Today's Market Guidance

Financial Overview:
World equity markets come into the action this morning minimally higher on the day. While the markets might have garnered some support from news that the EU was going to stand behind Greece, the EU hasn't specifically released how they will support Greece again and therefore the market wasn't overly cheered. It would also seem like the markets are deriving some support from expectations that the Fed will once again promise to remain on hold with respect to interest rates. However, as in other markets we suspect that the windfall from the Fed's stance will be minimal, as the trade is seemingly set to parse every word of the FOMC statement later today for any wording that might nail down the beginning of tightening process from the current 6 months or less timing. We have to think that stocks will be a little discouraged by the housing starts and permits data unless those figures trip up the market with a surprising result. From a technical perspective, it would seem like the stock market maintains a bullish tilt from the last two months upward momentum and that could help the market hold through the US scheduled data flow. We also think that the presence of the FOMC statement is supportive until the actual release of the statement and then a classic buy the rumor, sell the fact condition might be seen.

DOW:
The June Mini Dow starts the trading session out with a slightly positive tilt on the charts but very little in the way of distinctly favorable fundamental optimism. Critical support is seen at 10,573 today, with up trend channel support seen all the way down at 10,448, but we doubt that lower support level will be tested today, unless the bears get a clean sweep from a softer than expected Housing report and some noted change in the Fed statement that in turn leads to fears of an earlier tightening. We see little in the way of resistance until the 10,600 level, with the next higher resistance on the charts seen up at 10,617.

Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. The upside daily closing price reversal gives the market a bullish tilt. The close over the pivot swing is a somewhat positive setup. The next upside target is 10637. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 10619 and 10637, while 1st support hits today at 10545 and below there at 10490.

S&P:
With the S&P actually holding a net spec short positioning as of last Tuesday, and the S&P seeing a noted corrective setback from the Friday high to the Monday low (of almost 14 points) we have to think that the S&P is technically sound. However, we also think that the fundamental outlook for the market is somewhat suspect, with recent data pointing to a very slow and perhaps even suspect recovery track. On the other hand, the market seems to have the resolve to respect up trend channel support and mostly maintain a weak bullish bias. Up trend channel support in the June S&P is seen at 1136.40, with closer-in pivot point support pegged at 1144.80.

A bearish signal was triggered on a crossover down in the daily stochastics. 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 short-term trend is positive on the close above the 9-day moving average. The market tilt is slightly negative with the close under the pivot. The next downside objective is now at 1133.75. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 1151.00 and 1153.75, while 1st support hits today at 1141.00 and below there at 1133.75.

NASDAQ:The June Nasdaq is fresh off a noted corrective setback on the charts and that should serve to balance the partially overbought technical condition that might have been present last Friday morning. Fortunately, for the bull camp the Nasdaq will probably continue to outperform the rest of the market, with somewhat solid chart support seen down at 1913.50. Up trend channel support isn't seen until 1889.25 but we doubt that support will be tested today unless something very negative surfaces in the headlines. Expect the bulls to weakly control this morning.

