Stocks Keep Charging Back
S&P – Stock index futures are higher in overnight trading, driven by financial stocks. UBS – the EU's largest bank – is following Citigroup's lead and accepting foreign capital infusions from Singapore and the Middle East to deal with mortgage related writedowns. U.S. banks rallied on the news, as it appears that virtually every large bank is going to have at least some losses related to the lending sector. Traders now look as though they are willing to accept the losses as long as they are not worse than expectations. The market is also upbeat over the possibility that the Fed will cut rates tomorrow and the U.S. Dollar seems to finally have found some stability of late, though the Dollar Index is slightly lower this morning. The only economic data on tap today is the pending home sales figure, which is expected to show a 1.0 percent decline. December e-mini S&P's closed right on the 50-day moving average on Friday and are trading above the key average this morning. Friday's price action did produce a spinning top candlestick, which suggests a short-term negative bias. Countering this, the momentum indicator is showing bullish divergence from the RSI, suggesting a positive short-term bias. Support comes in at 1485 and 1460, while resistance can be found at 1525 and 1540.
Crude Oil – The Oil market is slightly lower this morning in very choppy trading. Like stock investors, Oil traders are looking forward to tomorrow's rate decision by the Fed because of the lack of news. While the market seems to consider a rate cut a foregone conclusion, traders will focus on the language the central bank uses to describe its economic forecast in the release. The market largely discounted lower-than-expected Crude inventory numbers last week due to higher product numbers and slowing economic growth expectations for the U.S. and U.K. The market did rally sharply on Thursday after the release, but this can at least partially be attributed to short covering and buying by small speculators. The daily January Crude Oil chart remains bearish, with the market unable to hold Thursday's move above the 50-day moving average. The sharp rally did negate what would have been a downside breakout in the market based on early trading. Momentum is showing bearish divergence from the RSI, which suggests a negative near-term bias. Support can be found at 86.00 and 84.00, while resistance comes in at 90.00 and 93.05.
Soybeans – January Soybeans continue to make new contract highs, bolstered by strong demand and lower carryout forecasts. South American growing conditions remain in focus, with dry spells in Argentina likely interfering with Soybean pod formation. Infarma lowered its crop production estimates for 2008 as a result of the poor growing weather, but it should be noted that Chinese crop estimates have been slightly raised. The strong demand for old crop Beans is likely to lead to an even smaller carryout than previously expected for the current crop year, which has really driven the January and March contracts. January Beans had a breakout on the daily chart on Friday, which could be solidified by a solid showing today. The market is swiftly approaching overbought levels on the RSI and Slow Stochastic indicators, which could inhibit upside movement. Support comes in at 1103.75 and 1090, while resistance can be found at 1125 and 1140.
Rob Kurzatkowski, Commodity Analyst
