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.