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Analysts’ opinions mixed on tomorrow's non-farm payrolls report

Economists and traders have a relatively wide range of estimates on tomorrow's payroll figures. On the low end are those looking at yesterday's release of the ADP/Macroeconomic estimate of 97,000 new private sector jobs created in May. On the upper end, those looking at improved weather conditions and an upswing in the factory sector are calling for a payrolls figure closer to 150,000 new jobs. There is greater consensus on an unchanged unemployment rate, which currently stands at 4.5%. Average hourly earnings – a measure of wage inflation closely watched by Federal Reserve officials – are expected to show a moderate increase of 0.3% in May. Market participants will also be watching for any revisions in the March and April payroll figures. Set your alarm clocks early, as the Labor Department will be releasing the May figures at 7:30 AM Chicago time.

FCOJ futures closed the month of May sharply lower, as speculative and fund selling tied to forecasts for potential rain in the parched citrus growing region of Florida overwhelmed light trade buying. The most active July contract fell to lows not seen since April 20th, as traders report moderate sell-stops being triggered below the recent lows of 154.50. Traders report active spread trading as long-term speculative accounts begin to roll out of July and into the November contract. The next support area for July OJ is seen at 148.00, with major support found at the April 19th lows of 146.00. Resistance is found at 160.50. July Orange Juice closed at 151.40, down 6.10.

Active overnight trading keeps traders awake!

Corn: December Corn futures traded higher in early trade, as traders gear up for a possible decline in the U.S. crop ratings last week. The USDA reported 62% of the U.S. Corn crop was rated good to excellent last Monday, down 2% from the prior week. Less than expected rainfall in parts of the Corn Belt may lead to a lower crop rating in this afternoon’s report. At the close of overnight trade, December Corn was trading at $3.38 ½, up 2 cents a bushel.

S&P 500 futures: More volatility is expected in the S&P 500 futures this morning, as traders reassess last week’s 87-point sell off in the S&P futures. Since the re-opening on Sunday, September e-mini S&P futures have traded in a nearly 15-point range, with over 200,000 contracts already being traded as of 6:30 am Chicago time. With no major economic reports out today, traders will look towards corporate earnings reports and any additional news on the sub-prime loan situation to gauge their trading decisions today. In early trade, September mini-S&P 500 futures are trading at $1461.00, up 3.00.

Treasury futures:
September 10-year Note futures are trading higher in early trade, following the lead of the European Bond market, as credit spreads continue to widen. This is causing a flow of funds into the Government Bond market, as traders and investors look for a “safe haven” to park funds. September 10-year Note futures are trading at 107-200, up 0-075.

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The market gives and the market takes away!

Today on Wall Street, the Dow lost 146 points to bring the average down to 13,211. The S & P 500 dropped 18 to end the day at 1455 while the Nasdaq gave up 37 to close at 2546. Even though most of the day was spent in positive territory, the bears won the battle today with a down market on bad news from the mortgage sector.

Bonds finished the day higher in value with the 10-year note closing with a yield of 4.74%. With news from the mortgage sector pushing the market down, bonds had an “end of day” rally in the last hour of the day.

In the world of economic news, consumer confidence beat expectations coming in at 112.6. This is the highest it has been in six years. Personal spending came in right at expectations at .1% and personal income came in slightly below expectations at .4%.

In Asia, the Hang Seng was up almost 2% at 23,023 and the Nikkei was down slightly at 17,318.

Economic Data Scheduled for Wednesday, August 1, 2007

(All times are U.S. Central Time)

U.S.
9:00 AM: ISM Index (Consensus 55.5)
9:30 AM: EIA Weekly Energy Stocks (Estimate CL -700k)

Canada
None

U.K.
3:30 PM: PMI Manufacturing Index (Consensus 54.0)

European Union
3:00 AM: PMI Manufacturing Index (Consensus 54.8)

Japan
None

Crude for Thought!

Energy futures: After September Crude Oil fell just short of hitting an all-time high of $78.40 for the near-term contract yesterday, a modest profit-taking sell-off is taking place in early trade as traders square their positions ahead of this morning’s EIA weekly energy stocks report. Current estimates are for Oil stocks to have fallen by approximately 700,000 barrels last week, with refinery utilization expected to have increased by 0.7%. Gasoline stocks are expected to have risen by 1.1 million barrels, and distillates – including Heating Oil – are expected to have increased by 1.4 million barrels last week. In early trade, September Crude Oil is trading at $77.69, down $0.52.

Stock Index futures: Yesterday’s sell-off in the U.S. stock market spread overseas, with major European stock indexes down between 1 and 2 percent in early trade. Continued concerns over the subprime loan situation have stock index traders in a selling mood. After falling as low as 1442.25 overnight, S&P 500 futures are starting to come back before the day session begins. In early trade, mini-S&P 500 futures are trading at 1454.75, down 7.25.

Japanese Yen: September Japanese Yen futures rose to 3-month highs this morning, as continued risk aversion selling by large speculators is causing an unwinding of the so-called “carry trades” supporting the Yen. The Australian and New Zealand Dollars and the Euro Currency are among leading currencies taking a hit as the Yen rises. In early trade, September Japanese Yen futures are trading at .8488, up 0.0019.

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Bulls charge ahead at the close!

Today was quite the sea saw battle between the bulls and the bears in the US stock market. In the end, the bulls won today’s battle. The Dow closed the day at 13,366 gaining 154 points. The S & P ended the day 10 points on the positive side of the fence while the Nasdaq closed at 2553, up 7 points.

In the news, pending home sales came out with a surprise increase of 5% for the month of June. This could be a leading indicator of new and existing home sales for the report coming out at the end of August. The ISM index came in below expectations at 53.8. The concensus was 55.5.

Bond yields were on the rise today as the 10 year note closed the day with a yield of 4.78%.

In the overseas markets, the Nikkei closed yesterday at 16,870 (down 2.19%) and the Hang Seng closed at 24,455 (down 3.15%).

Economic Data Scheduled for Thursday, August 2, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: Initial Jobless Claims (Consensus 310K)
9:00 AM: June Factory Orders (Consensus +1.0%)

Canada
None

U.K.
6:00 AM: BOE Interest Rate Decision (Consensus 5.75%)

European Union
4:00 AM: June PPI Mom (Consensus +0.3%)
4:45 AM: ECB Interest Rate Decision

Japan
None

Stock Indexes Fly, Make Bears Cry!

Stock Index futures: Mini-S&P 500 futures are trading flat this morning after a flurry of buying hit the screen in the last 45 minutes of trading yesterday to send the index up 30 points at its peak and allow for a sharply higher close. European stock index futures are up as well, with gains of between 0.5% and just over 1% seen in afternoon trading in Europe. In early trade, September mini-S&P 500 futures are trading at 1472.00, up 2.00.

Natural Gas: September Natural Gas futures are pushing to the upside in the early going, as traders square positions ahead of this morning’s EIA storage report. Current estimates are for a 76 billion cubic feet (bcf) build in Natural Gas stocks last week. Currently, 2.763 trillion cubic feet (tcf) of Gas is in storage – a record high for this time of year. In early trade, September Natural Gas is trading at 6.395, up 0.043.

British Pound: September British Pound futures are trading slightly higher this morning after the Bank of England (BoE) voted to keep interest rates unchanged at 5.75%. Though widely expected, there is now talk that the BoE will raise rates 25 basis points at its September meeting. In early trade, September British Pound futures are trading at 2.0291, up 0.0024.

Economic reports out today: U.S. economic data is light today, as traders gear up for tomorrow’s Non-farm Payrolls report. Today’s agenda includes:

7:30 AM CDT: Initial Claims for 7/28 (consensus 310k vs. 301k prior)

9:00 AM CDT: June Factory Orders (consensus +1.0% vs. –0.5% prior)

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Two in a row!

The U.S. stock markets continued their late-day rally habits today, with all three benchmarks finishing to the upside. The Dow gained an even 100 points to finish at 13,463, while the S&P added 6 to close at 1472. The NASDAQ finished ahead 22 at 2575.

Initial Claims came in below expectations today at 307,000 versus estimates of 310,000. Factory Orders came in at .6%, well below the 1% expectation. Tomorrow will be a more active day on the economic calendar, with both Unemployment and Non-farm Payrolls set to be released.

Bonds had a relatively flat day, with the yield on the 10-year Note moving up 1 basis point from 4.76 to 4.77. The spread between the 2- and 10-Year Notes remains the same at 18 basis points.

Overseas, the Nikkei finished at 16,984 (up .67%) and the Hang Seng moved down less than .1%, closing at 22,443.

Economic Data Scheduled for Friday, August 3, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: July Non-farm payrolls (Consensus +135K)
7:30 AM: July Unemployment rate (Consensus 4.5%)
7:30 AM: July Average hourly earnings (Consensus +0.3%)
9:00AM: July ISM Non-Manufacturing Index (Consensus 59.5)

Canada
None

U.K.
3:30 AM: July Purchasing Managers Services Index (Consensus 57.4)

European Union
3:00 AM: July Purchasing Managers Services Index (Consensus 58.1)
4:00 AM: June Retail Sales MoM (Consensus +0.8%)

Japan
None

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All Eyes on Today’s Payrolls Report!

Treasury futures: September 10-year Note futures are down slightly in early trade this morning, as traders gear up for the Non-farm payroll figures for July. Estimates are for payrolls to have increased moderately with approximately 135,000 new jobs created. The unemployment rate should continue to remain steady at 4.5%, and average hourly earnings are expected to increase by 0.3%. In early trade, September 10-year Notes are trading at 107-135, down 0-015.

Stock index futures: Can we end the week on a high note? That is the question on stock index traders’ minds this morning after a wild trading week. The focus today will initially be on this morning’s jobs report, as steady job growth and moderate wage inflation are the expected outcome of today’s Labor Department report. However, concerns about the subprime loan situation will continue to garner attention. In early trade this morning, September e-mini S&P 500 futures are trading at 1479.50, down 2.25. Volume is a moderate 54,825 contracts as of 6:27 AM Chicago time.

Gold: December Gold futures look to end the week in positive territory, as moderate U.S. Dollar weakness and a continuing strike threat at three of South Africa’s biggest Gold producers is underpinning prices this morning. However, the China Gold Association announced yesterday that China’s Gold production was up 15% in the first half of 2007, producing 122.5 metric tons. In early trade, December Gold is trading at $677.00, up $0.40.

Economic reports out today:

(All times are U.S. Central Time)

7:30 AM: July Non-farm payrolls (Consensus +135K)
7:30 AM: July Unemployment rate (Consensus 4.5%)
7:30 AM: July Average hourly earnings (Consensus +0.3%)
9:00AM: July ISM Non-Manufacturing Index (Consensus 59.5)

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Crude Falls, Stocks Rebound!

Crude Oil: Follow-through selling from Friday’s weak close is keeping Crude Oil futures on the defensive in early trade. In addition, OPEC exports for July climbed by 181,000 barrels a day in July to 30.72 million barrels, according to a Dow Jones Newswire survey. Technical traders will note that September Crude Oil fell below the widely watched 20-day moving average today, which sparked further long liquidation selling. In early trade, September Crude Oil is trading at $74.06, down $1.42

S&P 500 futures: Buying emerged in the S&P 500 futures this morning, taking back some of the sharp losses from Friday after a disappointing U.S. Non-farm payrolls report. Lower Crude Oil prices and a rally in some of the major European stock indexes are helping support S&P futures this morning. In early trade, the September mini-S&P 500 futures are trading at 1453.00, up 10.00.

Soybeans: November Soybeans fell in overnight trading, as rain in Iowa and Illinois over the weekend figures to benefit the Soybean crop during its key pod-setting stage. In addition, traders will be squaring their positions this week ahead of the USDA August crop report due out on Friday. At the end of the overnight session, November Soybeans are trading at $8.46 ¾, down 14 ¼ cents.

No major U.S. economic reports scheduled today.

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FOMC Takes Center Stage!

Stock Index futures: Equity index traders may get a bit of a reprieve this morning after several days of extreme volatility, as the market gears up for the end of FOMC meeting this afternoon and the announcement on interest rates. The market expects the Fed to keep interest rates steady at 5.25%, but will be keenly interested in its statement after that decision is announced, especially in regards to how the Fed plans to handle the fear surrounding the subprime loan situation. In early trading, September S&P 500 futures are trading at 1467.00, down 0.75

Wheat: Another day, another contract high in December Wheat futures in Chicago, as surging demand due to tight world supplies has traders continuing to bid up prices. Weekly Wheat export inspections came in at 25.127 million bushels for the week ending August 2nd, well above the high end of estimates. Morocco issued a tender for 630,000 metric tons of option origin soft Wheat, which is deemed supportive to U.S. Wheat futures. Paris million Wheat futures hit another new all-time high this morning, trading as high as EUR220 a metric ton in the November contract. The U.S. Winter Wheat harvest is nearly completed, with the USDA reporting 94% harvested so far, up 6% from last week, and 3% above the five-year average. At the end of the overnight session, December Wheat was trading at $688 ½, up 5 cents a bushel.

Lean Hogs: October Lean Hog futures plunged yesterday after reaching contract highs on Friday, as traders liquidated long positions fearing a decline in wholesale pork demand while slaughter rates continue to increase. However, prices may remain volatile in the near-term, as many believe China, the world’s largest pork consumer, will need to increase its imports of pork due to a supply shortage after disease ravaged the country’s pig crop. Wholesale pork prices in China were up 44% through July due to supply shortages. October Lean Hogs closed yesterday at 75.05, down 2.55.

U.S. Economic reports for August 7th 2007

All times are U.S. Central time

7:30 AM: 2Q Advance Productivity (Consensus +2.0%)
1:15 PM: FOMC Policy Statement
2:00 PM: June Consumer Credit (Consensus $6 Billion)

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Stocks shine while traders tarnish on Treasuries!

Stock index futures rose for the third consecutive session, with S&P 500 futures hitting nearly 2-week highs as traders returned to the equities markets. September S&Ps closed up 21.10 to end the session at 1503.50, while September Dow futures closed up 157 at 13705, and September NASDAQ 100 futures ended the day up 26.00 for an even 2000.00.

Treasury futures tumbled, as flight-to-quality buying ceased and a disappointing 10-year Note auction weighted on prices. September 30-year bonds closed at 108-30, down 1-08, and September 10-year Notes closed at 106-275, down 0-225.

Economic Data Scheduled for Thursday, August 9, 2007
(All times are U.S. Central Time)

U.S.
7:30 AM: Initial Claims for week ending Aug 4th(Consensus 310,000)

Canada
7:30 AM: June New Housing Price Index YoY (Consensus 0.7%)

U.K.
3:30 AM: Total Trade Balance for June (Consensus -3.900 billion)

European Union
3:00 AM: ECB publishes monthly report (Aug)

Japan
6:50 PM: July Domestic Corporate Goods Price Index MoM (Consensus 0.6%)


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Credit Concerns Continue to Weigh on Stock Index Futures!

S&P 500 futures: S&P 500 futures are well in the red in early trade after three consecutive up days, as two large European banks reported losses in the U.S. subprime loan markets, sparking fears that credit concerns will spread to Europe. In early trade, September mini-S&P 500 futures are trading at 1488.75, down 15.25.

Natural Gas: Lead month September Natural Gas is trading moderately higher this morning, as traders gear up for the weekly EIA Gas storage report due out at 9:30 AM Chicago time. According to a Dow Jones Newswire survey, traders and analysts are expecting a build of 53 billion cubic feet (bcf) last week. Last year at this time, there was a withdrawal of 7 bcf. Current gas in storage totals 2.840 trillion cubic feet. In early trade, September Natural Gas is trading at 6.295, up 0.029.

Wheat: December Wheat futures hit another contract high in overnight trading, climbing above key resistance at $7.00 per bushel on concerns that the USDA will lower harvest estimates for European and Australian Wheat – as well as U.S. Winter Wheat production – in tomorrow’s USDA crop production and supply/demand report. Paris milling Wheat also made a new record high today, trading up 3.2% to 227 Euro per ton. At the close of the overnight session, December Wheat was trading at $7.06, up 7 ½ cents per bushel.

Economic Data Scheduled for Thursday, August 9, 2007
(All times are U.S. Central Time)

U.S.
7:30 AM
: Initial Claims for week ending Aug 4th (Consensus 310,000)

Canada
7:30 AM: June New Housing Price Index YoY (Consensus 0.7%)

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Bears take a bite out of the Dow!

The bears came to the table again today for another feast. The Dow dropped 386 points on the day for almost a 3% loss. The S&P 500 lost 44 and the NASDAQ gave up 56, while the bond markets closed higher and the Ten-year Note ended the day with a yield of 4.78%.

Subprime loans were the hot topic once again in the market. French banking group BNP Paribus suspended three funds that had exposure to US credit markets, saying it was due to the “complete evaporation of liquidity.”

Initial Claims came out today at 316,000, above the expected 310,000.

Over in Asia, the Nikkei is coming off a gain of just under 1%, while the Hang Seng lost about .5% in its last trading session. Written by Mike Tosaw, Director of Education

Economic Data Scheduled for Friday, August 10, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: Import/Export prices for July
7:30 AM: Crop Production and Supply/Demand Report
1:00 PM: Treasury Budget for July (Consensus-$33.0 billion)

Canada
6:00 AM: July Net Change in Employment (Consensus 23.5)
6:00 AM: July Unemployment Rate (Consensus 6.1%)

U.K.
None

European Union
1:45 AM: (France) June Industrial Production MoM (Consensus 0.4%)

Japan
12:00 AM: July Consumer Confidence Households (Consensus 46)


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Stock Sell-off Looks to Overshadow Major USDA Report!

Grain futures: It was a fairly quiet night in the Grain futures markets, as traders saved their strength for this morning’s USDA crop production and supply/demand report. Corn traders are looking for a moderate increase in production from the July report, with average estimates for a 12.909 billion bushel crop versus 12.840 billion in July. Soybeans are expected to also show a slight production rise to 2.653 billion bushels, up 28 million bushels from July’s report. All U.S. Wheat production is expected to decline, with average trade estimates calling for 2.129 billion bushels versus the 2.138 billion bushels in July’s report. At the close of the electronic overnight session, December Corn was trading at $3.45, down 3 1/4, November Soybeans were trading at $8.82, up 4 ½, and December Wheat was trading at $6.88 ½, down 1 ¼.

Cotton: U.S. Cotton production is expected to show a slight improvement in today’s USDA report, with average estimates calling for a 17.70 million-bale crop, up from 17.50 million bales in the July estimate. This is still well below 2006 production of 21.59 million bales, as producers switched acres from Cotton to Corn and Soybeans. In early electronic trade, December Cotton is trading at 6224, down 18.

Stock Index futures: No recovery in U.S. Stock index futures this morning, as major foreign stock indexes continue to slump, with the DAX 30 currently down 1.6%, the FTSE 100 down 3.01% and the Nikkei 225 closing down 2.37%. The European Central Bank added an additional 61.05 billion Euros ($83.6 billion) into the banking system today after yesterday’s 94.8 billion Euro injection. The Central Banks of Canada, Australia, and Japan joined the U.S. Federal Reserve in adding funds to help stem a short-term credit crunch. In early trade this morning, the September e-mini S&P 500 index was trading at 1440.00, down 18.00, while September mini-Dow futures are trading at 13185, down 142.

Mike Zarembski, Senior Commodity Analyst


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Bulls Taking the Upper Hand So Far This Morning!

Stock Index futures: After Friday’s volatile session, Stock Index futures are higher in early trade this morning, following assurances of liquidity from the Federal Reserve, European Central Bank, and Bank of Japan on Friday. European Stock indexes are higher this morning, lending some support to the U.S. market. On the economic calendar today is the release of Retail Sales figures for July at 7:30 AM Chicago time, with expectations for a rise of 0.2%, with ex-autos expected to show an increase of +0.4%. In early trade, September e-mini S&P 500 futures are trading 1461.75, up 10.75.

Copper: After falling to nearly 2-month lows on Friday, September Copper futures are showing signs of a recovery this morning, as rising demand from China, a decline in exchange stockpiles, and higher equity prices are combining to support prices. According to preliminary customs data from August 10th, Chinese Copper imports are up 49% from a year ago to stand at 1.72 million metric tons. In addition, Copper inventories in Shanghai fell by 1.7% last week, coming in at just below 90,000 mt. The London Metal Exchange reported Copper stocks fell by 200 mt this morning to stand at 114,300 mt. In early trade, September Copper is trading at 341.25, up 5.30.

Corn: Buyers continue to support Corn futures in overnight trading, as disappointing weekend rainfall amounts in parts of Iowa and Illinois have some traders concerned about potential yield losses due to the hot and dry weather. The recent rally comes despite Friday’s USDA estimates for a 13.054 billion bushel Corn crop. However, some traders are skeptical about this total given the iffy growing conditions in some parts of the Corn Belt. At the end of the overnight session, December Corn was trading at $3.54 ¼, up 3 ¾ cents.

Economic Data Scheduled for Monday, August 13, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: July Retail Sales
9:00 AM: June Business Inventories


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Early Stock Index Rally Fades as Worries Persist

U.S. Stock Index futures closed higher this afternoon, but well off the day’s highs, as traders continue to fear that the economy will show signs of slowing due to continued concerns over credit conditions and a weak U.S. housing market. September S&P 500 futures closed at 1454.60, up 3.60, and September Dow Jones futures closed at 13255, up 18. Treasury futures staged a late rally, with September Bond futures ending the session up 5/32 to settle at 109-15. Traders will be looking towards tomorrow’s PPI figures, with the consensus estimate for a 0.1% rise, and the “core” rate without food and energy prices up 0.2% in July.

Economic Data Scheduled for Tuesday, August 14, 2007

(All times are U.S. Central Time)

U.S.
7:30 AM: July PPI (Consensus 0.1%, Core 0.2%)
7:30 AM: June Trade Balance (Consensus -$61.0 billion)

Canada
None

U.K.
3:30 AM: July CPI MoM (Consensus -0.2%)

European Union
1:00 AM: (Germany) 2nd qtr GDP (Consensus 0.4%)
4:00AM: 2nd qtr GDP MoM (Consensus 0.5%)

Japan
None


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Stock Indexes Fall as Credit Crunch Continues!

Bears feasted on bulls again this afternoon, as September S&P500 futures fell by 21.10 to close at 1434.00. European indexes were also in the red, with the September DAX 30 index falling 41.50 to close at 7463.00, and the September FTSE 100 shedding 84 points to close at 6161.50. Bond futures were moderately higher, with the September contract gaining 11/32 to close at 109-26.

Traders will focus on tomorrow’s release of July’s CPI, as analysts look for a moderate rise of 0.1%, with the “core” index expected to increase by 0.2%. In addition, energy traders are expecting a nearly 2 million barrel drop in U.S. Crude stocks last week in the Energy Information Administration’s weekly energy stocks report tomorrow at 9:30 AM Chicago time.

Economic Data Scheduled for Tuesday, August 15, 2007

(All times in U.S. Central Time)

U.S.
7:30 AM: July CPI (Consensus 0.1%, Core 0.2%)
8:15 AM: July Industrial Production (Consensus 0.3%)
8:15 AM: July Capacity Utilization (Consensus 87.1%)
9:30 AM: EIA Energy Stocks report

Canada
None

U.K.
3:30 AM: Bank of England minutes

European Union
None

Japan
None


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Another Volatile Day in the Markets!

Japanese Yen: Lead-month September Japanese Yen futures soared to highs last seen in July of 2006, as a sell-off in many of the major stock markets continues to inspire a flight to “safe haven “ securities such as short term government debt and traders continue to liquidate “carry trades.” Traders will also be closely watching today’s U.S. housing starts figures for July, with expectations for a slowdown to an annualized pace of 1.4 million versus 1.467 last month. In early trade, September Japanese Yen futures were hovering at 0.8788, up 0.0199.

S&P 500 futures: No recovery in early trade for U.S. Stock Index futures, as a sell-off in major world stock markets has caused the September mini-S&P 500 contract to fall below the 1400.00 level for the lead month contract for the first time since March. The beneficiary of the flight of funds from the stock indexes appears headed to U.S. Treasuries, with the yield on the two-year note falling to a 22-month low this morning. In the early going, September S&P 500 futures are trading at 1393.75, down 20.75.

Crude Oil: Lead month September Crude Oil gave back all of yesterday’s gains and then some in early trade, as fears of a global economic slowdown tied to falling equity markets caused fresh selling in the Crude market. This comes despite yesterday’s weekly EIA report showing U.S. Crude inventories falling by a larger-than-expected 5.17 million barrels last week. However, traders will be watching the track of Hurricane Dean, which is located about 500 miles east of Barbados early this morning. Though it is still too early to tell if the refinery operations along the U.S. Gulf Coast will be affected by this storm, traders are preparing for increased volatility in the Crude market going into the weekend. In early trade, September Crude Oil stands at $71.46, down $1.87.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Thursday, August 16, 2007

(All times in U.S. Central Time)

U.S.
7:30 AM: July Housing Starts (Consensus 1.405 million)
7:30 AM: July Building Permits (Consensus 1.400 million)
7:30 AM: Initial Claims for week ending 8/11 (Consensus 315,000)
11:00 AM: Philadelphia Fed for August (Consensus 8.0)


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Commodities Crash, But For How Long?

It was hard to find much green on the commodity quote boards today as liquidation selling pummeled nearly every commodity sector. Some of the highlights (or lowlights): December Cotton closed down the 300-point limit, September Lumber was down 9.50, November Soybeans were down 40 cents, December Gold was down $21.40, October Live Cattle was down 2.07, September Crude Oil dropped $2.33, and the list went on an on. The continuing shakeout from the credit crisis has spurred a flight to liquidity, with traders and investors looking to seek refuge in short-term government debt. Fundamentals were largely ignored in many markets, as forced liquidation of positions took center stage with margin calls looming. However, as of 2:46 PM Chicago time, the S&P 500 futures have staged a bit of a rally, and if they can finish unchanged or higher, we may see a different outcome in the commodity markets tomorrow.

Soybean futures were hit hardest in the grain complex sell-off this afternoon, with the most-active November contract falling the 50-cent limit at one point in the session to its lowest levels since mid-May. The entire commodity complex had been under pressure today due to the continued rush for liquidity in the wake of recent financial turmoil. Also weighing on the Soybean products was the improved chances for rainfall in the Midwest, including previously parched sections of the region. U.S. weekly Soybean exports came in at 313,300 metric tons for the week ending August 9th, with 236,000 mt for the 2006-07 marketing year. Soy products were not immune from the sell-off, as December Bean Oil posted triple-digit losses on the back of sharply lower Crude and Malaysian Palm Oil futures, and December Soy Meal broke through near-term resistance at the 20- and 100-day moving averages. The next support point for November Soybeans is seen at the psychologically important $8.00 level, with resistance found at the 100-day moving average of $8.34. November Soybeans closed at $8.14 ½, down 40 cents.


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Volatile Trade to End the Week!

Energy futures: After yesterday’s sharp sell-off in the energy complex and most other commodity markets, there’s been a bit of a recovery this morning as Crude Oil and energy product futures are trading moderately higher to start the day. Traders are beginning to focus on Hurricane Dean, which moved past the islands of St. Lucia and Martinique this morning as a category 2 hurricane. The current path has Dean moving west and possibly into the Gulf of Mexico, where a large potion of U.S. Oil and Gas production is located. In early trading, September Crude Oil is trading at $71.69, up $0.69 and September RBOB Gasoline is trading at $2.0201, up $0.0021

Nikkei 225 futures: Japan’s leading stock index future couldn’t find support from the late recovery in the U.S index futures markets, as a soaring Yen had traders fearing Japanese exports would be hurt. This caused the index to hit lows not seen in just over a year. In early going at the CME, September Nikkei futures were trading at 15395, down 555.

U.S. Stock Index futures: Yesterday’s dramatic late rally in the major U.S. indexes failed to support prices in early trade this morning, as spillover from a weak finish in Japan and continued fears that the worst of the credit crunch may not be behind us have put sellers back in control so far. Economic releases will be light today, with the
preliminary University of Michigan consumer sentiment survey for August on tap. In early trade, September e-mini S&P 500 futures are at 1412.25, down 12.25, and September mini-Dow futures stand at 12827, down 117.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Friday, August 17, 2007

(All times in U.S. Central Time)

U.S.
9:00 AM: University of Michigan Sentiment Index (Consensus 88.5)
2:00 PM: Cattle on Feed

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Traders Getting “Energized” for Today’s EIA Report!

Energy futures: After briefly falling below $69 on Tuesday, analysts will be watching for a rebound in Oil prices after this morning’s weekly EIA energy stocks report. Traders are anticipating between a 2.5 million and 3 million barrel decline in Crude stock last week, with the continued backwardation of Oil futures prices discouraging the storing of Oil. Gasoline stocks are expected to fall by between 600,000 and 800,000 barrels and Distillates – including Heating Oil – are expected to show a build of 800,000 barrels last week. In early trade, October Crude Oil is at $69.84, up $0.27, October RBOB Gasoline is at $1.8312, up $0.0135, and October Heating Oil is at $1.9770, up $0.0070.

Canadian Dollar: Fears that tightening credit concerns worldwide will force the Bank of Canada to change course and lower interest rates at its September 5th meeting have hurt the Canadian Dollar. With rates currently at 4.5%, the market initially was looking for one or perhaps two more rate hikes by the end of 2007, with inflation standing as the Bank’s top priority. However, in light of the recent credit crunch that view has changed, and short-term Canadian interest rate futures are now pricing in rate cuts by the end of the year. However, continued belief that the U.S. Federal Reserve will cut interest rates at its September 18 meeting has put a bid into the “loonie” this morning. In early trade, the September Canadian Dollar is sitting at 0.9456, up 0.0054.

Stock Indexes: Higher Stock Index futures in Europe are spilling over to the U.S. market, as traders believe the Federal Reserve will lower rates to help stem the credit crisis and keep the U.S. economy on track. This comes after yesterday’s meeting with Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and Senate Banking Committee Chairman Christopher Dodd, in which Dodd was quoted as saying that Bernanke agreed to use “all of the tools at his disposal'' to help stabilize the financial markets. Many analysts believe this includes lowering the Fed Funds rate at the Fed’s upcoming September 18th meeting. In early trade, September e-mini S&P500 futures are at 1460.75, up 10.50, and September Dow Jones futures are at 13191, up 74.

Mike Zarembski, Senior Commodity Analyst


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Bulls and Bears Call a Ceasefire

US stocks were relatively flat today, as both the Dow and the S&P 500 finished down just one point, while the NASDAQ lost 11 on the day. Over in the bond market, the yield on a 10-year Note fell to 4.63%.

Initial Claims came in slightly above expectations this week at 322,000 versus a consensus expectation of 320,000. Tomorrow, traders will be waiting to see what the New Home Sales numbers are going to be. Although the discount rate cut will not be factored into the number (positive or negative), it will interesting to see if we get a break in the bad news from the housing sector or continued downward momentum.

In the Asian markets, the Nikkei finished ahead 2.6% and the Hang Seng ended its last trading session 2.7% to the upside.

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Are New Home Sales Going to Surprise?

Treasuries: Traders will be watching the Bonds today with New Home Sales set to be announced at 9:00 AM Chicago time. With the expectation at 825,000, we will see if there is a rush to Bonds after the announcement, business as usual, or reason to get out of the Treasuries. Last month’s Housing Starts number did give an indication that we may get some good news today in the housing market, but building permit numbers were down from expectations a month earlier. In the early going, the 10-year Note is trading higher.

S&P e-mini: The S&P 500 is just coming off of its starting point for 2007. Although we did dip into negative territory for a while last week, the stock market has since gained some ground back to the positive side. The S&P never quite hit its lows for the year from back in March, but it did come close. Traders will be watching to see whether the market will consider where we have been support, or will it test the yearly lows from March? The S&P e-mini contract was trading down 3 points at 6:00 AM Chicago time.

