Optimism to Start the Week
S&P – Despite disappointing job data, equity futures start off the week on an upbeat note on news that Washington Mutual will get a cash infusion from investors. The Fed is said not to be involved in the plan to shore up capital, which is good news for lenders, as it shows that there are private sector investors who see value for mortgage lenders and may see risks mitigating. Merrill Lynch’s comments that the credit markets may be “past their worst” added to the bullish sentiment in financial stocks. Stronger Crude Oil prices have driven energy company shares higher in the pre-market hours. Yahoo offered a stern rejection of Microsoft’s recent offer, citing declining share prices of the Redmond giant, and stood strong against the threat of a proxy fight. The technical outlook for the June e-mini S&P has improved significantly over the past two weeks. If the June contract is able to rally past resistance at 1392.50 and 1402.50, it would be a strong longer-term sign for the market. Momentum continues to move sharply higher, outpacing both price and RSI. Support comes in at 1361.50, 1351.00 and 1337.75, while resistance can be found at 1385.25, 1398.50 and 1409.00.
Dollar Index – The Dollar is slightly higher this morning after posting losses the past three sessions. The optimism from the stock index futures seems to have spilled over to the greenback. While employment data may be a black cloud over the greenback, recent signs that the economy may be improving suggest the Fed may not have to cut rates as aggressively as previously thought. Technically, the June Dollar has made some progress, rebounding from all-time lows, but failure to attack recent highs at 73.50 to this point is somewhat discouraging and could lead to further consolidation. The pattern has shifted from a possible double bottom to an equilateral triangle, which could signal a sharp breakout in either direction. Momentum has moved higher, despite the selling pressure late last week, signaling a somewhat positive near-term bias. Support comes in at 72.09, 71.82 and 71.545, while resistance can be found at 72.635, 72.91 and 73.18.
Rob Kurzatkowski, Commodity Analyst
