Today's Market Guidance

Financial Overview:
World equity markets are showing some minor corrective action in the early Monday trade and that isn't surprising considering a recent softening of US data points and what could be a renewed push to ram through US Health Care reform. While some in the trade might be set to fan the idea that the US Fed will provide support to the market off, its on-hold stance on Tuesday, others remain concerned about a series of debt related issues from around the globe. With a renewed push for Health care reform this week and some possible movement on Financial Reform, the bear camp might claim that uncertainty is set to rise this week and that in turn is cause for some investors to bank profits from the last 1 1/2 month rally. In looking to the scheduled US data flow today, it would seem like the bear camp will come away from the numbers with a bit of an edge this morning.

DOW:
While up trend channel support doesn't come in today until 10,422 today we see no reason to doubt the bear case out of the starting gate today. We suspect that the trade will find some initial support at the even number level of 10,500, but that one can't rule out the prospect of a temporary return to the quasi consolidation lows, which were forged around last week's lows of 10,457. The Commitments of Traders Futures and Options report as of March 9th for Dow Jones Index $5 showed Non-Commercial traders were net long 27,570 contracts, an increase of 6,596 contracts. The Non-reportable traders were net long 168 contracts, a decrease of -2,693 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 27,738 contracts. This represents an increase of 3,903 contracts in the net long position held by these traders.

Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's close above the 9-day moving average suggests the short-term trend remains positive. The close over the pivot swing is a somewhat positive setup. The next upside target is 10643. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 10631 and 10643, while 1st support hits today at 10569 and below there at 10520.

S&P:
The S&P comes into the action early this morning in what appears to be a weaker bias, but since the weakness doesn't look to be the result of a definitively concerning economic condition or anxiety event we wouldn't expect a sharp liquidation wave to dominate the trade directly ahead. Nonetheless, the S&P could be disappointed with the flow of scheduled data today and that in turn could leave the profit taking mentality in place. Initial support is seen down at 1140, with up trend support seen at 1138.90. The Commitments of Traders Futures and Options report as of March 9th for S&P 500 Stock Index showed Non-Commercial traders were net short 64,813 contracts, a decrease of 3,545 contracts. The Non-reportable traders were net long 57,659 contracts, a decrease of -2,426 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 7,154 contracts. This represents a decrease of 1,119 contracts in the net short position held by these traders.

The market made a new contract high on the rally. Rising stochastics at overbought levels warrant some caution for bulls. The market's close above the 9-day moving average suggests the short-term trend remains positive. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside target is at 1157.00. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 1152.00 and 1157.00, while 1st support hits today at 1142.00 and below there at 1137.00.

NASDAQ:
The Nasdaq comes into the early Monday trade sitting just above last Friday's lows and seemingly into a bit of a corrective posture. We see little in the way of definitive support on the charts until the 1905 level this morning, especially with the market doubting the pace of the US recovery and the scheduled numbers today possibly set to come in weak. The Commitments of Traders Futures and Options report as of March 9th for Nasdaq Mini showed Non-Commercial traders were net long 48,991 contracts, a decrease of -14,682 contracts. The Non-reportable traders were net long 3,631 contracts, an increase of 1,005 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 52,622 contracts. This represents a decrease of 13,677 contracts in the net long position held by these traders, which would also seem to suggest that the Nasdaq isn't as vulnerable to technical selling as one might have expected after a month long rally.

