength today (even the Nikkei was up aggressively) one gets the impression that flight to quality interest is falling and the interest in risk associated currencies is on the rise. In short, the trade seems to want out of the Dollar and into what is thought to be undervalued Non Dollar currencies. Apparently the currency markets don't need much in the way of data to foster ideas that the global recovery remains in place and therefore we suspect that the Dollar will remain weak this morning, even in the face of a slight decline in US retail sales readings. In fact, the June Dollar index this morning has already fallen to the lowest level since early February and would appear to be capable of a very weak trading session ahead. However, the market did see some better than expected Euro zone Industrial production readings overnight and that might have given the Dollar sellers an added incentive. Technical traders might point to a gap in the June Dollar Index down at 79.91 to 79.86 as an initial target for the Friday morning trade in the Greenback.

Gold:
With global equities showing strong early gains, the Dollar under noted pressure and global economic sentiment mostly positive, it would seem like gold and other physical commodity markets are facing a classically supportive fundamental environment early today. The bull camp might try to play up supportive news of declining South African gold production, as the trade saw yet another story from that front overnight. Earlier in the week South Africa posted a sharp year over year monthly gold production decline and in the early trade today, the gold market was presented with a private forecast that pegged 2009 annual South African annual gold production to have declined. Even the Indian gold market was higher overnight and that should have the bull camp confident into the US scheduled data flow. However, the bear camp might hold out hope, that weaker US retail sales numbers will provide the Dollar with a lift and that some of the positive sentiment in place early today, will be moderated. On the other hand, the bull camp does seem to have a broad measure of outside market forces working in their favor in the early Friday trade. An issue that the bears might try to play up later in the trading session today, is the idea that next week's FOMC meeting might temper the current belief that US rates will be left low for the next 6 months. Also tempering bullishness toward gold this morning, is overnight press coverage that the Chinese once again talked against expanding their official gold holdings. At least into the US opening today, outside market action and classic supply side issues seem to have given the bulls the upper hand.

Silver:
The silver market is showing positive early action on the charts and it would appear that a number of outside market forces are favoring the bull camp in the early Friday morning silver trade. Like gold, the silver market might have been partially oversold around the prior session's lows and that in turn could be providing the market with a measure of technically related short covering buying. However, silver might also be deriving some buying interest from big picture macro economic developments, as classic supply side news in silver overnight wasn't particularly supportive. In fact, a number of Press outlets overnight carried news of an increase in Russian silver production for 2009, but the bull camp in silver will probably suggest that was largely an anticipated development. Furthermore, some traders think that increases in silver output are going to be absorbed by rising investment and physical demand. The silver market has also managed to discount a modest rise in daily silver exchange warehouse stocks overnight perhaps because of noted strength in a number of physical commodity markets this morning.

Crude Oil:
Crude oil has been able to gain upside traction overnight with price support coming from broad based selling in the dollar raising investor risk appetite and the currency action certainly seems to be providing traders with a fresh incentive to buy oil up at these price levels. If a more extensive break in the dollar is seen, which may occur if today's report on retail sales comes in weaker than expected, currency connected buying may be strong enough to lift April crude oil over this week's high. But the positive price bias in crude oil is also coming from a generally better macro economic view and a more optimistic outlook for a recovery in oil demand this year. Oil is likely being supported by a report showing a record monthly gain in Euro-zone industrial output in January adding to sentiment that a global economic recovery is starting to take hold. We also suspect part of the gains in oil markets overnight are likely tied to the IEA keeping its global oil growth forecast at 1.57 million barrels a day for this year and also slightly lifting its total demand estimates for last year and this year on strong emerging market oil demand. The EIA surprised oil markets this week by significantly lifting their global oil demand forecast for this year to 1.5 million barrels per day while OPEC also raised their global demand outlook, but remains at a more conservative 880,000 bpd. With crude oil back over $80 per barrel and OPEC production at a 14 month high does suggest that global oil demand is expanding. In fact, demand optimism in the oil markets this week has certainly been supported by trade data from China showing oil imports last month were the second highest on record. Oil markets also appear to have shaken off jitters that China will continue to tighten monetary policy and may be instead focusing on the fact that robust growth in China will keep oil demand strong. The oil market's improving macro economic view has been closely tied to the strength in equities and seeing global stock markets push higher overnight is likely another factor providing additional price support to oil this morning. But in order for the oil market to fully over come an overbought technical condition and a fundamental setup that isn't particularly strong will likely require a positive news flow that raises oil demand expectations and also supports a higher trade in equities. The chart setup puts April crude oil on course to eventually retest the January high. While the bull camp clearly has the early edge, traders should also be prepared to see a more volatile two sided trade in oil if today's reports on retail sales, consumer sentiment and business inventories raise any macro economic doubts or turns outside market influences less supportive. But given the oil market's resiliency to shake off any negative news and with oil agencies forecasting stronger global demand, price pull backs in oil still look to be buying opportunities.

Natural Gas:
After dipping to a new low for the move April natural gas has edged back up a bit in the early overnight trade. While a more significant price correction in natural gas could be seen at any time given the extent of the market's oversold condition, the fundamental setup still suggests gains aren't likely to hold. With April futures falling to a new contract low, natural gas may attract some bargain hunting buying at these lower price levels. Speculative short covering in natural gas may be inspired by the firmer trade in crude oil and a weaker Dollar raising investor risk appetite. Pre-weekend short covering in natural gas may also prop up prices on ideas that yesterday's sell off was overdone considering the storage report showed a slightly larger than expected draw of 111 bcf which tied last year's stock decline and was larger than the 5 year average decline of 109 bcf. Also some private weather forecasters are predicting cooler temperatures in some key Midwest locations two weeks out and that may provide some temporary price support to natural gas. April natural gas looks to be sufficiently oversold to stage a recovery bounce back to $4.60 or perhaps even $4.80. But with the season transitioning into spring, a technical correction in natural gas isn't likely to hold while fading heating demand, rising domestic production and weak industrial fuel use leaves the fundamental outlook bearish and downside price risk in place for an eventual decline towards the $4.00 price level.