OVERNIGHT/EARLY MORNING DEVELOPMENTS
The U.S. stock indexes are slightly higher in early electronic trading, on a corrective bounce from solid losses Monday. The U.S. dollar is stronger versus the major currencies in very early U.S. trading, gold is solidly lower, crude oil is slightly lower and U.S. Treasury Bonds are slightly lower in early dealings. Grains were lower in overnight electronic trading. There were no major market-moving news events overnight. The main feature in the markets is talk that the Federal Reserve will now likely continue to raise U.S. interest rates following hawkish inflation comments by Fed Chairman Bernanke Monday afternoon.
U.S. ECONOMIC REPORTS/EVENTS
On tap today is ICSC store sales index; Redbook retail sales; Fed Governor Bies and K.C. Fed President Hoenig speak today.
U.S. STOCK INDEXES
The indexes were slightly higher in overnight electronic trading, following solid losses Monday that came in the wake of Bernanke’s hawkish inflation comments. Trading has become choppy again. I still don’t look for any strong price trends to develop in the indexes. More likely is choppier and more sideways trading action during the normally quieter summer months.
September S&P 500: The bulls still have some near-term technical momentum, but need to step up and show power today. The shorter-term moving averages (9- and 18-day) are still turning bullish. The 4-day moving average is above the 9-day and the 9-day is still turning higher. Today, key shorter-term technical support comes in at Monday’s low of 1,277.00 and then at last week’s low of 1,270.00. Sell stops likely reside just under Monday’s low. Key upside resistance for active traders today is the 1,288.00 level and then at Monday’s high of 1,297.20. Buy stops are likely just above both of these price levels.
September Nasdaq: The shorter-term moving averages (4- 9- and 18-day) are neutral. The 4-day is above the 9-day moving average, but the 9-day moving average is turning back down and is below the 18-day. Today, key shorter-term technical support is the Monday’s low of 1,599.50. Sell stops likely reside below that level. Heavy sell stops likely are located just below the May low of 1,583.00. On the upside, short-term resistance is seen at Monday’s high of 1,629.50 and then at the 1,646.00 level–last week’s high. Buy stops are likely located just above those levels.
September Dow: Prices Monday hit a fresh three-month low. The next shorter-term downside objective for the bears is pushing prices below solid near-term support at Monday’s low of 11,140. Heavy sell stops likely reside just below that level. Heavy sell stop placement is likely also seen just below the May low of 11,153. Buy stops likely reside just above technical resistance at Monday’s high of 11,305. Shorter-term moving averages show the 4-day turning back lower, to possibly produce a bearish cross below the 9-day moving average today, to produce a minor sell signal.
U.S. TREASURY BONDS AND NOTES
Both notes and bond prices were slightly lower in overnight trading in Chicago. While last Friday’s U.S. jobs report was bullish for Treasuries, Bernanke’s hawkish inflation comments Monday afternoon threw cold water on any rally attempt in the Treasuries. There are no clues of a bottoming process occurring in notes or bonds.
September U.S. T-Bonds: Shorter-term moving averages (4- 9- 18-day) are still bullish. The 4-day moving average is now above the 9-day average. Both the 4-day and 9-day are above the 18-day, which is bullish. Shorter-term resistance still lies 107 23/32–the May high. Solid buy stops likely lie just above that level. A push below support at 107 even would provide the bears with some fresh shorter-term downside technical momentum. Sell stops likely reside just below that level.
September U.S. T-Notes: Prices are weaker in early morning dealings. A good number of buy stops likely reside just above shorter-term and intermediate-term resistance at 105.30.5–the May high. Shorter-term moving averages are bullish. The 4-day moving average is above the 9-day average, and both the 9-day and 4-day are above the 18-day moving average, which is bullish. A move in prices below shorter-term support at 105.10.0 would likely uncover sell stops. More stops likely reside just under support at 105.00.0.
The September U.S. dollar index is solidly higher in early morning electronic dealings and the currencies are lower. Fed Chairman Bernanke boosted the greenback with his inflation-hawkish comments Monday afternoon, which suggested the Fed will continue to raise interest rates. The September U.S. dollar index finds key shorter-term technical support at Monday’s low of 83.73 and then at the contract low of 83.27. Shorter-term resistance is seen at 84.50. A drop below the contract low could be the beginning of a downside “breakout” from a congestion area at lower price levels, and would signal another fresh leg down in prices for the DX. Key shorter-term technical support in the September Euro today is located at 1.2900. Light sell stops likely reside just below that support level. Shorter-term technical resistance for the Euro is seen at 1.3000. Light buy stops likely reside just above that shorter-term resistance level.
The metals are solidly lower in early morning dealings, as the U.S. dollar is solidly higher. Price action last week did produce near-term chart damage in gold and silver. In August gold, prices would have to push back above resistance at $675.00 to negate a steep downtrend line in place on the daily bar chart. Key shorter-term technical support for August gold today is the $630.00 level. Sell stops likely reside just below that level. Heavy sell stop placement is likely just below strong support at last week’s low of $624.00. Buy stops likely reside just above shorter-term resistance at $650.00.
Prices are lower in early electronic dealings. Prices are in a fledgling uptrend from the May low. In July crude oil, look for buy stops to reside just above resistance at Monday’s high of $73.84. Look for sell stops just below support at $71.00. I don’t look for much more upside in crude, at present price levels. I still look for more trading within a range–bound by key near-term support at $68.00 in July crude and solid resistance at $75.00. 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. It’s very likely going to take another geopolitical market “shock” to move crude above $75.00.
Prices were mostly lower in overnight electronic trading, following good USDA crop progress readings for corn and beans Monday afternoon. The HRW wheat crop ratings were bad, but that was expected. However, the spring wheat crop also did show some deterioration. Weather patterns in the Corn Belt are near-term non-threatening. Key for bulls is the “high-pressure ridge” watch. There is a heat dome over the Plains states, and if that starts to move north, then a full blown weather market could develop in the grains. The wheat market is still showing some signs that a top is in place.