Today's Market Guidance

Financial Overview:
The stock market has clearly lost part of its bullish buzz again this morning, despite the new highs for the move forged in the prior trading session. In looking at US Treasury market action, it is clear that market continues to doubt the pace of the US recovery and that mentality has consistently crept into the psychology of the equity markets this week despite the fact that a number of stock market measures managed to post fresh new highs for the year this week. Therefore, the trend in stocks remains up, but there has been a nagging feeling of being overbought in this market and that seems to result in early morning weakness, followed by an investor fueled recovery into mid session. We do think that the Greece debt issue is serving to discourage some buyers of this market and if the debt issue hadn't inundated the headlines early this week, we could have seen a very large euphoria rally in equities. It is possible that the equity market will see a minor benefit from the US Housing starts readings but one would think that favorable transport earnings earlier this week will serve to provide an ongoing measure of support to prices today into a series of key earnings from Google, GE, Bank of America and CitiGroup. We can't rule out early corrective action and perhaps weakness into the end of the European news day, but we wouldn't take control away from the bull camp today.

Dow:
The June Mini Dow sits closer to the prior high than the prior low in the early going today and that would suggest that the market has maintained a bit of bullish momentum today. We don't expect the scheduled data to seriously undermine the market as the earnings flow this week has built some confidence in large cap stocks. Therefore we think that the June Mini Dow will be able to respect close-in support of 11,065, but a temporary re-test of 11,041 is possible off the last headlines from Europe before those press outlets wind down ahead of the weekend summit. Up trend channel support in the June Mini Dow is seen all the way down at 10,964, but we don't expect to see that kind of setback today.

The rally brought the market to a new contract high. 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 has a slightly positive tilt with the close over the swing pivot. The near-term upside objective is at 11161. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 11144 and 11161, while 1st support hits today at 11070 and below there at 11012.

S&P:
The June S&P would seem to have a quasi double bottom low around the 1201.30 level, with up trend channel support in the market today seen all the way down at 1194.75. Into the action this morning, we see no reason to call for a downside reversal, as US corporate earnings news should be capable of countervailing what might be a slight discouraging US Housing Permits report early in the trading session. If by chance the Permits figures were to improve, that would surprise the trade and give the bull camp a leg up. Initial resistance today is seen at 1208.50 and then again up at 1210.40.

The June S&P would seem to have a quasi double bottom low around the 1201.30 level, with up trend channel support in the market today seen all the way down at 1194.75. Into the action this morning, we see no reason to call for a downside reversal, as US corporate earnings news should be capable of countervailing what might be a slight discouraging US Housing Permits report early in the trading session. If by chance the Permits figures were to improve, that would surprise the trade and give the bull camp a leg up. Initial resistance today is seen at 1208.50 and then again up at 1210.40.

NASDAQ:
The June Nasdaq comes into the early Friday action below the prior close and seemingly a little vulnerable. However, with the focus of attention today on US Housing figures and perhaps the EU debt crisis, it is possible that the Nasdaq will be able to fly under the radar of would-be sellers in other sectors of the market. In fact, we also think that the Nasdaq might skirt the impact from US scheduled data perhaps because of mostly favorable earnings results from large cap financial companies should help overall market sentiment. Close-in critical support in the June Nasdaq is seen at 2026.50, with secondary support pegged down at 2023.25.

