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.