Coffee: Coffee is holding its own of late. It could have continued to drop earlier in the summer, but instead managed to hold on around the 110-115 mark, and has remained more or less range-bound between 110-120 for the summer. Are we seeing a bottom forming or is Coffee due for a breakout to the downside in the next few weeks? In early trade, Coffee was slightly higher this morning.


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Come On-A My House

S&P 500 futures closed higher today at 1468, primarily on good news from the economic calendar. New Home Sales came in at 870,000 versus expectations of 820,000, while Durable Orders increased 5.9%, well above the expected 1%. Monday’s Existing Home Sales number will also play a part in what the market does next week. With all of the bad press that the subprime market has been generating lately, today’s news gave bulls a reason to get out on the floor and dance.

On the charts, the S&P 500 was above the 1500 level briefly on August 8th, and as of today’s close we are 20 points away from that mark again. The previous flirtation with this level created a resistance point, so bulls will need some momentum to stage a true rally and send the S&P back over 1500.

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LME Stocks Increase, Copper Retreats!

Copper: Lead month September Copper fell sharply in early trade, as exchange warehouse stocks increased sharply this morning. The London Metal Exchange (LME) announced that Copper stocks increased by 10,075 metric tons to stand at 135,625 mt. In addition, a large increase of Nickel stocks on the LME was also weighing on the base metals complex. In early trade, September Copper was trading at 327.30, down 7.65.

Wheat: Chicago December Wheat fell just short of a new record high in overnight trade, as traders look for a continuation of the strong demand for U.S. Wheat while the weather plays havoc with growing conditions worldwide. Major Wheat exporters such as Canada, Ukraine, France and Australia have had production problems thanks to unpredictable weather this year. This morning, Egypt is looking to buy 60,000 mt of Wheat and Bangladesh plans to import 50,000 mt. At the end of overnight trade, December Wheat was at 748 ¾, up 10 ¾ cents.

Stock Index futures: Weakness in several European and Asian markets this morning is spilling over into U.S. trading, with e-mini S&P 500 futures trading in the red. This morning’s report on consumer confidence for August is expected to show a decline from the 112.6 reading in July. The Conference Board will release the figures at 9:00 AM Chicago time. In early trade, September e-mini S&P 500 futures are trading at 1463.00, down 6.75.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Tuesday, August 28, 2007

(All times in U.S. Central Time)

U.S.
9:00 AM: Consumer Confidence for August (Consensus 104.5)
1:00 PM: FOMC minutes from August 7th meeting


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Consumers Not So Confident – Stocks Fall!

Stock Index futures fell sharply this afternoon, as the Conference Board reported consumer confidence fell sharply in August to 105.0 after posting a 111.9 in July. In addition, S&P/Case-Shiller reported property values in 20 metro areas fell by 3.5% in June from year-ago levels. Stock Index traders did not react kindly to this news, sending the September e-mini futures down by 31.50 points to stand at 1438.25. September NASDAQ 100 futures closed down 42.75 to end the session at 1907.75.

Treasury Futures finished on the upside, with the September 30-year Bond closing at 111-20, up 0-09, and the September 10-year Notes settling at 109-160, up 0-210.

Economic Data Scheduled for Wednesday, August 29, 2007

(All times in U.S. Central Time)

U.S.
9:30 AM: Weekly EIA Energy Stocks Report

Great Britain
None

Canada
None

European Union
1:10 AM:(Germany) Gfk Consumer Confidence Survey (Consensus 8.5)

Japan
6:50 PM: Retail Trade MoM for July (Consensus -1.1%)

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Wild, Wild Wheat Trade Overnight!

Wheat: Chicago Wheat futures traders have had an exciting morning so far, with a surge in the last 90 minutes of the overnight session sending prices for the December contract to an new all-time high of $783 ½. Though no specific news seems to be responsible for the move, traders remain nervous over world Wheat ending stocks, with the Australian Wheat crop now forecasted to be in the 20 to 22 million metric tone range. However, rainfall has been light again this season, and many traders fear that this estimate may be overly optimistic once the harvest begins. Iraq has issued a tender to buy 50,000 of Hard Wheat this morning. At the end of the overnight session, December Wheat was trading at $7.81 ½, up 23 cents.

Stock Index Futures: The roller coaster ride for index traders continued this morning, as September e-mini S&P 500 futures gave back a portion of yesterday’s 27.25 point gain ahead of this morning’s release of the next preliminary estimate of 2nd quarter U.S. GDP. Expectations are for an increase to 4.1% versus the previous estimate of 3.4% growth rate, due mostly to a narrower-than-expected trade gap in June. In early trade, September e-mini S&P 500 futures were trading at 1457.75, down 7.75.

Dollar Index: September Dollar index futures were strong in early morning trade, as the seven major CME currency futures were all trading in the red after the Bank of England announced that it loaned 1.6 billion pounds at the penalty rate of 6.75 %. This news continued to stoke fears that the recent credit crunch is far from resolved, sending currency traders to safe haven buying of the U.S. Dollar. In early trade, September Dollar Index futures were trading at 80.96, up 0.32.

Mike Zarembski, Senior Commodity Analyst

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Stock Indexes Higher as President Attempts to Help Subprime Mortgage Holders

Stock Index Futures: Sharp gains are seen in U.S. Stock Index futures market this morning, as President George Bush will announce a plan to help subprime mortgage holders. It is believed the President will allow the Federal Housing Administration to guarantee loans for borrowers who are delinquent, which should help to avoid foreclosure and even allow refinancing of the loans at more favorable terms. Index traders are reacting positively to the news, as it should help ease the recent credit crunch brought on by the subprime loan situation. In early trade, September e-mini S&P 500 futures were trading at 1477.75, up 16.25.

Treasury futures: President Bush’s plan to help subprime mortgage holders is doing no favors for Treasury bulls, as traders start to price in a reduced chance of multiple Federal Reserve interest rate cuts. The short end of the yield curve has been particularly hard hit this morning, with December 2-year Note futures trading lower by 0-0850, at 102-3150.

Wheat: The historic $8 per bushel level didn’t put up much of a fight in overnight trade, as Chicago Wheat prices stormed to another new all-time high price of $8.07 ¾ for the December contract. With below-average production from most of the world’s leading Wheat exporters, world Wheat ending stocks are expected to be at 26-year lows for the 2007-08 marketing year. Now traders are starting to fear that dry conditions in Australia and Argentina – both among the Southern Hemisphere’s leading Wheat producers – will cut yields there as well. India’s State Trading Corporation is tendering for a large amount of Wheat, with some analysts believing India may be in the market for as much as 700,000 tons. Paris million Wheat futures also made new-all time highs this morning, rising by 7% to 272 Euro per ton. At the end of the overnight session, December Chicago Wheat was trading at $8.05 ¼, up 20 ¾ cents.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Friday, August 31, 2007

(All times in U.S. Central Time)

U.S.
7:30 AM: Personal Income for July (Consensus 0.3%)
7:30 AM: Personal Spending for July (Consensus 0.3%)
7:30 AM: Core PCE Inflation for July (Consensus 0.2%)
8:45 AM: Chicago PMI for August (Consensus 53.0)
9:00 AM: Factory Orders for July (Consensus 3.0%)
9:00 AM: University of Michigan Consumer Sentiment for August (Consensus 83.0)


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Gold Can't Hold Above $690!

Gold: After trading at 5 ½ week highs and moving above the key $690 level yesterday, profit-taking selling has emerged in early Gold trade this morning, with weakness in European and Asian stock markets and a stronger U.S. Dollar index giving traders a reason to lighten up on long positions. Currently, December Gold is trading at $688.90, down $2.60

British Pound: Consumer confidence levels fell to 4-month lows this morning, as the Nationwide Building Society’s index of sentiment fell to a reading of 94 – its lowest level since April. The spending index bottomed out for the year, dropping 7 points to a reading of 79. This sent September British Pound futures lower, as traders believe the Bank of England will keep interest rates steady tomorrow. In early trade, September British Pound futures are trading at 2.0102, down 0.0039.

S&P 500 futures: September e-mini S&P 500 futures are giving back most of yesterday’s gains in early trade this morning, as traders fear recent upheaval in the credit markets will hurt earnings in the 3rd quarter. Also hurting stock futures was the forecast from the Organization for Economic Cooperation and Development lowering its 2007 growth estimate for the U.S. to 1.9%, down 0.2% from the previous forecast. In early trade, September e-mini S&P 500 futures were trading at 1479.50, down 10.00.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Tuesday, September 5, 2007
(All times in U.S. Central Time)
U.S.
9:00 AM: Pending Home Sales for July
1:00 PM: Fed Beige Book

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U.S. Housing Slump Continues, Dragging Stocks Lower

A disappointing Pending Home Sales report and fears that Friday’s payrolls report will show sluggish jobs growth weighed on stock indexes today, with the S&P 500 losing 17.13 and the Dow Jones falling by 143.55.

Treasuries were the biggest benefactor of today’s stocks slump, with the Ten-year Note yielding 4.47% and the Two-year Note yielding 4.02%. Traders will be focusing on Friday’s Non-farm Payrolls report for August, with expectations of an increase of 110,000 jobs. The unemployment rate is expected to remain steady at 4.6%

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Thursday, September 6, 2007
(All times in U.S. Central Time)

U.S.

7:30 AM: Initial claims wk-9/1 (Consensus 330k)
7:30 AM: 2nd qtr Productivity revised (Consensus 2.4%)
9:00 AM: ISM Services for August (Consensus 54.5)
9:30 AM: EIA Energy Inventories

Great Britain

3:30 AM: Industrial Production for July (MoM) (Consensus 0.2%)
6:00 AM: Bank of England interest rate decision

Canada

7:30 AM: Building Permits (MoM) (Consensus -1.5%)

European Union

5:00 AM: (Germany) Factory Orders for July (Consensus -2.5%)
5:45 AM: ECB interest rate decision

Japan

None

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Subdued Trade Ahead of NFP

Stock indexes posted modest gains this afternoon as traders gear up for tomorrow’s Non-farm Payrolls report for August. The consensus is for payrolls to have increased by 110,000 jobs last month, but some analysts are looking for a lower figure in light of layoffs in the mortgage industry following the subprime loan fallout. The unemployment rate is expected to remain steady at 4.6%.

Treasury futures were lower to close afternoon trade, with December Ten-year Note futures falling by 0-070 to close at 109-160, and December Two-year Note futures ending the session at 103-0875, down 0-0275.

Economic Data Scheduled for Friday, September 7, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: Non-farm Payrolls for August (Consensus 110,000)
7:30 AM: Unemployment Rate for August (Consensus 4.6%)
7:30 AM: Average Hourly Earnings for August (Consensus 0.3%)
9:00 AM: Wholesale Inventories for July (Consensus 0.5%)

Great Britain
None

Canada
6:00 AM: Unemployment Rate for August (Consensus 6.1%)

European Union
1:00 AM: (Germany) Trade Balance for July (Consensus 15.6 billion)
5:00 AM: (Germany) Industrial Production for July (MoM) (Consensus 0.9%)

Japan
12:00 AM: Leading Economic Index for July (Consensus 70.0)

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Financial Markets Await This Morning’s NFP Report

Stock Index Futures: September e-mini S&P 500 futures are lower in early morning trade, as traders gear up for this morning’s release of the August U.S. jobs report. Job growth is expected to show a slight rise from July, despite the recent U.S. housing slump and credit crunch. The majority of estimates range from between 90,000 and 110,000 new jobs created in August versus 92,000 in July. Meanwhile, the unemployment rate is expected to remain at 4.6%. The Labor Department will release the data at 7:30 AM Chicago time. In early trade, September e-mini S&P 500 futures are trading at 1474.25, down 5.25.

Treasury Futures: Financial traders also await this morning’s NFP report. A weaker-than-expected increase in jobs last month just might be the final key to unlock the Federal Reserve’s tightening bias and convince Fed Governors that the markets are correct in their assessment that a rate cut is necessary at the September 18th meeting. In quiet early morning trade, the December Ten-year Note is trading at 109-180, up 0-020, and the December Two-year Note is trading at 103-0700, down 0-0175.

Gold: The yellow metal rose to highs not seen since mid-2006, as investors and traders are now starting to return to Gold as a “safe haven” investment in the wake of increased volatility in the stock and bond markets due to turmoil in the credit markets. In addition, the belief that the Fed will cut interest rates by at least 25 basis points this month could hurt the U.S. Dollar, but would benefit Gold. In early trade, December Gold is trading at $706.60, up $2.00.


Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Friday, September 7, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: Non-farm Payrolls for August (Consensus 110,000)
7:30 AM: Unemployment Rate for August (Consensus 4.6%)
7:30 AM: Average Hourly Earnings for August (Consensus 0.3%)
9:00 AM: Wholesale Inventories for July (Consensus 0.5%)

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August Jobs Data Sends Shockwaves Through the Financial Markets!

What a way to end a holiday-shortened week, as traders brush off the “unofficial” end of summer and face a shockingly weak Non-farm Payrolls report for August. This morning the Labor Department reported that payrolls for August fell by 4,000 jobs versus pre-report expectations of a rise of between 90,000 and 110,000 jobs. As if that were not enough to send shivers through Fed officials, job creation figures for July were also revised down from the 92,000 originally reported to only 68,000, and June payrolls were lowered from 126,000 jobs to just 69,000. Once again, manufacturing jobs suffered, falling by 46,000 jobs last month – the sharpest drop in over 4 years. The slump in the U.S. housing market is starting to take its toll on the labor market as well, with the construction sector shedding 22,000 jobs. Not even government could help the labor market, as public sector jobs fell by 28,000. Service sector hiring was one of the few bright spots in today’s numbers, posting a fairly modest 60,000 jobs gain. The unemployment rate held steady at 4.6%, and average hourly earnings met expectations, rising by 0.3%.

Short-term interest rate futures were the biggest gainers on today’s news, with December Fed Funds futures pricing in a 4.25% Fed Funds rate by end of the year and a 50% chance that rates could be cut to 4%. The Fed Funds rate currently stands at 5.25%. The long end of the yield curve was also in a bullish mode, with December 30-year Bonds moving up by over one full point at the day’s peak. Stock indexes were down sharply across the board, with the Russell 2000 and S&P 400 mid-cap futures among the hardest hit. The U.S. Dollar plunged as traders continued to price in further interest rate cuts by the Fed, especially against the Japanese Yen and the Swiss Franc. So called “carry trades” were being unwound, with the Aussie/Yen and Kiwi/Yen combos bearing the brunt of the punishment. The metals complex had mixed messages for traders, with the precious metals – especially Gold – performing well, as investors move some assets over as a hedge against the volatile stock and bond market activity seen during the past few weeks. Meanwhile, base metals were weaker, with Copper falling moderately on concerns that a slowdown in the U.S. economy may turn into a recession that would adversely affect industrial activity. Today’s figures put an even bigger spotlight on the Fed’s next meeting scheduled for September 18th, as traders and economists look at not only what the Fed will do with interest rates, but how it views the overall health of the U.S. economy given recent economic data and events.

Mike Zarembski, Senior Commodity Analyst

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A Day on the Treadmill

Both bulls and bears left the party early today as the markets went for a great ride, but without much to show for it in the end. The Dow ended the day 9 points in positive territory, while the S&P closed down 2 points and the NASDAQ lost 6. Bonds continued their rally today with another gain, as the 10-year Note closed with a yield of 4.75% and the 30-year Note ended at 5%.

There wasn’t much news to start the trading week, which may help explain the relatively flat close. Traders seem to be reserving most of their expectations for the upcoming Federal Reserve meeting a week from tomorrow, when many assume the Fed will lower rates. However, this is a rate cut that may already be priced into the market, meaning it may not help as much as people think. Later this week, we look forward to Initial Claims and Retail Sales figures.

Overseas, the Nikkei dropped 2.22% and the Hang Seng was flat in the last trading session.

Mike Tosaw, Director of Education

Economic Data Scheduled for Tuesday, September 11, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: Trade Balance for July (Consensus -59.0 billion)

Great Britain
3:30 AM: Total Trade Balance for July (Consensus -37.0 billion)

Canada
7:30 AM: New Housing Prices for July (YoY) (Previous 7.8%)

European Union
None

Japan
6:50 PM: Current Accounts for August (Consensus 1900 billion)

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Bulls Strike First This Week

US stock markets staged a big rally today, with the Dow adding 180 points, the S&P gaining 19, and the NASDAQ closing 38 points in the green. Although there were no big news announcements on the economic calendar (Trade Balance came in close to expectations), the market rallied nonetheless.

Bond yields were down again today, with the 10-year Note finishing at 4.36%. The big talk once again for both stocks and bonds is the magical date of September 18th when the Fed meets to discuss interest rates and the overall health of the U.S. economy.

Overseas, the Nikkei added .71% while the Hang Seng lost .2%.

Mike Tosaw, Director of Education

Economic Data Scheduled for Wednesday, September 12, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: USDA Crop Production and Supply/Demand Report
9:30 AM: EIA Energy Stocks Report

Great Britain
3:30 AM: Average Earnings Excluding Bonus for July (Consensus 3.5%)

Canada
None

European Union
4:00 AM: Industrial Production for July (MoM) (Consensus 0.2%)

Japan
12:00 AM: Household Consumer Confidence for August (Consensus 44.0)

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Bulls and Bears Remain Wallflowers at Today’s Dance

There wasn’t a lot of news in the U.S. markets today, and in the end there wasn’t a whole lot of movement either. The Dow came out ahead by 16 points, the S&P finished up a fraction of a point, and the NASDAQ lost 5 on the day. Crude Oil drew much of the attention today with a 1.8% increase, actually going above the $80 per barrel level for a time.

The bond markets finished ahead on the day, with the 10-year Note closing with a 4.4% yield, while the 30-year Bond ended the day at 4.68%. The Federal Reserve meeting next Tuesday continues to be the focal point for forward-looking traders.

In Asia, the Nikkei closed down .5% and the Hang Seng finished its last session ahead by 1.5%.

Mike Tosaw, Director of Education

Economic Data Scheduled for Thursday, September 13, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: Initial Jobless Claims for wk ending Sept. 8th (Consensus 325K)
1:00 PM: Treasury Budget (Consensus -85.0 Billion)

Great Britain
None

Canada
None

European Union
None

Japan
None

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Credit Fears Crunched!

Equity futures rose in the U.S. and Europe this afternoon on speculation that the recent worldwide credit crunch may be nearing an end. The Federal Reserve announced that the U.S. commercial paper market improved somewhat last week, bolstering investors’ confidence. The U.S. Dollar rose versus the Euro and Yen and U.S. Treasury futures declined, as flight-to-quality buying ebbed.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Friday, September 14, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: Retail Sales for August (Consensus 0.5%)
8:15 AM: Industrial Production for August (Consensus 0.3%)
8:15 AM: Capacity Utilization for August (Consensus 82.0%)
9:00 AM: Business Inventories for July (Consensus 0.3%)
9:00 AM: University of Michigan Sentiment Index for September (Consensus 83.5)

Great Britain
None

Canada
None

European Union
1:00 AM: Consumer Price Index for August (MoM) (Consensus 0.1%)
1:00 AM: (Germany) Consumer Price Index for August (MoM) (Consensus-0.1%)

Japan
None

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Bears Don’t Like Cold Beans!

Soybeans: Freezing temperatures in parts of the northern Midwest over the weekend have bean traders buzzing, as concerns mount that crop damage may have occurred in parts of Iowa, Minnesota, and Wisconsin. This news helped send November Soybeans to highs not seen in three years, with prices moving closer to the psychologically important $10 per bushel level. At the end of the overnight session, November Soybeans are trading at $9.71 ¼, up 16 ½ cents.

Stock Index futures: U.S. equity index futures have started the week on a down note following losses in Europe, as a major U.K. mortgage lender, Northern Rock Plc, fell to seven-year lows after customers continued to withdraw savings following a bailout by the Bank of England last week. This has sparked fears that the recent credit crunch has not been resolved and may spread throughout the world. In early trade, December S&P 500 futures are trading at 1476.00, down 9.00.

Coffee: Following a move to 9-year highs by the Robusta contract in London, Arabica Coffee futures in New York rose to one-month highs in early trade, as traders fear tight supplies ahead of the harvest in Vietnam – the world’s largest producer of Robusta Coffee – starting in November. High Robusta prices have caused some Coffee roasters to switch to using more Arabica beans in their blends. In early trade, December Coffee is trading at 122.75, up 1.85.

Mike Zarembski, Senior Commodity Analyst

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The Waiting is the Hardest Part

The markets went down today – not by a lot, mind you, but they still closed lower than when they started, as the Dow lost 39, the S&P dropped 7, and the NASDAQ gave up 20. On a day when meaningful news was in short supply, the bears modestly won the battle.

Over in the bond pits, yields decreased, with the 10-year Note finishing the day with a 4.48% yield. The 30-year Bond closed with a 4.72% yield, while the 2-year ended with a 4.08% rate.

PPI would normally be the tomorrow’s marquee release, but most traders on this particular Tuesday will be devoting more attention to the Federal Reserve meeting. Current debate is vacillating between a .25% and a .5% rate cut – if the Fed happens to either pause or even raise rates, it will come as a huge surprise to the markets.

Overseas, the Nikkei added 1.94% and the Hang Seng lost 1.2% in their last respective trading sessions.

Mike Tosaw, Director of Education

Economic Data Scheduled for Tuesday, September 18, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: PPI for August (Consensus -0.3%. Core 0.1%)
8:00 AM: Net Foreign Purchases for July (Prior 120.9 Billion)
1:15 PM: FOMC Policy Statement

Great Britain
3:30 AM: Consumer Price Index for August (Consensus 0.4%)
3:30 AM: Retail Price Index for August (Consensus 0.5%)

Canada
None

European Union
4:00 AM: (Germany) ZEW Survey-Economic Sentiment (Sep) (Consensus-17.0)

Japan
None

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All’s Quiet Before the Fed Meets

Stock Index futures: Indexes in both Europe and the U.S. are little changed from yesterday’s close, as traders await what might be one of the most widely anticipated FOMC meetings in years. The slump in the U.S. housing market coupled with the recent liquidity crisis looks to have forced the Fed’s hand into lowering the Fed Funds rate by 25 basis points, according to survey of economists by Bloomberg News. However, the statement released after the rate announcement will be closely analyzed by the markets for any signs that further rate cuts are down the line, or if the Fed hopes to jawbone the market into believing it is ready to tackle further weakness in the economy if necessary without losing its grip on controlling inflation. In early trade, the December e-mini S&P 500 futures are trading at 1478.75, up 1.75.

Wheat: Chicago Wheat futures continue to rebound from last week’s sharp price correction after hitting all-time highs on Wednesday. The Australian Bureau of Agricultural and Resources Economics lowered its estimate for the country’s Wheat production to 15.5 million metric tons – down sharply from its previous estimate of 22.5 million tons. Australia is the third largest Wheat exporter behind the U.S. and Canada. South Korea bought 47,700 metric tons of U.S. Wheat today, with Taiwan and Japan also expected to tender for U.S. Wheat this week. Both Pakistan and Turkey may each need to import up to 1 million metric tons of Wheat this season to help replenish stockpiles. At the end of the overnight session, December Wheat is trading at $8.87, up 12 cents.

Crude Oil: Lead month October Crude Oil rose above $81 per barrel in overnight trade, as traders anticipate another drawdown in U.S. Crude inventories last week with rising demand continuing to overwhelm supplies. In tomorrow’s EIA energy stocks report, traders are anticipating another 2 million barrel draw in Oil stocks, which will be the 10th drawdown in 11 weeks should it come to pass. In early trade, October Crude Oil is trading at $80.91, up $0.34.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Tuesday, September 18, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: PPI for August (Consensus -0.3%. Core 0.1%)
8:00 AM: Net Foreign Purchases for July (Prior 120.9 Billion)
1:15 PM: FOMC Policy Statement

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Fed Ignites Futures Traders With Surprising 50 Basis Point Rate Cut!

It was a wild afternoon for futures traders, especially after the Federal Reserve surprised some traders by lowering the Fed Funds rate by an aggressive 50 basis points to 4.75%. The FOMC vote was a unanimous 10-0 for the rate cut. The Fed also lowered the Discount Rate by 50 basis points to 5.25% – the second such cut in a month’s time. The news sparked an aggressive rally in Stock Index futures, with e-mini S&P 500 futures up well over 30 points at the peak. Bulls were also stampeding over to the metals sector, with December Gold trading over $730 per ounce, and December Silver leaping by nearly 25 cents. The energy complex was also sharply higher, with October Crude Oil futures moving above the $82.00 level for the first time. However, the cut was bad news for the U.S. Dollar, with the December Dollar index falling over 50 ticks at one point, as traders punished the greenback and the Japanese Yen. Long-term interest rate futures also posted sharp losses this afternoon. Traders now expect further interest rate cuts are in the offing, with March 2008 Eurodollar futures pricing in a 100% chance of a 4.5% Fed Funds rate by the first quarter of 2008, and an 88% chance of a 4.25% rate.

Mike Zarembski, Senior Commodity Analyst

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Fed Fuels Futures Markets, But Will Inflation Follow?

Stock Index futures: Equity index bulls continue to celebrate into the early morning trade, after the Federal Reserve started the party rolling by cutting the Fed Funds and Discount rates by 50 basis points each. This sparked a tremendous rally in the stock indexes, as traders believe that the rate cuts will be enough to stimulate growth in the U.S. despite the recent housing slump. Traders will now turn their focus to this morning’s economic reports, with the Labor Department scheduled to release its report on consumer prices in August. Traders are looking for no change in the headline figure, but a moderate 0.2% rise in the so-called “core” rate, which excludes food and energy prices. Also out this morning is the report on housing starts and building permits for August, with economists expecting a decrease in housing starts to an annual rate of 1.35 million, which would be the lowest number in twelve years. In early trade, December e-mini S&P 500 futures are trading at 1540.00, up 7.00

Crude Oil: October Crude Oil futures continue to hover above $82 a barrel in early morning trade, as yesterday’s surprisingly aggressive Federal Reserve rate cut is expected to help stimulate the U.S. economy and keep energy consumption strong. Traders also are looking for another decline in Crude Oil inventories last week in today’s EIA energy stocks report – current estimates are for a decline of between 1.5 and 2 million barrels. In early trade, October Crude Oil is trading at $82.14, up $0.63.

Ten-year Note futures: Medium- and long-term Treasury futures are moderately lower in early morning trade, as traders start to sell longer-term government debt after yesterday’s Fed rate cut generates concern that inflation will start to heat up. One need only look at the continued weakness in the U.S. Dollar and soaring Gold and Crude Oil prices to see the market pricing in accelerating inflation expectations. Cash yields on the Ten-year Note rose by 5 basis points to 4.52% this morning in London. In early morning trade, December Ten-year Notes were trading at 109-225, down 0-050.

Mike Zarembski, Senior Commodity Analyst

Economic Data Scheduled for Wednesday, September 19, 2007
(All times in U.S. Central Time)

U.S.
7:30 AM: CPI for August (Consensus 0.0%. Core 0.2%)
7:30 AM: Housing Starts for August (Consensus 1345K)
7:30 AM: Building Permits for August (Consensus 1350k)
9:30 AM: EIA weekly Energy Stocks Report – week ending 9/14

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Oil’s Well for Crude Bulls Again

Energy futures: November Crude Oil rebounded above the $80 per barrel level in the early going as traders gear up for another decline in U.S. Crude inventories. This morning’s weekly EIA energy stocks report is expected to show Oil supplies fell by between 1.8 and 2.2 million barrels last week. Traders will also be watching the inventory figures for Cushing, Oklahoma – the delivery point for NYMEX Crude Oil futures. Recent inventory declines and solid demand are responsible for the continued backwardation of the WTI Oil market – wherein near month contracts trade at a premium to deferred month contracts. Backwardation signals that users are willing to pay a premium for immediate supplies. Gasoline inventories are expected to show a moderate increase of between 100,000 and 300,000 barrels. Distillates – which include Heating Oil – are expected to show a 1 million barrel gain. In early trade, November Crude Oil is trading at $80.11, up $0.58.

Coffee: Profit-taking selling hit the December Arabica Coffee futures market in early trade, after an 8-month high was reached yesterday. Dry weather in the main Coffee growing regions of Brazil has been chief among the reasons for the recent price rise. However, origin sellers came out on yesterday’s rally, leading weak bulls to start to book profits on their long positions. Brazil’s Coffee exports have started to increase, with the Green Coffee Exporters Council reporting exports totaling 1.214 million bags so far this month, up from 915,873 bags last month. In early trade, December Coffee was trading at 129.95, down 3.15.

Dollar Index: Short covering buying emerged in December Dollar Index futures, as bears sought to book profits ahead of this morning’s release of U.S. durable goods orders for August. The consensus is for a decline of 3.5% last month, as buyers of big-ticket items held back their purchases due to uncertainly in the U.S. economy. In early trade, the December Dollar Index was trading at 78.450, up 0.255,

Mike Zarembski, Senior Commodity Analyst

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What, Me Worry?

That may be the mentality of stock index futures traders, as Dow Jones futures surged to an all-time high yesterday afternoon. The rally in the U.S. stock market comes despite predictions from leading experts that the chances of the U.S falling into a recession remain 50/50, and talk from leading fund managers that the Fed has not yet restored confidence in the U.S. credit markets. The U.S. housing market remains mired in a slump, with a report out this morning expecting to show that pending home sales fell to their lowest levels since the index has been calculated starting in 2001. So why are investors enamored with stocks again? One possible explanation might be the changing focus by the Federal Reserve from inflation containment to general prevention of an economic slowdown. The 50 basis point rate cut in September signaled that the Fed is willing to tolerate some moderate increases in inflation in order to prevent a recession in the U.S. This gave traders the confidence to move assets back into the stock market –especially multi-national blue chips – on the belief that the Fed will continue with its “accommodative” stance and keep interest rates low for the foreseeable future. Whether this tactic works and prevents a rapid slowdown of the U.S. economy or just fuels another speculative “bubble” in securities is still unknown, but for stock index bulls it’s “let the good times roll!”

Looking at the daily chart for December mini-Dow futures, we notice traders still in a buying mood after yesterday’s record-setting session. Prices are well above all the major moving averages, and momentum remains strong. The 14-day RSI is now in moderately overbought territory, with a current reading of 81.67. Yesterday’s highs of 14198 will act as resistance, with support found at 13782. In early trade, December mini-Dow Jones futures are trading at 14166, up 9.

Mike Zarembski, Senior Commodity Analyst

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Commodity Prices Tumble as Stocks Come Back in Vogue

Precious Metals: Sharp declines are being seen in the precious metals complex this morning, as a rally in the U.S. Dollar and lower oil prices are slowing the voracious investor appetite for Gold and its brethren. Aggressive speculator selling was seen in Tokyo, with the Tokyo Commodity Exchange (TOCOM) Platinum and Gold contracts showing hefty losses at the close of trading. In early New York trade, December Gold is trading at $738.20, down $15.90, and January Platinum is trading at $1361.00, down $40.20.

Crude Oil: NYMEX light sweet Crude Oil futures continue their sell-off after Friday’s technical reversal, falling below the $80 per barrel mark with traders contemplating lower Oil demand from refineries as profit margins erode. The price of refined products such as Gasoline and Heating Oil have not kept pace with the rising price of Crude, which has cut the margins refiners were getting for processing Oil into energy products. In addition, a stronger greenback the past two days may start to crimp demand for commodities priced in Dollars from foreign buyers. In early trade, November Crude Oil is trading at $79.19, down $0.99.

Dow Jones Index futures: After a record-setting day on Monday, Dow futures continue to climb as traders move back into equities, believing that the worst of the subprime mortgage crisis may be over. The early morning rally comes despite expectations that this morning’s release of the National Association of Realtors' index will show a drop in August in the number of signed contracts to buy previously owned homes. In early trade, December mini-Dow futures are trading at 14182, up 25.

