ES - 1.5m contracts
NYSE - 614m vs 569m (+8%)
NASDAQ - 1.52b vs 1.37b (+12%)
***Disturbution*** Market down on higher volume after light volume on the last 3 up days.
Tuesday, January 12, 2010
QM Target #1 Hit
Crude just had a very nice move down to follow the market lowere.
Our 1st target was hit at 81.000
Move stop on remaining contracts to breakeven at 81.400
2nd Target is 80.450
Our 1st target was hit at 81.000
Move stop on remaining contracts to breakeven at 81.400
2nd Target is 80.450
QM Trade Triggered
Our sell stop was just hit. We are short 3 @ 81.400.
1st Target is 81.025
Stop is 82.025
1st Target is 81.025
Stop is 82.025
QM Entry
Symbol: QM
Chart: 15m
Entry: Sell Stop @ 81.400
Stop: 82.025
Target 1: 81.025
Target 2: 80.450
Target 3: 79.500
Chart: 15m
Entry: Sell Stop @ 81.400
Stop: 82.025
Target 1: 81.025
Target 2: 80.450
Target 3: 79.500
Today’s Market Guidance (From Profit Source Futures & FX Research)
Financial Overview:
The stock market is showing signs of correcting in the early action today. Apparently the kick off to the earnings cycle was disappointing yesterday afternoon, with Alcoa results failing to inject fresh optimism into the stock market. We would have expected S&P dialogue on the Chinese situation overnight to have supported the market overnight, as many analysts have recently fretted that the Chinese economy was in a bubble posture that was prepared to exert drag on the world recovery effort. The S&P rightly pointed out that China holds a 'large' external asset position and that the Chinese economy had enough positive momentum to offset their contingent liabilities. Those analyst that suggest the Chinese economy is a house of cards might have trouble explaining away the massive December import increases Sunday night that were seen in a host of heavy industrial commodities, especially in Iron ore as that suggests to us, that China is actually seeing some activity in its capacity to export steel to the world. While we are generally up beat toward growth prospects and think that the market should be cheered by the prospect of rates remaining low, we concede to the prospect that prices are somewhat overvalued and perhaps in need of a typical 2-3 day corrective setback. In most measures, today would only be the 2nd day down!
Dow:
The big cap stocks might be a burden to the market in the coming trading sessions, as earnings results will have to show some top line sales growth, or we suspect that a bit of a correction will be seen. In fact, the March Mini Dow might be destined to dip in a controlled fashion, back down to the even number 10,500 level, with an ultimate low potentially seen down at a quasi double low zone down around the 10,451 level. If the Mini Dow does break down in the coming sessions and the earnings cycle actually shows an improvement toward the end of the week, that could result in a noted recovery rally off even the slightest up beat earnings news story.
The market made a new contract high on the rally. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market setup is supportive for early gains with the close over the 1st swing resistance. The near-term upside target is at 10682. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 10656 and 10682, while 1st support hits today at 10570 and below there at 10511.
S&P:
With a new high for the move and failure in the prior trading session and a range down follow through this morning it is clear that the bear camp has gained the upper hand. As suggested already, we think the market is in the midst of a typical 2 to 3 day corrective setback that initially seems to be devoid of anxiety. While the Fed's Bullard brought up the prospect of commercial real estate problems, the trade so far hasn't latched onto that situation as a primary driving force of the bear case. However, we suspect that the March S&P is poised to slide back to 1127.20, with up trend channel support today also seen down at 1119 today and at 1121 on Wednesday.
The market rallied 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 close over the pivot swing is a somewhat positive setup. The next upside target is 1153.06. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 1147.87 and 1153.06, while 1st support hits today at 1137.63 and below there at 1132.57.
NASDAQ:
We don't really think that the lower cap or tech sector stocks have that much to worry about over the coming two trading sessions, but we also don't think that the Nasdaq will be able to completely avoid a track lower with the rest of the market. Near term downside targeting in the March Nasdaq is seen down at 1865.20, but an even lower track down to 1858.75 is possible if the current break extends to a three day corrective pattern.
Gold:
Clearly the Chinese move to tighten reserve requirements took some of the bullish edge off the rally in the prior trading session, but one might have expected the gold market to regain some footing off the S&P views overnight on China and South Korea credit ratings. However, the gold market is seeing a little more outside physical commodity market weakness in the early Tuesday trade, than was seen in the Monday morning trade and that at least temporarily resulted in the April gold contract falling back below the quasi even number $1,150 level in the early trading action. It is possible that a change in gold lending rules in Vietnam is being seen as a slight negative to gold prices, but Vietnam hasn't been a dominating key market indicator for the gold bulls recently and therefore that potentially bearish news item might not have much lasting influence. With the US Dollar potentially settling into a more positive correlation with the US equity markets and the macro economic view toward the US becoming a little more suspect in the wake of the US non farm payroll result late last week, it is possible that weak equity prices are contributing to the initial weakness in gold prices today. Therefore some gold bulls are hopeful that a favorable US Note auction result at mid session today will serve to underpin gold prices.
