Today's Market Guidance

Financial Overview:
While the stock markets were trying to show positive action in the overnight trade, the market in total wasn't able to project a definitively bullish environment. However, many markets remain confident that the Euro zone debt crisis would remain under control today, but there is some disappointment that promises to have a deal in place before the weekend appears unlikely. While the Treasury market might not see much of a reaction to the scheduled US data flow this morning, we think that the US stock market needs to see something helpful from the numbers in order to leave the bull camp in control. We have to wonder if the market will show some profit taking late in the trading session, as some traders balk at holding longs ahead of what could fresh Euro zone conflict over the weekend while others are fearful of additional negatives flowing on the Goldman front. On the other hand, the bear camp probably won't be overly interested in attacking equities because they too could see some adversity into Monday's opening. It does seem as if the US equity markets are starting to discount or mostly ignore the flow of scheduled earnings but so far earnings have provided the market with an underpin. Traders might need to buy weakness today and keep fairly narrow objectives on those positions.

Dow:
The June Mini Dow was able to forge another new high for the move overnight but the market didn't seem to be displaying much in the way of upward momentum. Critical pivot point support in the June Mini Dow is seen at 11,132 this morning with more significant support seen down at 11,108. Initial resistance is seen at 11,168 today but the market will probably need a perfect storm of scheduled data and nothing in the way of discouraging EU news to continue to claw back toward the 2010 highs. Some traders are concerned that the major oil spill in the Gulf is capable of derailing sentiment, as the environmental impact could be quite significant on the Gulf Coast.

Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The close above the 9-day moving average is a positive short-term indicator for trend. There could be more upside follow through since the market closed above the 2nd swing resistance. The next downside target is now at 10951. The next area of resistance is around 11211 and 11256, while 1st support hits today at 11059 and below there at 10951.

S&P:
With some Press outlets touting the prospect of additional government charges against Goldman and the markets waiting for confirmation of an EU debt deal there is certainly a measure of cross currents keeping sentiment off balance. We see an initial pivot point at 1205.30 early today and more significant support of 1201.60 seen early today. We suspect that the market will show some initial weakness if the GDP number fails to come in above the +3.4% level, as the bull camp needs something to put the bulls back into a forward gear.

Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The cross over and close above the 18-day moving average indicates the intermediate-term trend has turned up. The market's close above the 2nd swing resistance number is a bullish indication. The next downside target is 1182.94. The next area of resistance is around 1214.37 and 1219.43, while 1st support hits today at 1196.13 and below there at 1182.94.

Nasdaq:
The June Nasdaq has managed a minor rise above the prior session's high in the early action today and that would seem to leave the bull camp in control. Critical support in the June Nasdaq is seen at 2035.25, with a closer in pivot point of 2041.00. As suggested already, we get the feeling that the market is bullishly biased today, but that the market needs help from favorable scheduled data to tamp down the Euro zone fears and restart the upward momentum that kicked in at 10:30 am on Wednesday.

Bonds:
The US Treasury market comes into the action today showing signs of trading above yesterday's range. Perhaps all the talk about a favorable auction cycle provided an added lift to prices, as that action came on the heels of the US Fed promising to leave rates down for an extended period of time. Technically one could suggest that participation in the auctions is showing signs of tapering off, but under the current environment, the market just isn't looking for major cracks in the bull's foundation. We also think that renewed flight to quality interest off the Greek debt situation is providing the market with some minimal early buying interest today. With the markets earlier in the week playing off the news that the EU/IMF would agree to an aid package before this weekend, and the weekend nearly upon the markets, it is possible that some players are anticipating a delay and a delay easily expands the uncertainty. In looking ahead to the action today in the US, the trade will be presented with a 1st quarter GDP reading that is generally expected to have risen markedly less than the 4th quarter reading. The market will also be presented with an Employment Cost Index reading, a regional ISM reading and a Consumer confidence reading but we are not sure that the market is going to react sharply to those readings. While the initial and ongoing claims readings showed some improvement in the economy yesterday, the bear camp just hasn't been able to crack the flight to quality stranglehold of the EU debt crisis. With the US equity market early this morning showing only minimal gains and the rest of the markets showing some weakness, that should leave the bull camp with a very minor edge in the Friday morning Treasury market action. At least in the early action today, the June bonds look to have forged fairly solid support just above the 117-30 level, with similar support in the June Notes pegged at 117-06. Given the delay from a package that was expected 'ahead of the weekend' to a package coming 'in a few days' we have to give the edge to the bull camp and we suspect that June bonds will be able to trade in a range bound by 117-29 to 118-12. We expect a similar trading range in June Notes pf 117-06 to 117-17. In the end, it would take much stronger than expected US economic readings or a surprise 'ahead of the weekend agreement' to force a sharp slide in Treasuries in the current environment. While the market is fairly convinced that inflation remains under control, the US Employment Cost Index reading was a pet statistic of the prior US Fed Chairman and a sharper than expected rise in that reading this morning could serve to shift the pendulum away from totally being mostly to Treasuries, to perhaps a more neutral view. In short, we just get the feeling that hard breaks are not in the cards today, unless there are some big surprises in the headlines. For now, the bull camp looks to be able to maintain control of the trend.

Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. 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 downside target is 117-070. The next area of resistance is around 118-150 and 118-240, while 1st support hits today at 117-230 and below there at 117-070.