Mike Zarembski, Senior Commodity Analyst

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All’s Quiet Before the Payrolls Report

S&P 500 futures: There is a slight bid on e-mini S&P 500 futures this morning, as traders gear up for a rebound in non-farm payrolls in September. Expectations are for payrolls to have increased by 100,000 jobs in September, a sharp rebound from the loss of 4,000 jobs in August. However, many believe that an increase in government jobs will account for the bulk of any rise, as private sector job growth lags behind. In early trade, December e-mini S&P 500 futures are trading at 1556.25, up 4.00.

Dollar Index: December Dollar index futures are trading moderately lower, as traders look for the unemployment rate to rise by 0.1% to 4.7% in today’s jobs report. Traders expect the manufacturing, construction, and financial services sectors to be a drag on employment, keeping alive the possibility of further interest rates cuts in the remaining weeks of 2007. In early trade, December Dollar Index futures are trading at 78.280, down 0.100.

Treasury futures: After closing near the highs of the session yesterday, Treasury futures are moderately lower as traders await the non-farm payrolls report. Average hourly earnings are expected to increase by a moderate 0.3% – the consensus figure for almost every month. If the report shows a bigger increase in wages, Treasuries may be on the defensive as wage inflation creeps back into the spotlight. In early trade, December Ten-year Note futures are trading at 109-180, down 0-02.

Mike Zarembski, Senior Commodity Analyst

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Copper Tarnishes Bull Run

Copper: After rising 2.4% in London trading last week, Copper futures are giving back those gains in early trade, with traders fearing that Chinese demand will dry up in light of high prices. However, Copper could receive a boost later in the week if a strike by workers at Southern Copper Corp. in Peru continues into its second week. In early trade, December Copper is trading at 361.55, down 10.90.

Wheat: Chicago Wheat futures continue their decline from all-time high prices, with traders looking for sharply increased plantings this fall as producers take advantage of “attractive” new-crop Wheat prices. Wheat futures in Paris were down as much as 4% in late morning trade, adding to the weakness in the Chicago market. At the end of the overnight session, December Wheat was trading at $8.76 ¼, down 13 ¾ cents.

Dollar Index: The greenback is higher versus the Euro and Yen in early morning dealings, as traders expect European finance ministers to discuss ways to halt the Euro’s steep climb against the U.S. Dollar during the ECB meeting in Luxembourg today. In early trade, December Dollar Index futures are trading at 78.490, up 0.255.

Mike Zarembski, Senior Commodity Analyst

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Bernanke Rocks the Market

e-mini S&P – Comments by Ben Bernanke yesterday sucked the life out of equities in the early going and the market was unable to recover, with the S&P posting a second consecutive day of double-digit losses. The Fed Chairman warned investors that while the Central Bank’s rate cuts will help the economy, the Fed cannot “insulate investors from risk,” and noted that the slumping housing sector is likely to continue its drag on the economy. DataQuick Information Systems also released data showing that southern California home sales declined by nearly 30 percent in September, with the lowest number of units sold since the company began tracking housing data in 1988. The market will have more housing data to digest with today’s release of Housing Starts and Housing Permits at 7:30 AM CST. The figures are expected to come in at 1.285 and 1.3 million, respectively, both down from August. Also hitting the newswires, Citigroup, JPM and Bank of America announced that they have set up a rescue fund of sorts to bail out global credit markets at the behest of the Treasury Department. The fact that such a fund was set up probably adds more fear than comfort to the marketplace, at least among small investors. The spike in Crude Oil prices has also weighed on the market in the first two days of trading this week. Technically, the December e-mini continues to stay in an uptrend, but the close below the 18-day MA may signal that a near-term high is in place. The RSI and slow stochastics are both in neutral territory, which leaves room for more downside before the market ventures into oversold territory. Support comes in at 1530.00 and 1500.00, while resistance can be found at 1566.00 and all-time highs of 1586.75.

Wheat – Wheat finished lower overall, but did bounce back late in the day to avoid a technical breakdown. Lack of positive fundamental news seems to have taken the wind out of the Wheat market's sails, leading to this most recent wave of selling. Unwinding of long Wheat / short Corn spreads after Friday's supply and demand report and continued profit-taking helped push things to the downside, even as traders have largely shrugged off the news that heavy rains have set back early winter Wheat planting. December Wheat held above the critical 830 mark, which if violated would have confirmed a head and shoulder reversal pattern. Wheat found solid support around 815, which also happens to be in the neighborhood of the 50-day SMA, and the strong close formed a bullish hammer, which may give Wheat a slight bullish short-term technical bias. The momentum indicator showed almost no change from the previous trading session and registered a bearish -40.50. Both the RSI and slow stochastics are showing oversold levels, which could give the market a lift. Support comes in at 815 and the 38.2 Fibonacci retracement support of 765.25, while resistance can be found at recent highs of 890 and 911.25.

10-year Notes – The treasury markets have retreated since the surprise rate cut in August drove 10-year Note yields down to 21-month lows of 4.3 percent. Traders have been reluctant to jump into the treasuries despite credit fears and weakening economic indicators. This hesitance has been based on a number of wildcard factors, including inflation fears stoked by rising energy prices and the growing belief that the Fed may shift gears and raise rates. Last Friday's PPI data showed contained inflation, but traders are looking for follow-through in this morning's CPI release. The housing report may not make much of an impact on the market unless there is a huge surprise one way or the other. December Notes have weakened technically, with prices trading below the 50-day SMA for the over a week. A close below 108-00 may spark selling and trigger stops. Support can be found at 108-00 and 106-13, while resistance comes in at 109-06.5 and 109-30.

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More Fed Watching

Dow Jones – Stocks mounted a comeback in late trading yesterday, as optimistic traders hoped that the Fed would once again slash rates at the end of the month. Housing starts were at the lowest levels in 14 years, and the CPI report showed that inflation is tame for the time being. Meanwhile, S&P also downgraded a host of sub-prime debt last year. The release of the Fed's Beige Book – which showed slower growth in the 3rd and 4th quarters – really sparked the equity markets late in the day. All of this unimpressive economic data leads many to believe that the Fed will take action, especially given Ben Bernanke's recent comments about the housing sector being a drag on the economy and the inability of the Fed to insulate investors from risk. The late rally stopped what could have been a technical breakdown on the December Mini-Dow chart yesterday, as the market was able to hold above support at 13830. Momentum is showing positive divergence from RSI, suggesting a possible recovery in the coming days. The RSI is showing oversold levels in early trading, which may be a prelude for a Friday bounce. Traders will keep an eye on the 9 and 18-day SMA, which are very close to crossing on the downside. Support comes in at 13830 and 13550, while resistance can be found at 14085 and 14237.

Bonds – The Bond market was strong yesterday and in overnight trading, as disappointing economic data keeps rolling in. Bonds have not been the defensive play recently because of a weak greenback and investors choosing to look elsewhere – mainly commodities – to address their inflation concerns. The weak Dollar has played a key role in all of this, with large treasury market players China and Japan seeking alternatives. The belief that a rate cut is coming and fresh sub-prime fears in the minds of fixed income traders have boosted December Bond prices by more than a point and a half over the last two days. December Bonds also have some positive technical factors going for them. The slow stochastic indicator showed an upward crossover, and the momentum indicator has outpaced the RSI. Also, the market looks as though it may be confirming a breakout from the wedge pattern it has been forming since the beginning of September, which could push prices above recent highs of 114-08. Support comes in at 111-05 and 110-00, while resistance comes in at 112-10 and 113-00.

Coffee – Coffee is trading lower overnight on weak technicals and ample rains in Brazil. Brazil is forecast to receive light to moderate rainfall, which will aid budding in the new crop. Forecasts for two cold fronts expected to hit the growing region within the next week and a half helped to slow the price decline yesterday. With neither front expected to be particularly severe, traders have opted to take profits and adopt the wait and see approach before reacting. Technically, Coffee remains weak and is currently trading below the 128.00 support area. Traders are paying attention to the key 125.00 support area which if violated could send prices below 120.00, possibly toward the mid-teens. Resistance can be found at 133.25 and 138.50. Momentum stands at a weak -1.80 and the RSI is a neutral 36 percent coming into trading. The RSI has dipped into oversold territory, suggesting that the decline may stall or even get a bounce at 125.00.

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Stock Indexes Feel the Heat

S&P – The stock market commemorated the 20th anniversary of the Black Monday meltdown with a huge sell-off on Friday. The lingering credit crunch has hit the markets especially hard over the past week, stoking fears that the economy may contract even if the Fed continues cutting rates. Many traders had been tolerating the disappointing housing numbers, figuring that corporate bottom lines might at least benefit. But this view has largely changed in the wake of Bank of America's disappointing earnings release, which demonstrated yet again that subprime debt worries are very much in play. The subprime worries have made their way around the globe, with international investors scooping up distressed debt and the European and Asian markets bracing for the oncoming pinch. The bludgeoning of the market continues this morning, with the December e-mini S&P dropping over 12 points after shedding over 40 on Friday. American Express and Countrywide – both with heavy debt exposure – are set to release earnings today, and traders anticipating bad numbers have been dumping shares of both stocks in the early going. The December e-mini dropped below the 50-day moving average on Friday as the market closed on support in the 1505 area. Currently, the market is well through this support area, as well as the key 1500 psychological mark. The e-mini is also very oversold, registering a 24 percent reading as of Friday's close and a reading in the low teens this morning, which could bring some bargain hunters back into the market. Likewise, slow stochastics are very oversold, but have not given an indication when a crossover will take place. Support now comes in at 1485 and 1465, while resistance can be found at 1520 and 1530.

Wheat – Wheat went limit-up on Friday on news that Russia plans to curb exports, a move that would test the already tight stocks in the global Wheat markets. Wheat is off this morning, as Russia enacted a 10 percent tax on exports instead of the 30 percent tax many were expecting. Solid rains across much of the winter Wheat-growing region have only been a minor obstacle to farmers still planting and should aid growth. Traders may continue the recent liquidation phase in the market due to the weak technicals and lack of positive fundamental data. The market confirmed a head and shoulders top last week that measures a move into the low 700's. Support has been found in the 50-day moving average, with the market unable to even temporarily break through this area. Momentum is beginning to show fairly significant bearish divergence from the RSI and price, suggesting a near-term bearish bias. Support can be found at 815.50 and 765, while resistance comes in at 890 and 910.

Copper – The fire sale in the equity markets has Copper traders liquidating positions. The weaker-than-expected growth in the U.S. housing sector continues to plague the market, but a broader global slowdown could send the market spiraling downward. If economic conditions cause a recession in the U.S. and a slowdown in Europe and Asia, Chinese exports would likely slow significantly, which could dramatically decrease demand for Copper going forward and decrease the chances of fresh stockpiling by China. December Copper confirmed a double top, measuring a move to 338.20 last week. It looks like the 50-day moving average has provided some support to the market – at least initially – in overnight trading. Momentum is showing bearish divergence from the RSI, suggesting possible further downside. Support comes in at 342 and 332, while resistance can be found at 358.10 and 366.

Rob Kurzatkowski, Commodity Analyst

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Techs save the day

E-mini NASDAQ – Stocks rebounded mid-session, as investors flocked to the tech sector as a safe haven of perceived strong earnings going forward, especially with the Christmas shopping season nigh. After the close, tech heavyweights Apple and Texas Instruments both posted earnings that topped street estimates, with Apple blowing away estimates of $0.86 a share with a $1.01 post. Banking shares managed to rebound somewhat on news that Bear Stearns has forged a strategic alliance with a Chinese bank to get a stronger foothold in the lucrative Chinese investment banking sector. The FDIC warned that the subprime squeeze will get worse before it gets better, with the number of resetting ARM mortgages expected to peak in the second quarter of next year. There are now rumblings that the credit card and auto loan industries will be the next to feel the pinch, as home mortgages are generally a priority over other debt for consumers. Unlike the broader market, the NASDAQ mainly looks technically sound, not backing down from recent highs and trading above the major moving averages this morning. Momentum remains strong at a healthy +92.00 and the RSI is neutral at 44 percent. Support comes in at 2125.00 and 2075.00, while resistance can be found at 2175.00 and 2200.00

Crude Oil – Crude Oil dropped for the second consecutive session as traders took profits. Turkey has reiterated plans to invade the Iraqi Kurdish region, with the Turkish prime minister recently commenting that no foreign power (read: the U.S.) will dictate what the nation does in its own security interests. What remains to be seen is the scope of the conflict. In addition to Turkey and Iraq, heavily Kurdish regions exist in Iran, Syria, and Armenia, which could also be drawn into a conflict. On the fundamental front, Crude Oil inventory data has been bearish recently, and many traders are looking for another build in Wednesday EIA report. A slowing economy could weaken demand, and traders still have Chinese industrial production on tap later this week. December Crude Oil is showing overbought readings on both the RSI and slow stochastic indicators, which suggests that the market will either labor going higher or may break down a bit. Momentum is very strong at a robust +5.76 coming into trading and the indicator is showing very slight bullish divergence from RSI. Support can be found at 84.75 and 82.45, while contract highs at 88.49 may act as resistance.

Bonds – The treasury markets took a pause yesterday to cool off after December Bonds gained almost three points over the prior three trading sessions. There was some profit-taking yesterday, and many traders were reluctant to add to their positions ahead of the FOMC meeting next week. Bond traders may also be reluctant after several failed rallies over the past year. The FDIC warning over subprime debt helped he market avert a broader sell-off, but Bonds have not felt their classic “flight to quality” effect recently due to the weaker Dollar. Bond technicals could also be blamed for the pause yesterday, as the market is extremely overbought on the RSI and slow stochastics, with the stochastics close to crossing over to the downside. Yesterday's indecision led to a spinning top pattern, which suggests some negative short-term bias. Support comes in at 112-10 and 111-13, while resistance can be found at 113-16 and 114-08.

Commodity Analyst, Rob Kurzatkowski

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Oil's Perfect Storm

Crude Oil: Crude Oil continues to climb this morning and is currently trading above the $90 mark. In recent days, the market has had a number of factors going for it – a weak Dollar, falling inventories, traders accumulating commodities, geopolitical conflict and a cryptic oil cartel. The greenback continues to slide ahead of the FOMC meeting next week, with traders now thinking that a half-point rate cut may be in order. The soft Dollar has caused traders to load up on commodities as an inflation hedge. Crude was drifting lower prior to the EIA's inventory report, but the lower supplies gave Oil bulls the jolt they needed. OPEC has pledged to increase exports by 500,000 barrels, but the cartel has not indicated that it would further increase output, saying the market was “well supplied.” There are also indications from tanker tracking companies that the 500,000 increase is going to be more in the 50,000 range. In addition to the ongoing conflict over the Iranian nuclear program and the Turkey-Kurd situation, there were reports that Israeli warplanes were shot at, but not hit, over Lebanon. All of these factors are “what if” forces driving the market higher, but not actual economics like the supply report. Hedge and commodity funds seem to be pushing prices much higher than supply and demand would dictate, so a withdrawal of money from the market by these funds could trigger a sell-off at any point. December Crude continues to look bullish on the daily chart, but the market is very overbought. Momentum continues to outpace RSI to the upside, which is bullish over the near-term. Support comes in at 88.50 and 84.75, while resistance may be seen at 92.00 and 95.00.

S&P: Stocks finished nearly unchanged in a wild day of trading yesterday. Prior to the open, durable goods orders and weekly jobless claims both came in worse than expected and the market immediately sold off. New home sales were better than expected, but the prior two months were revised down by 60,000 and 69,000, respectively, negating any positive that could be drawn from the report. The market then began to brush aside the economic data and focus on corporate earnings, which have been solid. As we approach Wednesday's FOMC rate decision, the market figures to trade in a choppy, erratic manner reminiscent of yesterday's action. The only report released today is the Michigan consumer sentiment figure at 8:45 AM CST, which is expected to come in at 82.3, up slightly from last month's 82.0. Technically, the ESZ07 is trading in a sideways consolidation pattern between 1495 and 1530, without a clear direction in the near-term. The market is still well above the weekly uptrend line, and it would take a sell-off into the low 1400's for the market to break down longer-term. Momentum is showing bearish divergence from the RSI, which points to a negative bias in the near future. Critical support and resistance are 1495 and 1550, with a close beyond either level likely to determine market direction over the medium-term. In addition to these key levels, minor support and resistance come in at 1508 and 1542, respectively.

Gold: Precious metals continue to climb on the tumbling greenback and skyrocketing Oil prices. Gold has benefited from climbing commodity prices and inflation-averse investors. Lower rates likely mean more USD downside and possibly more upside for the precious metals market. December Gold is trading above recent highs of 776.90, which would be considered a technical breakout if the market is able to hold these levels. Momentum is beginning to show some bearish divergence from the RSI. Given the sharp climb in prices in the early going, a close below 776.90 would probably be considered bearish by traders and could spark some profit-taking by Gold traders who have been faked out by the market before. Gold is overbought on both the RSI and slow stochastics, suggesting possible profit-taking in the near-term. Support comes in at 765.00 and 750.00, while resistance can be found at 783.00 and 800.00.

Rob Kurzatkowski, Commodity Analyst

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Supply Concerns Keep Crude on the Move

Crude Oil – Crude Oil continues to climb this morning on news that Mexican production in the Gulf of Mexico is expected to drop by 600,000 barrels a day due to a storm. Friday, gunmen kidnapped oil workers in oil-rich Nigeria – the second attack in less than a week. Traders are genuinely concerned about supply for the first time in a long time due to the sharp drop in weekly Crude Oil inventories and a suggestion that OPEC isn't making good on its pledge to increase output by 500,000 barrels a day beginning in November. Geopolitical tensions remain unchanged, with Turkey continuing to battle Kurdish rebels and Iran thumbing their nose at the rest of the world with regards to the country's controversial nuclear program. Crude Oil continues to follow through on the bullish flag pattern confirmed on Thursday. The market is giving overbought readings on the RSI and stochastic indicators, but this has done little to slow the market given all of the outside fundamental factors. Momentum is climbing and showing bullish divergence from RSI, suggesting this rally may not be short-lived. Support comes in at 88.50 and 85.00, while resistance may be found at 95.00 and 97.50.

S&P – Index futures are higher again this morning on expectations that corporate earnings will remain strong. The focus has been the booming tech sector and petroleum companies, who figure to benefit from rising Crude Oil prices. Traders are looking to the Fed to slash interest rates on Wednesday, with the focus on how much – not if – the central bank will lower rates. The market shrugged off very disappointing economic data last week with the thinking that earnings will remain strong through early next year, at which time the interest rate cuts should make their way through the economy. The December e-mini S&P is trading just below the key psychological 1550.00 mark, and a solid close above the level could bring more buyers into the market. A close above1550.00 would also push the market above all major moving averages for the first time in over two weeks. Momentum is showing bearish divergence from RSI, which suggests that the recent rally may begin to fade. Support comes in at 1525.00 and 1500.00, while resistance can be found at 1550.00 and 1573.50.

Bonds – Bond futures are slightly lower in quiet trading this morning, as traders await Wednesday's Fed decision. Bond traders have been optimistic about the upcoming FOMC meeting, with many now expecting a half point cut. The reason for this optimism is that the FOMC has been seen as very consumer conscious, and housing has clearly been on the Board's mind. This type of thinking could be setting fixed income traders up for a letdown, with the central bank likely sticking to quarter point cuts to stave off inflation. A half point cut may be too much for Bond traders as well, as the Dollar would likely plummet, which would decrease demand for USD-denominated investments, including treasuries. December Bonds failed to advance beyond early September highs and the market remains overbought, even after a third consecutive negative session. Momentum has been flat to lower and has been moving in lockstep with the RSI indicator. The market has found some support in early trading at the 9-day moving average. Support comes in at 112-10 and 111-13, while resistance comes in at 113-20 and 114-05.

Rob Kurzatkowski, Commodity Analyst

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FOMC Decision – Trick or Treat?

Crude Oil – Today figures to be a volatile day for the Crude Oil market, as traders await weekly petroleum inventories figures and the Fed rate decision. Crude inventories are expected to show a weekly gain of 600,000 barrels, but Distillates and Gasoline are expected to show a draw of 1.1 million and 300,000 barrels, respectively. Two conflicting reports by tanker tracking companies regarding OPEC making good on its promise to increase exports by half a million barrels a day starting November 1 has led to some confusion among traders. The Fed has stuck with its forecast of moderate growth next year, which is favorable for petroleum demand, and may lead to inaction later this year to stave off inflationary pressures. December Crude Oil had a weak close, finishing near the lows of the day after trading below $90 late in the session. The market was able to find some support this morning around the 9-day moving average. Momentum is still slightly outpacing RSI, which sets a moderately bullish tone short-term. Support comes in at 88.50 and 85.00, while resistance can be found at contract highs of 93.70 and 95.00.

E-mini S&P – Index futures are trading higher this morning ahead of the Fed rate decision. Today is a report-heavy day for the stock market, and traders will have plenty of data to digest. GDP – expected to show an annual growth rate of 3.2 percent – is released at 7:30 AM CST, followed by Chicago PMI, Construction Spending and the weekly petroleum inventories report. Weakness in the figures, especially GDP and Construction Spending, figures to be bullish for stocks, as it would likely force the Fed to lower rates even further at its December policy meeting. U.S. stocks have done well on overseas exchanges in early trading, with many investors viewing the shares as a great value because of the weak Dollar. Technically, the December E-mini remains in a holding pattern, waiting for direction. The market backed off of its initial test of the 1550 resistance area, and a solid close above this mark would be needed to turn the technicals bullish. A close below the 1525 mark could be viewed as bearish near-term. Support comes in at 1525 and 1500, while resistance can be found at 1550 and 1570.

Silver – Precious metals took a hit yesterday on weaker energy prices and profit-taking. Nothing has fundamentally changed for the sector, although the Wall Street Journal’s resident Fed watcher did cast some doubt over tomorrow’s expected rate cut, saying that the housing sector has not slipped enough to cause the central bank to act. Writer Greg Ip’s statement caused some jitters in the equity markets and offered some support to a battered greenback, sending metal prices lower. An increasing number of traders are beginning to come to the conclusion that the Fed will not act this time around to leave the door open for a rate cut at the end of the year. If the Fed does act, traders believe the policy statement will likely have a very hawkish tone, which would likely bolster the Dollar and send metal traders into retreat mode. There was widespread profit-taking in commodities and Silver traders were no exception, especially with the market at overbought levels. Technicals will likely take a back seat to fundamentals today as traders await word from the Fed. Longer-term, the December Silver chart remains bullish and is measuring a possible move toward the $16-16.50 area. The initial rejection at the 14.55 resistance area is a negative sign shorter-term. Momentum remains strong despite the market finishing lower, and the indicator is showing bullish divergence from RSI. Support comes in at 13.80 and 13.50, while resistance can be found at 14.55 and 15.05.

Rob Kurzatkowski, Commodity Analyst

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Gold Sparkles

Gold – The Gold market topped the $800 mark intraday on strong Crude Oil and a weak Dollar, which cannot seem to find a bottom. With the greenback plummeting against all of the majors, overseas and institutional traders stayed away from Dollar-based assets and went back into accumulation mode on the commodities side. The FOMC statement mentioned inflationary pressures remaining in the market, but also noted that inflation should be held in check by slowing economic activity. The ever-cryptic central bank did leave the door open for future rate cuts, but seemed to lean toward a pause in its December meeting. With plenty of fresh cash on hand, commodity funds have been instrumental in driving prices higher than even the most bullish traders had expected. Gold remains bullish on the daily chart, but the market is overbought at the moment, which could trigger some profit-taking. The market briefly traded above the $800 mark both yesterday and this morning, but immediately backed off of this key psychological resistance area. Momentum is begging to flatten out, suggesting the possibility of profit-taking going into the weekend. Support comes in at 775 and 760, while resistance can be found at 810 and 825.

Dow – Stock index futures rallied sharply on the Fed rate decision and stronger-than-expected GDP and Construction Spending. The solid GDP figure suggests that corporate earnings will remain strong through the end of the year, although the enthusiasm was somewhat tempered by a dismal Chicago PMI Index reading below 50, showing contraction in the sector. Futures are lower this morning ahead of the PCE Inflation report at 7:30 AM CST, which is expected to show inflation at 0.2 percent for the month. The FOMC statement opened the door for further rate cuts, but at the same time tempered this by saying inflationary pressures remain. This is why the market is keenly watching the PCE figure, which is the Fed's favorite inflation gauge. The December Mini-Dow failed to move beyond its key 14,000 resistance mark yesterday, which disappointed technicians. Momentum is showing bearish divergence from RSI, suggesting a near-term downward bias. Yesterday's close above the 18-day moving average is near-term bullish and could mean that a near-term low is in place. Support comes in at 13,750 and 13,610, while resistance can be found at 14,000 and 14,090.

Crude Oil – Crude Oil was bolstered in early trading by a stronger-than-expected GDP figure and another unexpected drawdown in inventories. Crude inventories for the week ending October 26th fell 3.894 million barrels versus estimates of a 600,000 barrel build. The 4-week average of Crude Oil imports is roughly half a million barrels short of the 2005-06 average, while domestic production is in line with seasonal norms. U.S. Crude Oil stocks, which have been above the normal ranges since May, have actually dipped back into the average range, so there is by no means a shortage of supply. The FOMC policy statement was a mixed bag for Crude Oil traders. The Board suggested that the economy will continue to cool through the early part of next year, which suggests that petroleum demand will fall. On the other hand, the Fed acknowledged that it is keeping an eye on the climbing Oil prices, maintaining a close watch for inflationary pressures making their way into the economy. December Crude is off the charts – literally. Even after closing at record highs, the RSI indicator is not giving overbought readings, leaving the door open for more upside. Momentum is screaming higher and is outpacing RSI, which is bullish near-term. Today’s range of 6.36 marked the largest intraday range for Crude in recent memory, sending volatility indicators through the roof and giving no technical indication of topping out. Support comes in at 92.25 and 90.00, while resistance can be found at 97.50 and 100.00.

Rob Kurzatkowski, Commodity Analyst

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Early Indecision

10-Year Notes – Treasuries got a lift last week from weaker economic data, a Fed rate cut and subprime woes that began to seep from brokerage and investment banking into commercial banking as well. The "flight-to-quality" effect may be short-lived in 5- and 10-Year Treasury Notes, however, as both domestic and overseas funds have poured into these offerings, which may curb further advances. A weak Dollar could also curb overseas demand for U.S. investments, likely leading traders to shift funds into physical commodities. With the departure of Citigroup's Charles Prince, two major banking executives in as many weeks have become casualties of the recent mortgage downturn. With more disclosures likely in the coming weeks and months, treasury prices may find further support, even if the Fed opts not to lower rates at its December meeting. Last week's decision to cut rates by a quarter point seemed forced on the Fed to keep the markets happy, and the one dissenting vote makes future cuts no sure thing. December Notes broke out to new highs, but the market is trying to test the newly established 111-00 support area in early trading. Short-term direction may be difficult to predict given the conflicting technicals, with slow stochastics showing overbought levels, but momentum continuing to show bullish divergence from RSI. Support comes in at 110-25 and 110-00, while resistance can be found at 111-25 and 112-07.

Crude Oil – Crude Oil is slightly lower overnight as tensions ease between Turkey and Kurdish rebels. The Kurdistan Worker's Party freed eight Turkish soldiers captured last month and Turkish Prime Minister Erdogen is meeting with President Bush to discuss the conflict. The Dollar is weaker this morning, which has kept the losses modest. The slumping greenback has helped catapult Crude Oil and commodities in general, due to lower cost and inflation concerns. The drop in supply over the last few weeks has opened some eyes, but reserves remain within the 4-year average. Crude Oil remains strong technically, and the chart has not shown any indication of a reversal unfolding. The market remains overbought, which could slow upward momentum. Support comes in at 93.70 and 90.00, while the market may run into resistance at 96.00 and 100.00.

E-mini S&P – Stocks will start the week in negative territory on continued subprime concerns. The Citigroup board is bringing former Treasury Secretary Robert Rubin in to help right the ship and send a strong message to investors. It could also be interpreted as a message that troubles in the subprime sector are here to stay for some time. Large commercial banks like Citi could be hit especially hard in the second quarter of next year when ARM loans peak, as borrowers delay or renege on payments for auto and credit card loans. The December e-mini S&P broke down last week, despite closing above the 1550 resistance area on Wednesday. Momentum is beginning to show positive divergence from RSI, suggesting some short-term upward bias. The ESZ07 is currently trading below the 9-, 18-, and 50-day moving averages and further weakness could bring a downward crossover of the 18- and 50-day averages, which would be bearish longer-term. Support comes in at 1500 and 1460, while resistance can be found at 1525 and 1550.

Rob Kurzatkowski, Commodity Analyst

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Profit-Taking Tarnishes Gold

Gold: Gold futures are sharply lower this morning on profit-taking and lower energy prices. After climbing to record high closes last week, traders are looking to take some profits off the table in this technically overbought market. Metal traders have been talking about $800 Gold for some time, but now that this figure has been eclipsed, there is widespread indecision on where we go from here. Longer-term fundamentals remain bullish – the Dollar is weaker, energy prices are still near historical highs, physical demand is strong in India and China, and inflationary pressures remain high in the U.S. December Gold comes in at a very overbought 89 percent on the RSI, which has heavily influenced the selling pressure this morning. Momentum has turned somewhat lower this morning, but remains strong at +54.7. Friday's spinning top pattern, coupled with two candlesticks with long upper wicks, also sets a bearish technical tone for the day, as it indicates bulls did not have control of the market, even as the market made new record high closes. Support now comes in at 808.70 and 780.00, while resistance can be found at 848.00.

Dow: Stocks tumbled last week on the continuing subprime mortgage concerns and earnings warnings. Retail sales showed the weakest October figures since 1995, which could be a prelude to a slower-than-expected holiday shopping season. Wachovia and E-Trade have joined the subprime fray, with both companies issuing warnings on Friday. Surprisingly, bank shares are leading the charge this morning, as value investors have stepped in to buy shares in the beleaguered sector. On a sour note, Deutsche Bank released a report suggesting that subprime losses are expected to reach the $300 to $400 billion mark globally, far outstripping prior forecasts. Technology stocks have dipped this morning due to several downgrades in the sector and worries that the Christmas shopping season may be slower than anticipated. Friday's tumble sent the market toward the 13,000 support area and dragged the RSI below 25 percent, which could partially account for the bounce we are seeing in the early going. Momentum has begun to show bullish divergence from the RSI, suggesting short-term strength. Support comes in at 12,815 and 12,650, while resistance can be found at 13,250 and 13,500.

Crude Oil: Crude Oil futures are lower this morning on weaker U.S. economic growth forecasts and the possibility of OPEC production increases. There is speculation that Saudi Arabia – the only OPEC nation not pumping at capacity – may increase output by as many as 500,000 barrels a day. Fed Chairman Ben Bernanke's slower growth forecast for the U.S. has weighed on the market and prevented further advances. Several North Sea facilities that were shut last week have restarted production. Some traders have been disappointed that Crude prices did not test the $100 mark last week, which has eroded some confidence in the market. Three consecutive small body candlesticks on the daily chart show that traders have been indecisive, with bulls unable to control the trading sessions. The market is currently trading below the 9-day moving average, and a close below the average could signal short-term weakness. The stochastics and TRIX indicators crossed to the downside this morning, also suggesting short-term technical weakness. Support comes in at 93.70 and 90.00, while resistance can be found at 97.10 and 98.50.

Rob Kurzatkowski, Commodity Analyst

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Profit-Taking Continues to Take Its Toll

Crude Oil: Crude Oil futures are higher ahead of the weekly inventory data release on expectations of a drop in inventories and a weaker U.S. Dollar. Inventories of Crude Oil are expected to fall by 750,000 barrels, which would mark the fourth consecutive week of declines. The market sold off sharply yesterday on heavy profit-taking, even though Saudi Arabia contradicted earlier reports by indicating that it would not ramp up production. Despite the Saudi statement, indications are that OPEC nations do not want petroleum prices at these levels, fearing that it could stifle demand. Things have been very quiet on the geopolitical front in recent days, the lack of market-driving news stories likely influencing some traders to take profits. The Dollar is weaker against the major currencies this morning, making physical commodities more attractive. December Crude closed below the 18-day moving average, which suggests that a near-term high may be in place. The market came down to test the $90 mark, but bounced before reaching this psychological and technical support area. Momentum has drifted lower and is at the lowest levels since prices were at $80. Support comes in at 90.00 and 88.50, while resistance can be found at 93.70 and 95.00.