We have a bearish gut feeling toward gold today but we don't see the market as overly vulnerable to a large aggressive washout. However, we do see the prospect for additional Dollar weakness, but that potential benefit might be offset by ongoing weakness in the US equity markets. For a measure of bullish resolve today, look to the gold markets reaction to the Trade Balance figures, if gold can't rally in the face of a bigger trade deficit, then the bull camp is seemingly off the flight to quality track! On the other hand, if the US Trade Balance narrows, that suggests to us that the US economy is slower than expected and that probably isn't a good development for the gold bulls. Longs in the near term have to be defensive.
Silver:
With a minimally higher US Dollar, noted weakness in copper and weakness in energy prices, the silver trade would seem to be presented with a slightly negative fundamental track in the early Tuesday trade. With the US equity markets also showing some noted weakness and part of that weakness coming from a disappointing earnings report from Alcoa, the industrial track for silver prices would seem to be less than encouraging for the bull camp. However, the bull camp in silver might point out that silver was relatively less overbought technically than the gold and platinum markets, and that in turn could serve to cushion silver prices against liquidation pressure. While silver exchange stocks declined overnight, the silver market just hasn't been in a position to react to minor changes in physical silver supply. The bear camp might try to play up the slide below the even number $18.50 level early today as a negative, while the bull camp will suggest that the Silver market is still comfortably above the 50 day moving average. In the end, noted weakness in the equity markets, appears to have cast a negative shadow for some physical commodity markets this morning and therefore it is possible that the silver trade will take a large measure of direction from the stock market today.
With an early negative trade on the charts today, the bear camp would seem to have the edge out of the gate. However, we don't get the sense that the silver market is poised to see an aggressive washout unless the equities are severely up ended by concerns toward the US commercial real estate sector or some other major anxiety type event. Near term downside targeting in the March Silver is seen at $18.09, which is the first retracement level off the late December/early January rally.
Crude Oil:
Crude oil has come under additional pressure in the early overnight action weighed down by the market's overbought technical condition, a warmer weather forecast and expectations for a sizable jump in oil stocks leaving downside price risk in place. While the uptrend in March crude oil from the December low looks to have become entrenched, the market may now be sufficiently overbought and along with other considerations gives the oil market some short-term downside price potential. The price reversal in March crude oil yesterday after reaching a fresh 15 month high hints that a temporary top may have been set. Given the traders setup in latest COT report with options suggests that the combined fund and spec net long position in crude oil likely reached a record on yesterday's rally and that might leave the market with less buying capacity and technically vulnerable to a more significant correction before making another test of this week's highs. A warming temperature trend in the second half of the month will certainly reduce heating fuel demand and that may provide some traders with enough incentive to book profits considering part of the run up in crude oil seemed to be weather related. The EIA's monthly supply/demand outlook for oil is scheduled to be released today and there are reports that the agency will forecast a slower rate of rising oil demand for this year and next and that outlook may also be a bit disappointing. We also suspect crude oil will be susceptible to profit taking ahead of this week's inventory report since most traders are expecting oil stocks to rise about 1 million barrels. In the early going crude oil is feeling some pressure from the weak action in the equity market which could become more of a bearish influence if equities see a sharp break on earnings jitters following a disappointing report from Alcoa. News that China has taken some additional steps to tighten liquidity and interest rates along with OPEC members saying production will be left unchanged at the next meeting could be other factors that weigh on oil in the short run. Given the market's technical condition a pull back in March crude oil to test support at $81.50 looks possible. But we also can't rule out a move back to $80, which is the first critical retracement of the December/January rally. So far the oil market isn't finding too much price support from escalating militant violence in Nigeria.
A technical correction across all markets has been over due following the steep price gains since the December low. With funds likely holding record net long positions in crude oil, heating oil and gasoline, more aggressive profit taking could be inspired this session by the bearish weather forecast, weak equity trade and concerns over rising oil & gasoline stocks in this week's inventory report.
Natural Gas:
A change in the forecast to a warmer temperature outlook has the potential to put further pressure on natural gas over the near-term. February natural gas briefly rallied above the pivotal $6.00 price level last week on expectations that frigid temperatures would boost heating demand and help to drain excess supplies from storage. Some traders expect this week's storage report to show a record decline in fuel stocks of 280 bcf compare to the old record of 274 bcf draw seen in January 2008. But with most forecasters predicting a significant warm up for the second half of the month, we suspect even predictions for a record storage drop won't be enough to prevent additional selling interest in natural gas. Market sentiment is certainly being undermined by temperatures in the Midwest rising into the 40's later this week and into the 50's in parts of the Northeast by the weekend and the slump in heating demand has clearly given the edge back to the bear camp. Since weather related demand for natural gas is seasonal, the market needs a return of industrial fuel demand to support a sustained uptrend in price and so far there is little indication that industrial fuel demand is set to recover. With the latest COT report with options for natural gas showing a bearish setup with funds net short and small traders net long leaves the market vulnerable to more aggressive chart based selling if support levels fail to hold. With daily technical indicators also turning bearish, we can't rule out an eventual slide in February natural gas back to the $5.13 to $5.00 price level if the mild temperature forecast holds.
