Stock Enthusiasm Carrying Over
S&P – Stock index futures are pointing to a higher open, sparked by yesterday’s late bargain hunting rally. Some of the panic the market has seen over recent sessions has dissipated for the time being and investors are hoping the recent actions by the Fed will help the battered financial sector recover from the subprime crisis. Yesterday’s swift turnaround was fueled by traders trying to capitalize on some suddenly cheap stocks and the technically oversold conditions. Today figures to be another volatile day for the market, although the ranges in the indexes will likely be smaller than we have seen over the past two sessions. Initial claims – scheduled for release at 7:30 CST – are forecast to show 320,000 jobless claims for the week, a rise of 19,000 over last week. Existing home sales may continue their slide after a surprising jump in November. The report at 9:00 AM CST is expected to show home sales at 4.95 million versus the November figure of 5.00 million. Given the fact that the Fed has acted as swiftly as it did, traders may not focus on today’s economic releases as intently as usual. The market may begin to move away from its “bad news is good news” approach due to the sharp rate cuts. The March e-mini S&P has improved significantly on the daily chart, but the contract would probably need to take out resistance areas at 1390 and 1420 to swing over to the bulls' favor. A recovery from technically oversold conditions on the RSI could leave the door open for further selling pressure if the market is unable to gain upside traction. Momentum has stayed relatively flat, even as the market has made tremendous recoveries over the past two sessions, indicating that the near-term bias remains in favor of the bears. Support comes in at 1320 and 1270, while resistance can be found at 1390 and 1420.
Crude Oil – Spurred by the recovery in the equity markets, Crude Oil futures are higher today after falling in five of the last six trading sessions. The move higher has been tempered by the fact that today’s EIA inventory figures are expected to show a build of roughly 1.75 million barrels of Crude Oil and expectations that gasoline inventories will rise for the eleventh straight week. Energy traders would like to see more signs of life in the U.S. economy before swinging the bias back to the bulls. Recent events on the economic front and the lack of geopolitical confrontations have sucked the air out of the Oil market. The March contract is still trading near the key support area around 86.50, and a solid close below this level could bring a new flood of selling pressure. If the market is unable to make a push above the $90 mark over the next few sessions, it would probably further embolden energy bears and force many remaining bulls out of the market. Momentum has remained flat this morning, suggesting bias remains to the downside in the near term. Support comes in at 86.50 and 85.00, while resistance can be found at 90.00 and 91.90.
Cotton – Cotton futures have rebounded in early electronic trading after the market made a limit move lower. A slowdown in the global economy may decrease import demand from China, which has been a real driver for the market. Overbought levels on both technical indicators and the COT report helped spark the sell-off, which began last Friday. Cotton was also sucked into the wave of commodity selling due to the poor state of the U.S. economy. Speculation that farmers will begin planting more Wheat to try and capitalize on the historically high prices could act as support for the Cotton market over the longer term, but traders may not be ready to accept prices above the 70.00 mark until more concrete data is released by the USDA. The inability of the March contract to hold above last July’s highs was discouraging for technicians and may have contributed to the selling pressure over the past few sessions. It is critical for prices to hold above the 66.00 mark, as a solid close below this level could signal the beginning of a downtrend. Momentum has stayed in positive territory and the RSI has come down significantly from overbought levels. Support comes in at 66.00 and 63.25, while resistance can be found at 70.00 and 72.50.
Rob Kurzatkowski, Commodity Analyst
