U.S. Stock Indices are trading flat this morning after a limited, rangebound overnight trade. The chart pattern suggests that this week’s rally may be running out of steam after three straight sessions of higher-highs.
This morning’s U.S. Initial Claims Report may act as a catalyst for a pop in equity prices today but the primary concerns among investors remain the risk of contagion in Europe and the possible slowdown in global economic growth.
Technically, the June E-mini S&P 500 has a possible upside target at 1190.75 but also faces exposure to a 50% of the recent rally to 1115.50. The old bottoms at 1171.00, 1176.75 and 1179.75 could prove to be strong resistance today. The first sign of weakness will be a break back under a .618 level at 1155.50.
The June E-mini NASDAQ has a wall of resistance at 1985.75 and 1989.50. A break under 1933.25 will be the first sign of weakness. The June E-mini Dow found resistance at the old bottom at 10916. Weakness could start if 10684 fails to hold on a test.
The June Treasury Bond continued to weaken overnight in limited trading. Traders have been lightening up safety positions this week as the stock market rallied and exposure to risk subsided. This week’s Treasury auctions have kept traders on the sidelines while limiting ranges.
Technically, downside pressure is expected to continue to push this market into a 50% price level at 119’11. There may be a technical bounce at this level, but a failure to build support could drive it into the .618 support at 118’04.
June Gold is trading lower overnight after soaring to a new all-time on Wednesday at $1249.20. Based on the short-term range of $1156.20 to $1249.20, this market remains vulnerable to a correction to $1202.70 to $1191.70.
The driving force in this market has been the fear of contagion. Speculators have been buying gold in anticipation of further weakness in the Euro Zone economy. Traders are monitoring the debt markets in Spain, Portugal and Greece to watch for any drastic changes in risk premiums. This would serve as the first notice that concerns about sovereign debt defaults are returning.
June Crude Oil is under a little pressure overnight. The recent bottom at 74.51 is still intact but vulnerable. A drop in the Euro could trigger a break through this level. Traders remain concerned that a slowdown in the Euro Zone economy will lead to a further deterioration in demand for crude oil and energy products. Yesterday’s oil inventory report showed an increase in supply that encouraged further selling. The outlook in demand for crude oil remains bleak although losses could be limited on the thought at China’s robust economy may be able to pick up the slack.
The June Dollar Index is trading better this morning, driven higher by weakness in the June Euro and June British Pound. The Euro continues to drift lower on the lack of confidence in the new European Union bailout proposals. Traders still feel that this plan will fail because it amounts to nothing except new debt piled upon old debt. The euphoria created by the new government in the U.K. seems to be wearing off as traders are driving the British Pound lower as they face the reality of new austere financial measures. Yesterday’s report from the Bank of England calling for slow growth in the economy is also helping to apply downside pressure. Increased demand for higher risk assets is pressuring the June Japanese Yen while underpinning the June Canadian Dollar. 
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