OVERNIGHT/EARLY MORNING DEVELOPMENTS

The feature overnight was a strong rally in gold. All commodity markets will be closely watching gold today. The U.S. stock indexes are weaker in early electronic trading. The U.S. dollar is lower versus the major currencies in very early U.S. trading. U.S. Treasury Bonds are modestly higher in early dealings. Grains were higher in overnight electronic trading. There was no major market-moving geopolitical news overnight.

U.S. ECONOMIC REPORTS/EVENTS

On tap today is the U.S. current account deficit figure and the University of Michigan’s consumer sentiment survey. St. Louis Fed’s Poole speaks in South Korea. Fed governor Kohn speaks in Boston and Fed governor Kroszner speaks in New York.

U.S. STOCK INDEXES

The indexes are weaker in early morning electronic trading, following strong gains Thursday, in a short-covering bounce from recent losses. The bears still have the near-term technical advantage, but my bias is that near-term lows are in place, or close at hand. Weekly high closes in the indexes today would certainly bolster this notion.

September S&P 500: The shorter-term moving averages (9- and 18-day) are still fully bearish. The 4-day moving average is below the 9- and 18-day average, and the 9-day is below the 18-day moving average. However, a weekly high close today would begin to turn the shorter-term moving averages back into a bullish posture, as the 4-day would likely produce a bullish signal by moving back above the 9-day. Today, key shorter-term technical support comes in 1,259.50. Sell stops likely reside just under that level. More sell stops likely reside under shorter-term support at 1,250.00. Shorter-term upside resistance for active traders today is at Thursday’s high of 1,270.50 and then at 1,275.00. Buy stops are likely located just above those price levels.

September Nasdaq: The shorter-term moving averages (4- 9- and 18-day) are turning bullish. The 4-day is poised to move above the 9-day moving average with higher prices today. The 9-day moving average is still below the 18-day. Today, shorter-term technical support is located at 1,580.00. Light sell stops likely reside just below that level, and then below support at Thursday’s low of 1,546.50. On the upside, short-term resistance is seen at the overnight high of 1,603.00 and then at the June high of 1,646.00. Buy stops are likely located just above each of those levels.

September Dow: Bulls got a boost Thursday. For today, sell stops likely reside just below support at 11,000 and then at Thursday’s low of 10,917. Buy stops likely reside just above shorter-term technical resistance at Thursday’s high of 11,1250. Shorter-term moving averages are still bearish, but the 4-day moving average would likely move above the 9-day today to produce a bullish signal, if price action is to the upside today. The 9-day is still below the 18-day moving average. Look for the Dow to be the leader of the indexes in the near term.

U.S. TREASURY BONDS AND NOTES

Both notes and bond prices were modestly higher in overnight trading in Chicago. The markets suffered near-term chart damage Thursday and the bulls have lost their recently gained upside near-term technical momentum.

September U.S. T-Bonds: In overnight trading, prices dipped to a fresh two-week low. Shorter-term moving averages (4- 9- 18-day) are now turning more bearish. The 4-day moving average is now below the 9-day average, and is poised to move below the 18-day as soon as today. The 9-day is still above the 18-day. Shorter-term resistance lies at Thursday’s high of 107 15/32 and then at 107 24/32. Buy stops likely lie just above those levels. Shorter-term technical support lies at the overnight low of 106 26/32 and then at 106 20/32. Sell stops likely reside just below those levels.

September U.S. T-Notes: Prices are weaker in early morning dealings. Buy stops likely reside just above shorter-term resistance at Thursday’s high of 105.11.0. Shorter-term moving averages are turning more bearish. The 4-day moving average has crossed below the 9-day average. The 9-day is now poised to cross below the 18-day moving average. A move in prices below shorter-term support at the overnight low of 104.30.0 would likely uncover sell stops. Heavy sell stops likely reside just under solid support at the June low of 104.22.5.

CURRENCIES

The September U.S. dollar index is modestly lower in early morning electronic dealings and the currencies are modestly higher. Dollar index bulls are losing near-term technical momentum and need to step up soon to show some more power. The dollar index finds key shorter-term technical resistance at the overnight high of 85.47 and then at Thursday’s high of 85.77. Shorter-term support is seen at the overnight low of 85.26 and then at 85.00. The September Euro today finds sell stop orders are likely located at shorter-term technical support at the overnight low of 1.2705 and then just below support at Thursday’s low of 1.2659. Shorter-term technical resistance for the Euro is seen at the overnight high of 1.2751 and then at 1.2766. Buy stops likely reside just above those shorter-term resistance levels.

METALS

The metals are stronger in early morning dealings, with gold leading the way with sharp gains overnight. While serious near-term chart damage has been inflicted on gold this week, a potential selling “exhaustion tail” may have occurred on the daily bar chart, whereby selling interest dried up at lower price levels and prices rebound. A stronger close today would be a solid technical clue that a near-term low is in place. In August gold, prices would have to push and close back above solid resistance at $600.00 to give the bulls a bit of fresh technical momentum. Key shorter-term technical support for August gold today is $580.00 and then at the overnight low of $571.20. Sell stops likely reside just below those levels. Buy stops likely reside just above shorter-term resistance at the overnight high of $589.00, and then above $595.00.

ENERGIES

Prices are trading near steady in early electronic dealings, but near the overnight low. In July crude, look for buy stops to reside just above resistance at $70.00 and then at $70.50. Look for sell stops just below shorter-term support at the $69.00. I still look for more trading within the recent well-defined range–bound by key near-term support at $68.00 in July crude and solid resistance at $75.00. But a drop below the aforementioned trading range–including multiple closes below it–would then likely mean a trading range in crude oil prices between $65.00 and $70.00. Natural gas price action this week does suggest that a near-term low is in place in that market, and that prices can work sideways to higher in the coming weeks.

GRAINS

Prices were higher in overnight electronic trading, on a corrective short-covering bounce from more losses Thursday. Chart damage has been inflicted on corn and wheat markets this week. Weather forecasts for the Corn Belt are turning more near-term bearish. It now looks like it will take a weather market scare to jump start the corn and soybean market bulls. Traders will also seek direction from the “outside markets”–gold and crude oil today. Stronger gold prices could spill over into added strength in the grains today.