Bonds:
The Treasury market has generally remained within striking distance of its recent highs in the face of a slight tempering of macro economic sentiment. Apparently the Treasury market wasn't overly concerned about the prospect of a trade or currency war between the US and China, as Treasury prices have managed to remain within 8 ticks of the last two week's highs in the face of the calls from the US yesterday to label China a currency manipulator. Perhaps the presence of the FOMC meeting statement later today is providing lingering support to Treasury prices, but we get the impression that the trade is also in a position to dredge up the slightest evidence on when the end of low rates will be seen. In other words, the market is fully convinced that the Fed is on hold for now, but the aggressive parsing of the Fed's words will be done under the guise of predicting an eventual end to the easing. In the mean time, we have to think that housing starts and permits data will serve to lift Treasury prices somewhat, especially since that news will come several hours ahead of the actual FOMC statement. However, the bull camp looks to be limited because of the indications that the Fed could halt the purchase of long term securities at the end of this month and also because of the Fed's preparation for the end of easing, which might require other mechanical changes. In other words, the markets expect benchmark rates to remain low well into the summer but the trade will constantly be on the look out for subtle signs of change. In fact, the importance of the wording of today's FOMC statement and every FOMC statement in the coming six months will probably expand so dramatically that the trade will make note of any fresh words or any words that are left out. Therefore, the bull case looks to get some help from the housing numbers early but the brunt of the bull case is probably lost because of what the trade eventually expects to happen. For the action today, we suspect that June bonds have the capacity to return to and perhaps above the March 12th high of 117-09. We think the most important reading today will be the housing permits figure, as that figure tends to be more forward looking. It would seem like most estimates for the numbers today call for a slight contraction again and if more weakness is noted today, after signs of weakness in housing data from other sources over the last two weeks, one would think that concerns for the US real estate sector will provide Treasuries with a modest lift. Initial upside targeting and resistance for June Notes is seen at 117-07 today, but a weaker than expected set of readings from Housing starts and permits, could put Treasury prices at the highest level since March 5th. In our gut, we suspect that any rally off the early numbers or promises from the FOMC later on will be unable to sustain higher pricing as the trade is afraid of the eventual move toward higher rates. In order to fully turn on the upside track again, probably requires realistic fears of a failed recovery track. While the EU has yet to release details on its planned assistance to Greece, EU statements overnight seemed to promise support again and that probably removes some potential flight to quality buying interest from the Treasury market. In conclusion, we suspect that the bulls will have weak control for most of the trading session, but one might not be overly impressed with the markets ability to rally, unless the Fed crosses up the trade with a little more emphasis on lingering pockets of weakness in the US economy, as that would effectively push back the tightening timing.

US Dollar:
The Dollar seemed to reject the sub 80.00 area rather definitively recently but we also doubt that the June Dollar index is capable of a sharp rise up through very thick overhead resistance on the charts, without some headline event. Yesterday we thought that an emerging currency exchange rate war between the US and China might be the basis for a sharp run up in the Dollar, but that story doesn't appear to be gaining much traction. In fact, favorable EU/Greece news flow overnight would seem have to reduced the flight to quality interest in the Dollar. However, we think the currency markets are tracking the ebb and flow of the US economy rather closely and that weak numbers will temper the interest in 'riskier' currencies and in turn provide the Dollar with a bit of a lift. If the Dollar doesn't rally in the face of soft US housing starts and permits data this morning, that will highlight the lack of bullish resolve toward the Dollar. In our opinion, the June Dollar might be lucky to see a rise to 80.60 in the face of the US housing report and that could confirm that the December through February rally in the Dollar has indeed run its course.

Gold:
As was noted last week, worries over European sovereign debt seem to be periodically supporting gold prices and that is a direct contrast to the sentiment that was mostly seen in the gold market in the November through February time frame. While the gold market saw a couple instances of higher gold production, one from a minor producer for 2009 and one estimate for record 2010 gold production from another producer overnight, that news doesn't seem to have been given much credence in the early Tuesday trade action. With a number of potential cross currents today from the Housing starts and permits report and the FOMC meeting, the gold trade looks to make a decision on whether to track the currency markets or the equity markets. The bull camp will point to a move above the 50 day moving average of $1,127 in the June gold contract as a positive development, while the bear camp is hopeful that slack US housing data will serve to lift the Dollar and in turn dent optimism toward the gold market. Some traders are even suggesting that seeing platinum reach the highest level versus gold, (since September of 2008) is bullish toward gold prices, as those traders think that gold has become cheap relative to platinum prices.