The stock market is showing signs of correcting in the early action today. Apparently the kick off to the earnings cycle was disappointing yesterday afternoon, with Alcoa results failing to inject fresh optimism into the stock market. We would have expected S&P dialogue on the Chinese situation overnight to have supported the market overnight, as many analysts have recently fretted that the Chinese economy was in a bubble posture that was prepared to exert drag on the world recovery effort. The S&P rightly pointed out that China holds a 'large' external asset position and that the Chinese economy had enough positive momentum to offset their contingent liabilities. Those analyst that suggest the Chinese economy is a house of cards might have trouble explaining away the massive December import increases Sunday night that were seen in a host of heavy industrial commodities, especially in Iron ore as that suggests to us, that China is actually seeing some activity in its capacity to export steel to the world. While we are generally up beat toward growth prospects and think that the market should be cheered by the prospect of rates remaining low, we concede to the prospect that prices are somewhat overvalued and perhaps in need of a typical 2-3 day corrective setback. In most measures, today would only be the 2nd day down!
Dow:
The big cap stocks might be a burden to the market in the coming trading sessions, as earnings results will have to show some top line sales growth, or we suspect that a bit of a correction will be seen. In fact, the March Mini Dow might be destined to dip in a controlled fashion, back down to the even number 10,500 level, with an ultimate low potentially seen down at a quasi double low zone down around the 10,451 level. If the Mini Dow does break down in the coming sessions and the earnings cycle actually shows an improvement toward the end of the week, that could result in a noted recovery rally off even the slightest up beat earnings news story.
The market made a new contract high on the rally. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market setup is supportive for early gains with the close over the 1st swing resistance. The near-term upside target is at 10682. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 10656 and 10682, while 1st support hits today at 10570 and below there at 10511.
S&P:
With a new high for the move and failure in the prior trading session and a range down follow through this morning it is clear that the bear camp has gained the upper hand. As suggested already, we think the market is in the midst of a typical 2 to 3 day corrective setback that initially seems to be devoid of anxiety. While the Fed's Bullard brought up the prospect of commercial real estate problems, the trade so far hasn't latched onto that situation as a primary driving force of the bear case. However, we suspect that the March S&P is poised to slide back to 1127.20, with up trend channel support today also seen down at 1119 today and at 1121 on Wednesday.
The market rallied 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 close over the pivot swing is a somewhat positive setup. The next upside target is 1153.06. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 1147.87 and 1153.06, while 1st support hits today at 1137.63 and below there at 1132.57.
NASDAQ:
We don't really think that the lower cap or tech sector stocks have that much to worry about over the coming two trading sessions, but we also don't think that the Nasdaq will be able to completely avoid a track lower with the rest of the market. Near term downside targeting in the March Nasdaq is seen down at 1865.20, but an even lower track down to 1858.75 is possible if the current break extends to a three day corrective pattern.
Gold:
Clearly the Chinese move to tighten reserve requirements took some of the bullish edge off the rally in the prior trading session, but one might have expected the gold market to regain some footing off the S&P views overnight on China and South Korea credit ratings. However, the gold market is seeing a little more outside physical commodity market weakness in the early Tuesday trade, than was seen in the Monday morning trade and that at least temporarily resulted in the April gold contract falling back below the quasi even number $1,150 level in the early trading action. It is possible that a change in gold lending rules in Vietnam is being seen as a slight negative to gold prices, but Vietnam hasn't been a dominating key market indicator for the gold bulls recently and therefore that potentially bearish news item might not have much lasting influence. With the US Dollar potentially settling into a more positive correlation with the US equity markets and the macro economic view toward the US becoming a little more suspect in the wake of the US non farm payroll result late last week, it is possible that weak equity prices are contributing to the initial weakness in gold prices today. Therefore some gold bulls are hopeful that a favorable US Note auction result at mid session today will serve to underpin gold prices.
We have a bearish gut feeling toward gold today but we don't see the market as overly vulnerable to a large aggressive washout. However, we do see the prospect for additional Dollar weakness, but that potential benefit might be offset by ongoing weakness in the US equity markets. For a measure of bullish resolve today, look to the gold markets reaction to the Trade Balance figures, if gold can't rally in the face of a bigger trade deficit, then the bull camp is seemingly off the flight to quality track! On the other hand, if the US Trade Balance narrows, that suggests to us that the US economy is slower than expected and that probably isn't a good development for the gold bulls. Longs in the near term have to be defensive.
