Today's Market Guidance

Financial Overview:
The stock market takes a licking and keeps on ticking. Apparently the market is capable of shaking off downside pressure and remaining within a well defined up trend pattern on the charts. In looking back, the market clearly saw a measure of bullish news yesterday and failed to respond to that news and that sparked talk of lost momentum. However, favorable UK retail sales readings, mostly favorable US Fed rate talk recently and little in the way of anxiety off the Portugal downgrade yesterday would seem to suggest that the bull camp generally remains in control. It did seem as if the Portugal downgrade was the key undermine for the equity market in the prior trading session and therefore the markets will be taking every headline from the EU summit very seriously over the coming 24 hours of trade. While the Chinese/US trade flap continues to bubble in the background, we don't see that issue holding back equity prices from clawing out more new highs for the year ahead. In fact, if the markets can garner anything positive from the US claims data later this morning, that might be enough for more grinding hard fought gains early today.

DOW:
The June Mini Dow sits just below the 2010 highs in the early action today and there doesn't appear to be much in the way of negative anxiety in the marketplace. Up trend channel support in the June Mini Dow contract is seen at 1069.80 today, with that level rising to 1072.25 on Friday morning. While we think the bull camp retains a slight edge, we also think that the market needs a little help from the US data to make another round of fresh yearly highs. We would remain bullish, as long as the June Mini Dow manages to hold above 1077.60.

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 market's close below the pivot swing number is a mildly negative setup. The next upside target is 10859. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 10823 and 10859, while 1st support hits today at 10757 and below there at 10726.

S&P:
Up trend channel support in the June S&P is seen at 1158.60, with that channel support rising to 1162.50 on Friday morning. While the market might be tripped up by negative EU summit news or periodic concerns from the US/China trade situation, the market has been able to limit the negative reactions to those themes this week. Therefore, we have to remain bullish toward the market and would even consider buying a minor break in the wake of the claims figures. In fact, we would remain bullish toward the market as long as the June S&P manages to hold above 1161.20.

A crossover down in the daily stochastics is a bearish signal. 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 close above the 9-day moving average suggests the short-term trend remains positive. It is a slightly negative indicator that the close was under the swing pivot. The next downside objective is now at 1156.13. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 1169.25 and 1174.12, while 1st support hits today at 1160.25 and below there at 1156.13.


NASDAQ:
The June Nasdaq remains within a well defined up trend channel on the charts. Up trend channel support today is seen at 1938.20, with that level climbing to 1944.50 on Friday morning. However, the market might have a critical closer-in pivot point on the charts around the even number 1950 level. As suggested in the broad coverage this morning, the Nasdaq probably needs some headline help to extend on the upside, but this market has managed to rise consistently over the last two months, despite the lack of positive economic news.
 
Bonds:
The Treasury market clearly came under definitive liquidation pressure in the US Wednesday trade but most of the selling took place in the wake of the scheduled US number flow. Some might suggest that a lackluster auction was responsible for the sharp slide, but the market was already down by more than a full point well ahead of the mid day auction results. It is also possible that the combination of a sharp rise in the Dollar served to undermine US Treasuries, as foreign interests were being forced to pay for purchases of Treasuries with falling currency values. Even more surprising is the fact that Treasury prices weren't lifted off news of a Portugal debt downgrade, as increased concern toward EU debt fears should have provided US Treasuries with a flight to quality boost. In retrospect, the US numbers alone weren't overly damaging to Treasuries, but in conjunction with better numbers from the EU PMI and the German Ifo yesterday, the Treasury trade might have been rushing to factor in better US numbers ahead. As we suggested yesterday morning, seeing analysts suggest that early 2010 Euro activity was held back by weather seemed to give a lot of credence to the idea that US activity was also held down in February. Therefore, the market might pay more attention to the weekly claims figures today as opposed to any US data from the February time frame. However, it has been a couple weeks since the Treasury market saw something definitively bearish to Treasury prices from the claims figures. On the other hand, another auction offering today is expected to produce slack results, as some foreign interests are distracted in Asia and the word early in the week was that longer maturities were becoming less attractive. Therefore, we have to leave a slight edge with the bear camp today, but we are not sure that the market is destined to plow through the prior session's low of 115-19 in June bonds and at 115-28 in June Notes unless the ongoing claims reading posts a decline in excess of 50,000. While the sharp slide yesterday might have pushed up yields slightly, we doubt that the auction results are going to provide any noted support to prices later today. On the other hand, the June bonds seem to be sitting in a 'no-mans' land on the charts by settling below the 116-00 level, with little in the way of solid support to underpin the market until the 115-12 level. Even Bill Gross sounded defensive toward bonds and somewhat interested in stocks yesterday and he has been the bond markets biggest cheerleader. As suggested yesterday, the Treasury market looks to remain vulnerable to minimally bearish news, with bullish news probably given only minor attention. However, we would be surprised to see another big range down move today, unless the claims figures foster a distinct wave of recovery talk.
 
The close under the 60-day moving average indicates the longer-term trend could be turning down. A crossover down in the daily stochastics is a bearish signal. Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The intermediate trend has turned down with the cross over back below the 18-day moving average. The market is in a bearish position with the close below the 2nd swing support number. The next downside target is now at 114-040. The next area of resistance is around 116-250 and 118-090, while 1st support hits today at 114-230 and below there at 114-040.
 