Bonds:
The Treasury market has generally maintained a positive tilt this week and given the brunt of the data released on Thursday morning an ongoing bullish bias seems to be justified. Somewhat surprisingly equity market action has diverged with some of the scheduled data released this week and it is also clear that some measure of European debt flight to quality support has been seen in US Treasuries this week. Apparently the markets see the potential for Greece to request aid from the EU/IMF as a rekindling of the crisis, even though it has been known for weeks that the Greeks wanted and needed some kind of help to attempt to lower their ultimate borrowing costs. Nonetheless, the Treasury market is currently looking for bullish developments and that will be the path of least resistance unless the US housing starts and permits data is definitively stronger than expected. In fact, we aren't totally convinced that Treasury prices will even come under pressure in the face of favorable housing data today as the Greek debt issue is probably going to remain in the headlines through the weekend meeting. It is possible that some pre-meeting statements could sooth anxieties, but it is perhaps more likely that pre-meeting statements from EU Ministers will keep the topic in the headlines and take US Treasuries away from their own internal fundamentals. It was clear that the failure to see a further improvement in the US claims figures yesterday provided a lift to Treasuries and therefore the macro economic pendulum should favor the bull camp today. While Housing Starts might come in with a decent gain this morning, the trade generally expected the Permits (a lagging indicator report) to contract and that should leave a mixed but still generally supportive tilt in the marketplace. We suspect that the Michigan sentiment numbers will only be given passing attention, as Housing and EU debt should be all encompassing. As suggested yesterday, we see the potential to return to this week's highs of 116-22 in June bonds, especially since the June Notes have already managed a move this morning back above this week's early high of 116-22! Therefore Notes have already managed a quasi technical breakout on the upside and we suspect that is coming compliments of the EU debt scare and also because of the initially weaker equity market action. Next resistance in the June Notes comes in at 116-30, with the market easily into that level today if the housing starts fail to rise as much as expected. Some estimates have housing starts rising by 5% or 6%, but not all analysts expect those figures to be that strong. In conclusion, the bulls have control today, unless Greek officials or EU officials make statements that temper anxiety, but with the meeting still looming ahead we suspect that US Treasuries will retain a positive bid through the close today.

Momentum studies are rising from mid-range, which could accelerate a move higher if resistance levels are penetrated. The close above the 9-day moving average is a positive short-term indicator for trend. The daily closing price reversal up on the daily chart is somewhat positive. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside target is at 116-290. The next area of resistance is around 116-170 and 116-290, while 1st support hits today at 115-210 and below there at 115-040.

US Dollar:
Given the overnight turbulence overseas, the Dollar has been able to hold its ground against the major currencies, although US economic numbers later this morning could end up providing a layer of fresh buying. We still think that weak economic numbers from major economic players will lend support to the Dollar and apply pressure to the Euro. Steps by the Chinese government to cool growth in their property sector, by raising mortgage rates is being seen by the market as a signal that Chinese rate hikes are close at hand and that is typically supportive to the Dollar in a weird flight to quality way. With an expected revaluation of the Yuan to accompany that action, the Dollar could lose ground to the Yen, as well as other Asian currencies and that could countervail some of the early support being seen from the EU situation. However, the Dollar continues to be the main beneficiary of the EU's problems and with little hope that this weekend's meeting of European finance ministers will come up with anything more that rhetorical support, one has to leave the edge with the Dollar bulls. In fact, unless the US numbers come in positive and US equities manage another rise to fresh new highs this morning it will be difficult to put EU flight to quality buying interest in the Dollar on the sidelines. However, the June Dollar does appear to have some initial resistance up at 80.85 and it could take some incendiary commentary from the EU, perhaps from the Germans to throw the Dollar back up into the April gap.

Euro:
Good Euro Zone economic data this morning failed to lift the June Euro away from its early lows, as the Euro simply looks to remain on the defensive going into a weekend that shows little hope of solving the EU debt crisis. As of right now, there appears to be too many differences of opinion within the EU, not to mention the threat of even more aid requests on the horizon, for the June Euro to turn back towards the highs from earlier in the week. Unless US economic readings this morning manage to change market sentiment drastically, it is more likely than not, that we will see a slide in the June Euro down to fill the gap at the 1.3506 level. If the US numbers are disappointing, equities take out the prior session's lows and EU Ministers are bickering in the Press that could send the Euro down to 1.34.