Silver:
With a minimally higher US Dollar, noted weakness in copper and weakness in energy prices, the silver trade would seem to be presented with a slightly negative fundamental track in the early Tuesday trade. With the US equity markets also showing some noted weakness and part of that weakness coming from a disappointing earnings report from Alcoa, the industrial track for silver prices would seem to be less than encouraging for the bull camp. However, the bull camp in silver might point out that silver was relatively less overbought technically than the gold and platinum markets, and that in turn could serve to cushion silver prices against liquidation pressure. While silver exchange stocks declined overnight, the silver market just hasn't been in a position to react to minor changes in physical silver supply. The bear camp might try to play up the slide below the even number $18.50 level early today as a negative, while the bull camp will suggest that the Silver market is still comfortably above the 50 day moving average. In the end, noted weakness in the equity markets, appears to have cast a negative shadow for some physical commodity markets this morning and therefore it is possible that the silver trade will take a large measure of direction from the stock market today.
With an early negative trade on the charts today, the bear camp would seem to have the edge out of the gate. However, we don't get the sense that the silver market is poised to see an aggressive washout unless the equities are severely up ended by concerns toward the US commercial real estate sector or some other major anxiety type event. Near term downside targeting in the March Silver is seen at $18.09, which is the first retracement level off the late December/early January rally.
Crude Oil:
Crude oil has come under additional pressure in the early overnight action weighed down by the market's overbought technical condition, a warmer weather forecast and expectations for a sizable jump in oil stocks leaving downside price risk in place. While the uptrend in March crude oil from the December low looks to have become entrenched, the market may now be sufficiently overbought and along with other considerations gives the oil market some short-term downside price potential. The price reversal in March crude oil yesterday after reaching a fresh 15 month high hints that a temporary top may have been set. Given the traders setup in latest COT report with options suggests that the combined fund and spec net long position in crude oil likely reached a record on yesterday's rally and that might leave the market with less buying capacity and technically vulnerable to a more significant correction before making another test of this week's highs. A warming temperature trend in the second half of the month will certainly reduce heating fuel demand and that may provide some traders with enough incentive to book profits considering part of the run up in crude oil seemed to be weather related. The EIA's monthly supply/demand outlook for oil is scheduled to be released today and there are reports that the agency will forecast a slower rate of rising oil demand for this year and next and that outlook may also be a bit disappointing. We also suspect crude oil will be susceptible to profit taking ahead of this week's inventory report since most traders are expecting oil stocks to rise about 1 million barrels. In the early going crude oil is feeling some pressure from the weak action in the equity market which could become more of a bearish influence if equities see a sharp break on earnings jitters following a disappointing report from Alcoa. News that China has taken some additional steps to tighten liquidity and interest rates along with OPEC members saying production will be left unchanged at the next meeting could be other factors that weigh on oil in the short run. Given the market's technical condition a pull back in March crude oil to test support at $81.50 looks possible. But we also can't rule out a move back to $80, which is the first critical retracement of the December/January rally. So far the oil market isn't finding too much price support from escalating militant violence in Nigeria.
A technical correction across all markets has been over due following the steep price gains since the December low. With funds likely holding record net long positions in crude oil, heating oil and gasoline, more aggressive profit taking could be inspired this session by the bearish weather forecast, weak equity trade and concerns over rising oil & gasoline stocks in this week's inventory report.
Natural Gas:
A change in the forecast to a warmer temperature outlook has the potential to put further pressure on natural gas over the near-term. February natural gas briefly rallied above the pivotal $6.00 price level last week on expectations that frigid temperatures would boost heating demand and help to drain excess supplies from storage. Some traders expect this week's storage report to show a record decline in fuel stocks of 280 bcf compare to the old record of 274 bcf draw seen in January 2008. But with most forecasters predicting a significant warm up for the second half of the month, we suspect even predictions for a record storage drop won't be enough to prevent additional selling interest in natural gas. Market sentiment is certainly being undermined by temperatures in the Midwest rising into the 40's later this week and into the 50's in parts of the Northeast by the weekend and the slump in heating demand has clearly given the edge back to the bear camp. Since weather related demand for natural gas is seasonal, the market needs a return of industrial fuel demand to support a sustained uptrend in price and so far there is little indication that industrial fuel demand is set to recover. With the latest COT report with options for natural gas showing a bearish setup with funds net short and small traders net long leaves the market vulnerable to more aggressive chart based selling if support levels fail to hold. With daily technical indicators also turning bearish, we can't rule out an eventual slide in February natural gas back to the $5.13 to $5.00 price level if the mild temperature forecast holds.
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