OVERNIGHT/EARLY MORNING DEVELOPMENTS
The feature overnight was sharply lower metals prices and lower crude oil prices. The U.S. stock indexes are firmer in early electronic trading. The U.S. dollar is stronger versus the major currencies in very early U.S. trading. U.S. Treasury Bonds are slightly lower in early dealings. Grains were solidly lower in overnight electronic trading. Major market-moving news overnight and over the weekend is reports that China is again acting to restrain its economic growth by raising interest rates and curtailing lending. This is an underlying bearish factor for most raw commodities markets.
U.S. ECONOMIC REPORTS/EVENTS
On tap today is the NAHB housing index and Atlanta Fed president Guynn speaks. It’s a light event day today in the U.S.
U.S. STOCK INDEXES
The indexes are firmer in early morning electronic trading, following good rebounds last week. The bulls are regaining some near-term technical momentum. My bias is that near-term lows are in place.
September S&P 500: The shorter-term moving averages (9- and 18-day) are turning bullish. The 4-day moving average is above the 9-day. The 9-day is still below the 18-day moving average. A minor bullish pennant pattern has formed on the daily bar chart. Today, key shorter-term technical support comes in 1,256.90–Friday’s low. 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 last week’s high of 1,270.50. Heavier buy stops are likely located just above that price level.
September Nasdaq: The shorter-term moving averages (4- 9- and 18-day) are turning bullish. The 4-day is above the 9-day moving average. The 9-day moving average is still below the 18-day. Today, shorter-term technical support is located at 1,565.00. Light sell stops likely reside just below that level, and then below support at 1,555.00. On the upside, short-term resistance is seen at Friday’s high of 1,603.00. Heavier buy stops are likely located just above that level.
September Dow: Bulls are regaining power. For today, sell stops likely reside just below support at 11,000 and then at 10,917. Buy stops likely reside just above shorter-term technical resistance at Friday’s high of 11,130 and then just above resistance at 11,200. Shorter-term moving averages are turning bullish, as the 4-day moving average has moved above the 9-day to produce a bullish signal. 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 lower in overnight trading in Chicago. Bears again have near-term technical momentum on their side, following weekly low closes on Friday. The markets have suffered near-term chart damage.
September U.S. T-Bonds: In overnight trading, prices dipped to a fresh three-week low. Shorter-term moving averages (4- 9- 18-day) are mostly bearish. The 4-day moving average is below the 9-day average and the 18-day. The 9-day is above the 18-day, but is turning back south. Shorter-term resistance lies at 107 even and then at Friday’s high of 107 9/32. Buy stops likely lie just above those levels. Shorter-term technical support lies at the overnight low of 106 15/32 and then at 106 8/32. 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 105.00.0, and then just above resistance at Friday’s high of 105.07.0. Shorter-term moving averages are turning bearish. The 4-day moving average has crossed below the 9-day and 18-day average. The 9-day is now below the 18-day moving average. A move in prices below key shorter-term support at the June low of 104.22.5 would likely uncover heavy sell stops.
CURRENCIES
The September U.S. dollar index is moderately higher in early morning electronic dealings and the currencies are modestly lower. Dollar index bulls still have some-term technical momentum but need to step up soon to show some more power. The dollar index finds key shorter-term technical resistance at the June high of 86.08. Shorter-term support is seen at the overnight low of 85.60. The September Euro today finds sell stop orders are likely located at shorter-term technical support at the overnight low of 1.2653 and then heavy sell stops just below solid support at the June low of 1.2609. Shorter-term technical resistance for the Euro is seen at the overnight high of 1.2687 and then at 1.2700. Buy stops likely reside just above those shorter-term resistance levels.
METALS
The metals are sharply lower in early morning dealings, with gold leading the way. While a near-term low may be in place following late last week’s rebound, there is the potential for a bear flag developing on the daily bar chart for August gold. 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 the overnight low of $569.10. Sell stops likely reside just below that levels, and then just below support at $565.50. Buy stops likely reside just above shorter-term resistance at $580.00 and then at the overnight high of $584.00.
ENERGIES
Prices are trading lower and near the overnight low 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 $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 last 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 sharply lower in overnight electronic trading, following beneficial weekend rains in the dry western Corn Belt, and more rain in the forecast. Extended weather forecasts for the Corn Belt are now deemed by traders to be non-threatening. There’s a lot of growing season left for corn and beans, but right now, the weather favors the bears. Traders will also seek direction from the “outside markets”–gold and crude oil today. Weaker gold prices could spill over into added weakness in the grains today.
