Overnight Developments: The U.S. stock indexes made a recovery in overnight electronic trading, following steep losses during the day session Wednesday. The U.S. dollar was slightly weaker versus the major currencies overnight, gold was moderately lower and U.S. Treasury Bonds were slightly higher in overnight trading.
U.S. Economic Reports: On tap today are jobless claims; the April Leading Economic Indicators (LEI) report; the Philadelphia Federal Reserve business index; weekly natural gas storage report. Fed Chairman Bernanke speaks at a Chicago Fed bank conference. None of these reports/events are considered major market movers, however.
U.S. Stock Indexes: The indexes showed a moderate rebound in overnight electronic trading, following sharp losses during the day session Wednesday. Some near-term technical damage was inflicted on the indexes Wednesday. Bulls are rattled and I would not be surprised to see more selling pressure in the near term. However, I don’t look for strong price trends to develop. More likely is choppier and more sideways trading action heading into the summer months.
June S&P 500: The shorter-term moving averages (4- 9- and 18-day) have turned bearish the past few sessions and prices have also dropped below the key 100-day moving average just recently. However, the 14-day RSI did dip into oversold territory (below 30.00) on Wednesday, which is one clue that prices could see a corrective bounce today.
June Nasdaq: The shorter-term moving averages (4- 9- and 18-day) have turned bearish the past few sessions and prices have also dropped below the key 100-day moving average just recently. However, the 14-day RSI did dip into oversold territory (below 30.00) on Wednesday, which is one clue that prices could see a corrective bounce today.
June Dow: This index was hammered lower Wednesday, leading the declines in the stock indexes. I look for the Dow to continue to be the leader on any significant price moves in the index. If the indexes are to post a recovery soon, the Dow will have to be the leader. A close below solid chart support at the April low of 11,080 would produce more chart damage and open the door to some more downside pressure to develop.
U.S. Treasury Bonds and Notes: Jobless claims came in as expected, but were large enough to give the Treasuries an early-morning boost. However, it’s just short covering in bear markets. Bonds and notes continue to hover near their contract lows, with the near-term price trend still being solidly down. I don’t see any near-term clues to suggest bonds and notes will see a significant trend reversal any time soon. Look for a sideways to lower “grind” in prices to continue. Path of least resistance in bonds and notes continues southward.
June U.S. T-Bonds: For active traders, resistance at this week’s high of 106 17/32 is key upside objective for bulls. For bears, a close below solid support at the contract low of 105 11/32 is next downside objective. Shorter-term moving averages (4- 9- 18-day) are bearish. The 14-day Relative Strength Index is in neutral territory.
June U.S. T-Notes: Bulls could do nothing with this week’s key reversal up on the daily bar chart, which only reaffirms the bears’ strong near-term posture. However, the 4-day moving average is poised to push above the 9-day average today, which would be a slightly positive near-term technical development. Resistance at this week’s high of 105.10.0 is key upside objective for active Note traders. Solid support at the contract low of 104.18.5 is key level for bears.
Currencies: The June U.S. dollar index is weaker in early morning dealings. Remember that trends in the currencies tend to be stronger and longer lasting than trends in other markets. Wednesday’s rebound in the dollar index and weakness in the major currencies was just corrective in nature. The strong near-term trends are still in place. Don’t stand in front of a freight train and try to pick a bottom in the DX or a top in the currencies. I’ll keep you informed on any early technical clues that do suggest trend changes may be on the horizon.
Metals: The metals are mixed in early morning dealings. Gold and silver are lower and copper is modestly higher. The bulls are not out of the woods yet, regarding the potential for another big downside corrective pullback. And this is key: Copper is likely to lead the gold and silver markets on any significant price moves in the near term. Reason: Copper had gone stratospheric recently, pushing to above $4.00 a pound. It’s the red industrial metal that should begin to feel any serious downside pressure first, if the speculative trading community does decide to let some air out of the bubble.
Energies: Prices are under slight selling pressure in early dealings. Bears do have some fresh downside near-term technical momentum following this week’s losses. Solid losses today are likely to produce some near-term chart damage, as markets are close to key near-term support levels ($68.00 in June crude). I look for prices to chop within the recent trading range of $68 and $75.00. A drop below this 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: Weekly USDA export sales this morning came in positive for corn and neutral for wheat and soybeans. Weather in the Plains is the major feature, with hot conditions forecast for the Plains states in the coming days. Markets are a bit overextended, technically, and if follow-through strength can be attained today, the grain markets could be setting the stage for much bigger price gains heading into the key summertime months. Grain traders will continue to closely watch the “outside markets” which are mainly metals and crude oil. In fact, look for grain markets to more closely follow crude oil and gold more closely than their own fundamentals, for at least the near term.