US Dollar:
Although it has given back some of its gains after making a new 10 month high yesterday, the Dollar is still well above its recent range as the market's focus remains squarely on the E.U. summit beginning today in Brussels. News that the European Central Bank would still accept bonds as collateral with a minimal investment grade rating did little to turn around the capital flight across the Atlantic and that leaves the Dollar generally supported on the charts. The subject of assisting Greece with its sovereign debt problems was not supposed to be the main topic of discussion in the summit, but with yesterday's ratings downgrade of Portugal's debt, the market will be watching out for any details of a possible solution, particularly in regards to whether the IMF will become involved or not. With only a Weekly US Jobless Claims number to impact the market later today, a lack of news out of Europe should be more than enough to maintain the Dollar's generally bullish tone but the severity of yesterday's move could leave the market vulnerable to profit-taking, as the run up yesterday was really aggressive and compacted. We see initial support on the charts at 81.93 and then again down at 81.82. The big thing to watch today, is whether or not the Dollar rallies on good US numbers, as that type of action would really give the bull camp confidence.
 
EURO:
The Euro has seen some recovery from yesterday's downside blowout, as some shorts are fearful of a solution from the EU summit. However, with more rhetoric than substance in the market regarding the sovereign debt situation, there are very few traders that are actually expecting the summit to provide something that is significantly supportive to the Euro currency. There are many in the markets who feel that the Greece situation may be the beginning of a chain reaction of failures, and that the E.U. will be forced to revisit these issues with the sovereign debt of other countries during the near future. Some even suggest the EU is playing hardball with Greece, because they are attempting to reserve their ammunition for a cavalcade of debt problems. Therefore, assume the worst for the Euro in the near term, but those that are short the Euro might consider the purchase of some cheap near to expiration calls as the Euro is at least temporarily technically oversold.
 
Gold:
The Indian gold market was slightly higher overnight. The bull camp will suggest that a rejection of the prior session's lows, in the overnight trade is a supportive development, while the bear camp will suggest the market remains vulnerable as long as it lingers below the even number price of $1,100 on the April gold charts. The trade did see news of a rise in Russian gold and currency reserves overnight to $448.2 billion. However, the gold market also saw news of record gold production from a Russian mining company overnight, but that news might have been countervailed by forecasts calling for lower overall 2010 Russian gold production. In retrospect, the gold market was at least temporarily undermined in the wake of the Portugal debt downgrade and that could mean that gold will be watching the headlines from the EU summit very closely.
 
Silver:
Overnight the silver market saw a minor rise in silver exchange stocks of 141,000 ounces and that news came on top of news of rising silver production from a Canadian based silver miner in the prior trading session. Silver seemed to be undermined off the EU debt situation yesterday and that probably has the silver trade intently focused on the EU summit in the trade today. Silver this week has mostly behaved like a physical commodity market, that is heavily dependant the ebb and flow of the Greenback. The silver market and other physical commodity markets also appear to be searching for a clearer direction on the track of the global economy.
 
Crude Oil:
May crude oil has recovered some of yesterday's sell off but remains near the middle of this week's trading range. While the Dollar remains well supported going into the E.U. summit in Brussels today, the chances of another commodity washout remain slim unless there is a flat-out negative outcome from that meeting. However, the crude oil market might be held back a little by this week's storage numbers. On the other hand, the May crude oil contract rejected another slide below the $80.00 level again and that should increase the markets respect of that support area. However with EIA crude stocks rising 7.245 million barrels and that news coming in the wake of a similarly large rise in API crude stocks earlier in the week, there is certainly a measure of bearish supply side news in the marketplace. However, EIA crude oil stocks are 10.04 million barrels below year ago levels, but they are also 20.819 million barrels above the five year average. Crude oil imports for the week stood at 9.397 million barrels per day compared to 8.428 million barrels the previous week. The refinery operating rate was 81.11% up, 0.56% from last week compared to 82.01% last year and the five year average of 85.87% and that might be seen as a negative to crude oil demand, but a possible supportive development for product demand. With the Dollar a touch weaker, equities initially positive and the energy market showing some early strength, it is possible that the trade is anticipating some help from the US claims readings. This market is all about demand, supply is secondary and therefore the bull camp needs good data to send May crude oil prices up to resistance today of $81.65.
 
Natural Gas:
The most bullish thing one can say about the natural gas market this week is that the May contract mostly managed to respect consolidation support of $4.115. While the trade is expecting a minor draw in the weekly natural gas stocks figures later this morning, the market isn't expecting much in the way of a surprise from that report, or from the supply side of the equation. For the near term, the most important factor driving natural gas prices might be the ebb and flow of speculative interest in the crude oil/natural gas spread and the action in the US Dollar. It is our opinion, that more definitive declines in the crude oil market could lend some support to natural gas prices in the coming trading sessions, but without that action it is hard to find a distinctly bullish fundamental theme for natural gas. The bull camp had to be disappointed with the markets failure to benefit from what seemed to be slightly better than expected US numbers yesterday. However, the natural gas trade apparently needs really solid proof of improved US growth to even begin to think about improved natural gas demand. The trend looks to remain down unless May natural gas manages to rise back above resistance of $4.217.