Today's Market Guidance

Financial Overview:
At first glance today things seem to be a little better. However, despite extremely favorable German ZEW readings, favorable Diamler news overnight and a re-opening of European airspace, there are still a number of potentially troubling issues hanging over the equity markets. At this point, it would seem like the Greece situation will be easier to solve than the Goldman situation and that could mean that the Greece situation is likely to get less Press and could perhaps improve slightly over the coming 36 hours. The market has also generally seen favorable corporate earnings overnight and that has given international markets a positive bid this morning. While the S&P technically managed a big range down reversal recovery move yesterday, that formation wasn't a classic exhaustion move that could have signaled a full end to the corrective tilt. In other words, the market might be able to mount a bounce this morning, but the bull camp still seems to need a lot of very favorable news to begin to unseat the idea that one of the biggest US financial firms is being targeted. Unfortunately, there isn't much in the way of scheduled data due out from the US today and that leaves the earnings parade and Fed Chairman testimony from the financial reform effort as the primary driving forces in the marketplace. We suspect that earnings will be positive but we can't see the Fed testimony as a positive to tock prices.

Dow:
While the June Mini Dow was able to make and reject a new low for the move on Monday, we don't get the sense that the sellers were exhausted and that prices are poised for anything other than a simple compacted recovery bounce. In fact, given the thin economic news slate and the news that the UK has started its probe of Goldman, the positives of a very favorable German ZEW reading and favorable cyclical news from a car and truck manufacturer, are probably going to be given little attention today. While one could suggest that the June Mini Dow will be able to respect up trend channel support of 10,937, we just have to wonder how the bull camp will muster widespread optimism in the current environment. Perhaps the re-opening of the European airspace will give the Mini Dow the capacity to climb up to close-in resistance on the charts of 11,080.

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 downside closing price reversal on the daily chart is somewhat negative. The market tilt is slightly negative with the close under the pivot. The next upside objective is 117-190. The next area of resistance is around 117-040 and 117-190, while 1st support hits today at 116-160 and below there at 116-105.

S&P:
As suggested already, the S&P gave off a bottoming signal of sorts yesterday but we don't think that the range down action yesterday was severe enough to suggest that the sellers fully exhausted themselves. We do think that a reopening of European airspace, favorable earnings news and up beat German economic data should give the bull camp temporary control over prices this morning. However, looming in the wings, just ahead of mid session is a Fed Chairman testimony and there is the chance that the Greece debt issue will resume throwing off headlines later today, ahead of a Wednesday morning EU meeting. In short, the market can bounce but we are not sure that the bear threat can be consistently held off. Initial resistance in the June S&P is seen at 1201.30 and then again up at 1204.00.

Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The market's close above the 9-day moving average suggests the short-term trend remains positive. The daily closing price reversal up is a positive indicator that could support higher prices. The market has a slightly positive tilt with the close over the swing pivot. The next downside target is now at 1175.69. The next area of resistance is around 1205.12 and 1209.18, while 1st support hits today at 1188.38 and below there at 1175.69.

Nasdaq:
Favorable tech sector news overnight seems to give the Nasdaq a positive early bid today, but we aren't sure that the Nasdaq and the tech sector stocks are going to be allowed to focus exclusively on their own fundamentals. Evidence of skepticism was seen with the markets partially negative reaction to IBM earnings yesterday afternoon as some players pointed out some disappointment in gross operating margins. While the market is showing positive early action, the Nasdaq has only managed to return to the middle of the last three trading session's trading range. With both Yahoo and Apple reporting earnings after the close today, it is possible that this market will wait for confirmation of favorable tech sector earnings news before attempting to push the June Nasdaq up to the first resistance zone on the charts of 2020.

