Overnight Developments: The U.S. stock indexes made another modest recovery in overnight electronic trading, following more solid losses during the day session Thursday. The U.S. dollar is stronger versus the major currencies in early trading, gold is modestly lower and U.S. Treasury Bonds are slightly higher in early dealings.
U.S. Economic Reports: There are no major U.S. economic reports due for release today. Chicago Fed President Moskow speaks this morning at a banking conference. U.S. Treasury Secretary Snow speaks at a Bond Market Association meeting at midday.
U.S. Stock Indexes: The indexes again showed a moderate rebound in overnight electronic trading, following solid losses during the day session Thursday. Significant near-term technical damage has been inflicted on the indexes this week. The indexes are now short-term oversold, technically, and due for a corrective bounce soon. I don’t look for strong price trends to develop in the indexes. 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 this week have also dropped below the key 100-day moving average. This index is overdone on the downside, but a weekly low close today would further embolden the bears. Key technical support today is this week’s low of 1,261.70. Sell stops likely reside under that price level.
June Nasdaq: The shorter-term moving averages (4- 9- and 18-day) are also bearish and prices have also dropped below the key 100-day moving average. However, the 14-day RSI is into oversold territory (below 30.00), which is one clue that prices could see a corrective bounce today. Key technical support for today is this week’s low of 1,592.00. Sell stops likely reside below that level.
June Dow: This index has been leading the declines in the U.S. 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. Key today will be for the bulls to hold technical support at this week’s low of 11,135. Sell stop likely reside below that level. And 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: Prices are narrowly mixed in early dealings today. Price action Thursday saw a decent price recovery. But again, it’s just short covering in bear markets. Near-term price trends are still solidly down. I still 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: A weekly high close on Friday would give the bulls some fresh upside technical momentum. There is some stiff daily resistance at Thursday’s high of 107 2/32. Some buys stops likely reside above that level. For bears today, a price move below support at 106 even would suggest the upside correction has run its course and the downtrend will resume. Shorter-term moving averages (4- 9- 18-day) are beginning to turn bullish, however. The 4-day moving average has just moved above the 9- and 18-day averages.
June U.S. T-Notes: Bulls posted a good upmove Thursday, but now Thursday’s high of 105.21.0 is some stiff overhead resistance. Buy stops do likely reside just above that level. The 4-day moving average has just pushed above the 9-day average, which is a slightly positive near-term technical development. A move in prices below support at 105.00.0 likely means the upside correction is finished.
Currencies: The June U.S. dollar index is solidly higher in early morning dealings. While the strong near-term trends in the major currencies are still in place, price activity has become more volatile and choppy at lower levels in the dollar index and at higher levels in the currencies. This is one early clue that the price trends may be about to end. A weekly high close in the DX and weekly low closes in the currencies would be significant technical developments that add to notions of trend changes.
Metals: The metals are lower in early morning dealings, with copper leading the way with sharp losses. My bias is that copper is likely to lead the gold and silver markets on any significant price moves in the near term. Sharp early losses in copper today don’t bode well for gold and silver. And silver bulls are already on the ropes after big losses Thursday. Weekly low closes in the metals would be significantly near-term bearish. I am by no means a longer-term market bear on the metals, however.
Energies: Prices are modestly higher in electronic dealings this morning. Prices Thursday did rebound from the bottom of their recent trading ranges, which is not surprising. Look for more trading with in a range–bound by key near-term support at $68.00 in June 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.
Grains: Prices were lower in overnight electronic trading, which does not surprise me. The grains feel a bit heavy to end the week, especially in corn and wheat. Weather in the Plains is still the major feature, with hot conditions forecast for the Plains states in the coming days. If the grains can push above their highs for this week, then that
could set the stage for much bigger price gains heading into the key summertime months. But my bias is that the markets are tired and due for at least some corrective downside action in corn and wheat. Soybeans also look susceptible to near-term selling pressure.