Gold: Gold prices have rebounded sharply this morning on strength in energy prices and a weaker U.S. Dollar. Prices fell for three consecutive days on heavy profit-taking and weakness in commodities in general. Gold has been driven by the currency markets recently, and a slumping greenback could bring bulls back into the market. Continued worries in the U.S. mortgage and housing markets could also result in a “flight to quality” effect in the Gold market. Despite the solid fundamentals, Gold may been susceptible to further profit-taking, having rallied sharply in recent weeks. Traders will focus on today's PPI figures, which are expected to show an increase in core PPI of 0.2 percent. More inflationary figures could give the market a lift. December Gold held above the 18-day moving average, which is a positive sign for bulls. Momentum has swung higher at a steeper pace than RSI, which suggests short-term technical strength. Support comes in at 785.00 and 775.00, while resistance can be found at 810.00 and 825.00.

S&P: Stocks had a stellar showing yesterday on strong earnings from Wal-Mart and suggestions that the recent wave of subprime write-offs may be slowing. Goldman Sachs said it does not plan to write off a significant number of bad loans, bucking the current trend and offering investors some encouragement. Retail sales are expected to show a decline today, but the market will likely focus on profitability of retailers and not the raw sales figures. Nonetheless, weaker sales figures could indicate slower economic growth, as consumers find themselves in a credit crunch amid rocketing energy costs. Traders will also have to digest today's PPI release, which could show that producer prices climbed due to higher energy costs. The December e-mini S&P closed just below resistance at 1485.00 and the market was unable to push above the 9-day moving average in early trading this morning. Momentum continues to outpace RSI, but to a lesser degree, which suggest that the market may have run out of steam in the short-term after rallying over 40 points yesterday. Support comes in at 1460.00 and 1435.00, while resistance can be found at 1485.00 and the key psychological 1500.00 area.

Rob Kurzatkowski, Commodity Analyst

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Energy Bulls Giving Thanks

Crude Oil – Crude Oil futures rallied to touch all-time highs yesterday and set a new high for the January contract. The rally was fueled in large part by a rapidly declining U.S. Dollar and an expected drop in Heating Oil inventories. In addition to the uncertainty plaguing the U.S. economy in the wake of the credit crunch, talk of OPEC nations and China diversifying away from the Dollar has put a lot of downside pressure on the greenback. The release of the FOMC minutes showed that the October rate cut passed by only a slim margin, but traders seemed to think the central bank will continue to lower rates to stave off economic contraction that would likely lead to further declines in the value of the Dollar. Chairman Bernanke seems to prioritize economic growth over keeping inflation in check, unlike his predecessors Greenspan and Volcker. Today's weekly inventory figures are expected to show a build of roughly 1 million barrels of Crude Oil, but a surprise drop could push prices beyond the $100 mark, especially with the market hunting for bullish news. January Crude had a technical breakout above the prior contract high of 97.63, but did so on lighter volume. Crude made a new all-time high of 99.29 in overnight trading before retreating below 98.50, as traders were reluctant to continue buying ahead of the inventories data. Momentum has shifted lower, while RSI climbed slightly, suggesting a slight bearish bias. Support comes in at 97.63 and 93.06, while resistance may be found at 100.00 and 105.00.

Heating Oil – January Heating Oil made new contract highs in overnight trading on speculation that inventories are going to show a decline of 400,000 barrels for the week. This winter is expected to be much milder that prior years, but much of the country will be dealing with below average temperatures for the next couple of weeks. The rising cost of Crude Oil and the seasonal decline in inventories have pushed prices higher. Last week, DOE data showed that Heating Oil inventories were at 30 days of supply after the market was oversupplied for much of the year. A drop below 30 days of supply could spark further rallies in both the Crude Oil and finished products markets. Like Crude, January Heating Oil rallied to a new contract high close yesterday and made new all-time highs in overnight trading. While this can be viewed as a breakout, traders remain cautious because of the low volume figures ahead of the Thanksgiving holiday. Momentum has fallen in early trading, but there is no divergence from the RSI indicator. The market did break sharply after making new highs, which could put some downward pressure on the market if inventories are in line with forecasts. Support comes in at 2.6700 and 2.5900, while resistance may be found at 2.7500 and 2.8000.

S&P – Stock index futures are lower this morning on the strength of the energy markets and lukewarm forecasts for the Christmas shopping season. Stocks managed to rally late in the day to post gains after the release of the FOMC minutes. The minutes showed the Fed lowered growth expectations for 2008, which led traders to believe that rate cuts could lie ahead. But yesterday's euphoria has worn off and rapidly rising energy prices have weighed on the market. If petroleum prices continue to climb, the Fed may be forced into inaction or even change its bias toward a rate hike early next year, which would not only slow down the economy but also kill demand for petroleum. Traders will focus on the Michigan Consumer Sentiment figure more than usual ahead of the holiday shopping season, and Wall Street seems concerned that rising prices at the pump and tighter lending standards may keep consumers away from the stores. December e-mini S&P futures continue to trend lower and are currently trading below the major moving averages. The 9-day MA has acted as resistance over the last seven trading sessions, and the market may need a close above the average to get some upside momentum. The momentum indicator continues to show bearish divergence from RSI, painting a negative technical picture for the market. Support comes in at 1425.00 and 1400.00, while resistance can be found at 1465.00 and 1496.00.

Rob Kurzatkowski, Commodity Analyst

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Stocks Jump on Strong Black Friday Sales

NASDAQ – Stock index futures are higher in overnight trading on stronger-than-expected sales numbers to kick off the holiday shopping season. Forecasts were calling for “Black Friday” sales to be below last year's $9.5 billion mark, but consumers came out in full force and initial estimates put Friday's sales figures in the neighborhood of $10 billion. Analysts were expecting the rising cost of fuel and tighter credit standards to keep customers away from the cash registers. But deeply discounted electronics turned out to be the main driving factor, with big name retailers like Best Buy and Circuit City rolling out specials and zero percent financing. These are risky moves for retailers in the recent credit climate, as they cut into profit margins. Tech and electronics companies figure to get a boost from the initial figures, and online retailers such as eBay and Amazon are expected to show strong sales on what has become known as "Cyber Monday.” The December e-mini NASDAQ is trading above the 9-day moving average in the early going, and a close above the average could signal some short-term bullishness. Tempering this is the fact that momentum is staying flat, while prices and the RSI indicator are climbing, which can be seen as bearish near-term. The market has been trapped in a triangle/wedge pattern on the chart, showing indecision among traders. Price action indicates that the market is moving higher this morning with some restraint, initially backing off when approaching 2050.00. Support comes in at 2014.00 and 2000.00, while resistance can be found at 2060.00 and 2100.00.

Crude Oil – Crude Oil futures are higher this morning, but the market was reluctant to push above contract highs in the early going. Prices fell after last week's inventory figures, which were bullish on the surface, showing a large drawdown, but the report also showed a large build in the key Cushing, Oklahoma port – the delivery point for NYMEX Crude. Funds and large traders took some profits off the table ahead of the Thanksgiving holiday, which drove prices lower following new highs. Strong sales to kick off the holiday shopping season along with a weaker dollar are both bullish factors for the market. January Crude futures were reluctant to make a push to new contract highs in early trading and prices are now below 98.50. Momentum is showing bearish divergence from the RSI, suggesting that traders' enthusiasm may be wearing a little thin after the recent run-up. It also suggests that more fundamental news may be needed to drive prices higher. Support comes in at 96.15 and 95.00, while resistance can be found at contract highs of 99.29 and 100.00.

Gold – Gold futures are higher this morning on a weaker Dollar and higher Crude Oil prices. Unlike Crude, which has backed off considerably from overnight highs, the Gold market appears resilient due to the slumping greenback. Traders are not convinced that the strong weekend sales figures are going to boost the slumping economy, which may lead to another Fed rate cut in December and, more than likely, a weaker U.S. currency. With energy prices near all-time highs, the Crude Oil market may labor to move higher, as the high costs may cut demand. This may be a chance for the Gold market to detach itself from energy prices and, once again, become the main inflation hedge for investors. December Gold has rebounded solidly after flirting with the first Fibonacci support area – in theory a market could rally to prior highs or make new highs after bouncing off of this key support area. December Gold closed above the 50-day moving average and resistance at 819.40 on Friday, which is considered bullish medium-term. In contrast to these bullish indicators, momentum is beginning to show some bearish divergence from the RSI and prices, suggesting that the market may consolidate or correct. Support comes in at 820.00 and 807.00, while resistance can now be found at 837.50 and 849.50.

Rob Kurzatkowski, Commodity Analyst

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What a Difference a Day Makes

Dow – Dow futures surged 183 points yesterday, fueled by news that Citigroup will receive $7.5 billion in cash from foreign investors. Congress may pass a law as early as today to mandate improved fuel economy standards for U.S. automakers and encourage domestic production, hoping to keep over 17,000 jobs in the country. Yesterday's momentum seemed to disappear on news that Wells Fargo and Freddie Mac plan to cut jobs due to the slowing economy. Durable goods orders are reported at 7:30 AM CST and are expected to show no change. Also on tap today is the existing home sales figure at 9:00 AM Central, which is expected to see a drop in the annual pace to 5.0 million homes. The Fed Beige Book is also set to be released at 1:00 PM Central, and traders will scrutinize the report to get an idea of what the central bank has in mind for future rate adjustments. December Mini Dow futures closed just below the 9-day moving average and the market is currently trading above the average this morning. A close above the 9-day MA may signal some short-term strength in the market. Momentum is showing bearish divergence from the RSI, suggesting that yesterday's sharp rally was a “dead cat bounce.” The market did manage to hold above support at 12,750, but price action seemed to indicate that short covering helped lift the market higher. Additional support comes in at 12,500, while resistance can be found at 13,050 and 13,250.

Crude Oil – Crude Oil futures are lower for the third consecutive trading session on a stronger Dollar and expectations that the weekly inventory number will show a build of around 500,000 barrels. New reports suggest that OPEC plans to ramp up production to the tune of 750,000 barrels a day in response to rising prices and fears of a downturn in demand. Qatar's energy minister downplayed the report and stated that he was unaware of the proposal. Several OPEC member states – namely Saudi Arabia and Nigeria – have made comments recently that they fear that the rising price of Oil may curb demand, making recent word of increased production very plausible. January Crude Oil closed below the 18-day moving average, suggesting that a near-term high may be in place. Further price declines could bring about a downward cross-over of the 9- and 18-day averages, which could be considered bearish short- to medium-term. Momentum is climbing slightly this morning, but has been outpaced by the RSI indicator. Support comes in at 93.50 and 91.85, while resistance can be found at 96.15 and 97.65.

Wheat – Wheat futures are slightly lower in overnight trading on a weaker Dollar. The market had a good bounce yesterday, aided by news that Morocco is buying 316,000 of Soft Red Wheat (CBOT), suggesting that world stocks of the grain remain tight. The USDA also reported that crop conditions for winter Wheat were the poorest since 1999, but traders are waiting to see if the southern Great Plains region will get some much needed moisture, which could improve the condition of the winter crop. An extended rally in the Dollar could put some downside pressure on the market. March Wheat futures closed above the 50-day moving average for the first time in almost a month, which could add to the recent momentum the market has seen. The 9-day moving average crossed above the 18-day this past Friday, which is a bullish signal medium-term. The market has been trapped between 825 and 860 over the past three trading sessions, suggesting some indecision among traders. Momentum is outpacing RSI to the upside, which could be seen as slightly bullish near-term. Support comes in at 825 and 815, while resistance can be found at 860 and 874.50.

Rob Kurzatkowski, Commodity Analyst

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Sour Crude

Crude Oil – Crude Oil futures are slightly lower this morning, despite comments by Algeria and Qatar that OPEC does not need to increase output. The nations stated that the market remains well-supplied and suggested that increases to supply could lead to a glut. The public comments indicate that there is indecision among OPEC members, but a minority of analysts believes the cartel will push forward with a production increase of 500,000 to 700,000 barrels a day. Oil declined almost nine and a half dollars last week on expectations that the U.S. economy will slow in the early part of next year, coupled with stronger-than-expected GDP figures for the 3rd quarter that could lead the Fed to bypass another rate cut. January Crude is trading just above the 50-day moving average and a close below the average could be a bearish signal longer-term. Adding to the bearish picture is the 9-day moving average, which is about to cross the 18-day average to the downside. The market is swiftly approaching oversold territory, which could lead to some short covering and consolidation or, possibly, a bounce. Momentum has gone into the negative in the late part of last week for the first time since early September. Support now comes in at 87.23 and 83.82, while resistance can be found at 90.00 and 93.06.

S&P – Stock index futures are trading higher overnight, supported by a stronger financial sector. Shares in Citigroup and Bank of America are leading the way due to some easing in recent subprime/mortgage fears. Equity traders are expecting the Fed to lower interest rates later this month, and there is a possible bailout in the works for the adjustable rate program. Lower Crude Oil prices could give the stock market a lift, making less of an impact on corporate bottom lines and improving holiday sales as consumers find themselves with more expendable income. The December e-mini S&P broke out above resistance at 1475 on Friday, which may lead to some follow-through buying. The 9- and 18-day moving averages are close to confirming a bullish crossover barring a sharp turnaround. Momentum has moved over 100 points, but remains negative. Support now comes in at 1475.00 and 1454.00, while resistance can be found at 1500.00 and 1525.00.

Gold – The Gold market has followed Crude Oil lower in early trading on a stronger Dollar and sale by the European Central Bank. The ECB sold 42 metric tons of the precious metal, which will more than likely overwhelm lackluster demand for the metal. Jewelry demand in the U.S. and Europe has been lukewarm, at best, which could lead to an oversupplied market. Commodity traders are at odds with equity traders in their Fed rate policy expectations, with commodity traders looking for the central bank to pause and stock traders looking for yet another quarter point cut. February Gold is very close to confirming a double top formation, which measures a possible move of almost $100 to the downside. Like Crude, the Gold market has held the 50-day moving average thus far, but further advances by the USD could pressure prices lower. Momentum is showing extreme bearish divergence from the RSI, which gives the market a bearish short-term technical bias. Support can be found at 780.00 and 765.00, while resistance can be found at 800.00 and 813.80.

Rob Kurzatkowski, Commodity Analyst

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OPEC Leaves Production Unchanged

Crude Oil – Crude Oil futures are up over a 1.50 in early trading and closing in on the $90 mark on news that OPEC will leave production unchanged, a decision was heavily influenced by global economic uncertainty in 2008. Believing that the market is already well-supplied, the cartel was concerned that increased production could create a glut and drive prices lower. Today's weekly inventory numbers are expected to show a decline in Crude Oil of 700,000 barrels for the week ending November 30th, while gasoline inventories are expected to rise 700,000 barrels and distillates are forecast to drop 400,000 barrels. January Crude has held the 50-day moving average, signaling that the market has found some technical support in the near-term. The pattern on the daily chart suggests that this is a consolidation period before more declines. Tempering this view, the momentum indicator is beginning to outpace RSI, which is bullish in the near-term. The RSI came in oversold, which could offer further technical support. Support comes in at 87.15 and 84.00, while resistance can be found at 90.00 and 93.00.

NASDAQ – Stock index futures are higher in spite of the OPEC news this morning, after declining the two previous trading sessions. The rebound is led by chip manufacturers, as the DRAMexchange Index posted five consecutive gains. Higher chip prices will likely lead to improved profits for semiconductor makers, and traders have begun value-buying in the tech sector. The market is still looking for the Fed to cut interest rates next week to bolster the economy, helping to offset the likelihood that energy prices will climb due to the OPEC decision. The December e-mini NASDAQ bounced off of support at 2050 and the market is holding above both the 9- and 18-day moving averages. The two moving averages had a bullish crossover yesterday – despite the declining market – which could offer some near-term strength. Momentum is showing bearish divergence from the RSI, possibly offsetting the bullish MA crossover. Support comes in at 2050 and 2000, while resistance can be found at 2100 and 2130.

Gold – Gold futures are higher for the third consecutive trading session, aided by higher energy prices. Climbing energy costs and a good chance of another Fed rate cut next week could create an inflationary scenario for the U.S. economy, leading to higher demand for commodities – specifically precious metals. The USD has rebounded slightly in recent days on news that policy makers in the U.S. and Europe will step up their efforts to prevent subprime losses from spreading. Extended rallies in the greenback could put some downward price pressure on the precious metals market. February Gold rebounded before reaching the $780 mark, which would have been the trigger line to confirm a double top reversal. This was also in the area of the 50-day moving average. The market has been reluctant to move above the 9- and 18-day moving averages in the early going, and momentum is beginning to lag behind RSI – two bearish near-term signals. Support comes in at 800 and 780, while resistance can be found at 815 and 835.

Rob Kurzatkowski, Commodity Analyst

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Dollar Reversal?

RBOB – Gasoline futures fell in reaction to larger-than-expected inventories and a strengthening U.S. Dollar. While the market found early support in OPEC's decision to keep output unchanged, Gasoline inventories rose by 4 million barrels, surpassing analysts' estimates of only a 700,000 barrel rise. OPEC's decision, while bullish on the surface, can actually be viewed as a bearish statement on the U.S. and European economies, and their potential impact on demand for petroleum products. The Dollar has rebounded from recent lows and many are now seeing at least some stabilization in the battered currency. January RBOB futures fell below the 50-day moving average and early price action indicated a confirmation of a bear flag pattern on the daily chart, barring a sharp reversal. While these technical indicators are bearish, the market is very oversold short-term, which could lend some price support to the market. Support now comes in at 2.17 and 2.13, while resistance can be found at 2.25 and 2.2850.

Soybeans – Bean futures are lower in overnight trading as a result of falling energy prices and a strengthening greenback. Demand for biofuels may be curbed by the recent decline in Crude Oil. The rising Dollar may slow exports – particularly to China – and could lead to a larger-than-expected carryout as a result. Poor growing weather in South America may give the market some support and help to counterbalance the bearish factors. After closing above the $11 mark in late November, this area has offered fairly stout resistance of late. The 9- and 18-day moving averages are close to crossing over to the downside, which could be considered bearish in the near term. On a positive note, the momentum indicator continues to stay in positive territory and is outpacing RSI. Support comes in at 1080 and 1068, while resistance can be found at 1105 and contract highs of 1114.

Dollar Index – The Dollar has rebounded strongly after making lows on November 23rd, and today's rally marks the fourth consecutive positive trading session. The greenback has been aided by a recovery from recent lows in the stock market and economic uncertainty in Europe. There is now talk that the U.S. government will be offering some relief to the beleaguered housing and subprime sectors, which has given the market a lift. Speculation that the Bank of Canada and Bank of England may both cut interest rates has also made the Dollar more attractive to investors. The March Dollar Index is trading above resistance at 76.10 in early trading, and a solid close above this area – which would also signal a close above the downtrend line – could bring more longs into the market. The market is swiftly approaching near-term overbought levels due to the recent run-up, which could slow some of the momentum it has recently built. Momentum is lagging behind the RSI, which suggests that consolidation may lie ahead. Support can now be found at 75.70 and 75.15, while resistance comes in at 76.45 and 76.75.

Rob Kurzatkowski, Commodity Analyst

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S&P Rallies on Government Bailout

Today's big story was the government's plan to send relief to subprime mortgage holders by freezing adjustable mortgage rates for qualified borrowers over the course of the next five years. This announcement came at around 2:00 PM Eastern and the markets promptly reacted with a 10-point gain over the course of the next hour, as bulls appreciated the thought of fewer foreclosures.

On the chart, the e-mini S&P 500 (ESZ7) is clearly above both the 15- and 25-day moving averages today after clinging to the 25-day average for the last few days and trading below the 15-day average for almost a month. The slow stochastic is presently indicating no reversal to the downside. The last two market lows had a slow stochastic at around the 20 level (August and late November).

Today’s market upswing was most likely driven by news in a way that a lot of reversals are, but it's probably too early to say if this is a true reversal. Tomorrow should help clarify things, as the unemployment rate is set to be released at 8:30 AM Eastern.

Mike Tosaw, Director of Education

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Stocks Rally on Subprime Bailout Plan

S&P – Stocks rallied on news that the White House is planning to offer relief to subprime and ARM borrowers. The plan would allow borrowers to refinance or freeze the rate of their loans. Freezing rates could decrease or at least stabilize foreclosure rates, which have been steadily climbing. Financial companies’ shares jumped on the news, as it could lead to strengthening balance sheets for companies with mortgage portfolios. Fixed income markets have priced in a 25 basis point rate cut by the Fed next week while some analysts are calling for a 50 basis point cut, which seems unlikely. The market is flat this morning as traders focus on the Non-Farm Payrolls number, which is expected to show the economy added only 70,000 jobs for the month, down from 160,000 in October. The unemployment rate is expected to rise to 4.8 from 4.7 percent the prior month. December e-mini S&P futures broke out above resistance between 1495 and 1500, and the market closed just below the 50-day moving average. A solid close above the average could bring in more buyers and force shorts to cover. Momentum has moved sharply higher in recent trading sessions and is outpacing RSI, which is now hovering near overbought levels. Support comes in at 1485 and 1465, while resistance can be found at 1525 and 1551.

Crude Oil – Crude Oil jumped above the $90 mark on President Bush's mortgage-aid plan. The plan, along with a Fed rate cut next week, could help the U.S. economy move at a much brisker pace than previously expected and increasing petroleum demand. Wednesday's inventory numbers failed to spark a rally because of the dim economic forecast, and the market continues along in a “no news is good news” mode because of the outlook. The mortgage relief plan and renewed tensions between the U.S. and Iran could change the negative bias the market has seen recently. February Crude rallied above the 50-day moving average and the $90 resistance mark, suggesting that the market has found some stability. Momentum is outpacing the RSI, which points to a bullish short-term bias. The RSI itself is oversold, which could have contributed to yesterday's rally. Support comes in at 88.45 and 86.85, while resistance can be found at 93.05 and 95.00.

Copper – Copper also benefited from the proposed mortgage bailout plan, with the market trading almost 7 cents higher overnight. A rebound in the housing sector could help demand, which has been sagging of late. A recovery in the U.S. economy could also help drive economic activity in China, whose main export partner is the U.S. The two nations are the largest users of Copper. March futures have found support near the $3 mark after falling from the $3.75 area since early October. The 9- and 18-day moving averages are close to crossing over to the upside, which would be a bullish indicator. Resistance at 3.21 will be a key test for the market and a close above this area could trigger a bullish reversal from the downtrend. Momentum is outpacing RSI, suggesting a bullish bias. Support comes in at 3.0300 and 2.9770, while resistance can be found at 3.1460 and 3.2100.

Rob Kurzatkowski, Commodity Analyst

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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

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Fed Day

S&P – Stock index futures continued their recent rally this morning ahead of the Fed announcement. The mortgage and banking sectors are still riding the wave of enthusiasm sparked by President Bush's mortgage bailout plan and capital infusions from outside investors. Many traders are looking for a quarter point rate cut and a positive statement from the FOMC, but not too positive, as it could close the door on further cuts. Also, any mention of inflation in the statement could have a negative impact on the market. Technically, the December e-mini S&P is coming in very overbought due to the recent rally. Momentum studies continue to outpace the RSI, which may help offset the negative bias. The market managed to hold yesterday's rally above the 50-day moving average, which sets a positive tone for the market longer-term. Support comes in at 1490 and 1465, while resistance can be found at 1525 and 1550.

Crude Oil – The Oil market has rebounded in early trading after starting off the week on a sour note. Petroleum traders have struggled to justify current prices levels, as inventories remain strong enough to meet the winter demand and the health of the U.S. economy remains a huge question mark. A quarter point rate cut and a positive statement from the Fed today may aid prices in the near term, but many traders remain skeptical on the longer-term price outlook for petroleum prices. The January Crude chart remains bearish, as the market continues to trade sideways after the price collapse, signaling the possibility of further downside. Momentum has rebounded slightly, but remains negative and is being outpaced by the RSI, which may be seen as bearish near-term. Support comes in at 86.85 and 84.05, while resistance can be found at 90.70 and 93.00.

Gold – Gold is trading lower this morning on a stronger U.S. Dollar and profit-taking, as precious metal prices have detached themselves from energy prices over the past couple of weeks. Gold has become a safe haven for traders who are pessimistic about the economy and have lost faith in the energy sector. The Fed rate cut has been priced in by currency traders, so it may not have a large impact on the Dollar. A bleak policy statement could trigger a sell-off in the greenback and support Gold prices. Since almost confirming a double top reversal on the daily chart, February Gold prices have rebounded over $30. Momentum has shifted gears and is now approaching positive territory after spending the past two weeks on the negative side. Support can now be found at 795 and 785, while resistance comes in at 825 and 835.

Rob Kurzatkowski, Commodity Analyst

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Oil Heads For Higher Ground on Fed Day

Crude Oil (CLF8) took a run above 90 with the bulls for a period today before settling back at 89.22 – still ahead 1.5% on the day. You can make a case either way as to whether the 25 basis point Fed rate cut had anything to do with the rally, but the bottom line is that Crude is back in positive territory.

The chart suggests that we're in a bit of a consolidation over the last few days. Since the beginning of the month, Crude has been bouncing between 85 and 91, and the market remains below both moving averages. If this is a move to the downside for the longer term, the next level of support is at 84, followed by stronger support at 78. To the upside, the market never managed to get above the 100 level a few weeks ago, marking the 99 area as resistance on that end.

Of course, the biggest news of the day was indeed the Fed rate cut. S&P futures reacted negatively with a close to the downside of 40 points (1478), setting up an interesting ride for the rest of the week with retail sales, initial claims, CPI, and PPI all still on tap.

Mike Tosaw, Director of Education

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Fed Disappoints Equity Traders

Dow – The Dow Jones Industrials fell by almost 300 points after the Fed lowered rates by a quarter point. While the rate decision was in line with consensus estimates, traders were disappointed by the language in the policy statement. Inflation is still very much on the minds of the central bank’s policymakers, indicating that the Fed may be hesitant to cut rates at its next meeting. Fed Fund futures were pricing in a 1/3 chance of a 50 basis point cut, making for a large contingent of disappointed traders when the announcement came down. Financial stocks were hit especially hard due to the recent belief that the Fed would help bail out the battered lending sector by injecting liquidity, which may not be the case after all. Traders sometimes forget that the availability of cheap money has contributed to the current mortgage crisis in a major way. The December Mini Dow fell below the 50-day moving average after three consecutive closes above the key average. This also created a bearish engulfing candlestick pattern, which suggests a possible reversal of the recent uptrend. Momentum has swung sharply lower, but remains in positive territory. The RSI also moved sharply lower and the very overbought levels coming into may have helped contribute to the sell-off. Support comes in at 13,400 and 13,200, which may be a litmus test for the market, as price stabilization at this level could provide longer-term technical support. Resistance can be found at 13,650 and 13,800.

Crude Oil – Like equities, the petroleum market was disappointed by both the quarter point rate cut and the language in the policy statement. Crude Oil traders view the cut as too little, too late for the slumping economy. Today's EIA inventory numbers are expected to show a drawdown of 750,000 barrels, but products are expected to make another strong showing, with gasoline and distillate stocks forecast to rise 1 million and 500,000 barrels, respectively. If the products figure holds up to estimates, the Crude figure itself is likely to have very little impact on trading. The $90 mark has acted as a barrier to rallies since the beginning of the month, with the exception of last Thursday. Because of the sell-off leading up to recent consolidation, the bias on the daily chart seems to remain to the downside. Momentum has edged higher, but remains negative for the moment. The RSI indicator has recovered from oversold levels, which could negate some of the short covering support the market has seen recently. Support comes in at 86.85 and 84.00, while resistance can be found at 90.50 and 93.00.

Soybeans – The USDA report yesterday confirmed many traders' suspicions that carryout will be lower than prior estimates, but not to the extent that the report showed. The report estimated August 31st inventories will drop to 185 million bushels, sharply lower than median analyst estimates of 197 million bushels. Continued poor growing weather in Argentina and parts of Brazil, along with higher South American Corn acreage – which could also steal away Bean acres – also helped support prices. January Soybeans are approaching overbought levels once again, which could stall further rallies. Momentum is beginning to lag behind the RSI, which suggests consolidation or a possible sell-off near-term. Support comes in at 1110 and 1080, while resistance may be found at 1150 and 1165.

Rob Kurzatkowski, Commodity Analyst

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Indecision Caps a Wild Week

S&P – Stock index futures are lower ahead of this morning's CPI release at 7:30 AM CST, which is expected to show consumer prices climbing at a brisk 0.6 percent pace. Given the Fed's new plan to inject liquidity into financial institutions directly and a somewhat hawkish policy statement, the higher inflation numbers may force the central bank to sit on its hands when it convenes next month. The spike in Crude Oil prices over the past few days may also weigh on the market. Industrial production – which will be released at 8:15 AM CST – is expected to show a modest 0.2 percent gain in production, up from a 0.5 percent decline last month. Given the uncertainty in the economy, traders may key on this figure more than usual, and a weaker-than-expected figure may suppress any chance of a rally. The December e-mini S&P has been unable to mount a rally beyond the 9-day moving average after failing to hold the 50-day moving average earlier this week. Momentum is showing bullish divergence from the RSI, which suggests that the market has a slight upside bias in the near-term. Support can be found at 1465 and 1440, while resistance comes in at 1495 and 1525.

Crude Oil – Crude Oil is little changed this morning, as petroleum traders also await the CPI figures. Like equity investors, Crude Oil traders are skeptical of the Fed's new plan to collaborate with European and Canadian central banks to offer liquidity to financial institutions. This lack of faith led to a sell-off late in the day yesterday, with traders showing little confidence that the Fed's plans will be able to turn around the slumping economy. If inflation pressures kick up, investors may again flock to physical commodities, making Crude Oil an attractive investment. Of course, this could be tempered by sagging economic conditions, as it could lead to lower demand. The January Crude chart has turned around over the past few days, with the market sustaining rallies beyond the $90 mark. Yesterday's weak close was an indication that traders may be treading lightly and not trusting that this is a true breakout to the upside. Momentum is currently near the zero line and is being slightly outpaced by the RSI indicator. Support comes in at 90.70 and 88.00, while resistance can be found at 95.00 and 96.25.

Gold – The Gold market is lower this morning on a stronger U.S. Dollar. Precious metals traders are moving cautiously ahead of this morning's CPI release and price action indicates that traders may be looking for tamer inflation figures. While sharply higher inflation numbers typically drive the Gold market, the relatively benign estimates for the CPI figure could cause the Dollar to rally, as the Fed would be less likely to slash rates going forward. The new plan by the Fed to deal with the banking sector directly may be viewed as a move to provide more liquidity and, at the same time, not cause the greenback to freefall as it has in the wake past rate cuts. February Gold is trading below the key psychological $800 support mark, but the critical support area the market must maintain is $785. A move below this figure could trigger a triple top reversal, which could spark an extended sell-off. It is difficult to tell if the daily chart has been building a triple top reversal or a wedge consolidation pattern, which could lead to more upside. This confusion may cause technicians to take a “wait and see” approach. Despite the second consecutive day of declines, the momentum indicator has moved higher and is outpacing the RSI, suggesting a short-term bullish bias. In addition to 785, support can be found at 755, while resistance comes in at 813 and recent highs of 822.80.