Yen:
The June Yen continues to benefit from Yuan revaluation talk and from Euro weakness as it has surged to it highest levels since late in March. While it seems more likely than not that Japanese interest rates are still headed lower, there has been enough doubt raised over the past few weeks about the timing of such cuts, that Chinese rate action might end up occurring first. With the ruling party in Japan being very clear this morning in their desire for a weaker Yen, it is hard to believe that any sort of rally will be able to get beyond the 108.14 level this late in the week.

Gold:
The gold market overnight saw news of a minor South African gold production snafu, evidence of a rise in Indian jewelry exports and news of a decline in quarterly gold production from a small gold producer overnight but this market just isn't positioned to take a lot of direction from classic supply and demand side developments. However, some Press outlets this morning saw the lack of interest in the Indian gold market this morning, as a sign that gold prices are considered a little expensive to potential buyers in that market. Sentiment does seem to starting the Friday US trading session out with a minor bearish tail wind, as the residual fear of fresh EU debt travails and a weak Euro didn't leave the marketplace overnight. With slightly weaker global equity price action this morning and somewhat disappointing US economic numbers on Thursday, the bear camp in gold seems to be a little more confident than the bull camp in the early going. As mentioned already, some markets even seemed to fret over the prospect that Greece would officially ask for aid, even though that has been a forgone conclusion by many analysts for weeks. Comex Gold Stocks for April 15th were 10.093 million ounces up 9,903 ounces.

Silver:
The silver market continues to see re-hashed news of an increase in physical silver production from a Russian miner in the prior trading session, but the supply focus doesn't look to be the main focal point of the trade today. Not surprisingly, the silver trade continues to look over its shoulder to the action in the currency markets, the ebb and flow of the EU debt saga and to the action in the equity markets. Some in the silver trade are attempting to talk up the prospect that silver is behaving better than gold technically, while other segments of the market are fearful of ongoing sluggish action in the platinum group metals. It does seem as is silver has managed to diverge with gold somewhat this week and that might be a function of a relatively smaller net spec long positioning in silver in the last COT positioning reports. Comex Silver Stocks for April 15th were 115.586 million ounces up 17,950 ounces. Stocks have declined 11 of the last 20 days.

Crude Oil:
Energy prices have been put under pressure this morning from end-of-week profit-taking, from fears of slowing in China and also because of fears that the EU debt situation is poised to rear its ugly head again. The move by Chinese officials to raise mortgage rates today may have spooked the markets, as any sort of brakes put on the Chinese economy will likely foment concerns of a cooling of the enormous energy demand from that nation. Comments made by OPEC officials this week indicating they are comfortable with prices rising to $90 or $100 before they take any action to increase production have possibly set the stage for a move toward those price levels, but the market will need to see the EU situation come under full control before we are likely to see another strong move to the upside. The problems within the EU over sovereign debt, as well as periodic doubt on the pace of the US recovery are likely to put more pressure on the energy market today, and that in turn should prompt some longs to head towards the sidelines before the weekend. To be overly bearish one could also leap to the conclusion that further and sustained closure of air travel in Europe serves to foment sagging demand views and in turn that could even kick up economic slowing fears in the Euro zone. In fact, the Euro zone has already been forecasted to lag seriously behind other parts of the world in the recovery process and therefore seeing the ash problem sustain and also seeing fresh EU debt problem seems to give the energy bears some cover today. While the June crude oil market has managed to reject big downside thrusts recently, we can't argue against a ratcheting down to $84.95 today in June crude oil in the event of a sharp slide in equities or a gap filling rise in the US Dollar.

Natural Gas:
The June natural gas market remains vulnerable of its own volition and with a large amount of bearish outside market elements added into the equation today, we can't rule out a retest of the sub $4.00 level. The weekly natural gas storage report showed an injection of 87 bcf yesterday and that is another element that looks to weigh on prices today. Total storage stands at 1,756 bcf, or 16.3% above the 5 year average and that simply leaves the market facing a wall of supply. Over the last four weeks natural gas storage has increased 141 bcf and so far Washington doesn't appear to be willing to step up the use of natural gas in the US. What is clear is that coal players give more money to Washington than do natural gas players. The path of least resistance is pointing downward today.