Bonds:
The Treasury market should have been able to extend on the upside in the prior trading session, as anxiety toward the Euro zone and the Goldman situation on Monday morning was clearly present. However, a rather significant up tick in the US Conference Board Leading Indicators report served up a measure of economic confidence and that in turn dampened interest in a market that was fresh off a series of decent daily gains. With the German ZEW readings jumping up aggressively overnight, the Greek debt situation not producing any fresh concerning headlines and equities showing some positive action in many international measures overnight, the initial bias in Treasury prices could have been pointing to the downside this morning. However, while bonds came into the early Tuesday action sitting right on the prior session's lows, we get the sense the bullish capacity remains just under the surface. One might even suggest that a reopening of the European airspace is an issue that could allow for some minor weakness in Treasury prices. With the US economic report slate empty today, the trade will be forced to glean its direction from the action in the equity markets and perhaps by a lesser degree from the flow of US corporate earnings reports. With Diamler posting favorable earnings and in the process raising its 2010 sales forecasts for autos and trucks, the earnings news overnight has generally giving off ideas that the recovery is continuing, even if the markets are still doubtful of the sustainability of the recovery. Furthermore, with the UK FSA supposedly announcing a probe of Goldman, it would appear that regulators are poised to pile on Goldman and that might mean as a group, that they intend to attempt to drive the firm out of business and that in turn seems to suggest that the Goldman headline is going to remain a factor for quite some time. In the event that the Goldman news flow calms down, it is possible that Treasury prices might slide back on the charts, especially with a much hotter than expected Inflation reading seen out of the UK overnight. In our opinion, an economy doesn't usually produce hot inflationary readings unless there is some forward progress in that economy. In short, the bear camp might have a slight edge today but the lack of scheduled data and Fed Chairman testimony to a Congressional panel might serve to lock the price action in an early tight trading range. In conclusion, it might be possible to see a slide down to 116-09 in June bonds early, with a similar dip down to 116-18 in June Notes. The Note market recently has shown more sensitivity than the Bonds and one could argue that Notes were more short term overbought into the Monday high than the Bond market and therefore a decline to secondary support of 116-14 in June notes is possible if the equity market gains in the US become more significant. However, as can be seen from our narrow downside support predictions, we aren't expecting wide gyrations in prices. In fact, it won't take much to rekindle the bull's interest in this market, as the Greece and the Goldman situations haven't been resolved fully and both remain highly fluid. In order to turn the Treasury market definitively lower, will probably require a lot of very good economic readings to drown out the rumor mill in the financial sector.

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. The daily closing price reversal down puts the market on the defensive. The market's close below the pivot swing number is a mildly negative setup. The near-term upside target is at 117-130. The next area of resistance is around 116-290 and 117-130, while 1st support hits today at 116-070 and below there at 116-000.

US Dollar:
A lack of fresh news from Goldman or Athens has helped to deflate the risk aversion Dollar rally, although prices have held much of their gains from the past few sessions. It would appear that not everyone is convinced that the danger has passed, as the Dollar has held some support levels going into the opening today. With little in the way of US economic numbers until Thursday morning, there will be little in the way of specific news to change ideas that US economy continues to make a slow but steady recovery. There is likely to be some pressure put on the Dollar today as the European airspace reopens and also because of a much stronger than expected German ZEW reading last night, as that news will likely provide European currencies with a bit of a relief rally at the expense of the Dollar. As long as the US stock market continues to hold yesterday's turnaround and the Goldman issue remains quiet, the Dollar should be expected to give some ground. In short, it is all up to overall global macro economic sentiment where the Dollar heads from here. In order to press the Dollar throughout the trade today and into the Wednesday action, the bear camp has to think that the EU is going to come forward with something positive on the Greece debt situation! Near term downside targeting is seen at 80.80 and perhaps down at 80.69 today.

Euro:
The June Euro has been able to build on a strong German ZEW survey and continue to recover above the 1.35 level this morning. There is also a sense that the market may get an additional benefit when European airspace becomes fully operational within the next few days. With officials from the EU & the IMF now scheduled to have a meeting in Athens on Thursday, it appears more likely than Greece will tap into the aid package proposed earlier in the month. While this may give the June Euro a relief rally, we probably have not seen the last one of these aid packages going to an EU nation. While there is plenty of room for the June Euro to run towards the upside near-term, any spike rally will likely be capped off once prices move above the 1.36 level.

Yen:
The June Yen has already begun to follow through on yesterday's reversal and head back towards the 107.00 level, as quieter outside markets and an easing of risk aversion seem to have undercut some of the Yen's recent strength. Although comments by a Bank of Japan official indicating that they have no 'preset' idea regarding upcoming monetary policy, a deflationary Japanese economy makes it fairly clear which direction interest rates are likely to be going. Look for an initial move towards the 107.00 level, with a test of the recent lows if the Bank of Japan does take action.

Gold:
Since the market didn't give much attention to the initial news of a closure of an Australian gold mine in the wake of recent quake, the gold trade is not likely to see the reopening of that mine as an influential factor for gold prices today. However, it would seem like the outside market forces have shifted by 180 degrees from those present Monday morning. The bull camp will probably point out the high to low break in June gold this month of $46 an ounce, as an overdone move, while the bear camp will probably continue to assert that the Greece debt situation is far from being resolved. With June gold to the early highs this morning, sitting as much as $20 an ounce above the prior session's lows, there would seem to be some evidence of renewed physical buying interest, or perhaps simple technical short covering. With an expected Indian interest rate hike seen overnight there might be some concerns that Indian gold demand is likely to be limited somewhat but the other side of that coin is the argument that the Indian economy is evidently strong enough that the Indian government felt the need to meter economic activity. Comex Gold Stocks were 10.136 million ounces up 44,306 ounces.