Bonds:
After waiting for most of the week for guidance from US scheduled data flow last week, the bull camp in Treasuries was apparently rewarded with enough economic uncertainty to result in a quasi upside breakout on the charts. In retrospect, the trade was also able to skirt the latest round of US supply and now the focus turns toward the FOMC meeting statement. With the scheduled data sketchy, the Treasury market probably thinks that Fed Statements this week will tend to favor the bull camp. It is also likely that US Treasuries were given an added boost off the news of a purchase of US Treasuries by the Japanese Post bank. While the foreign purchase of US Treasury bonds was only a touch above $3 billion, the news comes on the coat-tails of suggestions from the Chinese that their purchases of US instruments weren't political but economically based and therefore the market continues to see US bonds and notes still very much in demand. In looking ahead to the action today, the trade will be presented with an extremely actively slate of readings, with a heavy emphasis on manufacturing. In looking at expectations for the US data today, it would appear that there is an expectation of generally slow readings and that has probably left the Treasury market well bid and almost at the middle point of the last month's trading range. The Commitments of Traders Futures and Options report as of March 9th for U.S. Treasury Bonds showed Non-Commercial traders were net short 107,382 contracts, an increase of -9,318 contracts. The Non-reportable traders were net short 30,850 contracts, a decrease of 1,443 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 138,232 contracts. This represents an increase of 7,875 contracts in the net short position held by these traders. The Commitments of Traders Futures and Options report as of March 9th for US Treasury 10Yr Notes showed Non-Commercial traders were net short 84,852 contracts, an increase of -3,748 contracts. The Non-reportable traders were net long 710 contracts, a decrease of -3,694 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 84,142 contracts. This represents an increase of 7,442 contracts in the net short position, held by these traders. With ongoing pressure to pass Health care reform and expectations of movement on financial reform, it is also possible that some traders have been forced to the sidelines rather than face a sloppy two sided trade. All things considered, we think the bull camp is set to start the trading session out today with a slight edge, as equities are weak, recent data was soft and the trade is likely to expect the Fed to reiterate the need to leave rates low in their upcoming statement. If one mixes in a push to invoke the Volcker Rule, which could also suggest that Treasuries could have more favor than equities directly ahead. Initial support in June bonds is pegged at 116-27, with similar support in June Notes seen at 116-25. On the other hand, June Bonds look to have little in the way of resistance until 117-09, with similar resistance in June notes placed at 117-05.

US Dollar:
The Dollar seems to have rejected a probe of the 80.00 level in the early Monday trade, with the market potentially seeing the Dollar to be oversold technically. There was a bit of focus on the Chinese currency over the weekend, as the Chinese Premier indicated that the Chinese currency wasn't undervalued and given some of the recent Chinese trade surplus readings, that kind of dialogue probably won't be left untouched by Washington. With some European policy tension seen overnight between the French and Germans, equities showing initial weakness and recent US numbers slack, we suspect that the Dollar is set to get some very light buying interest. However, we also think that the Dollar has a mountain of overhead consolidation resistance on the charts starting at 80.39 and becoming very thick around the 80.50 level. Pushed into the market we would give the bull camp an edge today, with the market potentially set to test the 80.79 level into the FOMC statement on Tuesday afternoon. The Commitments of Traders Futures and Options report as of March 9th for US Dollar showed Non-Commercial traders were net long 36,030 contracts, a decrease of -2,046 contracts. The Non-reportable traders were net long 3,232 contracts, an increase of 29 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 39,262 contracts. This represents a decrease of 2,017 contracts in the net long position held by these traders.

Gold:
The bull camp will suggest that gold has managed an impressive early trade today by managing a positive trade in the face of strength in the Dollar and weakness in equities. The bull camp might also like to play up the fact that April gold managed to hold above the even number $1,100 level in the early Monday morning trade. However, Indian gold trades were up beat toward gold in the overnight trade and some traders have suggested that the upward bias in gold prices this morning is the result of ongoing concern toward sovereign debt issues, but that would seem to be a break with recent trade sentiment. The 50 day moving average in the April gold contract is above the market this morning up at the $1,111.20 level. The Commitments of Traders Futures and Options report as of March 9th for Gold showed Non-Commercial traders were net long 223,637 contracts, an increase of 732 contracts. The Non-reportable traders were net long 46,036 contracts, an increase of 63 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 269,673 contracts. This represents an increase of 795 contracts in the net long position held by these traders.