US Dollar:
The Dollar continues to drift away from its recent highs this morning, as concerns over the EU debt crisis appear to be subsiding for now. While the final details of any package have not been finalized yet, and it may be a stretch to think that the Greeks will totally follow through with all of their austerity measures, the absence of the words 'debt restructure' in any of today's rhetoric may be providing enough positive euphoria to the markets to keep risk aversion off the table for now. A full slate of US economic numbers this morning have the potential to change sentiment quickly, but it would likely take some fresh negative news out of Europe in order for the Dollar to make another run at this week's highs. Baring that, look for the Dollar to stay under moderate pressure today, although the lack of any formal solution to the EU debt problem will likely keep prices supported above the 81.40 lows from last weekend.

Euro:
The June Euro has continued its recovery from this week's lows, as the chances of a finalized agreement for an aid package for Greece appear to be increasing or the market just seems to be buying into that argument. Maybe the credit downgrades this week for several EU nations was the scare that negotiators needed for a quicker move toward an agreement, but there is plenty of work left to be done, particularly for the Greeks who will not be used to these sort of government spending cuts. There were reports that the German Finance Minister suggested that some credit rating agencies can be wrong and that seemed to give the Euro an added boost. Decent Euro Zone inflation and Employment data released this morning have added to the support for the June Euro this morning, but there is still a strong possibility that negative news could derail this up move without notice. With that in mind, look for the June Euro to hold its gains above the 1.33 level and perhaps expect a move up to the next chart resistance point of 134.15.

Yen:
The June Yen has come under pressure this morning, both from the easing of risk aversion and from the results of today's Bank of Japan meeting. Although the BOJ kept Japanese rates unchanged, they also said that they needed to do more in order to increase growth outside of straight monetary policy and that deflation would likely not end before next year at the earliest. With the June Yen already on the doorstep of new lows, the lack of details in today's statement could not have given the market much comfort. Look for a test of the June Yen's lows around 105.60, if not today, then early next week.

Gold:
While EU debt concerns remain in place this morning gold and other classic physical commodities don't appear to be off balance because of that situation. In fact, seeing gold trade higher with the rest of the metals markets is a change of pace from the action seen early in the week. Not surprisingly, the gold market appears to be discounting news of higher gold production from Gold Fields, perhaps because of favorable Indian gold price action overnight. The bulls might be emboldened by the capacity to make new 2010 highs on the charts early this morning, but some tech traders also suggest that the $1,175 level in the June gold contract is potentially some form of pivot point today. Comex Gold Stocks were 10.148 million ounces down 4,739 ounces. Stocks have increased 11 of the last 20 days.

Silver:
July silver has managed a fresh new high for the move and has reached the highest level since early January. While the silver market has seen some periodic pressure recently off fears that the EU debt crisis was going to derail, or slow the global recovery, the capacity to forge new highs for the move, is probably something that emboldens the technical crowd into the US Friday morning opening. Some would suggest that silver continues to benefit from favorable Indian demand dialogue, but it still seems like silver and gold are taking a large measure of direction from big picture macro economic developments. Comex Silver Stocks were 115.429 million ounces up 429,217 ounces. Stocks have declined 11 of the last 20 days.

Crude Oil:
July crude oil looks to be continuing its move higher today, as the easing of EU sovereign debt concerns have helped the market overcome high storage levels and in turn forge a higher high for the move in the early Friday action. It is interesting to note that the only area of the oil complex not close to new highs for the move are the front two months in crude oil, as the supply glut in Cushing, OK has allowed deferred months to gain quite a bit over the front months. With expectations for increased summer driving activity seen as a reflection of US economic recovery capacity, any sort of sustained drawdown in crude stocks could send prices towards new highs for the year, particularly as this does not take into account sustained demand from China and the rest of the world. We continue to think that the market is overly infatuated with the US supply and demand situation and that in turn has prompted the anti speculation crowd to make a lot of stupid statements. One does have to brace for a politically inspired call to 'do something' with position limits. We think that the agency will be forced to lower speculative limits from the initial offering, but we also think that the world will rush to get even longer before the new limits are in place. There is a very real danger that attempting to artificially lower oil prices, will result in higher prices than would have been seen if the market were allowed to do its own thing. Apparently news of higher a-float oil supply overnight is not undermining oil prices this morning as the ebb and flow of crude oil prices looks to sit with the ebb and flow of the debt crisis and perhaps the direction of US equities. Critical support in July crude oil today is seen at $87.34, with critical resistance pegged at $88.03.

Natural Gas:
While July natural gas has managed to respect the prior session's low overnight, the sharp reversal and failure in the prior trading session appears to have temporarily wounded the bull case. Clearly the market isn't ready to overcome the patently bearish supply side of the equation, as the weekly natural gas storage report showed an injection of 83 bcf yesterday and total storage stands at 1,912 bcf or 18.8% above the 5 year average. Over the last four weeks natural gas storage has increased 274 bcf and that clearly worried the bull camp. While the trade is fearful that the massive oil spill will restrict production, or perhaps shipping movement, we are not sure that the oil spill will physically support prices. It is possible that limiting drilling activity will be supportive and it is also possible that the US will reevaluate its recent renewed push for off shore drilling. We still have to wonder why Congress, the President and those claiming foul over long speculation aren't lobbying for the increased use of a very abundant and safer environmental energy supply source like natural gas. Apparently a new extreme disparity between crude oil costs in BTU and natural gas costs in BTU is lost on most people! We think players need to have long duration call positions in play.