Silver:
While April gold managed to rise above its 50 day moving average this morning, May silver managed to rise above its 100 day moving average at $17.28. With some metals traders suggesting that gold and silver are getting a lift from ongoing concerns toward Euro zone debt, it would seem like there is some support from flight to quality issues again and that is a break with the recent track of fundamentals in the silver market. However, other traders are suggesting that the real source of the strength in the silver market is coming from ideas that the global economy is indeed recovering and that physical demand for silver is set to rise. Unfortunately for the bull camp, the silver market was presented with a noted sharp increase in daily silver exchange warehouse stocks of 4.8 million ounces yesterday afternoon and that could increase the importance of the daily silver stocks figures in coming sessions. Like gold, silver is probably garnering some support from the stellar leadership in the platinum market, which has now reached the highest price relative to gold prices since the height of the sub-prime crisis. In short, the bulls will suggest that silver and gold are cheap relative to platinum, while the bear camp will suggest that platinum simply has tighter relative fundamentals.

Crude Oil:
After an initial price dip overnight tied to lingering doubts over the demand outlook for oil crude oil has found its footing and has been able to trade higher. As oil markets brace for this week's inventory report and the Fed statement out later today, price direction this session will likely be guided by key outside market influences. Equities have edged higher and the dollar lower, and if these overnight moves gain traction this session, it could provide a solid lift to oil prices today. But we still see limited upside potential for May crude oil right now given the market's overbought technical condition and surfacing doubts about oil demand. Therefore, even with outside market support, we suspect yesterday's high in May crude oil is likely to hold. Yesterday's economic news on regional manufacturing, industrial production and the housing market reflected a slow growth scenario that suggests sentiment toward a recovery in oil demand this year may have become too optimistic. In fact, the demand outlook for oil may be further dented by today's economic news on housing starts which may show a 3.5% monthly decline. Oil markets have also been pulled back from last week's high on concerns the global economic recovery and oil demand growth could be undercut this year if China starts to tighten monetary policy more aggressively to rein in rising inflation. By all indications, OPEC plans to leave quotas unchanged at Wednesday's meeting and with cartel member compliance by some measures dropping to only 53% last month, it still feels as if the oil market is being over supplied. In fact, we suspect some of the profit taking in oil has been inspired by most traders expecting to see a nearly 1 million barrel rise in crude oil stocks in this week's inventory report mainly due to higher imports which would be the seventh consecutive rise in weekly oil supplies. Oil markets also appear a bit jittery ahead of the Fed's policy meeting as traders will be looking at the statement for any indications of the Fed's stimulus exit strategy. With daily technical indicators still at overbought level, May crude oil making a quasi double top last week and with the positioning of Fund traders likely reaching close to a record net long level at last week's highs would seem to leave the technical setup favoring the bear camp and vulnerable to an eventual break back to test $78.20. On the other hand, the weak price action in the dollar in the early going also gives May crude oil some upside potential this session. But unless strong macro economic optimism for a recovery in oil demand can take hold again, it still looks as if the oil market's technical condition will limit the upside for now while keeping downside price risk in place. Look for more aggressive chart based selling if May crude oil fails to hold support at $79.41 while overhead resistance is likely to come in at $80.89, $81.20 then yesterday's high at $81.64.

Natural Gas:
Given the extent of the natural gas market's oversold condition, there continues to be some risk to short position holders since a recovery bounce in prices could be seen at any time based purely on technical indicators. Some private forecasters are predicting cooler temperatures for next week and that may entice some traders to book profits. But while April natural gas may be able to stage a recovery bounce soon perhaps back to $4.60, the market's weak fundamental setup also points to prices eventually heading back to test the $4.00 price level. Natural gas supplies at the start of the injection season in April should be close to the 5 year average and with the steady climb in the number of drilling rigs in operation along with predictions for a jump in LNG imports this year, bearish sentiment has become entrenched on expectations for natural gas supplies to climb perhaps back to burdensome levels since a weak economic recovery suggest industrial fuel use will also be slow to recover. Today's report on housing starts will provide some additional economic insight that may impact market direction although weak reading is expected. While the path of least resistance remains down for natural gas, the market has become sufficiently oversold that short position holders should have some type profit protection strategy in place, just in case a short covering bounce occurs.