Rob Kurzatkowski, Commodity Analyst

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Sweet Corn

Corn – Corn prices jumped overnight on expectations that ethanol use will increase, after Congress on Friday passed a new farm bill which would mandate substantial increases in biofuel usage. The bill would push ethanol demand near production capacity and force the fledgling ethanol industry to find ways to use crop leftovers – such as husks and cobs – to produce the alternative fuel. Sagging Dollar prices have boosted export demand for Corn and related products, such as sweeteners, while lower feed stocks in Europe and Australia have also helped drive demand overseas. March Corn briefly made new contract highs in early trading and prices remain strong. The market is very overbought right now, but the overbought levels have been more than offset by strong momentum, which is outpacing the RSI indicator. Support for the March contract comes in at 425 and 410, while resistance can be found at 450 and 465.

Soybeans – Bean prices continue to rally in overnight trading on expectations that demand for U.S. exports will remain strong. The Dollar is trading a bit weaker in overnight trading, which could help give exports – which have already surpassed USDA estimates – a lift. China's appetite for Beans and Oilseed has not waned in the face of rising prices, and demand is forecast to remain strong through the end of the crop year. Crude Oil prices are lower in overnight trading and could hamper rallies, as it would adversely affect Bean Oil demand. January Soybeans remain overbought on the daily chart, with prices rising in 8 of the last 10 trading sessions. The overbought conditions may restrict further upside, but momentum remains very strong and is outpacing RSI in the early going. Support comes in at 1145 and 1114, while resistance may be found at 1175 and 1200.

S&P - Stock index futures are trading lower this morning on mounting fears of a severe slowdown or recession. While there is a contingent of analysts quick to use the R word, the fear of a severe slowdown is spreading in the same manner in which the credit crunch has spread to the broader economy. The Fed did little to boost investor confidence last week with a quarter point rate cut and its collaboration with European and Canadian central banks. New disclosures by Bank of America and Citigroup in relation to credit market exposure also shook investor confidence. Financial companies are leading the way lower this morning. After starting out with a boom, holiday sales are expected to disappoint and retail stocks have suffered this morning as a result. The December e-mini S&P is trading below both support at 1465 and the 18-day moving average this morning. A close below the 18-day could suggest that a recent high is in place. Momentum is showing bearish divergence from the RSI, suggesting more downside is definitely a possibility. Support can now be found at 1440 and 1406.25, while resistance comes in at 1483 and 1501.

Rob Kurzatkowski, Commodity Analyst

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Corn Exports Show No Letup

Corn – Corn futures posted solid gains yesterday on strong export data. Unlike the rest of the CBOT grain complex, the stabilization in the U.S. Dollar and rising prices did little to curb demand in Corn. Market chatter suggests that a host of factors may lead Soybean acres to increase significantly and take away from Corn acres in 2008, including attractive Bean prices, record Corn fertilizer costs and crop rotation. The ethanol hype over the past few years has also caused farmers to over-plant Corn, which has done ecological damage in the Midwest and may make the region more prone to drought conditions. Longer-term meteorological models suggests the La Nina weather pattern is picking up in the Pacific, which could cause dry conditions in both North and South America in the upcoming crop year. March Corn found support at the 9-day moving average over the past two trading sessions, showing that the market has maintained short-term positive momentum. Momentum is showing positive divergence from both price action and the RSI. Corn remains at overbought levels on the RSI, which may leave the market susceptible to profit-taking pressure. The bearish crossover on the stochastics on Monday was negated by the indicator lines crossing back up as a result of yesterday's move. Nonetheless, the indicator remains above the 80 percent mark, which gives further indication of overbought conditions. Support comes in at 430.25 and 411, while resistance may be found at contract highs of 443.25 and 465.

Coffee – Coffee fell for the second consecutive day on lack of buying interest in commodities and indications that Brazil's output may be larger than previously thought. The drought conditions in the key Coffee-growing regions may make much less of an impact on the 2008 crop than earlier projections, according to a joint report released by Fortis Bank and VM Group. The report is showing the possibility of a 50 million bag crop, trumping earlier estimates of 44 million bags. At this point, it is still too early to tell how the inclement weather has affected the crop in the infant stages of growth. Commodity fund activity was very light, with the inflationary GDP deflator figure being offset by a strong Dollar. In general, softs have gotten a lift from fund buying in recent weeks, as investment managers have diversified away from commodities that have made explosive moves over the year, such as metals and energies. Some of the selling may also be attributed to profit-taking ahead of year end, as well as the technically overbought conditions. The RSI, SMI and slow stochastics are giving overbought readings, with the latter two indicators showing bearish crossovers. The daily chart shows two consecutive spinning top candlesticks, which points to indecision among traders and may suggest a short-term reversal of the recent uptrend. March Coffee is still trading above the major moving averages and has not yet shown major evidence of a reversal, despite the claim made by the oscillators. Momentum has been resilient in the face of yesterday's sell-off. Support comes in at 132.50 and 131.25, while resistance can be found at 135.25 and 136.75.

Dow – Stocks finished higher in another choppy trading session yesterday. Buyers stepped in despite the first ever losses posted by investment banking powerhouses Bear Stearns and Morgan Stanley due to writedowns related to subprime loans. Leading indicators were weaker than expected at -0.4 percent, initial claims rose more than forecast and the revised GDP deflator showed a higher rise in prices than the preliminary release, all of which were equity bearish. Traders may key on the deflator figure, which paints a truer inflation picture, as it is shows an unfiltered view of the change in consumer prices, whereas the CPI data leaves out certain consumer staples. Online retailers are expected to have a stronger holiday season that previously believed, a fact that helped spark a rally in both tech and retail stocks. After the bell, RIMM posted strong earnings, which doubled last year's profits for the same period. The market will digest more inflation and income data with the release of the PCE incomes, spending and inflation figures at 7:30 AM CST. The March Mini Dow chart remains in a tight consolidation pattern, suggesting more downside may lie ahead. The 9-day moving average crossed the 18-day, which is a negative signal in the near-term. Momentum is showing positive divergence from the RSI, which conflicts with the chart to show a bullish bias. The RSI is quickly approaching oversold levels, which may support the market going into the New Year. Support comes in at 13185 and 12900, while resistance may be found at 13535 and 13645.

Rob Kurzatkowski, Commodity Analyst

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"Eventful" Few Days For Crude

Crude Oil – Oil futures are up for the third consecutive trading session on renewed Middle East tensions. Turkey has mounted a new offensive in northern Iraq against Kurdish rebels, which threatens to disrupt supplies. The Turkish government has indicated that the attacks against rebels will continue, but the military also stated that they will only attack rebel bases. While the offensive itself is not likely to result in damage to pipelines, traders fear that PKK rebels may launch terrorist-style attacks on key supply lines to retaliate against perceived American and Iraqi government complicity. Elsewhere, criminal gangs siphoning off a Nigerian Oil pipeline triggered an explosion that killed 40 and disrupted supplies from the Oil-rich nation, which pumps 2.5 million barrels a day. After a relatively calm month on the geopolitical front, these renewed tensions – along with the belief that OPEC has not yet made good on its promise to increase output as of November 1 – have traders thinking that U.S. supplies will be lower than seasonal norms. Tomorrow's inventory release – a day later than usual due to the Christmas holiday – is expected to show a drop for the sixth consecutive week. The February Crude chart is beginning to look more bullish, but traders may be cautious due to recent false breakouts and light volume, which has caused choppy trading conditions. Traders may be looking for a close above recent highs of 94.72 to validate an upside breakout and a late-day sell-off could scare away bulls. The momentum indicator has turned positive for the first time in two weeks, when it and the market turned higher before falling back. The indicator is showing bullish divergence from the RSI, suggesting a positive near-term bias. Support comes in at 92.35 and 89.15, while resistance can be found at 95.20 and 96.60.

S&P – Stock index futures are flat in early trading on news that retail sales leading up to the Christmas holiday have improved, but by less than many had expected. The retail sector is now gearing up for the post-holiday/New Year season, which starts today. Gift card use has increased significantly over the past several years, and retail giants like Best Buy and Wal-Mart are banking on their use, along with deep discounts, to help drive sales going into 2008. Many big box stores are expected to discount products more deeply than in previous years to clear away inventory, a recent trend that has made the post-holiday season almost as vital as the pre-holiday period. Other than retailers, it looks to be a quiet news day for the market with no economic releases and no early stories hitting the wires. The March e-mini S&P closed above the key 1500 on Monday, which may be considered an upside breakout. Traders may take the signal with a grain of salt, however, given the light volume and the perceived “Santa Claus rally” on Monday. More confirmation may be needed to attract bulls and stop out bears. Support comes in at 1485 and 1475, while resistance can be found at 1515 and 1530.

Soybean Oil – Bean Oil continues to rally on strong demand and rising spot prices in China, with the March contract making a push toward new highs. The strength in petroleum prices and a weaker Dollar could further support Bean Oil prices. China's appetite has not waned in spite of the stabilization of the greenback in recent weeks, with domestic output lower than expected and the government's plan to stockpile oilseeds. The March chart shows Bean Oil breaking out of recent congestion. Momentum is showing bearish divergence from both price and RSI, which could indicate the possibility that this may be a false breakout. The market is in overbought conditions on the RSI and stochastic indicators, signaling that the market may be susceptible to selling pressure. Support comes in at 47.33 and 46.45, while resistance may be found at 48.25 and 48.60.

Rob Kurzatkowski, Commodity Analyst

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New Year, Same Old Worries

Crude Oil – Oil futures are higher in early trading on continued geopolitical tensions and expectations that U.S. inventories will show yet another decline. Nigerian militants launched attacks against several police stations and tourist destinations in Port Harcourt, sparking fears of deadly exchanges between the military and criminal gangs in the Oil-rich city. The news comes on the heels of the Bhutto assassination, which threatens to destabilize nuclear-armed Pakistan. Crude Oil inventories are forecast to drop by nearly 2 million barrels, which would mark the seventh consecutive weekly decline. Meanwhile, a severe cold front is set to hit the Northeast, which is expected to boost Heating Oil demand. Despite the bullish news, the market may be susceptible to selling pressure due to the slumping economy and technically overbought conditions. The 9-day RSI is giving a reading north of 90 this morning and the stochastics remain in overbought territory. Momentum is beginning to flatten after jumping sharply over the past few trading sessions. Support can be found at 94.65 and 93.00, while resistance comes in at 97.92, 98.12 and 99.29.

Gold – Gold opens up the New Year on a strong positive note, buoyed by higher energy prices and a weaker U.S. Dollar. Monday's sell-off can largely be attributed to profit-taking before year end and a reaction to technically overbought levels. Economic uncertainty and inflation fears are likely to drive the market in the near-term. With the stock market showing chinks in the armor and treasuries trading at relatively high levels, Gold ETFs are likely to continue seeing a cash influx, which would drive physical demand for the metal. Traditional commodity funds are also likely to power the market, with traders once again talking about the possibility of prices reaching $1,000 an ounce. The market is still a long way from this mark and a series of major events – such as economic meltdowns in the U.S. and Europe – would likely need to occur for the market to make the ascent to four-digit prices. The 9-day RSI has fallen back from the low 90's, but February Gold remains at overbought levels. While these overbought levels may not lead to a sell-off, the market may consolidate and labor in moving higher. Momentum remains strong and is outpacing the RSI, suggesting a positive bias. Support comes in at 825 and 810, while resistance can be found at 855 and 880.

S&P – Stocks try to ring in the New Year on a positive note, with shares rising in European trading. This morning's release of construction spending data and the ISM Index are both forecast to show weakness, spurring the pre-market rally. Traders are betting that weakness in the figures – set to be released at 9:00 AM CST – will force the Fed's hand in lowering rates. The December FOMC minutes will be released at 1:00 PM CST and will give investors more insight into the central bank's mindset. The early part of the year figures to be volatile due to the uncertainties facing the economy, which could result in more funds being shifted to the sidelines by traders not willing to stomach the difficult trading conditions. The March e-mini S&P has held support in the 1475-1480 area, but a violation of this level could bring about a test of the 1450 area in the near-term. Momentum is showing slight upside divergence from the RSI, which sets a mildly bullish tone for the remainder of the week. Support comes in at 1471 and 1445.75, while resistance can be found at 1511 and 1530.

Rob Kurzatkowski, Commodity Analyst

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And the Market Volatility Continues

Dow – The Dow almost let early gains slip away in yesterday’s trading session, but in the end managed to post a modest gain of almost 13 points. The afternoon plunge was led by disappointing auto sales figures for the month of December. The battered U.S. auto industry was hit hard by tighter lending standards and the rising price of gasoline. Stock traders have been gun shy over the past few trading sessions on worries that the rising cost of petroleum could further dampen the U.S. economic outlook and negate any positive impact that could result from the recent rate cuts. Today’s focus will shift to the labor market after the release of non-farm payrolls at 7:30 AM CST. The report is expected to show the labor market slowing and adding only 75,000 jobs in December, down from November’s 94,000 new jobs. The unemployment rate is forecast to rise to 4.8 percent and hourly earnings are expected to fall to 33.6 from 33.8. The tight labor market and rising cost of gasoline may curb American consumers’ appetites for non-necessities like electronics. Right now, the long- and short-term outlooks on the Dow chart give vastly different views. The spinning top candlestick formed by yesterday’s price action indicates that the market may bounce in the near-term. But the weekly Dow chart (see cash index chart below) shows a more ominous outlook, as the market may be in the midst of forming a head and shoulders reversal pattern. The neckline of 12,787 has acted as support the last three times the market traded down to it, but a violation of this area could spark sell-offs to Fibonacci retracement support near 11,515. Momentum is showing bearish divergence from the RSI, setting a short-term negative bias. Support comes in at 13083, 13022 and 12967, while resistance can be found at 13198, 13254 and 13314.

Sugar – Sugar futures surged on reports that Indian production of the sweetener will fall well short of lofty expectations. Bullish sentiment in commodities as a whole and a bullish petroleum inventory report fueled strong speculative buying. Index funds are expected to step up their buying over the next week to mimic the DJ-AIG Commodity Index, which suggests that spec buying could remain strong in the near-term. The fund activity resulted in shorts getting squeezed out of the market and triggered a large number of buy stops. Today’s bias may shift to the bears, as the market has already run through a good number of buy stops and new buyers may be hesitant to enter the market without some pullback. Longer-term fundamentals have improved on a recent increase in South American demand and lower-than-expected Southeast Asian production, but overall the market remains well-supplied. The March Sugar chart shows a breakout from the recent congestion pattern on late buying. The March contract seems to have established 10.70 as near-term support, springing higher after violating the area briefly yesterday. The momentum indicator is outpacing the RSI, pointing to a possibly bullish short-term bias. Support comes in at 10.90, 10.54 and 10.35, while resistance can be found at 11.45, 11.64 and 12.00.

Gold – Gold continued its historic march to new highs yesterday, bolstered by stronger commodity prices and a slumping Dollar. Traders are beginning to talk about the Fed being backed into a corner, almost forced to lower rates despite inflationary pressures. Commodity prices have rallied over the past several years, mainly due to forces outside of the U.S. economy, such as China’s explosive growth. Prices of raw materials may continue to climb in the event of a U.S. recession, sparking global inflation. In this scenario, Gold and other precious metals may begin to appreciate at an even quicker pace than energy prices. This view could be tempered by the opinion that a U.S. recession could easily spill over into the global economy, trimming the demand for raw materials in the very same developing economies that have been driving the commodity bull market of late. The February Gold chart remains bullish, but oversold. The market has almost reached its objective price of 890 after breaking out of the wedge consolidation pattern on the daily chart. Support comes in at 866.20, 859.50 and 843.00, while resistance can be found at 875.80, 882.50 and 892.20.

Rob Kurzatkowski, Commodity Analyst

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Small Caps Feel the Heat

Russell – Stocks tumbled hard Friday on a Non-Farm Payrolls number that surprised even the most pessimistic of investors. Not only did the economy only add 18,000 jobs for the month of December – far short of consensus estimates of 70,000 – but the unemployment rate jumped from 4.7 to 5.0 percent when the market was expecting no higher than 4.8 percent. These numbers underscore the economic pressures that the stock market has been feeling as of late. Corporate earnings have been fairly solid to date with the exception of companies with considerable subprime exposure, but forward guidance has been revised down, indicating that 2008 may be a tough year for corporate America. The Russell 2000 underperformed versus the major indexes in 2007 and the New Year may bring more bad news for the small cap sector. This is not surprising given that the Russell has outshined the broader market since the second half of 2004. With the lending market feeling the crunch of the subprime fallout, smaller cap stocks may find loans harder to come by than larger, more established institutions. This could result in many of our nation's smaller companies not being able to weather the storm in the event of a prolonged economic downturn or recession. The cash Russell 2000 index formed an ominous double top formation on the monthly chart, suggesting that the market may see significantly more downside during the year. The pattern measures a move to the second Fibonacci retracement support of 590. The March e-mini Russell suffered a near-term setback, falling below support at 735.00. The 9-day RSI has fallen into oversold territory, which could lend some support to the market in the near-term. Support comes in at 715.20, 703.10 and 684.20, while resistance can be found at 746.10, 765.10 and 777.10.

Gold – Gold futures are slightly lower this morning on a stronger U.S. Dollar and a decline in Oil prices. Both this morning's early selling and Friday's lackluster trading seem to have been driven by profit-taking. The fact that the market stayed in the red on Friday highlights the fact that buying pressure over recent weeks may have caused the market to become a bit strained. Fundamentals remain overwhelmingly bullish for the precious metals market, so the action or lack thereof over the past two sessions may be signaling consolidation before the market makes another push to historic highs. The daily February Gold chart remains very bullish and may be forming a bull flag if the market remains passive today. The RSI and stochastic indicators are signaling very overbought conditions, which is likely driving the profit-taking. The overbought readings may make it difficult for the market to break new highs in the near-term without cooling off first. Support comes in at 857.90, 850.00 and 843.10, while resistance may be found at 872.60, 879.60 and 887.50.

Crude Oil – Oil futures are lower for the third consecutive trading session on unseasonably warm weather across much of the eastern half of the country. Here in Chicago, temps are expected to reach highs in the low 60s – golf weather. This warming pattern is expected to reach the Northeast, which is likely to curb Heating Oil demand significantly. Oil traders have been locking in profits over the past two sessions due to overbought technicals and a lack of meaningful news on the geopolitical front. The slowing state of the U.S. economy has traders in a lull over the past three sessions, but has yet to cause any heavy selling pressure. Thursday's price action formed a spinning top reversal pattern, which may be contributing to some of the technical selling we have seen. The market has honored the $97 mark as support both Friday and in the early going today, but a sharp move below this level could bring more selling pressure. The 9-day RSI is falling back from overbought levels and is now being outpaced by the momentum indicator. Support comes in at 96.87, 95.83 and 94.56, while resistance may be found at 99.18, 100.45 and 101.49.

Rob Kurzatkowski, Commodity Analyst

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Energy Traders Eye Inventory Figures

Crude Oil – Oil futures are higher ahead of this morning's EIA inventory report, which is expected to show a drop of 2 million barrels for the week. After falling sharply over the past two months, inventories are expected to be at their lowest levels in three years. Militants in the Oil-rich nation of Nigeria have threatened attacks, adding to the already strong buying interest. It appears that the extremist group may be targeting the nation's Oil supply according to communications from the group's leader. The drop in U.S. inventories over the past two months has offset slower demand amidst the glacial economic pace of late. February Crude remains bullish on the daily chart, but the market may be at a turning point. Rallies above the $98 mark could spur buying activity, while sell-offs below support at $95 could trigger stops and increase the speed of the correction. Momentum continues to outpace the RSI, which is bullish in the near-term. Support comes in at 95.21, 94.09 and 92.93, while resistance may be found at 97.49, 98.65 and 99.77.

S&P – Stocks are looking to recover this morning after suffering yet another setback yesterday. The e-mini S&P has only been able to close in positive territory once this year, and even that was a meager gain of just 0.25. Yesterday's pending home sales figures were much worse than expected – coming in at -2.6 percent versus expectations of -0.6 – hinting that the housing slump may be far from over. The market was looking for a weak figure to force the Fed's hand in lowering rates, but the size of the decline irked many traders. Rumors that Countrywide may be declaring bankruptcy – vehemently denied by the company – sent the markets tumbling late in the day and underscored the uncertainties that remain in the credit markets. Consumer credit came in much higher than expected, which puts the Fed in an interesting predicament. Consumers are racking up debt at breakneck speed, which, along with inflationary commodity prices, gives the central bank a disincentive to lower rates. On the other hand, economic figures are increasingly ominous, indicating a need for lower rates. Fed fund futures point to a 31 percent chance of a quarter point rate cut and a 68 percent chance of a half point cut. March e-mini S&P futures closed below support at 1420, suggesting the market may see continued selling pressure in the near-term. The RSI and stochastic indicators are somewhat supportive for the market, currently showing oversold conditions. Support comes in at 1380.75, 1364.50 and 1336.00, while resistance may be found at 1425.50, 1454.00 and 1470.50.

Bonds – Bond futures are slightly higher this morning, supported by uncertainty in the equity markets. Due to the poor performance of stocks in recent weeks, fixed income products and commodities have seen strong capital inflows in a flight-to-quality scenario. Bonds may see selling pressure in the coming weeks if commodity prices remain strong, due to inflation concerns. Something will have to give, as these markets typically have an inverse price relationship and the correlation seen over the past several weeks has been atypical. March Bonds are overbought on the daily chart, but momentum remains strong nonetheless, signaling the possibility of more upside. Prices are approaching late November highs, which may bring consolidation or a small correction. Yesterday's price action formed a spinning top candlestick, signaling a possible short-term reversal. Support comes in at 117-22, 117-02 and 116-16, while resistance may be found at 118-28, 119-14 and 120-02.

Rob Kurzatkowski, Commodity Analyst

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OPEC Comments Keep Crude Market in Check

Crude Oil – Oil futures pulled back in trading yesterday despite a very bullish inventory figure – a draw of 6.8 million barrels that easily eclipsed consensus estimates of a 2 million barrel draw. However, Gasoline inventories saw their strongest build in over a year with a jump of 5.22 million barrels, offsetting the news in Oil. The state of the U.S. economy was very much on the minds of traders, with the latest blow coming from Goldman Sachs in a recession prediction for 2008. Stocks did manage to do an about face late in the day to post the best gains of the year thus far, but this was largely due to value buying and short covering amid oversold conditions. Each subsequent economic release seems to show conditions deteriorating to the point that even the most bearish of analysts are left scratching their heads. Commodities were mixed on the day, but indications point to another stellar year on concerns of highly inflationary conditions worldwide, not just in the U.S. OPEC's statements this morning indicate that the cartel is worried that a U.S. slowdown could easily spill over to the world stage. All of these factors are leading to a growing sentiment in the market that the threat of lower fuel consumption globally may influence traders to diversify away from petroleum and move to more traditional inflation hedges, such as precious metals and food-related commodities. Nonetheless, Crude Oil does still appeal to many traders who believe that tight global inventories will be able to support these lofty price levels and possibly even push prices above $100 a barrel. February Crude has drifted below 95.00 this morning and a close below this area could lead to a test of the 90.00 mark. Momentum remains strong in the face of the recent decline, but the divergence between the indicator and RSI is now rather insignificant. The market is flirting with the 18-day moving average and a close below the average would be a bearish signal in the near- to mid-term. Support comes in at 94.74, 93.80 and 92.19, while resistance can be found at 97.28, 98.90 and 99.83.

Dow – Stock index futures are coming in lower after posting the best gains of the New Year yesterday. The late buying was influenced by comments from Berkshire Hathaway that the company sees corporate earnings holding up in 2008, despite the tough economic conditions. Capital One slashed its growth forecast, becoming the latest victim of the credit crunch. The market will be keeping a close eye on today's initial jobless claims figure after last week's bombshell non-farm number. Scheduled for release at 7:30 AM CST, Initial Claims are forecast to rise to 340,000 – up from 336,000 the prior week – but it would not be surprising to the figure come in closer to 350,000. A slightly higher figure may actually be just what traders are looking for, with the belief that it could lead to expansionary policy from the Fed. Wholesale inventories at 9:00 AM CST are expected to show a 0.4 percent increase in November after a flat October figure. Yesterday's rally did little to improve the March Mini Dow chart, which remains very bearish over the longer-term. A close above 12845 may be considered bullish in the near-term and could bring about a test of 13250, but the market has a lot of work to do in order to change the longer-term technical outlook. Adding to the positive short-term technicals, momentum is showing strong divergence from the RSI, suggesting further short covering and bargain hunting may be seen over the next few trading sessions. Support comes in at 12599, 12452 and 12355, while resistance can be found at 12843, 12940 and 13086.

Gold – Gold is trading lower this morning on heavy profit-taking due to technically overbought conditions and lack of new buying interest. Lower energy prices and OPEC's somewhat grim outlook on the state of the global economy point toward tamer inflation, which has also influenced trading. Fundamentally, nothing has changed, suggesting that this could be the start of a healthy correction. The weak close after sharp rallies early in the day formed a spinning top candlestick, which is not necessarily bearish in and of itself but could signal a near-term reversal if the market is not able to recover from early losses. Closes below 870 and 859.40 may offer confirmation of the near-term reversal. The 9-day RSI and slow stochastics remain at very overbought levels, adding to the downside pressure. Momentum remains very strong, suggesting that a reversal may be short-lived. Support comes in at 872.20, 862.70 and 851.60, while resistance may be found at 892.80, 903.90 and 913.40.

Rob Kurzatkowski, Commodity Analyst

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Wheat Continues Short-Term Downward Trend

Wheat continued its slide to the downside today, with the price for the March contract (WH8) resting at 882.5 at of the time of this writing – a 0.73 percent drop on the day. March Wheat had been as low as 878 in early trading before bulls came in and took the price up around 907. But just before the noon hour, the bears reasserted their muscle and slowly brought the price down to its current level as the afternoon progressed.

On the chart, the moving averages crossed yesterday and Wheat remains below both of them today. If the contract reverts back to that mean, the market could be in position for a nice gain as bulls may consider this level a potential double bottom – there is another level of support around this area on 12/31. On the stochastic indicator, Wheat is not near a turnaround level to either side, with bears looking at the highs back in early October. Over the longer-term, the market could be approaching resistance at 962 (October), 986 (December), and 950 (January).

In other news, the U.S. stock market made significant gains today as the March S&P contract (ESH8) ended the day with a 12-point gain. Fed Chairman Ben Bernanke's indications that there may be a rate cut at the end of the month spurred the positive moves in the equities. Later in the day, it was announced that Bank of America is in talks to acquire Countrywide Financial.

Mike Tosaw, Director of Education

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USDA Sparks Wheat

Wheat – Wheat is close to limit up once again in overnight trading due to a far lower-than-expected seedings figure in the latest USDA report. This news was exactly what Wheat bulls were looking for with the market nearing key technical support levels. The lower U.S. acreage – specifically in the hard, red crop – coupled with continued dry weather caused by the La Nina weather pattern could significantly reduce the size of the winter crop and pressure dwindling stocks. The lower seedings figure could also more than offset what is seen to be a possible record Australian crop. Look for spreads between the old crop and new crop to possibly narrow due to the bullishness in the winter Wheat figures. July futures rallied to new contract highs of 836 overnight, which would signal a bullish breakout from a wedge pattern if the market is able to hold these levels. The measured move on a breakout could spark rallies beyond the $9 mark. Momentum has shifted back into positive territory as a result of the nearly 60-cent rally over the past session and a half, albeit to a relatively tame +25. Support comes in at 775.50, 744.75 and 714, while resistance can be found at 836.25, 866.50 and 897.25.

Crude Oil – Crude Oil futures try to recover after dropping three consecutive trading sessions and six of the last seven trading days. The slumping U.S. economy has the market falling despite bullish inventory data and geopolitical news. Oil bulls grew worried when OPEC publicly stated its concern last week that an extended period of slow growth or recession could easily spill over to the global economy. The market has found some price support after President Bush denounced Iran as a state sponsor of terrorism, reacting to recent actions by Iran's navy in the Strait of Hormuz seemingly aimed at provoking an incident between the two nations. These tensions – along with instability in Nigeria and the Turkish/Kurdish conflict – could act as price support even as the U.S. economy slows. March Crude closed below the 50-day moving average on Friday, which could be viewed as bearish longer-term if the market is unable to bounce back above the average. Momentum had shifted into negative territory briefly, but is now on the positive side due to price strength in overnight trading. Oil is approaching oversold territory, which could offer price support over the near-term. Support comes in at 91.29, 90.41 and 89.02, while resistance can be found at 93.55, 94.95 and 95.82.

S&P – Stock index futures are higher overnight on increased expectations of a Fed rate cut. Fed Fund futures are now pointing to a 66 percent chance of a quarter point cut, and a 34 percent chance of a half point. IBM stated that the company's quarterly earnings will easily surpass analyst estimates, which has helped lift futures in the early going. The statement, along with an upgrade of Apple, has more than offset negative guidance from Sears Holdings. The market will digest earnings data from Citigroup tomorrow and Merrill Lynch on Thursday, which could offer downside surprises. Today is a report-free day for the market, but the week will give investors plenty of data to mull over, including CPI and PPI inflation data, retails sales and housing data. The March e-mini S&P looks to be in a bearish consolidation pattern on the daily chart, pointing to the possibility of more downside. A close above the 1455 mark could be needed to swing sentiment to the bulls. Support comes in at 1397.50, 1387.25 and 1374, while resistance can be found at 1420.75, 1434 and 1444.25.

Rob Kurzatkowski, Commodity Analyst

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Corn Backs Off But Fundamentals Still Bullish

Corn – Corn shed some of its recent gains on profit-taking due to technically overbought conditions. The fundamental picture remains very bullish thanks in part to the lowest inventory figures since 1984. The grain markets have been aided by very strong overseas demand, along with a weak U.S. Dollar. While domestic prices are very high, the slumping greenback has made Corn a cheap import for countries with relatively strong currencies. China's demand has not waned and it is unlikely that high prices would due much to curb the nation's appetite for the grain, as we have seen with other commodities like copper, nickel and crude oil. Attractive Soybean prices may cause farmers to divert acres away from Corn, much the same way Corn diverted acres away from Beans this past crop year. March Corn remains very overbought, closing yesterday's trading at 91 percent on the 9-day RSI. This may put some downward pressure on the Corn market in the form of profit-taking, but the chart remains bullish barring some sort of gap reversal. Support comes in at 493, 498 and 505, while resistance can be found at 517, 522 and 529.

Gold – Gold futures continue to shine this morning on a weaker U.S. Dollar and lower stock index futures. The sagging equity markets and increased likelihood of future rate cuts by the Fed have given traders little incentive to dump positions. Physical demand for Gold remains very strong, as evidenced by the purchase of 10.75 metric tons by the StreetTracks Gold Trust ETF yesterday. The outlook for precious metals remains rosy due to the lack of alternatives, as global equities have been slumping, some other commodities are trading at levels difficult to justify based on fundamentals and treasuries/fixed income instruments lack the inflation hedge feature of commodities. February Gold remains very bullish on the daily chart, but yesterday's choppiness did form a spinning top candlestick, indicating the possibility of a near-term reversal or consolidation. The technically overbought conditions could influence traders to take profits. Support comes in at 892.40, 881.40 and 869.60, while resistance can be found at 915.10, 926.90 and 937.90.

10-Year Notes – March 10-Years are trading at new contract highs on the sell-off in equity futures and the continuing mortgage crisis. The treasury markets have seen a huge inflow of funds from nervous equity traders over the past few weeks. The subprime crisis – fresh in the minds of traders due to Citigroup's earnings release this morning – has certainly aided the “flight to quality” effect the market has seen. Today's retail sales report is expected to show zero growth despite the holiday shopping season, and could give further evidence of a need for the Fed to slash rates once again. The market has already priced in steep rate cuts from the Fed, so the central bank will have to act swiftly in order to appease fixed income bulls. The market will also have PPI data to mull over today, and a sharp increase in prices could cause prices to back off. If March Notes are able to hold rallies above 115-23.5, it could signal a breakout and add to the bullishness the market has seen. The RSI is beginning to creep toward overbought territory, which may inhibit further advances. Support comes in at 115-03, 114-22 and 114-12, while resistance can be found at 115-26, 116-04 and 116-17.

