OVERNIGHT/EARLY MORNING DEVELOPMENTS

The feature overnight was a moderate rally in metals and crude oil futures prices, after recent heavy selling pressure. All commodity markets will be closely watching gold and crude again today. The U.S. stock indexes are higher 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 lower 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 weekly U.S. jobless claims, the New York Federal Reserve’s manufacturing index, Treasury international capital flows data, industrial production, capacity utilization, DOE natural gas stocks, the Philadelphia Fed business index, Boston Fed president Minehan speaks, as does Fed governor Kroszner and Fed chairman Bernanke in Chicago.

U.S. STOCK INDEXES

The indexes were higher in early morning electronic trading, in a short-covering bounce from recent losses. The bears still have the near-term technical advantage.

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. One early clue that the market may be set for a decent recovery would be if the 4-day crossed back above the 9-day moving average. Today, key shorter-term technical support comes in 1,241.10–the overnight electronic low. Sell stops likely reside just under that level. More sell stops likely reside under shorter-term support at Wednesday’s low of 1,229.20. Shorter-term upside resistance for active traders today is at 1,250.00 and then at 1,255.00. Buy stops are likely located just above those price levels. Slow stochastics are still signaling a market that is oversold.

September Nasdaq: The shorter-term moving averages (4- 9- and 18-day) are still fully bearish. The 4-day is below the 9-day moving average, and the 9-day moving average is below the 18-day. Today, key shorter-term technical support is located at Tuesday’s low of 1,528.75. Sell stops likely reside just below that level, and then below support at 1,520.00. On the upside, short-term resistance is seen at this week’s high of 1,577.00 and then at 1,600.00. Buy stops are likely located just above each of those levels. Slow stochastics still show a market that is short-term oversold and due for a corrective bounce.

September Dow: Prices Wednesday hit a four-month low. Today, sell stops likely reside just below support at 10,800 and then at Wednesday’s low of 10,740. The market is still oversold on a short-term technical basis and due for more of an upside bounce. Slow stochastics are still in oversold territory. Buy stops likely reside just above shorter-term technical resistance at Tuesday’s high of 10,950. Shorter-term moving averages are still fully bearish, showing the 4-day below the 9- and 18-day moving average. The 9-day is also below the 18-day. An early bullish clue would be if the 4-day moved back above the 9-day moving average.

U.S. TREASURY BONDS AND NOTES

Both notes and bond prices were modestly lower in overnight trading in Chicago. The markets were hammered Wednesday by a bearish CPI report. The bulls are fading fast and need to show power today or Friday, or a retest of the recent lows is likely.

September U.S. T-Bonds: Shorter-term moving averages (4- 9- 18-day) are now turning bearish. The 4-day moving average is poised to move below the 9-day average. The 9-day is above the 18-day. Shorter-term resistance lies 107 16/32 and then at 107 24/32. Buy stops likely lie just above those levels. Shorter-term technical support lies at 107 even 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 105.16.0. Shorter-term moving averages are turning 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 105.00.0 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 still have some near-term technical momentum. The September U.S. dollar index hit a fresh six-week high Tuesday and finds key shorter-term technical resistance at this week’s high of 86.08 and then at 86.50. Shorter-term support is seen at Wednesday’s low of 85.35. The September Euro today finds sell stop orders are likely located at shorter-term technical support at 1.2650 and then heavier stops just below this week’s low of 1.2609. Shorter-term technical resistance for the Euro is seen at Wednesday’s high of 1.2730 and then at 1.2750 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, on a bounce from huge losses Tuesday. Gold is trading up around $10.00 an ounce. Serious near-term chart damage has been inflicted on gold. However, a potential selling “exhaustion tail” may have occurred this week on the daily bar chart today, whereby selling interest dried up at lower price levels and prices rebound. Today’s price action will also be extra important for traders. A strongly higher close today would suggest 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 $570.00 and then at $565.00. Sell stops likely reside just below those levels. Buy stops likely reside just above shorter-term resistance at the overnight high of $580.20, and then above $590.00.

ENERGIES

Prices are firmer in early electronic dealings. 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 overnight low of $69.00. If prices close solidly higher today, then 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. 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.

GRAINS

Prices were higher in overnight electronic trading, on a corrective bounce from strong losses Wednesday. Chart damage was inflicted on corn and wheat Wednesday. Traders will be watching USDA weekly export sales today. Weather forecasts for the Corn Belt are turning more near-term bearish as the week goes on. Traders will also seek direction from the “outside markets”–gold and crude oil today. I look for steady to firmer closes today.