Silver:
The silver market comes into the Monday trade with what appears to be a positive early bias. Apparently the trade is garnering some spillover support from international metals market action and that is somewhat surprising considering that the Dollar was higher and equities were a touch softer. The bull camp in silver is pointing to the markets capacity to hold above the $17.00 level in the May contract in the early going today and with the May contract also holding above the 50 day moving average, the bull camp looks to be relying on a series of technically based arguments. The bear camp probably wants to play up recent disappointment from the US number front, especially since the trade is generally expecting some unchanged to weak numbers again this morning. However, the bull camp might point to a supportive story on silver in a weekly US business publication, as a possible source of buying interest in the early Monday morning trade. The Commitments of Traders Futures and Options report as of March 9th for Silver showed Non-Commercial traders were net long 35,037 contracts, an increase of 4,147 contracts. The Non-reportable traders were net long 11,557 contracts, an increase of 760 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 46,594 contracts. This represents an increase of 4,907 contracts in the net long position held by these traders.

Crude Oil:
Crude oil has edged lower in the early overnight trade under pressure from lingering doubts about the demand outlook for oil, rising supplies from OPEC and from bearish outside market influences. A report of a bombing in Nigeria and some fresh refinery glitches seem to have lifted oil off overnight lows. But with May crude oil also suffering from an overbought technical condition, there may still be enough negatives in place to pressure the market in the short run back to test support in the $80.00 to $79.73 price range before the market makes another attempt at last week's highs. Oil has fallen back after last week's weak reading on consumer confidence shook the macro economic confidence of the bull camp. With crude oil stocks rising over the last several week, the rally in the oil markets has been purely based on expectations for fuel demand to improve this year, rather than a tightening of supplies. In fact, macro economic optimism has provided a strong lift to prices despite OPEC producing at a 14 month high as cartel member compliance has steadily slipped falling to only 56% last month. Oil has been closely following the moves in equities and part of the selling in oil this morning can be tied to the stock market under pressure from a rating agency warning about the status of US and UK sovereign debt, worries that China will become more aggressive in tightening monetary policy and concerns over US financial regulation reform. The combination of a stronger Dollar and weaker equity market trade clearly shows investor's scaling back risk at the oil market's expense. Now that last week's data has raised doubts about the pace of the economic recovery, we suspect significant downside traction in crude oil could be seen today if reports on regional manufacturing and industrial production come in below expectations. The March 9th COT report with options for crude oil clearly reflects the market's overbought technical condition with the combined fund and speculative net long reading at 203,084 contracts as of early last week leaving the market vulnerable to profit taking if support levels fail to hold. Since the economic recovery remains fragile, the rally in May crude oil clearly appears as if the market had moved ahead of its fundamental value and that will leave downside price risk in place. Based on a technical correction of the last leg up, we suspect a retracement back to $79.74 in May crude oil could be seen, especially if today's economic news and outside market influences continue provide a stronger profit taking incentive.

Natural Gas:
Natural gas edged to a fresh contract low in the early overnight action with the market's fundamental setup continuing to pressure prices lower. While a temporary technical bounce in natural gas may be seen at any time given that daily indicators have fallen to an oversold extreme, we eventually see April natural gas falling back to test the $4.00 price level or perhaps even lower. Bearish sentiment has become entrenched and the mixed bag of economic news last week gives little indication that economic conditions have improved enough to suggest industrial fuel demand will significantly recover this year. We suspect it will be difficult for the market to shake free from concerns over a hefty build up in storage supplies this spring especially with most weather forecasters predicting above normal temperatures in the Northeast and Midwest this week reducing heating demand. Last week's triple digit storage decline was likely the last for the season which still left total natural gas storage 1.2% above the 5 year average. The March 9th COT report with options also shows a bearish setup with non-commercial traders net short 78,611 contracts and non-reportable traders still 32,838 contracts net long and that setup suggests that the market may still have some capacity to trade lower while bouts of technical short covering aren't likely to hold. Today's reports on regional manufacturing and industrial production will provide some additional economic insight and may even inspire some short covering if there is a bullish surprise. Therefore, short position holders may want to have training profit stops in place. But a technical correction in natural gas isn't likely to hold since we suspect fading heating demand, rising domestic production and weak industrial fuel use will leave the fundamental outlook bearish and downside price risk in place.