Rob Kurzatkowski, Commodity Analyst

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Demand Uncertainty Keeps Crude Prices in Check

Crude Oil – Oil futures fell yesterday on a poor economic showing and Saudi comments regarding increased production. Retail sales showed a decline of 0.4 percent versus expectations of zero growth for the month of December. But a much more troubling figure for Crude bulls was a report by the Commerce Department showing that purchases at service stations were down by 1.7 percent. It certainly appears that consumers are beginning to feel the pressure from all sides, with a bleak employment picture, record-high fuel costs and the credit crunch leading to tighter lending standards. All of these factors point toward a decrease in spending power for the American consumer, which is especially troubling considering the fact that the economic growth seen after the "dot com bust" was driven by consumers spending at or above their means and a robust housing sector – both of which have crashed and burned. A slowdown in corporate growth would also likely lead to slower petroleum usage and may cause the International Energy Administration to cut their demand forecast for 2008. Saudi Oil Minister Ali al-Naimi commented that it may be time for OPEC to increase production. While this defies logic – potentially leading to a price collapse in the near term – a production increase could aid the global economy and lead to stronger future demand. This long-range move would probably provide an opening to central banks around the world to implement expansionary policies due to a lowered threat of inflation, softening the blow of a downturn. Today's EIA inventories numbers are expected to show a build of around 1 million barrels of Crude Oil, a 1.55 million barrel build in distillates and a 2.5 million barrel build in gasoline stocks. The March Crude Oil chart negated a short-term reversal pattern to close below the 50-day moving average, which could be seen a bearish longer-term signal. The chart also appears to show the formation of a bearish consolidation pattern, which could spark sell-offs toward $86 in the near-term if validated. One positive technical factor is the bullish divergence between the momentum and RSI indicators, but the divergence is only very slight. Support comes in at 90.22, 88.94 and 87.02, while resistance can be found at 93.42, 95.33 and 96.62.

S&P – Stock indexes suffered heavy losses due to the poor showing on the economic front and the inability of Citigroup to reassure investors. The banking giant reported a loss of $8.83 billion and slashed its dividend by 41 percent. The dividend cut may be the far more troubling of the two figures, as it could be a harbinger of more write-downs related to CDO's and other mortgage-backed investments. Merrill Lynch, State Street and Bank of America all hinted at further losses due to subprime investments as well. The decline was not as bad as it could have been, as the poor retail sales figures and tame PPI data did somewhat buffer the slide in equities, fostering a perception among traders that the data could be the tipping point toward a half point cut by the Fed. Today is a report-heavy day, starting with the release of CPI data at 7:30 AM CST, which is forecast to rise 0.2 percent for both the aggregate and core figures. Industrial production released at 9:00 AM CST is expected to drop 0.2 percent, with a capacity utilization of 81.2 percent. Perhaps the most anticipated report of the day is the Beige Book at 1:00 PM CST, which will give traders some insight into the mindset of the Fed and provide a clearer picture of what economic datasets may influence the central bank more than others. The March e-mini S&P broke out of a bearish triangle pattern on the daily chart, suggesting the futures may test the 1350-1355 area. The market failed to establish support around the 1400 mark, which may cause traders to be wary near key psychological support areas in the near future. Support comes in at 1363.75, 1349 and 1319.75, while resistance can be found at 1407.50, 1437 and 1451.50.

Wheat – Wheat futures got a shot in the arm from freezing temperatures across the eastern portion of the Midwest. New crop futures have surged relative to the old crop due to a decrease in acres sown and strong early tenders. Farmers may have sown Wheat at a lesser depth than in prior years in an effort to get higher yields and speed up emergence – a risky strategy that further exposes the crop to the elements, such as this latest frost. July Wheat made new contract highs, giving confirmation to Monday's breakout above 830. Due to slumping prices prior to the USDA report, the RSI still has room to run before the market encounters overbought conditions. This has really been a dynamic week of trading, with the July contract looking as though it was going to take out support and then breaking out to new highs. Support comes in at 824, 796 and 775, while resistance can be found at 873, 894 and 922.

Rob Kurzatkowski, Commodity Analyst

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Market slides after with Bernanke's comments

S&P – Stock index futures are pointing higher on plans that President Bush will unveil a new stimulus package today. In testimony before the Finance Committee yesterday, Fed Chairman Ben Bernanke urged the President and Congress to take measures to get consumer spending and the housing market back on track. This caused the market to slide yesterday, but the fact that both Bush and Congress responded gave investors hope that new legislation may aid an economic rebound. GE and IBM raised their overseas growth forecasts, suggesting that large multinationals may be able to cope with a domestic downturn and use the slumping Dollar to their advantage. Leading indicators and consumer confidence figures will be released at 9:00 AM CST. Leading indicators are expected to show a -0.1 reading, but the figure may surprise to the downside given the grim results in recent economic releases for December. Consumer confidence is expected to slide to 74.5 percent, down from 75.5 the prior period. The confidence figure may also surprise to the downside due to all of the bad press the economy has received recently. Yesterday’s sharp slide gave confirmation to Wednesday’s bearish breakout on the March e-mini S&P chart and may be an indication of more downside in the near future. Even with the chart rally pre-market, the index would have to climb another 40 points before technical indicators would turn positive in the short term, and the market would have to rally over 100 points for a longer-term shift. Momentum is showing bearish divergence from the RSI, indicating today’s rally may be a "dead cat bounce." Support comes in at 1319.50, 1299 and 1264.25, while resistance can be found at 1374.50, 1409.50 and 1430.

Crude Oil – The Oil market has rebounded in tandem with stocks this morning in hopes that a stimulus package may help boost demand. The market is also aided by OPEC backing off of recent comments that output may be increased. Nonetheless, fundamental factors outside of geopolitical events remain bearish in the near term. Consumers are showing their shaky outlook on the economy at the pumps, with retail gasoline sales falling in December. This could lead to larger builds in gasoline stocks and the lower refinery utilization points to possible builds in supplies in the coming weeks. Weather maps for the next 90 days point to higher-than-normal temperatures across much of the nation, including the Northeast, which mainly uses Heating Oil instead of Natural Gas. The March Crude chart shows further consolidation, pointing to a bearish bias. Momentum is being outpaced by the RSI, suggesting a bearish near term bias. How the market behaves if and when it reaches the key 87.00 support area will likely determine the longer-term market direction. Support comes in at 88.85, 88.12 and 87.15, while resistance can be found at 90.55, 91.52 and 92.25.

Gold – Gold futures are holding their heads above water this morning, despite weakness in other precious metal prices and the rally in equities. Fresh buying activity remains strong, but has been overpowered by profit-taking in recent trading sessions. Physical demand remains strong, which has stopped a larger correction. The CPI report showed inflation growing at a much quicker pace than previously thought, which could keep demand strong. Fed fund futures are now pretty much factoring a half point rate cut later this month when the FOMC meets, and there is an increased likelihood of a three quarter point cut, which could lead to an extended slide in the Dollar. The recent reversal pattern on the daily chart suggests the market may test the first Fibonacci retracement, which coincides with early November highs of 855.00. Momentum is outpacing RSI, indicating that the weakness over the past few sessions has been a healthy correction. Support comes in at 873.30, 866.10 and 857.00, while resistance can be found at 889.60, 898.70 and 905.90.

Rob Kurzatkowski, Commodity Analyst

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Panic Rocks Equities

S&P – e-mini S&P futures are down almost sixty points this morning, following sharp declines in European and Asian markets over the past two trading sessions. The fire sale began yesterday with the thinking that the U.S. economy now has a 50-50 chance of slipping into recession. Investors became especially pessimistic after listening to Fed Chairman Ben Bernanke’s testimony before a Congressional panel last week, urging the President and Congress to act swiftly to aid consumer spending and the housing market. The market was less than satisfied with the stimulus package unveiled on Friday, viewing it as too little, too late. The very idea that the economy would need this sort of kick-start has really irked traders overseas. This week figures to be extremely volatile due to the panic kicking off the week and the high volume of earnings releases. This will be a very light week of economic reports, which may give traders a bit of a reprieve. The March e-mini chart is a disaster after gapping sharply lower. Momentum has fallen to an overwhelmingly bearish -208 in the early going. The RSI is now giving extremely oversold readings, which may slow the sell-off if it can attract bargain hunters. Support now comes in at 1250 and 1225, while resistance can be found at the top of the gap of 1319.

Crude Oil – Oil futures are sharply lower on panic selling in the equity markets. The sharp declines seen in Europe and Asia are extremely troubling to energy bulls, as they signal a greater chance of a global slowdown. The increasing demand in developing nations has contributed greatly to the strength in energy prices. A curbing of this demand, along with easing in other commodity prices, could lead to much slower inflation that previously forecast, making Crude Oil much less attractive as an inflation hedge. The U.S. Dollar is still spiraling out of control, which may give some near-term price support to the market, or at least act as a buffer to sell-offs. March futures are well off of overnight lows at the moment and it appears that declines below 86.00 have attracted some buying interest. Barring a sharp turnaround, today’s sell-off could signal a downside breakout to the consolidation pattern formed over the past three trading sessions. Momentum has moved lower at a slower pace than prices, suggesting the possibility of some short-term strength. Support comes in at 85.40 and 82.60, while resistance can be found at 89.00 and 91.60.

Gold – Gold futures are sharply lower this morning, but are well off of session lows that tested the $850 mark. The inflation picture seems a bit tamer at the moment due to the possible slowdown globally, making precious metals and other commodities somewhat less attractive to speculators. The recent wave of profit-taking has contributed to the initial price weakness seen in the session. Even with inflation pressures easing, Gold may hold its own in the near term due to the lack of opportunity in other investments. February Gold attracted strong buying interest after the market retreated to the 850 mark. The February contract is trading below the 18-day moving average at the moment and a close below the average could signal that a near-term high may be in place. A recovery above the average would likely form a bullish hammer and may violate a downside breakout on the chart. Momentum is outpacing the RSI, suggesting a slightly bullish technical bias in the near-term. Support can be found at 850 and 835, while resistance may be found at 870 and 890.

Rob Kurzatkowski, Commodity Analyst

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Surprise Rate Cut Buzz is Short-Lived

Dow – Continued economic uncertainty and a downward earnings estimate revision from Apple have pushed stock index futures lower pre-open. Yesterday’s surprise three quarter point rate cut from the Fed managed to temporarily soothe investors’ worries, but many traders viewed the move as several weeks too late. Stocks tumbled in Europe, as central bankers at the Bank of England and European Central Bank only hinted at future rate cuts while traders were banking on similar emergency action from the two. Today will likely be another volatile session, compounded by the fact that there are more big names – Motorola, eBay, Pfizer and General Dynamics among them – reporting quarterly earnings. There has been some pre-market chatter suggesting that all of the previously mentioned companies may post disappointing figures or revise future earnings downward. The panic selling seen yesterday caused the March Mini Dow to break through near-term support. The cash index fell below the key weekly support area of 12,100, which would be seen as bearish over the near term if the market is unable to rally beyond the figure. One positive that can be taken from yesterday’s sell-off is that the cash Dow did come close to reaching the downside target of the head and shoulders pattern created on the weekly chart. The move suggests that the market may be in store for more of a harsh, quick correction than an extended slump. Support comes in at 11500 and 11250, while resistance can be found at 12400 and 12550.

Sugar – The Sugar market has been on the same wild ride as stocks in recent days. After spiking as high as 13.09 in the March contract, the market has since dropped 150 points. The ICE exchange restricted a large Sugar trading company from Brazil from placing orders, which led to some panic selling as rumors swirled of a large block sell order. Fundamentally, world supplies of the sweetener remain on the high side, suggesting that the recent upward move may have been due to “hot money” entering the market and needing to find a home, as well as funds trying to balance commodity portfolios. The extreme volatility the market has seen over the past three sessions seems to have scared away some traders and resulted in a relatively tight range this morning. The pattern on the daily chart suggests a bearish engulfing reversal with wild price moves typically seen in “boom and bust” markets. March futures did manage to hold above support at 11.30, which is somewhat encouraging for bulls. Momentum has taken a sharp turn lower and is continuing to drop even as the RSI has stabilized. Support comes in at 11.30 and 10.75, while resistance can be found at 11.70 and 12.45.

Bonds – The Bond market is sharply higher again this morning, as traders begin pricing in the next rate cuts from the Fed. The three quarter point cut was already partially priced into the market, although it came a week earlier than traders were expecting. Mounting sentiment suggests that fixed income traders are banking on further expansionary policy from the central bank in the near future if the economy does not show some signs of improvement. The treasury market has seen solid inflows of funds due to the sell-off in equities, and further selling in overseas markets could attract further inflows of cash. Traders have been averse to corporate paper and bonds, making U.S. government debt obligations more attractive. Yesterday’s gains signaled a breakout above recent highs of 120-12 in the March Bond contract. Momentum is outpacing the RSI indicator, which points to the possibility of even more upside to the market. March Bonds are now approaching overbought levels, which could inhibit upward price movement and trigger some profit-taking. Support now comes in at 120-12 and 119-07, while resistance may be found at 122-16 and 113-08.

Rob Kurzatkowski, Commodity Analyst

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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

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Good News from Redmond Lifts Markets

S&P – Stocks continue the recent recovery rally, aided by strong earnings news from Microsoft. The tech giant beat the Street estimate and gave a more upbeat forecast for future revenues, infusing the market with some early good news upon which to build. It is beginning to look like the panic rocking the markets earlier this week was fueled, at least in part, by French bank Société Générale liquidating long FTSE futures established by a rogue trader. Companies that do not have a direct link to consumers or banking have reported solid earnings and attracted widespread value buying, while firms relying directly on consumers will have the toughest time rebounding, as financial stocks figure to benefit quickly from the Fed rate cuts. March e-mini S&P’s have given an indication that this recent reversal may spark further rallies, although plenty of resistance still lies ahead. Momentum has moved higher, but remains at a bearish -120. Support comes in at 1338, 1323.50 and 1314, while resistance can be found at 1362, 1371.50 and 1386.

Gold – February Gold made new all-time highs today, despite a stronger Dollar and higher equity prices. After taking profits last week, Gold bulls have been buying with great zeal over the past two sessions. The emergency rate cut earlier this week, along with speculation that the Fed will once again cut rates next week, has led many traders to believe that a greenback recovery will come later rather than sooner and could ultimately create a highly inflationary situation in the U.S. Commodity prices were higher across the board yesterday and this morning, suggesting money is moving back into futures markets from the sidelines. If February Gold is able to hold these gains, it would signal a new breakout and possible push toward the $1000 mark. Momentum remains very bullish at the moment and the RSI is quickly approaching overbought levels. It will be interesting to see how the February contract behaves when we approach overbought levels, as the market tends to pick up steam at 70-75 percent in a strong bull market, and strong selling pressure may be an indication of choppy sessions ahead. Support comes in at 892, 878.30 and 867.30, while resistance can be found at 916.80, 927.90 and 941.60.

Rob Kurzatkowski, Commodity Analyst

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Gold Continues to Shine in 2008

Gold – The Gold market continues to trade near record highs, buoyed by weakness in global equity markets and the U.S. Dollar. South African mines were forced to shut down in response to the country's largest utility threatening to cut power to miners, sparking a new wave of buying. The shutdown is only expected to close several mines completely for a day, but what is not known is how long it will take miners to get back to full capacity. The market has been on such a tear recently that almost any news on the U.S. economic front can be seen as bullish. If the economy sputters, traders can argue that the Fed will continue lowering rates, devaluing the greenback and opening the door for future inflation. On the other hand, if indicators pick up, the argument can be made that inflation will kick up sooner rather than later and make precious metals a good hedge opportunity. If the FOMC defies the markets and leaves rates unchanged later this week, it could adversely impact the precious metals market in the near term. April Gold broke out to a new contract high close on Friday, but traders would like to see a close above the previous high of 922.50 to offer further confirmation. Momentum is outpacing the RSI, which is bullish in the near term. The 9-day RSI and stochastic indicators are now at overbought levels, so it will be interesting to see how the market behaves in the near term. Support comes in at 908.60, 901.00 and 890.50, while resistance can be found at 926.70, 937.20 and 944.80.

Dow – Stock index futures are poised to open lower as a result of a sharp sell-off in European shares. Banks have been hit especially hard on the heels of the Societe Generale rogue trader fiasco. The scandal hit at a time when portfolio valuations are still difficult to calculate due to the continuing subprime crisis, which has caused another exodus in financials. Additional rate cuts by the Fed later this week have become less certain now after the surprise cut last Tuesday, which has impacted trading. Oil company shares have been impacted in European trading due to price weakness in the commodity and fears that the slowing economy may keep demand in check. Today's new home sales figures are expected to show a decline to 645,000 in December from the November figure of 647,000, according to median estimates. It would not at all be surprising to see the number come in closer to the 635,000-640,000 range. March Mini Dow futures continue to trend lower, and a close above 12,500 may be needed to renew bullish sentiment. Momentum is outpacing RSI, suggesting the market may begin to find some strength in the near term. Support comes in at 12,120, 12,005 and 11820, while resistance can be found at 12,420, 12,605 and 12,720.

Sugar – The Sugar market has rallied sharply in early morning trading, defying a statement by the chief of the International Sugar Organization (ISO) that prices will remain depressed. The group forecasts another year of record production from Brazil, but this may be at least partially offset by indications that the EU and India will trim production. The market is moving higher despite weaker Crude Oil and Corn prices, both of which are key outside markets for the sweet commodity. Today's rally may be a result of short covering after March futures held key technical support levels last week. The daily chart appeared to be forming a technical reversal before holding the key 11.30 mark. A move above the recent high close of 12.45 may result in a continuation of the uptrend. Support comes in at 11.54, 11.13 and 10.86, while resistance may be found at 12.22, 12.49 and 12.90.

Rob Kurzatkowski, Commodity Analyst

Hot Chocolate

Cocoa – Cocoa futures are trading higher for the sixth consecutive trading session, bolstered by tight supplies and rough weather conditions. The seasonal Harmattan winds from the Sahara have been fiercely blowing over the main growing region during a dry past week. If the arid conditions persist, the likelihood of a very small midcrop increases dramatically, which could lead to tight supplies over the summer. Ivory Coast arrivals set to begin October 1st are up by over 60,000 tons over the 2006-07 crop year, but the pace has slowed recently. There are also indications that supplies from neighboring Cameroon may be tight. Cocoa has gotten some outside market support due to the slumping Dollar, which may continue if the greenback is unable to stabilize. March Cocoa is close to testing recent highs of 2237 and prices may need to break above these levels to get some renewed buying pressure. The market is approaching overbought conditions on the 9-day RSI, which could put some downward pressure on the market in the near term. Support comes in at 2193, 2173 and 2161, while resistance can be found at 2225, 2237 and 2257.

Wheat – Wheat finished limit up in the front month March contract on a slumping U.S. Dollar and lower shipping costs, both of which could keep export demand strong for the old crop. Wheat received quite a bit of outside market support, as there was a broad rally in commodity prices. Old crop supplies remain very tight and the recent tightening of spreads between old and new crop seem to have reversed over the past few trading sessions. Widening spreads can be attributed to the weak greenback and lower shipping costs, as both of these factors would indicate the possibility of strong short-term demand, but it is unknown if these conditions will persist. Export controls by Russia and Argentina have also aided prices and opened the door for more U.S. exports. The limit move pushed March Wheat toward the recent high close of 962.50. A breakout above this recent high could spark buying and bring about a test of the $10 mark. Momentum has turned sharply higher and is outpacing RSI, suggesting a bullish near-term bias. Support comes in at 943, 923 and 913, while resistance can be found at 973, 983 and 1003.

S&P – Stock futures are higher this morning on renewed confidence and expectations that durable goods orders will rise. In his State of the Union Address last night, President Bush indicated that he wants Congressional legislators to put aside partisan politics and put together a stimulus package quickly. There has been some skepticism on how quickly such a package could be put into action because of the vastly different way in which the two political parties want to offer aid to consumers. Durable goods orders, released at 7:30 AM CST, are expected to rise 1.5 percent after falling the previous 4 months, which could hint that there is some life left in the economy. Consumer confidence is expected to fall to 87 percent, but it would not at all be surprising to see the figure come in closer to 85 percent due to the bad press the economy has gotten recently. Traders are betting that Wall Street will be able to bully the FOMC into a half point rate cut on Wednesday, lowering borrowing costs. March e-mini S&P futures were not able to make much headway technically, despite rallying strongly yesterday. 13,900 remains the barrier that the market may have to cross in order to gain a bullish bias. Support comes in at 1323.75, 1293.00 and 1275.75, while resistance can be found at 1371.75, 1389.00 and 1419.75.

Rob Kurzatkowski, Commodity Analyst

Stocks, Oil Await Big Ben's Decision

Dow – Stock index futures are flat to slightly lower in pre-open trading, as traders nervously await the FOMC rate decision this afternoon. The market is expecting the central bank to lower rates an additional 50 basis points. If the committee leaves rates unchanged or only cuts a quarter point, it could embolden bears and lead to selling pressure in late afternoon trading. Traders will have to digest the 4th quarter GDP and chain deflator data at 7:30 AM CST, expected to show economic growth for the quarter falling to 1.2 percent and the chain deflator rising to 2.6 percent. Traders may focus on the deflator figure, as a surprise jump in inflation may prohibit aggressive rate cut policies by the Fed going forward. There are a number of high-profile companies reporting earnings today – including Amazon, Kraft, Kellogg and Starbucks – which could result in high volatility, and the market may not find direction until well after the FOMC releases its policy statement. March Dow futures rallied yesterday to test nearby resistance at 12,500, but the market has initially rejected these advances. Rallies beyond 12,500 and more importantly the key 13,000 mark could turn the tide in the bulls' favor. Momentum remains in negative territory but has recovered substantially and now shows some bullish divergence from the RSI, which is somewhat encouraging for bulls in the near term. Support comes in at 12372, 12273 and 12207, while resistance can be found at 12537, 12603 and 12702.

Crude Oil – The petroleum market is little changed this morning ahead of weekly inventory figures and key economic data. Consensus estimates show a rise of 2.3 million barrels of Crude Oil, but it would not at all be surprising to see the figure come in closer to 2.7 million barrels. Gasoline is also expected to show a build of 1.9 million barrels, while distillates are forecast to show a draw of 1.6 million barrels for the week. The market has reluctantly rallied over the past week despite a plethora of bullish factors, such as the declining U.S. Dollar and strong commodity prices. Funds seemed to be diversifying away from the petroleum sector and into more underperforming commodities. This is not only due to skepticism over future demand, but also because asset allocations were too heavily geared toward energies. Judging from the price action over the past two weeks, it seems that Oil traders may have more conservative estimates on the size of the Fed rate cut. It looks as though OPEC will probably leave output levels unchanged due to its current precarious position – a rise in output could create a supply glut which might lead to a price collapse, wile a cut in output would send prices higher in the short term, but could quash future demand. March Crude has rallied to an area offering stout resistance between 92.00 and 95.00. Advances beyond the $95 mark could spark buying interest, while declines below 91.50 could indicate range-bound or bearish conditions. Momentum has moved incrementally higher despite the market trading higher for the fifth consecutive session, which suggests a neutral to bearish bias for the near term. Support comes in at 90.50, 89.37 and 88.41, while resistance can be found at 92.60, 93.55 and 94.69.

Rob Kurzatkowski, Commodity Analyst


Fed Announcement Sends Stocks on a Wild Ride

As usual, the markets spent most of the day waiting to see what the Fed was going to do. The announcement didn’t disappoint as the Fed cut rates by 50 basis points, spurring the market to an immediate turn to the upside. After a brief pullback, the e-mini S&P contract (ESH8) got as high as 1387 before settling for a close at 1351.

On the chart, we see that the trend for 2008 has been to the downside. We had a brief scare for the bulls a little over a week ago when the market was down over 60 points, but that situation was remedied by the Fed's emergency rate cut of 75 basis points.

We are still below the moving averages. If the market treats this news as bullish, this could be an indicator that acts as a magnet. Also, we are just coming off of the 20 level on the slow stochastic, indicating an oversold condition. Tomorrow's action should be interesting in the wake of the Fed's latest move. At the time of this writing, the after-hours markets are down slightly.

Mike Tosaw, Director of Education

Gold Loses Luster on Profit-Taking

Gold – The Gold market is lower once again this morning after shedding over 15 dollars on Friday. The non-farm payroll figure released on Friday was very Gold-friendly, but a large European hedge fund is rumored to have sold off a large portion of its position in reaction to how the market behaved after the number. The market seems to be experiencing some follow-through profit-taking early in the session on a firmer Dollar and weaker energy prices. Several South African mines are now running at 90 percent of normal power use – up from 80 percent for much of last week – which seems to be weighing on the market. Longer-term fundamentals remain bullish, with the Fed focused on preventing a recession rather than trying to keep inflation in check. The Dollar Index is trading near support and a violation of the 74.75 level could fuel further declines, which would likely support precious metal prices. Friday's sell-off did little chart damage and the market has held support at 900 so far this morning. Momentum has slipped below the +50 mark, showing a somewhat weakening trend. Support comes in at 900.40, 887.30 and 866.60, while resistance can be found at 934.20, 954.90 and 968.

Crude Oil – The Oil market is lower this morning after dropping almost three dollars on Friday. OPEC's decision to keep output unchanged came as no surprise to traders, but the payroll data hints that the U.S. economy is either in recession or dangerously close to heading down that road. Inventories have climbed back to seasonal averages and the demand picture continues to worsen, both of which have been disappointing for bulls. Last Wednesday's inventory data showed Crude Oil and Gasoline inventories rising, despite lower refinery use. Consumers decreased the amount of money spent at service stations for the month of December and inventory data suggests that consumer spending on motor fuel will likely fall again in January. Outside markets have added to the petroleum market's woes, with metals prices falling and the U.S. Dollar holding up in the face of terrible economic data. Friday's sell-off hints at a new test of support near the $86 mark and it will be interesting to see if Oil bears can finally push prices below this critical psychological and technical level. Support comes in at 87.57, 86.19 and 83.91, while resistance can be found at 91.23, 93.50 and 94.89.

S&P – Stock index futures are little changed in overnight trading after rising sharply on Friday. The market was strong despite the payroll data, aided by Microsoft's bid for Yahoo and the 50.7 ISM number beating analyst estimates of 48.4 – a figure below 50 shows contraction in the economy. Earlier this morning, car and truck sales showed a decline from December's sales. The market is now focused on the only major economic release today – Factory Orders – which is expected to show an increase for the first time in five months. Friday's close above the 1390 mark can be seen as bullish for the market near term, but a close above 1425 may be needed to swing chart bias toward the bulls. Momentum is quickly approaching the zero line and is outpacing the RSI indicator, both of which can be seen as bullish. Support comes in at 1379.75, 1362.25 and 1353.25, while resistance can be found at 1406.25, 1415.50 and 1432.75.

Rob Kurzatkowski, Commodity Analyst

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Crude Gives Back

Crude Oil – Oil futures are slightly lower this morning after jumping more than three dollars on Friday. Several OPEC ministers have hinted at a production cut at the March meeting to head off the possibility of a worldwide glut. Venezuelan President Hugo Chavez is set to lose a key legal battle with ExxonMobil over one of the country's nationalized Oil fields and has threatened to cut supplies to the U.S. in retaliation. Royal Dutch Shell indicated that the company may not be able to honor all of its Nigerian export contracts due to political instability and sabotage. The geopolitical news comes on the heels of the largest weekly increase in Crude Oil inventories in nearly four years, showing that the U.S. is well-supplied at the moment and giving the threat of an OPEC production cut more credence. The Dollar is weaker this morning, which could act as price support for the market. Rallies on Thursday and Friday can also partially be attributed to bears' inability to drive prices below key support between 86.00 and 87.00 in the March contract. The market has rejected an initial push toward recent highs of 92.71 this morning. A breakout above this high would validate a double bottom formation on the daily chart. Momentum is outpacing the RSI indicator, suggesting a positive near-term bias. Support comes in at 89.19, 86.60 and 85.21, while resistance can be found at 93.17, 94.56 and 97.15.

S&P – S&P futures are slightly higher this morning after the index gave back 10 points on Friday. Motorola is said to be in talks with Nortel Networks to combine their cell phone infrastructures. Elsewhere, Yahoo's board is expected to reject Microsoft's recent bid as too low, and the Redmond, Washington giant is likely to counter by taking its case directly to Yahoo's shareholders. Higher Oil prices may weigh on the market today and volume will probably be light ahead of the flurry of economic data the market will have to digest later this week. Equities have seen some capital inflows of late, with optimistic traders beginning to believe that the market is slowly bottoming out. The March e-mini S&P chart gives evidence of a lack of a consensus opinion on market direction. After rejecting the 1400 mark, March futures have held the 1320 area, indicating the market is not yet set to make new lows. Momentum is outpacing the RSI indicator, which suggests that the near-term bias remains to the upside. Support comes in at 1319.50, 1309.00 and 1296.75, while resistance can be found at 1342.25, 1354.50 and 1365.00.

Rob Kurzatkowski, Commodity Analyst

Inventories, Chavez Lift Oil Markets

Crude Oil – April Crude Oil is higher in overnight trading, boosted by lower-than-expected inventories and a positive GDP reading from Japan. Yesterday's build of 1.1 million barrels was much lower than the 2.7 million barrel increase the market was expecting. Meanwhile, the economy of Japan – the world's third largest petroleum consumer – grew at a pace of 3.7 percent in the fourth quarter of last year, which doubled the consensus estimate. The solid GDP figure suggests that a U.S. recession may not spill over to the global economy. Oil traders are once again worried about the possibility of tight supplies, setting a bullish tone for the market. Venezuelan president Hugo Chavez is following through on his plans to cut off Oil sales to ExxonMobil, which could have a small impact on U.S. supplies. The move may backfire on the heavy handed leader, as Exxon will have an easier time finding alternative suppliers than Venezuela will have finding alternate buyers for the hard-to-refine heavy Oil the country produces. The U.S. is one of the few countries with the ability to refine this heavy variety of Crude, and the communist government needs money to fund its social programs, which may cause the government to step back from this policy. April Crude appears to be breaking out of a bullish flag formation on the daily chart, realized after the contract confirmed a double bottom. This sets a bullish technical tone for the market, with the possibility of rallies to the $98 mark. Momentum is outpacing both RSI and price, which is also bullish in the near term. Support comes in at 92.32, 91.23 and 90.39, while resistance can be found at 94.25, 95.09 and 96.18.

S&P – Stock index futures are pointing higher this morning on the good news out of Japan. The strong Japanese GDP data should be supportive for large multinationals that do business in the Pacific Rim region. Positive comments from several economists stating that the U.S. may avoid a recession combined with value buying to lift the equity markets over the past three sessions. Despite the upbeat comments, rocky times may still lie ahead. Today's release of initial jobless claims is expected to show very meager improvement, with the consensus forecast calling for a drop to 350,000 from 356,000 last week. The labor market has been battered over the past few months and improvements to the poor data we have seen recently may be needed for stocks to maintain their recent recovery. The March e-mini S&P chart remains an enigma, showing much indecision among traders and a lack of short-term direction. The daily chart, however, does appear to be forming a wedge formation. The formation – which can take weeks to build in many cases – may be a harbinger of rough times ahead, as a downside breakout could send the market into the low 1200's or possibly even the 1100's. Bulls are looking for the March contract to take out recent highs near 1400 before sentiment can swing in their favor. A close above 1430 could signal a reversal of the recent downtrend. Momentum is outpacing the RSI indicator, suggesting that the near-term bias remains to the upside. More importantly, the 20-day momentum indicator is close to breaking through the zero line, which can be seen as a medium-term buy signal. Support comes in at 1348.00, 1332.25 and 1321.00, while resistance can be found at 1375.00, 1386.25 and 1402.00.

