S&P – Stock index futures are lower this morning on credit concerns and the $1.66 billion loss posted by bond insurer Ambac. Financial stocks have suffered the bulk of the damage thus far, but Oil and mining stocks are not far behind on losses in energy and metal futures. Further adding to the bearish sentiment, Boeing, UPS and Delta have all posted disappointing earnings figures. Due to a lack of economic data being released, today's trading will be earnings focused and volume should be fairly heavy. If the petroleum inventory report comes out bearish for Oil futures, the market may be able to stave off these early losses. On the other hand, a bullish report could send the market spiraling lower by mid-session.
The June e-mini S&P chart shows some promise, hinting that the market may be prepared to test the upper end of chart congestion at 1402.50. The market has held up better than it previously had at these levels, suggesting some of the panic and paranoia over recession has dissipated and traders are now focusing on forward earnings guidance instead of current economic conditions. Momentum is showing positive divergence from RSI at the moment, which is bullish over the near term. Support comes in at 1370.75, 1060.75 and 1050.75, while resistance can be found at 1390.75, 1400.75 and 1410.75.
Euro – The Euro is lower this morning on profit-taking and comments from ECB member states voicing their displeasure in the Dollar's sharp drop. The Eurozone may be forced to raise interest rates despite the credit crisis, which would likely lead to an even stronger Euro in the near term. A strong Euro would make EU countries less competitive in the global marketplace, which could lead to a slowdown in economic activity and a significant drop in the currency down the road, similar to what has happened with the Dollar. The declines in the Dollar have been a hot topic of discussion for the EU, with some states favoring the position of a strong currency versus the greenback, while others pointing out the loss of competitiveness for member nations. The largely socialist zone already has very high labor costs, and a loss of this competitive advantage may be the straw that breaks the camel's economic back.
The June Euro chart remains bullish and has held above the 9-day moving average in early trading. The pattern has been higher highs and lows, but the momentum indicator has been moving lower since peaking in mid-March and is a lackluster +0.0082 at the moment. This indicates that the uptrend remains vulnerable to selling pressure, but no reversal pattern has appeared to signal a correction. Support comes in at 1.5848, 1.5733 and 1.5664, while resistance can be found at 1.6032, 1.6101 and 1.6216.
Crude Oil – Oil is trading slightly lower this morning on the stabilization in the U.S. Dollar and talks to head off a strike at the Grangemouth refinery. Today's EIA report is expected to show a build in Crude Oil inventories of 1.5 million barrels, but a decline of almost 2 million barrels of gasoline. The gasoline figure has been a big driver for the market over the past several weeks and a large drawdown will likely continue this trend. On the flip side, if gasoline inventories show a much smaller draw than expected or a surprise build, a profit-taking sell-off may ensue.
June Crude is signaling the possibility of a reversal from record-high prices, but technicals can largely be thrown out the window in the early going due to the EIA report. Momentum has taken a sharp turn south, outpacing the RSI indicator and price to the downside, a bearish sign. Support comes in at 116.35, 114.62 and 113.31, while resistance can be found at 119.39, 120.70 and 122.43.
Rob Kurzatkowski, Commodity Analyst