Silver:
Apparently the silver market isn't overly concerned about overnight news of higher silver supply, as the silver market is showing somewhat noted recovery action into the early US Tuesday trade. With higher silver production noted from both the USGS and Pan American silver over the last 36 hours, there was certainly some supply side evidence to favor the bear camp. However, the silver market seems to be focused on the demand side of the equation in silver, instead of on the supply side of the equation. As in the gold market, the silver market is probably seeing some technically orientated buying interest this morning, especially when one considers that the July silver contract from the April highs was down as much as $1.14 an ounce to yesterday's lows. With some players circulating talk of renewed investment interest in gold overnight, that type of mentality might have fed into the bull's case in the silver market this morning. However, the US economic report slate is thin today and silver is likely to be dominating by the action in the currency markets and perhaps to some lesser degree by the flow of US corporate earnings. Some traders suggested that the reopening of European airspace is being seen as a positive for silver, but that would seem to be a bullish stretch. Comex Silver Stocks were 114.935 million ounces down 663,972 ounces.

Crude Oil:
June crude oil continues to recover from yesterday's spike lows, gaining even further ground during overnight trading off of the news that airspace over Europe was beginning to open up to commercial flights. The recovery in US equities has also lent some support this morning, and as long as the marketplace is no longer having such a strong aversion to risk, as it did during Friday and early yesterday, energy prices could continue to see a move further away from the recent lows. Although sentiment is improving, the market will cautiously be turning its attention to this week's storage numbers and to the threat that more negative news could be seen from either the Goldman situation or from the Greece debt situation. In the midst of the all the flap over the last several trading sessions, the energy markets seemed to miss or mostly discount a US military assertion that the world was likely its surplus dry up by 2012 and that there could be a significant oil shortage by 2015. While the market will likely focus on the shorter term ebb and flow of the global economy, we think prices are going to be underpinned by the idea that global demand for oil is going to remain robust! However, the onus will be on the bull camp to prove that US oil supply conditions are set to tighten and in the current environment the trade will hardly be able to discount news of a build in crude oil stocks or the failure to discharge relatively high gasoline stock levels. In short, to make the $82.50 spike low a key low for the rest of this week, the internal fundamentals can't weigh on crude oil prices. In the end, the primary driving force in the market will continue to be the big picture macro economic ebb and flow and today the bulls look to have an initial but suspect edge.

Natural Gas:
June natural gas can't seem to get out of its own way, as the market failed to hold any sort of recovery action overnight. A meeting between some of the world's top non-US natural gas producers yesterday in Algiers agreed that they should be doing something to raise prices, but apparently any sort of coordinated output reduction is not one of their ideas or the market simply remains focused on the demand side of the equation. With the current supply glut here and overseas, it may take a while for prices to make a major decisive move out of this trading range to the upside and that might only come in the event that nearby crude oil prices rise back above $90.00 or the outlook for a stronger global recovery is a widely accepted viewpoint again. Critical support remains at the $4.00 level on the June chart, but we can't rule out temporary probes below that level in the on again, off again financial turmoil environment.

Cattle:
Cash markets are near $99.00, up from $86.00 last year, and beef prices are at their highest level since July, 2008. Signals from the cash market remain positive, as demand is better than expected, both export and domestic. The discount of June cattle to the cash market is encouraging more aggressive selling in the cash market by producers, and this is helping to keep feedlots current with marketings as well as also helping to keep weights well below normal. June cattle saw choppy and two-sided trade for much of the session yesterday, as the early rally failed to provide much support to prices with outside markets providing enough pressure to push futures lower on the day into the close. Weakness in the US and Chinese stock markets along with strength in the US dollar were seen as bearish forces, and some selling emerged after the weekend COT report showed a record high net long position from fund traders. High open interest suggests volatile trade ahead. The estimated cattle slaughter came in at 125,000 head yesterday. This was unchanged from last week but down from 127,000 a year ago at this time. Boxed beef cutout values were up 21 cents at mid-session yesterday and closed 20 cents higher at $167.10. This was up from $166.31 the prior week and was the highest beef price since July 21, 2008. Cash markets are offered at $100-$102 this week after trading $100 early last week and $98 later in the week. The firm beef market is allowing packer profit margins to hold steady, even with the higher cash cattle market. The COT reports on the weekend showed a record high speculative net long position which is a caution flag. However, the report also showed a buying trend from the funds, which is usually a supportive short term force.