Rob Kurzatkowski, Commodity Analyst

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Consumers Brace for Higher Fuel Costs

RBOB Gasoline – Energy futures are slightly lower this morning on yet another rejection of the century mark in Crude Oil. Gasoline prices jumped due to a flurry of bullish news: the Alon refinery explosion, expectations that OPEC will trim production, continuing uncertainty over the Venezuelan supply and broadly higher commodity prices, which suggest a highly inflationary environment. Falah Alamri – the chairman of OPEC's Board of Governors, who is also head of Iraq's State Oil Marketing Organization – stated that it is too early for the cartel to discuss cuts in output and indicated that the petroleum organization will meet in Vienna to discuss administrative issues. This dovish statement tempers some of the more hawkish statements of late from member states, but may be taken with a grain of salt, given the Iraqi government's ties to the U.S. The fire at the Alon facility, which refines 70,000 barrels of Oil daily, may be much more significant news for consumers. The refinery is expected to be offline for two months, which may overlap with scheduled maintenance at other refineries, squeezing supplies of motor fuel. April RBOB broke out to new highs on the daily chart, signaling a possible technical breakout. Prices have moved back from the 2.7223 breakout point in the early going due to technically overbought levels. Momentum continues to outpace the RSI indicator, suggesting a positive near-term bias. Support comes in at 2.6579, 2.5821 and 2.5387, while resistance can be found at 2.7771, 2.8205 and 2.8963.

S&P – Stock index futures are lower this morning ahead of consumer price data. Stocks fell into the red yesterday after spending much of the day positive in reaction to rising energy costs and worries in the telecommunications sector. Today's early release of MBA mortgage data suggests that the housing and mortgage markets are continuing to spiral out of control. The overall MBA market index fell 22.6 percent, while the purchase and refinancing indexes fell 11.5 percent and 27.9 percent, respectively. This could be an indication that consumers are expecting more rate cuts from the Fed in upcoming meetings and may be holding off on new purchases and refinancing options as a result. Today's CPI report is expected to show an overall reading of 0.3 percent and a core reading of 0.2 percent. Higher-than-expected price readings would put downward pressure on the market, possibly forcing the Fed to stall further rate cuts. Housing starts and building permits are expected to come in at 1,015,000 and 1,040.000, respectively, indicating further weakness in housing. The report that most traders will be looking forward to is the FOMC minutes released later this afternoon, which will give investors the chance to go through the thought process of the Fed at that January 30th meeting, and will give more insight into what economic data the central bank will use in future meetings to set interest rate policy. The March e-mini S&P is trapped in a triangle/wedge formation on the daily chart and is close to breaking through the lower boundary, which would indicate further declines. Tempering this grim view, the momentum indicator is outpacing both price and RSI, suggesting a positive near-term bias. Support comes in at 1344.00, 1332.25 and 1319.50, while resistance can be found at 1368.50, 1381.50 and 1393.00.

Platinum – Platinum futures have shed almost 80 dollars in early trading on heavy profit-taking and worries that all-time record prices may trim demand. Jewelry demand for the noble metal is expected to plummet in the neighborhood of 30-40 percent not only because of high prices, but indications that economies worldwide are slowing – jewelers account for roughly a quarter of all platinum demand. More importantly, auto manufacturers – which account for just under two-thirds of global demand – have begun substituting Palladium for use in catalytic converters. The supply squeeze may spurn innovation in the industry, as manufacturers look for Platinum and Palladium substitutes. Much of the selling pressure can be attributed to profit-taking due to technically overbought levels. The RSI and stochastic indicators had readings in the mid-to-high 90's, which threw up red flags for traders. If the April contract is not able to recover, traders may view the chart setup similar to a key reversal. While not a true textbook key reversal, the pattern can be viewed as very bearish and hints toward a trend reversal, at least in the near term. Support comes in at 2081.50, 2009.80 and 1963.60, while resistance can be found at 2199.30, 2245.60 and 2317.20.

Rob Kurzatkowski, Commodity Analyst

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Gold Rises on Dollar Slump

Gold – Gold is higher in early trading, but is off of overnight highs after prices failed to test record intraday highs. The precious metal has a host of positive factors going for it at the moment, including rising energy costs and a slumping U.S. dollar. The greenback figures to stay soft due to the lackluster economic showing of late, as well as the increasing likelihood that the Fed will continue to trim rates. The central bank is in an awkward position at the moment as a result of the commodity price boom that is coinciding with an economic slowdown – commodity prices typically fall during periods of slow or negative growth in the economy, making it easy for central banks to simply trim rates to spur economic expansion. Expanding economies in China and other developing nations have increased demand for raw materials and decimated stockpiles. Last week's inflationary CPI report points toward the ideal scenario for Gold traders – high inflation and slow growth. Tomorrow's PPI numbers are likely to show producer prices increasing at an even higher pace than those of consumers, adding further price support for the yellow metal. The daily chart for April Gold remains bullish, but the last three candlesticks show a fair amount of indecision among traders. The chart appears to be forming a bullish flag pattern, which may lead to further price advances. Momentum is showing some bearish divergence from the RSI indicator, pointing to further consolidation or possibly even a pullback in prices. Support comes in at 939.60, 931.40 and 924.70, while resistance can be found at 954.50, 961.20 and 969.40.

Crude Oil – Crude Oil futures are little changed this morning, but geopolitical tensions figure to loom large this week. Turkey's incursion into the Kurdish region of Iraq has not disrupted Oil flow from the nation, but there are worries that an extended ground offensive may eventually affect supplies. Meanwhile, the U.S. is considering new sanctions against Iran over its nuclear program. The Oil-rich nation threatened to strike back at countries supporting the new sanctions, which may mean decreased exports from OPEC's second largest producer. Traders will continue to monitor these political events this week, but most of the market focus will be on next week's OPEC meeting. There really is no consensus among traders on what the cartel plans to do, with compelling arguments on both sides. On one hand, current production quotas may lead to supply excesses and steep price declines, but a decrease in production may be the straw that breaks the global economy's back, leading to economic contraction. The April Crude chart shows a spinning top candlestick after breaking through the $100 mark followed by a sharply lower session, suggesting the possibility of further declines from the century mark. Adding to this bearish sentiment, the momentum indicator is diverging from both price and RSI. Support comes in at 97.52, 96.24 and 95.31, while resistance can be found at 99.73, 100.66 and 101.94.

S&P – Stock index futures are higher this morning on bullish spillover from Friday's session. The market was able to finish last week on a positive note on speculation that troubled bond insurer Ambac Financial will be bailed out by several large banks. This good news could be met by some skepticism given that many of the banks involved in the bailout talks are have trouble of their own. Adding to the positive market sentiment, pharmaceutical giant Genentech gained FDA-accelerated approval for its breast cancer drug Avastin – a surprising move given the fact that sector analysts gave the drug less than a 50 percent chance of gaining such approval. Today's only major economic release is existing home sales data, which is expected to show sales declining 0.09 million average annual rate. The March e-mini S&P chart shows that market continuing to trade within the boundaries of the wedge pattern that has been forming since the beginning of the year. The congestion on the chart has gotten tighter and tighter, suggesting the market will be forced to determine a longer-term direction in the near future. Momentum is outpacing the RSI indicator, hinting toward a positive short-term bias. Support comes in at 1335.75, 1316.00 and 1305.25, while resistance can be found at 1366.50, 1377.25 and 1396.75.

Rob Kurzatkowski, Commodity Analyst

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Crude Jumps to New Record

Crude Oil – April Crude Oil futures have rallied to a new record high on an unexpected drawdown in U.S. inventories and a new record low for the greenback against the Euro. Much of yesterday's broad rally in commodities can be attributed to the Dollar trading at all-time lows, attracting a huge inflow of funds from equity and fixed income markets. Even though Crude inventories fell for the first time in eight weeks, the market continues to completely disregard fundamentals, which are anything but bullish. Gasoline inventories are at 14-year highs and the drawdown in Crude Oil inventories can largely be attributed to increased refinery activity. While OPEC did not officially cut production quotas, the feeling among many traders is that some member states will begin to pull back their own production, fearing slow demand may lead to oversupplies. The April Crude chart remains bullish but vulnerable to selling pressure due to overbought conditions. Support now comes in at 101.06, 97.61 and 95.66, while resistance can be found at 106.46, 108.41 and 111.86.

Cocoa – A weaker Dollar and supply worries have sent the Cocoa market sharply higher in early trading. Rains in drier parts of the Ivory Coast, along with technically overbought conditions, have caused some consolidation in recent sessions, but fundamentals remain bullish. Cocoa, Coffee and the grain markets are the few markets that actually have extremely bullish fundamentals, while the rest of the commodity market seems to be banking on a weaker U.S. currency, inflationary pressures and speculation that fundamentals will shift. This disconnect between supply and demand fundamentals and prices may make some commodity markets vulnerable to selling pressure in the weeks and months ahead, which could adversely affect fundamentally strong markets, such as Cocoa. Technically, May Cocoa appears to be breaking out of the bullish consolidation pattern on the daily chart, but the initial rejection of Tuesday’s contract high of 2845 is somewhat troubling. Momentum remains strong and is outpacing the RSI, which remains technically overbought. Support comes in at 2729, 2681 and 2651, while resistance can be found at 2836 and 2885.

S&P – The stock market is set to open lower on continuing worries over the mortgage sector. Thornburg Mortgage, Inc. received a default notice for failing to meet a margin call issued by JP Morgan, and a bond fund managed by the Carlyle also failed to meet several margin calls. To make matters worse, banking giant UBS has reportedly shed a good chunk of its mortgage assets in what was widely regarded as a fire sale. UBS is expected to have write-downs of close to $20 billion due to the mortgage crisis. Due to the credit crunch, banks have been very tight with lending, which has exacerbated the problems in the housing market. This could have banks suffering the effects of the crisis much longer than previously thought. High inflation and a weakening consumer sector have even the most optimistic market observers worried. Equities may continue to suffer, as investors struggle to find stocks that have value in the current environment. March e-mini S&P futures have broken the downside of the bearish wedge formation and formed a bear flag on the daily chart, suggesting the possibility of further declines. The contract low close of 1309.25 is an important point for the market, as a new contract low may bring about long liquidation. Support comes in at 1322.25, 1308.75 and 1297.50, while resistance can be found at 1347.00, 1358.25 and 1371.75.

Rob Kurzatkowski, Commodity Analyst

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Traders Nervously Await Non-Farm Data

Crude Oil – Profit-taking ahead of the weekend, along with some early reluctance among buyers, has Crude Oil futures trading lower in the early going. Today's release of non-farm payrolls, which are forecast to show a very small increase of 25,000 jobs for the month of February, has Oil traders a bit weary. Weaker-than-expected results could signal further slowdowns in demand for petroleum from U.S. consumers, especially if the figure shows further contraction in the labor market. A sharply lower U.S. Dollar could act as a buffer to any selling pressure the market may feel as a result of the data. Commodity markets – especially energies and metals – have risen sharply in recent weeks due to inflationary concerns, and the Oil market has become somewhat detached from supply and demand fundamentals. A strong figure could bolster some moderate buying, but traders may want to lock in profits ahead of the weekend, which could make it difficult to garner upside traction. The daily April Crude Oil chart remains bullish after breaking out to yet another new high yesterday. It would likely take sell-offs below 97.00 to reverse the recent trend. Support comes in at 103.55, 101.64 and 100.44, while resistance can be found at 106.67, 107.88 and 109.80.

Dow – Indecision among traders ahead of the non-farm payroll report has stock index futures little changed going into the number. Another month of contraction in the job sector may all but confirm that the economy is in a recession, which may adversely affect consumer behavior, even for those currently employed. Yesterday's release of foreclosure data suggests that distressed homeowners have lost hope and simply caved, which leads many to believe the housing market may get much worse before it gets better. The Fed's aggressive rate cut strategy may help bail out distressed banks, but banks have been reluctant to lend money after the sub-prime crisis, which may hurt them in the long run. The lack of buyers in the housing market may drive down the value of homes further, depreciating the value of foreclosed homes and thus compounding the woe for banks. The March Mini Dow chart shows a downside breakout of a wedge formation, signaling the possibility of even more downside. The move suggests the market may test the 11,000 mark before it rebounds. Weekly and monthly charts are much more ominous and hint at a more extended correction. Support comes in at 11950, 11831 and 11638, while resistance can be found at 12262, 12455 and 12574.

Platinum – The Platinum market has broken down this morning on South African authorities’ comments that electrical supplies to mines will be increased. This sparked a wave of long liquidation, which seems to have stopped out quite a few smaller traders that established longs late in the move. The thinness of the Platinum market certainly had an impact on the scope and swiftness of the drop in prices. The sharp losses over the past two sessions could also be the result of the market’s opinion that prices have risen too quickly. Today’s payroll report is a mixed bag for Platinum traders – on one hand, the metal could become more attractive as an investment vehicle and inflation hedge, but on the other, it could be a sign that demand will slow. If the market is unable to pare losses and regain the $2,100 mark, today’s sell-off will have done some chart damage. The violation of this support area could signal a reversal of the uptrend. The next significant chart support comes in at the first Fibonacci retracement area of 2003.90, with additional Fib support coming in at 1909.20 and 1814.50.

Rob Kurzatkowski, Commodity Analyst

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Gold Loses Some Luster

Gold – Gold is trading lower for the third consecutive session on heavy profit-taking. The Dollar strengthened against the Euro Friday and in early trading today, which may have sparked some selling from European traders. The lower Euro and lower energy prices have kept the precious metals markets from gaining any fresh upward traction. Coming on the heels of new highs just below the $1,000 mark, the sell-off may be a healthy sign for the market, as advances beyond this critical level followed by heavy selling would likely be a huge psychological blow for traders. Friday will be a big day for traders in both the equity and commodity arenas with CPI data on the horizon, as further confirmation of a rampant inflationary environment could bring strong buying. The recent selling has not caused any major chart damage yet, but declines beyond the 950.00 mark in the April contract could spark a more extended confirmation. The RSI peaked prior to Gold making record highs, which is a bearish signal over the mid-term. Momentum has dropped more sharply than prices, opening the door for further weakness. Support comes in at 966.60, 958.90 and 948.80, while resistance can be found at 986.30, 998.30 and 1005.90.

Cocoa – A broad sell-off in commodities – particularly softs – has sent the Cocoa market lower in early trading. Cocoa has not seen the solid buying coming on dips, as it had over the previous few weeks. Traders seem to have lost some of their enthusiasm for softs and grains in light of speculation that prices may have risen too much too quickly. Growing regions in Ghana and the Ivory Coast have gotten much needed rain of late, although only sporadically. The Cocoa market has not sold off as much as other soft commodities, signaling that many traders may believe fundamentals are still relatively strong. The May chart appears somewhat bullish, forming a sideways-to-lower consolidation pattern. Two rejections of the 1845 area do not bode well for the market technically, and advances beyond this level may be needed to bring buyers back. The RSI is only now starting to recover from technically overbought levels, underscoring the fact that the market may have risen too sharply in recent weeks. Momentum has dipped, although to a lesser extent that the RSI and prices. Support comes in at 2692, 2646 and 2617, while resistance can be found at 2767, 2796 and 2842.

S&P – Stock futures labored to stay near unchanged levels in overnight trading. Friday’s non-farm payroll number gives further confirmation that the economy is nearing recession, if it hasn't arrived there already. There were rumors circulating prior to the release of the report that the Fed would make another emergency rate cut if the report showed a contraction in the labor market. This did not materialize, but Fed Fund futures are now pricing in a high probability of a ¾ basis point cut. Banking stocks are once again feeling the bulk of the heat this morning on more reports of margin calls issued to major credit market players. A flurry of important economic data is scheduled for release on Thursday and Friday, with retail sales and Michigan consumer sentiment set to give traders a better idea of how the recent downturn has impacted the American consumer. Positive data could give the market a much needed lift on value buying from investors. Friday’s chart setup was a bearish continuation after confirming a bear flag pattern on the March e-mini S&P chart. Support comes in at 1277.00, 1261.50 and 1241.00, while resistance can be found at 1313.50, 1334.00 and 1349.75.

Rob Kurzatkowski, Commodity Analyst

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Flat CPI Surprises Traders

S&P – Stocks have gotten a bounce from a flat CPI report, which may open the door for more Fed rate cuts. Given the recent climbs in Crude Oil and foodstuffs, the report caught traders off guard, inspiring skepticism that this low inflation scenario will develop into a pattern. Stock traders have lost faith in the Fed’s policy decisions of late, even though the central bank has used virtually every weapon in its arsenal to combat economic stagnation and revive the beleaguered banking sector. To put it in simpler terms, traders believe there are too many things broken to easily fix by simply injecting liquidity. The rate-cutting policy of the Fed has led to a plummeting greenback and has done little to improve either the banking or housing sectors, resulting in a sharp drop in consumer confidence, which has been evident at the checkout line. Banks will likely continue to be tight with lending due to their poor financial conditions and may not be as proactive in renegotiating the terms of home loans, which may lead to steeper foreclosure rates. Foreign investment in the U.S. has fallen due to the Dollar’s exchange rate – even if foreign entities make money on their investments, the result could be a net loss when converted back into their home currency. Overseas money has been tied up in commodities, which has contributed to the boom in those markets. If investors begin bargain hunting and the stock market can recover from current levels, consumers may begin feeling better about the economy and could begin spending again. This might lead to a mild recovery, but the loss of wealth from the housing crisis may be the 800-pound gorilla holding back a larger-scale rebound. The June e-mini S&P’s recovery from recent lows is somewhat encouraging for technicians. A solid close above the 1350 area could result in a bullish shift over the mid-term for the June contract, and rallies beyond 1400 could signal a longer-term recovery. Failure to move beyond 1350 could result in a continuation of the downtrend, possibly signaling that the market will confirm the bearish wedge continuation pattern’s measure of the low 1200’s. Support comes in at 1291.25, 1267.50 and 1250.75, while resistance can be found at 1331.75, 1348.50 and 1372.25.

Crude Oil – It appears that Oil traders are skeptical of the CPI report and stronger greenback as well, with April futures only posting minor losses in the early going. The tame report possibly signaling further expansionary policy by the Fed will likely continue to weigh on the Dollar, making commodities an even more attractive investment for overseas traders. The bias today seems to be neutral to lower, as profit-taking after this week’s run-up may rein in the market. We could see very choppy trading today due to a lack of fresh news. Yesterday’s candlestick formation showed much indecision among traders, which may hint at profit-taking in the near-term. The April contract is overbought on the 14-day RSI and slow stochastics, registering 73 percent and readings in the mid 90’s, respectively. Support comes in at 109.06, 107.79 and 106.82, while resistance can be found at 111.30, 112.27 and 113.54.

Gold – The CPI report has sparked some indecision among precious metal traders, resulting in little change in Gold prices this morning. The zero inflation report makes Gold somewhat less attractive as an inflation hedge, but the implications for the Dollar are bullish. April Gold may make another run at the $1,000, given the close proximity of the current price, but whether or not we can sustain a close above this level heading into the weekend remains to be seen. Yesterday’s move to new contract highs and rallies beyond the 1000.00 mark may be encouraging for traders. The April contract is now right at overbought levels on the RSI, registering 70 percent, which could hold back rallies. Support comes in at 983.80, 973.90 and 965.00, while resistance can be found at 1002.60, 1011.50 and 1021.40.

Rob Kurzatkowski, Commodity Analyst

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Bear Stearns Shocks the Stock Market

S&P – A surprise announcement that JP Morgan Chase will be buying Bear Stearns for $2 a share rocked stock index futures. The news underscores the vulnerability of banks, which have been speculating on high risk mortgage investments. In its boldest move yet, the Fed is providing financing for as much as $30 billion of non-liquid assets owned by Bear. Furthermore, the central bank will eat any losses associated with the sale of these assets, which include a large number of mortgage-backed securities. The news will probably weigh on the stock market for the remainder of the session – particularly financials and banks, which are sharply lower in pre-market trading. The June e-mini S&P chart continues to look like a disaster, taking out both the relative and contract low. The market has not yet attained the measured move of the bearish wedge formation, which hints at low 1200’s as its target. Support now comes in at 1252.00, 1211.00 and 1169.00, while resistance can be found at 1335.00, 1377.00 and 1418.00.

Crude Oil – The energy sector is sharply lower on the fire sale occurring in the equities market. The trouble in the banking sector has some very ominous implications for both the corporate sector and consumers, with banks likely to continue being stingy in providing financing. Home values are likely to plummet and the loss of wealth will likely lead consumers to be much more conservative with their spending, which will impact the U.S. economy and possibly China. The market may begin moving more in line with fundamentals, especially if the overseas and fund money that has been flowing into the market begins to ebb. Wariness among shorts – after getting burned so many times during Crude’s historic ascent – may keep the market from completely collapsing unless they can muster the fortitude to test the waters once again. The lows reached by the April contract were flirting with forming a bearish engulfing pattern on the chart. There does appear to be solid support in the 103-104 area, but failure to hold this area could result in the market falling well below the 100.00 mark.

Rob Kurzatkowski, Commodity Analyst

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Stocks Rebound Ahead of Fed Decision

S&P – Stock index futures are sharply higher this morning on expectations that the Fed will lower interest rates later today. The Fed’s quick action on the Bear Stearns meltdown seemed to have eased some of the worries regarding the banking sector, but the move could have set a dangerous precedent. If the central bank is going to bail out banks that have made poor decisions, there is little incentive to back off from engaging in risky ventures and trades. This morning’s PPI numbers showed inflation increasing briskly, which may put producers in a tough spot. They have to pass the rising costs on to consumers to remain profitable, but doing so may decrease sales due to economic conditions that are shaky at best. Inflation may continue to ramp up after today’s Fed decision, as funds and overseas investors may continue to divert capital into commodities. Fed Fund futures are pricing in a 90 percent chance of a 100 basis point cut and a 10 percent chance of a 10 percent cut. The June e-mini S&P chart remains bearish, despite yesterday’s spinning top followed by a strong morning. The chart has duped traders several times into thinking we have hit a bottom in the past two months, so it may take a significant upward move to restore confidence. Advances beyond 1340 would be encouraging in the near-term, but we may have to see prices move beyond 1400 before longs begin buying in full force. Support comes in at 1250.25, 1221.00 and 1189.25, while resistance can be found at 1311.25, 1343.25 and 1372.25.

Copper – The Copper market has recovered slightly this morning after dropping 15 cents yesterday. LME stockpiles continue to diminish, which has been the trend since the beginning of the year. Emerging market demand for the metal remains steady, but lacks the strength to support the sharp rise in prices since the market bottomed out in December. A rate cut could once again bolster commodity prices, but this positive news could be tempered by a decrease in building permits, which came in at 978,000, well short of the consensus estimate of 1.02 million. The upward revision in both housing starts and building permits for the month of January is somewhat encouraging, but not enough to convince traders that we are nearing the light at the end of the tunnel in the housing meltdown. Yesterday’s sharp sell-off in the May contract confirmed a downward breakout from a bearish consolidation pattern and drove the market below support at 3.75. Momentum continues to move lower despite the rise in prices, hinting that the market is continuing to lose strength. Support comes in at 3.5935, 3.5065 and 3.3635, while resistance can be found at 3.8235, 3.9670 and 4.0535.

Wheat – Wheat futures bounced back slightly in overnight trading after closing yesterday’s session limit down. Yesterday’s broad sell-off in commodities dragged the grain markets down, which could be seen in two different lights. On one hand, traders may believe that a sharp economic downturn coupled with tight lending could slow demand. On the other hand, traders may have pulled funds from commodities to make investments in the equity and treasury markets, indicating that we maybe approaching a bottom in the stock market and the Dollar. The first scenario has the potential to drag down commodity prices across the board and lead to more “normal” recessionary conditions of no growth and slow demand, while the second scenario could be supportive for the grain markets longer-term, as it hints at sustained demand. Time will tell which one of these scenarios will in fact play out. May Wheat bounced off of its uptrend line, suggesting the trend remains in tact for the time being. Breakdowns below1080 could confirm a double top formation and possibly a trend reversal. Support comes in at 1164.50, 1088.75 and 1046.25, while resistance can be found at 1282.75, 1325.25 and 1401.00.

Rob Kurzatkowski, Commodity Analyst

Waiting

Crude Oil – An expected build of 2.3 million barrels has sent the Oil market lower in the early going. If inventories come in as expected, it would mark the ninth build in the past ten weeks. Despite economic uncertainties and an amply supplied market, Crude Oil has made a dramatic rise since August, primarily due to a tumbling Dollar and booming emerging markets. Due to the Dollar play, the market may be susceptible to selling pressure tied to the weak fundamentals. A larger-scale recovery in the stock market could also pull funds from the commodity markets, but a reversal in the greenback’s downtrend may be needed to bring the energy markets back in line with reality. Despite the sharp sell-off on Monday, no major chart damage was done and the May futures rebounded strongly from support near 102.00. The bearish crossover on the slow stochastics coupled with overbought conditions prior to the sell-off point toward possible weakness or consolidation in the near term. Support comes in at 105.53, 102.55 and 100.87, while resistance can be found at 110.19, 111.87 and 114.85.

Gold – The smaller-than-expected Fed rate cut continues to weigh on the Gold market in the early going. While the cut points toward a weaker U.S. currency, many currency and precious metals traders were pricing in a full point, leading to long liquidations. Today’s EIA energy inventory data will be closely watched by precious metal traders, with larger-than-expected inventories possibly further depressing prices in the near term on the thinking that inflation may not increase at the previously expected pace. April futures continue to drift toward the 960.00 support area on the chart. If the contract cannot hold this key support area, the market may see heavier long liquidation selling pressure and possibly even the emergence of shorts. Support comes in at 961.60 and 946.30, while resistance can be found at 1019.50, 1034.80 and 1056.10.

Dow – Stocks were strong through the entire session yesterday and rallied late to close near intraday highs, despite a smaller rate cut than the market was anticipating. A solid earnings report prior to the bell by Goldman Sachs set a positive tone for the day, as did the quick response from the Fed to the Bear Stearns crisis. Lehman Bros. profits tumbled, but the company remains solvent for the time being. Lehman seemed to be pegged as the next financial institution that could go under due to the subprime crisis, so the news was received as positive for financials. Adding to the collective sigh of relief after the Bear fiasco, Morgan Stanley posted record sales and trading revenue. Fannie Mae and Freddie Mac were cleared by regulators to purchase an additional $200 billion in home loans, which could aid the housing market. The cash Dow Jones index confirmed a W bottom formation, indicating the cash index could challenge resistance around 12,750 (12,770 in the June futures). This is by no means an indication that the market has completely turned around, but can be seen as a positive near-term signal. Support for the June futures comes in at 12127, 11849 and 11710, while resistance can be found at 12544, 12683 and 12961.

Rob Kurzatkowski, Commodity Analyst

Quiet Before The Open

S&P – Stocks posted solid gains yesterday on news that JPMorgan is increasing its bid for Bear Stearns and an unexpected rise in existing home sales. The better-than-expected home sales data has traders cautiously optimistic that we may be seeing a light at the end of the tunnel in the housing market crisis. Some of this bullish enthusiasm has waned in overnight trading, with futures posting only slight gains. Bank of America was downgraded by Merrill Lynch due to increasing loan delinquencies and the possibility that further write-downs are forthcoming. Today's only economic release is consumer confidence, which is expected to show a decline to 73.4 from 75.0 in February. Today's trading will likely be choppy and indecisive, with stocks vulnerable to selling pressure after the run-up over the last two sessions. The June e-mini S&P chart confirmed a W bottom formation, opening the door for more upside, possibly toward the 1400 mark. Momentum has moved lower this morning and is showing bearish divergence from both price and RSI, hinting that the bullish breakout could be a false signal. Support comes in at 1330.75, 1309.75 and 1294.50, while resistance can be found at 1367.00, 1382.25 and 1403.25.

Crude Oil – Despite the bounce in stock prices, Crude Oil futures have closed lower in five of the past six sessions on expectations that the U.S. economy will continue to falter. Fundamentals have been weak, but the recent selling pressure can largely be attributed to long liquidation, especially from overseas investors. The falling greenback has been the driving force behind the rally to new all-time highs in Oil, but the currency has managed to reverse course in recent sessions, helping spark the recent commodity exodus. Outside markets – especially precious metals – have put downward pressure on the energy market due to an extremely high volume of margin calls forcing traders out. Last week's EIA report was extremely bullish on the surface, but in reality it was not as supportive as a first glance would indicate. Demand for gasoline fell for the first time in over a month and the large drawdowns in gasoline and distillates could be attributed to lower refinery use. This week's inventory data may show a much larger-than-expected build in Crude Oil inventories considering the numbers in last week's report don't seem to add up. The May Crude chart shows a possible bear flag forming, suggesting further sell-offs toward the mid-90's are possible. Closes above 102.60 can be seen as bullish in the near term and a close above 105.00 could signal a new test of contract highs. Support comes in at 99.73, 98.61 and 97.26, while resistance can be found at 102.20, 103.55 and 104.67.

Wheat – Wheat futures are higher for the second consecutive session, aided by news that South Korea is removing tariffs on imports of the grain to curb inflation in food prices. High prices and the reversal in the exchange rate of the Dollar have weighed on Wheat prices in recent sessions. Governments may be looking to import more heavily in the near term in a bid to keep food inflation in check, but this may not last if the greenback is able to continue its recovery. The May Wheat chart confirmed a double top pattern and the rallies of the past two sessions look like consolidation due to some short covering. Momentum is sharply lower, outpacing both price and RSI, and signaling the likelihood of further corrections. Recent lows are near 980, which is solid support, and closes below this level could signal a reversal of Wheat's up-trend. Support comes in at 984.25, 948.50 and 909.50, while resistance can be found at 1059.00, 1098.00 and 1133.75.

Rob Kurzatkowski, Commodity Analyst

April Fools' Gold

Gold – Gold prices continue to tumble on broadly lower commodity prices and a higher U.S. Dollar. Subprime write-downs by European banks have led to a stronger greenback, which could find further support if the ISM number comes in better than expected. Funds have significantly reduced the size of their positions in commodities, putting pressure on the precious metals market. Even today's indication by ETF Securities LTD that Gold investment with the firm has exceeded 1 million ounces has not been able to stop the slide. Recovery in the U.S. equity markets could further pressure prices, negating Gold's “flight to quality” effect. The June Gold chart confirmed a bearish consolidation pattern yesterday, signaling the market may be ready to test lows near 860. Momentum has shown bearish divergence from RSI, suggesting the possibility of further weakness. Support comes in at 910.50, 899.50 and 881.90, while resistance can be found at 939.10, 956.70 and 937.70.

S&P – Stock futures are trading higher this morning, despite UBS and Deutsche Bank both increasing their subprime write-downs. Some market observers believe the market is beginning to see the light at the end of the tunnel in the credit crisis. News that Lehman Brothers and UBS are raising new equity was seen as a positive sign that these companies' problems are nearing an end. Traders are awaiting today's release of the ISM manufacturing data after yesterday's surprising Chicago PMI report. Analysts are forecasting the index to register a 47.5 percent reading, which would be a signal that the economy is contracting. A stronger reading – especially above the key 50 percent mark – would be seen as a positive sign and could result in a strengthening U.S. Dollar on expectations that the Fed will not have to be as aggressive with rate cuts. The technical landscape for the June e-mini S&P contract looks to be improving. After confirming a W bottom formation, the daily chart shows a bullish consolidation pattern, which may bring about a test of relative highs at 1392.50 and 1402.50. Momentum has been outpacing RSI, suggesting near-term strength. Support comes in at 1312.25, 1300.25 and 1291.25, while resistance can be found at 1333.25, 1342.25 and 1354.25.

Wheat – Wheat prices continue to tumble on news that farmers will increase their spring plantings of the grain by 7.8 percent. Fund liquidation has driven the July contract down by over three and a half dollars from contract highs, fueled by speculation that global supplies will not be as stressed as they have been over the past two years. The stabilization of the greenback, or rather its inability to make new lows, may be a sign that the currency is ready to recover, which could significantly hurt exports. The July Wheat chart remains bearish. After reversing sharply from contract highs, the chart shows the contract violating a triangle pattern that measures a move to relative lows at 893.75. Failure to hold this level could result in further liquidation and may result in a reversal of the uptrend. Support comes in at 909.25, 881.75 and 827.25, while resistance can be found at 991.25, 1045.75 and 1073.25.