Corn:
Signs of strong world demand; especially from China and continued signs that the US demand numbers are solid have supported the corn market. Surging meat prices in the US, high energy prices and the outlook for less exports and maybe some import demand from China this year suggests US demand numbers are likely turning more positive. Positive technical action yesterday was supported by fund buying which pushed corn to the highest price level since March 25th. The swing to the upside comes as a minor rain system is moving through the Corn Belt. This system started in the NW Corn Belt and Iowa yesterday and it is pushing through the northern tier of the Midwest today before sagging to the south into this weekend. Totals are expected to be light and scattered in most areas, with the latest forecasts showing just a bit less rain than previous forecasts. China has announced that it will increase the amount of corn that it releases from its strategic reserve next week. The first week's offering was 1.0 million tonnes, but that failed to reduce prices. This week's release will be bumped up to 1.38 million tonnes with 800,000 of that total in three major provinces in the NE where all of the offered corn was eagerly snapped up last week. Another example of strong feed demand from China is talk of increased import demand from China for US DDG's with talk yesterday of a possible purchase of near 200,000 tonnes. Traders said that a strong export sales total and fund buying were supportive factors for corn yesterday along with light selling by farmers and fund buying. Export sales for corn came in above trade expectations yesterday with net sales at 1,006,300 tonnes for the current marketing year and an additional 140,900 for next year for a total of 1,147,200 tonnes. As of April 8th, cumulative corn sales stand at 76.4% of the USDA forecast for 2009/2010 versus a 5 year average of 77.1%. Sales need to average 546,000 tonnes each week to reach the USDA forecast. Rain in Argentina has been slowing harvest progress for corn into the middle of the overall harvest season. Taiwan is buying 50,000 tonnes of corn, and Malaysia is in the market for 60,000 tonnes of corn from South America.

The new highs for April during yesterday's session may well result in greater nervousness on the part of spec shorts in corn. Both spec and commercial sentiment has gotten generally bearish since US planting weather started to improve dramatically in mid March. Trend-following funds and others have gotten short into this time frame, and this sentiment may be undergoing some revision after the rally and two weeks of very strong export sales in corn. Trend-following funds hold a near record net short position of 64,798 contracts as of April 6th. We still look for the July contract to move to the mid 380s or better. First support has risen to near 363 3/4 in the July contract with added support near 359 1/2. First resistance is still near 383 to 384 1/4.

Cattle:
The market seems to be in a position to work higher over the near-term, as a seasonal burst in demand and a continued trend toward lighter weights helps to support. Demand typically picks up dramatically into the May-June timeframe, as the barbeque season picks up the pace of beef demand. The USDA predicts that 2nd quarter beef production will be about 300 million pounds above first quarter production. This is the 'smallest' increase for the quarter in ten years, and could help exaggerate the typical seasonal tendency for beef prices to rally into the spring. If production is to meet USDA projections, average weights will need to pick up to a more normal level and this may be a difficult task given the steep discount of June cattle to the cash market. The large discount encourages producers to move cattle as soon as possible, which could hold weights lower. Average dressed steer weights for the week ending April 3rd came in at 813 pounds, down from 816 the previous week and down from 839 pounds last year. June cattle closed sharply higher on the session yesterday and near the highs of the day. The large discount to the cash market and ideas that warming weather and the improving economy will boost beef demand added to the positive tone. Weekly U.S. beef export sales for the week ending April 08 came in at 6,700 metric tonnes, compared with the prior 4-week average of 11,875 tonnes. Cumulative sales for 2010 have reached 208,600 metric tonnes, up 20.9% from last year's pace. The estimated cattle slaughter came in at 126,000 head yesterday. This brings the total for the week so far to 499,000 head, up from 491,000 last week at this time and up from 487,000 a year ago. Boxed beef cutout values were up 22 cents yesterday at $166.96. This is still up from $164.95 one week ago with the market near 21-month highs.