Rob Kurzatkowski, Commodity Analyst

Big Ben, IMF Report in Focus

Dow – Stocks posted strong gains yesterday, with the Dow recording a gain of over 300 points on a stronger-than-expected ISM number and signs that the subprime fiasco may be nearing an end. Futures have retreated in overnight trading on a lower growth forecast for the U.S. economy from the International Monetary Fund, which reduced its outlook to 0.5 percent for the year. More troubling than the U.S. outlook, however, is the fact that the IMF slashed its global growth outlook to 3.7 percent from 4.1 percent and suggested that there is a one in four chance of a global recession. Today's factory orders report is expected to show a drop of 0.8 percent, which is also weighing on the market early. Traders will focus most of their attention, though, on the testimony of Federal Reserve Chairman Ben Bernanke before the Joint Economic Committee, which is his first such engagement since the proposed financial oversight plan was laid out. The Fed has worked overtime to try to keep banks and the credit markets liquid and his testimony on these subjects will be keenly watched. June mini Dow futures broke out of a sideways-to-lower consolidation pattern on the daily chart and closed above the near-term relative high close. This suggests a possible test of the next relative high of 12722, with a close above this level possibly signaling a longer-term recovery. Support comes in at 12330, 12032 and 11870, while resistance can be found at 12790, 12952 and 13250.

Gold – Gold futures jumped this morning on the IMF report, which signals weakness in the global economy and makes the metal appealing once again as a “safe haven” investment. The report was especially skeptical of the U.S. growth outlook, sending the greenback lower and commodity prices higher. Gold has had its share of struggles recently due to the recovery in the equity markets, which along with a slight rebound in the Dollar has pulled capital away from commodities and led to a collapse in Gold prices. Failure to make further advances in the major stock indexes could result in a recovery in precious metal prices. If economic data continues to surpass analyst expectations and the U.S. economy shows signs of recovery, it could lead to a larger sell-off in Gold, as traders would continue to pull their funds out of commodities and buy equities. Also, this scenario could lead to a larger-scale recovery in the U.S. Dollar, resulting in overseas money leaving the precious metals market. The daily June Gold chart shows a bearish reversal from contract highs, but has not given an indication of bear market conditions to this point. Closes below 860 could signal that the bull run may be over, and sell-offs beyond 830 would signal a technical bear market. Support comes in at 867.50, 847.20 and 818.10, while resistance can be found at 916.90, 946.00 and 966.30.

10-Year Notes – Notes fell sharply yesterday, as money flowed into the equity markets at the expense of commodities and treasuries. The recent rebound in equity prices from lows has put some pressure on Note and Bond prices, leading to sideways congestion on the daily chart. Today's testimony by Bernanke will give traders better insight into the Fed's mindset and may give a clearer picture of what the central bank's interest policy may be in the near-term future. If the testimony is dominated by talk of inflation and recovery, it would likely be seen as bearish for interest rate instruments. On the other hand, if the session is marked by talk of economic uncertainty and the housing and credits crises, it would likely be seen as Bond and Note friendly. Yesterday's close below recent lows of 117-26.5 can be seen as bearish short-term, but June T-Notes have chart support at 117-14, 116-21 and 116-05 to buffer the downside. The 9-day moving average looks to be crossing the 18-day to the downside, which is a bearish signal short-term. Support comes in at 117-01, 116-11 and 115-10, while resistance can be found at 118-24, 119-25 and 120-15.

Rob Kurzatkowski, Commodity Analyst

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Job Contraction

S&P – The March Non-Farm Payroll report showed a loss of 80,000 jobs, underscoring the weakness in the labor market. The report included a downward revision of the February figure from a loss of 63,000 jobs to a loss of 76,000. The unemployment rate surged to 5.1 percent from 4.8 percent the prior month. Stock index futures sold off sharply immediately after the release of the data, but have bounced back to positive territory. While the recovery in the index futures defies common logic, traders may actually be pleased with the report, believing the Fed may continue injecting liquidity via rate cuts. Banking stocks got a boost in pre-market trading, which seems to go along with this mindset. Traders may also have been prepared for the report after yesterday’s large initial claims figure and are now looking beyond the report, hoping for an economic recovery later this year. If the market continues to move higher, the June e-mini S&P may show a breakout from a two-day bull flag pattern. A breakout could signal that the market may be ready to attack early February highs of 1402.50. Momentum continues to outpace both price and RSI, suggesting near-term strength. Support comes in at 1362.75, 1352.00 and 1344.50, while resistance can be found at 1381.00, 1388.50 and 1399.25.

Crude Oil – Oil futures have bounced back after selling spurred by the release of the payroll report. The demand outlook continues to look weak based on the data, but the possibility of a reversal of the recent upturn in the U.S. Dollar is friendly to commodities. The Oil market continues to play off of the currency markets instead of fundamental data. Even though the last two EIA reports were supportive of petroleum prices, the market is well off of highs because of the resurgence of the greenback. The daily and weekly May Crude Oil charts show consolidation and indecision. It is apparent when looking at the chart that there is reluctance to push prices beyond $110 a barrel, but at the same time, bulls seem to step up the buying pressure when the contract flirts with $100 on the downside. A breakout of this congestion will likely determine the direction of the market over the next several months after either the bulls or bears gain a decisive edge. Support comes in at 102.55, 101.26 and 99.32, while resistance can be found at 105.78, 107.72 and 109.01.

Bonds – Bond futures got a lift from the payroll report, as traders flocked to safer investments. While the report can be seen as very Bond-friendly, the implications for the U.S. Dollar may stymie treasury buying from overseas investors. Overall, the report could stop the recent slide in Bond prices. The solid economic data earlier this week hinted toward the Fed possibly pausing rate cuts, or at the very least being less aggressive with them. This report may change that mindset among traders. June Bonds found support at 117-00 and are currently trading above chart resistance at 118-23. Closes above 118-23 and 119-19.5 may be seen as bullish in the near term. Support comes in at 117-05, 116-25 and 115-28, while resistance can be found at 118-14, 119-11 and 119-23.

Rob Kurzatkowski, Commodity Analyst

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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

Standard & Poor's (Earnings, That Is)

E-mini S&P – Stock futures have given back a third of yesterday’s gains on weak earnings data from blue chips Pfizer, Merrill Lynch and Nokia. Nokia’s earnings fell short of street estimates for the current quarter, and the mobile phone bellwether lowered its guidance for the latter part of the year. Merrill posted a large quarterly loss of $1.96 billion, which was not entirely unexpected given the current banking climate. The Wall Street giant plans to write off an additional $6.5 billion of bad debt and reported a 40 percent drop in investment banking fees. On a positive note, IBM posted a 26 percent rise in profits and increased its earnings outlook for the remainder of the year. Recession fears still dominate trading and most of the recent buying has come on breaks, as investors try to scoop up stocks at bargain prices. The near-record price of Crude Oil and sharp increase in food prices may cause the Fed to re-think its current rate-cutting strategy. Today’s Initial Claims report showed an increase in jobless claims, but fell short of street estimates. The prior week’s claims were revised down by 12,000, which is somewhat encouraging.

June futures continue to trade in a sideways congestion pattern on the weekly chart and are now trading at the middle-to-upper end of the range. Weekly momentum studies have been falling – despite futures being higher for the week – and are currently showing bearish divergence from the RSI. This suggests that near-term highs around the 1390 mark may offer stout resistance. The daily chart shows that the rally may not have run out of steam yet. Stochastic and RSI indicators are neutral for daily and weekly timeframes.

Rob Kurzatkowski, Commodity Analyst

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Market Googled

S&P – Stock index futures got a lift after Google beat the Street and defied earlier reports that its paid click business was cooling. The company posted profits of $4.84 a share (excluding special items) versus analyst estimates of $4.55 a share – news that sent the company's stock as much as $80 higher in extended hours trading. Citigroup reported a loss of $5 billion for the quarter due to write-downs of $12 billion and a 48 percent decrease in revenues. While the loss of $1.02 a share missed Street estimates of a $0.95 loss, the company will continue to “divest non-strategic assets," according to CEO Vikram Pandit, meaning the company will try to package and sell its more risky investment products. Investors took news of Citi going back to its core business as a positive and shares were higher in European trading. Dampening the relatively upbeat Citigroup announcement, analysts have suggested that Merrill Lynch may need a capital infusion to stay afloat, citing the fact that the company has already used up most of the capital it raised in 2007. With no major economic releases, corporate earnings and option expiration may lead to volatile, choppy trading for much of today's session. June e-mini S&P futures have flirted with near-term highs at 1389 in early trading, but closes above 1402.50 may be needed to spark extended rallies. Momentum is starting to turn lower despite today's rally, suggesting it may be running out of steam. Support comes in at 1362.25, 1352.50 and 1346.25, while resistance can be found at 1378.50, 1384.50 and 1394.25.

Eurodollars – Eurodollar futures are lower for the fifth consecutive session on technical weakness and changes in interest rate outlooks. Interest rate traders have shifted their outlook on Fed policy this week, with the rate cut bias going from half a point down to only a quarter point. With energy and food prices rising at their fastest pace in 17 years, the central bank may be forced to address the inflation issue, meaning less aggressive interest rate policy. The sharp rise in commodity prices can be directly attributed to two factors: tight supplies and a weak U.S. currency. While the Fed can do little to address the first issue, moderation of its recent aggressive rate-cutting policy can lead to stability in the greenback and aid in slowing down the commodity freight train. June Eurodollars broke support at 97.26, which has aided in accelerating the downside move. The next significant chart support areas are found at 96.835 and 96.40, suggesting further declines may be possible. Momentum has begun to move lower at a slower rate that the RSI, suggesting the market may find some stability in the near term. Support comes in at 97.0250, 96.9275 and 96.7925, while resistance can be found at 97.2525, 97.3875 and 97.4825.

Crude Oil – Oil futures are lower this morning on profit-taking and stabilization in the U.S. Dollar. Here too, the possibility that the Fed may begin backing off of its aggressive rate cutting strategy in order to shore up the slumping greenback can be viewed a negative for energy prices. On the other hand, fundamentals have improved recently and the driving season is beginning to approach, making a price collapse in energy prices unlikely in the near term. Technically overbought conditions and lack of fresh news has led to profit-taking over the past two sessions. Momentum remains flat – despite the market being lower this morning – suggesting near-term strength. Support comes in at 114.15, 113.45 and 112.75, while resistance can be found at 115.55, 116.25 and 116.95.

Rob Kurzatkowski, Commodity Analyst

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Tough Times to Come?

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

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Holding Pattern for Metals, Financials

Gold – June Gold is trading lower this morning on a rosier outlook for the U.S. Dollar. Tomorrow's FOMC policy statement is expected to be hawkish in nature due to the rising costs of food and energy, which should bolster the greenback. The weakness in the currency is the primary reason for the exponential rise in energy prices over the past year and a half, and the Fed has come under political pressure to stem the tide. Trading figures to be fairly light until the statement is released tomorrow afternoon, and the language of the report will likely be the focus of traders more than the actual rate decision. Any hints at future rate cuts can be seen as bullish for the Gold market. The June Gold chart shows that the market may be vulnerable to selling pressure, as we trade near major support at 880. Furthermore, the contract failed to get any traction from the spinning top pattern, suggesting further weakness. A positive technical development is the bullish divergence between momentum and RSI, which hints at recovery. Support comes in at 890.20, 884.80 and 880.90, while resistance can be found at 899.50, 903.40 and 908.70.

S&P – Stock index futures are slightly lower in overnight trading, dragged down by disappointing earnings from Visa. The company – which had the largest IPO on record – reported a 28 percent increase in profits over last year, but missed the almost unattainable earnings expectations of many. Today's consumer confidence and tomorrow's GDP figures will give traders a better grip on economic conditions, but trading will probably be light prior to the FOMC decision. The consumer confidence figure is expected to drop to 61.0, its lowest level in 14 years. The June e-mini S&P chart remains bullish near term, but the market is in for a test as we approach major resistance in the 1390-1400 area. Solid advances beyond the 1400 mark may signal a larger recover for the market, while a rejection suggests sideways-to-lower action for the market. Support comes in at 1392.50, 1387.25 and 1381.00, while resistance can be found at 1403.75, 1309.75 and 1415.00.

Corn – Corn futures continue to charge forward due to slower-than-expected planting progress. Only 10 percent of this year's crop has made it into the ground so far, well below the 35 percent average. Yesterday's USDA report slashed the acreage figure to 86 million acres from the prior estimate of 90 million acres. With acreage expected to come in much lower than last year, it is imperative that farmers get as much of the crop planted as early as possible to stay above the trendline yield. The December Corn chart remains bullish, spiking to open higher on the overnight session and making new contract highs. One technical damper is the bearish divergence between momentum and RSI, suggesting that the trend may begin to weaken. Support comes in at 618.50, 606.25 and 599.75, while resistance can be found at 637.25, 643.75 and 656.00.

Rob Kurzatkowski, Commodity Analyst

Credit Crisis Clearing?

Dow – Dow futures are slightly higher in overnight trading on positive credit market comments from Hank Paulson and the Bank of England. The U.S. Treasury Secretary suggested that the credit crisis was “closer to the end” and indicated that the economy is still growing at a very modest pace, backed up by yesterday's 0.6 percent advanced GDP figure. The BOE repeated the assessment that the worst may have passed, noting that appetite for risk and confidence will eventually make their way back into the credit markets. England's central bank also pointed out that balance sheet losses may be overstated due to “large discounts for illiquidity and uncertainty." Stock indexes have made decent progress of late, while fixed income and commodity markets – aside from energies and grains – seem to have faltered, suggesting that capital is returning to the equity market. Yesterday's FOMC statement was fairly neutral for the market. The quarter point rate cut was exactly what the market was expecting and the statement signaled the end of rate cuts, but was not as hawkish as many had expected. The June Mini Dow continues to trade above resistance at 12,770, signaling that the market may be beginning an up-trend. Price action is very sluggish and momentum is relatively flat, hinting that the market may labor in moving higher. Support comes in at 12725, 12642 and 12500, while resistance can be found at 12949, 13090 and 13173.

Crude Oil – The Oil market is trading lower this morning on a stronger U.S. Dollar. Exxon is resuming talks with Petroleum & Natural Gas Senior Staff Association of Nigeria in hopes of ending a weeklong strike that has cut over 800,000 barrels a day in production. Yesterday's EIA data suggests the U.S. is well supplied with Crude Oil, but Gasoline supplies remain uncertain ahead of the busy summer driving season. The FOMC statement was not as bearish for Oil prices as many had expected, with the Fed failing to emphasize inflation. Nonetheless, the central bank looks like it will at least take a break from its rate-cutting cycle, which may hurt demand. June Crude offered further confirmation of a short-term reversal from a spinning top formation. Yesterday's close below the 18-day moving average indicates that a near-term high may be in place. Momentum seems to be rebounding slightly this morning, despite the bearish price action, which can be seen as somewhat positive. Support comes in at 112.27, 111.09 and 108.87, while resistance can be found at 115.67, 117.89 and 119.07.

Dollar Index – The Dollar Index is trading higher this morning, aided by beliefs that the Fed may be done cutting rates. The June Dollar failed to get a lift from the FOMC statement yesterday, as currency traders were looking for a heavier emphasis on inflation. With the recent rebound in the stock market and a credit crisis seemingly nearing its end, the U.S. may receive an infusion of overseas funds to help support prices. The daily June Dollar chart is consolidating after rebounding from contract lows, suggesting prices may have more upside potential. The crossover of the 9- and 18-day moving averages to the upside is a positive development, and the contract is currently trading above the 50-day moving average – solid advances beyond the average may signal a reversal of the downtrend. Aiding the bullish technical sentiment, momentum is showing bullish divergence from RSI and remains above the zero line. Support comes in at 72.49, 72.26 and 71.86, while resistance can be found at 73.12, 73.53 and 73.75.

Rob Kurzatkowski, Commodity Analyst

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Report Day

S&P – Stock index futures are higher in overnight trading on strength in European shares and hopes that today's FOMC policy statement will focus on curbing inflation. Many believe the central bank has focused so much of its attention on the credit market crisis and attempting to stave off inflation, that it has created an inflationary firestorm that constitutes the single biggest threat to the economy. Yesterday's consumer confidence figures give concrete evidence that consumers are having a difficult time grappling with higher food and fuel prices. As the prices of these necessities continue to climb, consumers are left with less purchasing power, making a recovery unlikely. While the Fed must take steps to bolster the U.S. Dollar in order to slow rising prices, weak economic data may prevent the committee from making an overly hawkish statement. In addition to the FOMC policy statement this afternoon, durable goods orders and new home sales data will be released in the morning. Durable goods orders, released at 8:30 AM EST, are expected to show zero growth following a drop of half a percentage point last month. New home sales, released at 10:00 AM EST, are expected to fall to 510,000 from 526,000 last month. Estimates for both of these economic indicators are low enough that an upside surprise may be more likely than one on the downside, which could set a positive tone for the market going into the FOMC statement. The September e-mini S&P formed a spinning top pattern on the daily chart, suggesting the market may get a bounce near-term. This view may be supported by the momentum indicator outpacing both price and RSI to the upside, which can be viewed as short-term bullish. Support comes in at 1304.50, 1293.50 and 1281.75, while resistance can be found at 1327.25, 1339.00 and 1350.00.

RBOB – Gasoline futures are slightly lower this morning ahead of the weekly inventory data, which is forecast to show a decline of 750,000 barrels. Demand for gasoline has been very weak given the state of the U.S. economy and rising costs. MasterCard's Spending Pulse survey indicated that demand for motor fuel was down 2.7 percent last week versus the same period a year ago, and the 4-week average of the survey is down 3.6 percent versus the same period last year. China, which has recently raised its subsidized fuel prices, has had strong fuel demand, leading to higher global prices. Traders will now focus on the Asian giant's demand figures to see if the rise in prices was simply a token gesture or if it will actually curb demand. RBOB prices could be susceptible to declines if global demand continues to cool and the greenback strengthens. Otherwise, the trend of rising prices may continue or, at the very least, stabilize at these high levels. The August RBOB chart shows that the market is consolidating and traders are uncertain of where the market will move next. Momentum is showing slight bearish divergence from RSI, suggesting that the market may be vulnerable in the short term. Support comes in at 3.4474, 3.4217 and 3.3919, while resistance can be found at 3.5029, 3.5327 and 3.5584.

Wheat – Wheat prices are higher for the second consecutive session on news that heavy rains have slowed the harvest. The sharp rise in Corn prices has forced Japan and South Korea to hike imports of Wheat to feed cattle. Japan, which is the world's largest importer of grains, could follow the South Korean model and replace half of its Corn requirements with feed-Wheat. This rally could be short-lived if Japan fails to substantially increase its imports of the grain, as the U.S. harvest is more than sufficient to meet domestic demand. December Wheat recently saw the 18-day moving average cross the 50-day average to the upside, while can be seen as bullish mid-term. If the market fails to advance beyond near-term resistance at 954, prices may fall below the key 900 market and beyond. Momentum is showing strong bullish divergence from the RSI indicator, suggesting strength in the short- to mid-term. Support comes in at 901, 890 and 878, while resistance may be found at 924, 936 and 947.

Rob Kurzatkowski, Commodity Analyst


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Point, Counterpoint

Crude Oil – Just as Israel tested its new interceptor missile, Iran went forward with its own long-range missile test – one capable of reaching Israel – further escalating tensions in its ongoing standoff with the West. This news sent Crude Oil futures $1.50 higher in early trading after falling more than $9 over the past two sessions. In addition to the new geopolitical development, traders will get to digest U.S. inventory data today, as the EIA is expected to show a decline of 2.5 million barrels for the week. Despite the bullish slant expected from today's report, Oil traders have begun to express their doubts about the global economy and commodity prices. Indicators outside of the U.S. are beginning to look more ominous, suggesting that inflation may begin to cool on weak demand for raw materials. Traders will continue to focus on Iran and possible supply disruptions, but the poor economic news may prevent the explosive rallies that we have seen in recent weeks. The August contract closed below the 18-day moving average yesterday, signaling that a near-term high may be in place. The chart pattern signals that the market may be in store for a correction, but weary bears may wait for a close below 132.00 before jumping into the market. Countering this bearish view, momentum remains above the zero line and continues to show bullish divergence from the RSI indicator. Support comes in at 133.31, 130.57 and 126.01, while resistance can be found at 140.61, 145.17 and 147.91.

S&P – Stock index futures are trading slightly lower this morning after posting solid gains yesterday. The news of Iran's missile test and the ensuing rise in Oil prices has weighed on the futures market in overnight trading. Airlines and retailers are expected to continue their pattern of disappointing earnings, which has overshadowed upgrades in U.S. metal manufacturers. The bottom line is that there is plenty of risk and uncertainty hanging over the market and many investors are simply not willing to stomach this risk until the economy shows more solid signs of improvement. The enthusiasm over the Fed suggesting that it will keep emergency funds open to banks may be short-lived, as the sector has stabilized but shows no signs of improvement. There are no major economic releases today, so the stock market may take its cue from the energy market after the release of the weekly inventory data. The September e-mini S&P chart shows a bullish engulfing pattern, suggesting a positive bias. Adding to this bullish view, momentum is outpacing the RSI indicator to the upside. While the chart shows potential, technicians would probably like to see the market close above the 1300 level before declaring a bullish reversal. Support comes in at 1248.25, 1222.75 and 1209.00, while resistance can be found at 1287.50, 1301.25 and 1326.75.

Rob Kurzatkowski, Commodity Analyst

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Stocks Try to Mount a Rally

S&P – Index futures are higher in overnight trading, lifted by stronger-than-expected earnings from JP Morgan – 54 cents a share versus estimates of only 44 cents. Coupled with the surprising news from Wells Fargo, some traders believe that the worst may have passed for many of the nation's larger financial institutions. Merrill Lynch, Coca Cola, Microsoft, IBM and Google are also releasing earnings today, which will likely make trading very volatile – nothing new for the market these days. On the economic front, housing starts and permits and initial claims will be released at 8:30 ET, and the Philly Fed number will come out at 10:00 ET. Housing starts are expected to fall to 960,000 and permits are expected to show a more modest decrease to 965,000, while initial claims are forecast to increase to 380,000. As with corporate earnings, these figures have been revised down – or up in the case of initial claims - to the point where an upside (downside) surprise may be likely. The Philly Fed number is expected to show manufacturing in the region still contracting, with a consensus estimate of -15.0, which would be a very modest improvement over last month's -17.1 figure. The September e-mini S&P shows what appears to be a V-bottom reversal on the daily chart, which may be considered bullish. Traders will be looking for some sort of follow-through to confirm that pattern, preferably a close above the 18-day moving average, which is currently sitting at 1263.25. Failure to cross resistance at 1293.00 in the near term may result in the bears retaining control of the market. Support comes in at 1213.50, 1186.00 and 1169.75, while resistance can be found at 1257.25, 1273.75 and 1301.00.

Crude Oil – Crude is lower for the third consecutive trading session on demand worries. China, the world's second largest consumer of petroleum, has reported its slowest economic growth since 2005. Of the 23 industrialized nations, Canada has been the only nation to avoid bear market conditions in its stock indexes. Recent supply and demand data has shown that the skyrocketing cost of Oil has changed consumer and industrial behavior, which, in turn, has trimmed demand both in the U.S. and overseas. Yesterday's EIA report demonstrated that despite increases in imports of “black gold” and refinery utilization, both U.S. demand for gasoline and exports of diesel fuel continue to fall. Things have quieted on the geopolitical front as well, with fears of Nigerian rebel group MEND stepping up attacks on Western interests yet to be substantiated. More importantly, the U.S. has made the symbolic move of joining the EU in nuclear talks with Iran. The U.S. is also expected to show a diplomatic presence in Iran for the first time since 1980, which could be seen as something of a breakthrough. However, both of these situations have the possibility to change quickly, which would send prices back into bull mode. August Crude Oil confirmed a bearish double top formation yesterday, but prices finished well off of lows, causing traders to be cautious acting on the pattern. Thus far, prices have stayed above support at 132.00 and many market observers may be looking for a solid close below this level before ceding control to the bears. The August contract is also in danger of closing below the 50-day moving average for the first time since early February, which could be seen as a bearish indicator longer-term. Support comes in at 133.31, 132.03 and 130.96, while resistance can be found at 135.666, 136.73 and 138.01.

Rob Kurzatkowski, Commodity Analyst

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Dollar Doldrums

Dollar Index – The U.S. Dollar continues to trade near all-time lows on weakness in financial stocks. The fallout from Freddie Mac and Fannie Mae continues to hang over the markets and the situation may worsen for both troubled lenders before it gets better. Both companies have stepped up their purchases of non-guaranteed subprime securities in recent months, opening the door for even larger write-downs in the near future. Making matters worse, profits at American Express tumbled due to a higher volume of consumer defaults, indicating the economic growth probably has not yet bottomed out. The banking crisis and weak consumer spending will likely preclude the Fed from raising rates this year, which favors the Euro and other overseas currencies and dims the chances of a larger-scale recovery. Fresh lows may lead to further unwinding of U.S. Dollar positions. The September Dollar Index chart shows the market in a solid downtrend, unable to even rally above the 9-day moving average in order to gain a bit of short-term upside momentum. If the market is able to hold recent lows and rally beyond the July 17 high of 72.675, the market may see a short-term recovery rally. Momentum has stayed fairly steady, despite recent price action, indicating the market may see a short-term bounce. Support comes in at 71.99, 71.76 and 71.515, while resistance may be found at 72.465, 72.71 and 72.94.

S&P – Disappointing earnings from American Express, as well as diminished growth outlooks from Apple and Texas Instruments, have sent stock futures tumbling in overnight trading. Traders who may have gotten a bit ahead of themselves on surprisingly good earnings reports last week and might be brought back to reality by this data. While larger money center banks appear to be seeing the light at the end of the tunnel, the worst may be yet to come for credit card companies and mortgage lenders. The increase in consumer defaults, coupled with a decreased appetite for discretionary purchases, may put credit card companies in a much more dire financial position. Because the card companies are generally not seen as quite as important in the grand scheme of the financial system as banks and mortgage lenders, the possibility of a government bailout is virtually non-existent. Technology stocks may continue to suffer the effects of an economic slowdown due to higher prices for necessities and the decreased purchasing power of consumers. Yesterday's spinning top candlestick pattern on the daily September e-mini S&P chart hinted at today's reversal of the recent uptrend, and traders may be looking for a weak close today to confirm a short-term reversal pattern. Rallies beyond the 1275 area and, more importantly, the psychological resistance at 1300 could attract bulls back to the market. Support comes in at 1254.75, 1247.75 and 1240.50, while resistance can be found at 1268.75, 1275.75 and 1285.75.

Gold – The sell-off in equities and lower U.S. Dollar has driven Gold prices higher in the early going. With economic conditions both in the U.S. and overseas weakening, traders may continue to pour money into Gold futures and ETFs. More importantly for the precious metals market, prices have somewhat detached themselves from energies and other commodities. Even if inflation begins to moderate, traders may opt to split their assets between precious metals and debt instruments to hedge against another ramp-up in inflation. Last week's decline in the August contract did not affect the technical outlook for Gold, as the market was able to confirm support at the previous resistance area of 950. Support comes in at 956.60, 949.50 and 943.30, while resistance can be found at 969.90, 976.10 and 983.20.

Rob Kurzatkowski, Commodity Analyst

Worldwide Woes

S&P – European and Asian markets slumped in overnight trading, dragging down U.S. stock index futures before the bell. Recent data seems to confirm recent fears that the U.S. slowdown is spilling over to outside markets. Germany's Ifo Business Confidence Index saw its largest drop since the 9/11 attacks, falling to 97.5 from 101.3 points for the month of June; Citigroup trimmed earnings forecasts for the UK banking sector by 40 percent; and, National Australia Bank, Australia's largest lender, wrote off A$830 in U.S. mortgages, causing shares to plunge. Back in the States, traders are expecting today's 10:00 AM EST report on New Homes Sales to show a drop to 505,000, which could lead to more woes in the troubled lending sector. Weak home sales figures and skyrocketing foreclosure rates have prevented a recovery in banking shares. Mortgage rates have also climbed on expectations that the Fed may begin tightening rates by year-end, suggesting housing prices may not bottom in November-December of this year, as many had expected. One positive that can be taken amid all of this dismal data is the fact that the U.S. economy was the first to feel the impact of the credit crunch and, in theory, could make the quickest recovery. Banks have already written off enormous sums of bad debt and seem to be erring on the side of caution when giving their earnings outlooks. Another positive implication of a slowdown overseas is the possibility of rapidly decreasing inflation. Consumption of raw materials – namely food and energy – may slow significantly, aiding a U.S. recovery. In addition to New Homes Sales, the Durable Goods Orders report will be released at 8:30 AM EST, and is expected to show a contraction of 3 percent. September e-mini S&P futures bounced off of the 38.2 percent Fibonacci retracement resistance area on Wednesday, suggesting traders may not be confident in the market's chances of a recovery. The 9-day moving average may be on the verge of crossing the 18-day average to the upside, which could be seen as positive in the near term. The market is at a turning point in the short term. Crossing the 1293 mark – which is both chart and Fib resistance – could swing the market in favor of the bulls, while a close below the 1240 support area could lead to further declines. Momentum is showing strong bullish divergence from both price and RSI, suggesting a positive short-term bias. Support comes in at 1241.50, 1229.25 and 1207.50, while resistance can be found at 1275.50, 1297.25 and 1309.50.

Crude Oil – Oil futures have edged slightly higher in the early going this morning on comments from Israel and Nigerian militant group MEND. Israel upped its rhetoric, saying that military options are available if negotiations with Iran fail. This is hardly fresh news, but may have shaken the resolve of some Oil bears. Traders seem to be more focused on suggestions from MEND that it will attack major pipelines that feed two of the nation's four major refineries. Today's trading may have a slightly bullish bias due to prices dropping rapidly over the past two weeks and concerns that supplies may be disrupted. The bullish enthusiasm may be somewhat subdued due to worries that a global economic slowdown may continue to trim demand. Also, the odds of an attack on Iran prior to the November election are fairly slim, as Israel could have a falling-out with U.S. over what might be seen as sabotaging the election and disrupting Oil supplies. September Crude Oil technicals remain bearish, at least in the near term. The 18-day moving average is in danger of crossing through the 50-day to the downside, which may be seen as bearish over the mid-term. Price action over the past two sessions, while positive, suggests that prices are consolidating before moving lower. If the price of the September contract falls below the $120 mark, the market may see more downside. Momentum is moving lower this morning, despite the rally, hinting that bulls may not be very confident in their opinion. Support comes in at 123.86, 122.23 and 120.94, while resistance can be found at 126.78, 128.07 and 129.70.

Cocoa – Cocoa prices have gotten a boost from a weaker Dollar and a stronger British pound, leading to arbitrage buying. Cocoa has plummeted this month on improved growing conditions in the Ivory Coast. Traders were expecting that some of the problems that had plagued the midcrop may also hamper the main crop, leading prices ahead of themselves. The government in the Ivory Coast is also stepping up efforts to spay crops, which would decrease the likelihood of black pod and other diseases. The real story in Cocoa may be the fund activity, with many funds bailing out of their positions, sparking this plummet. The market has been a favorite of many hedge funds and the sharp drop in energy and grain prices may have forced many funds out of Cocoa to meet margin calls and de-leverage their positions. Technically, September Cocoa remains weak. The chart pattern shows the market consolidating around the 2750 area, which could mean more downside lies ahead. Fibonacci support at 2654 may be a key area going forward. If prices are unable to stop their slide at 2654, prices could test April lows. Support comes in at 2725, 2706 and 2678, while resistance can be found at 2772, 2800 and 2819.

Rob Kurzatkowski, Commodity Analyst

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