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USDA Grain Stocks Review – 2010.09.30

by on September 30, 2010

CORN

The USDA September 1st stocks report was considered bearish against expectations with stocks coming in well above trade expectations and even well above the range of expectations. September 1st stocks were pegged at 1.708 billion bushels, about 300 million above trade expectations. This is also the ending stocks for the 2009/2010 season which was last reported in the September supply/demand report at 1.386 billion bushels. Traders have suspected a bearish report this week as the increase may just be accounted for with the early harvest for corn this year.

PRICE OUTLOOK: The news is bearish but the impact is still in question as the market realizes that most or all of the increase in stocks above expectations may be due to the early harvest of some fields this year and the total lack of any harvest last year as of September 1st. Traders are calling the market 7-12 lower on the opening but if 489 1/2 support for December corn holds early, we would not rule out a higher close today as the market senses that the stocks
news is flawed with new crop corn.

SOYBEANS

The USDA September 1st stocks report was considered slightly negative against expectations with stocks coming in just slightly above expectations but well within the range of estimates. September 1st stocks, also ending stocks for the 2009/2010 season came in at 151.1 million bushels as compared with 138 million last year and expectations for 350 million for September 1st of 2011. The report news is very neutral but corn stocks were well above expectations and this may be seen as negative.

PRICE OUTLOOK: The sharp 3-day break helped to alleviate some of the overbought condition of the market but futures still need to absorb increased selling pressures from producers due to harvest and the possibility of increased fund trader long liquidation selling into the end of the month. Selling resistance for November soybeans comes in at 1113 1/2 today with 1068 3/4 and 1051 as next targets.

WHEAT

The USDA’s Grain Stocks and small grains summary reports were considered mixed to bullish for wheat this morning with the opening call at unchanged to 4 cents higher. US all-wheat production for 2010/11 was lowered to 2.224 billion bushels from the previous estimate of 2.265 billion. Hard red winter wheat was lowered 11 million to 1.018 billion. Soft red production was lowered fairly sharply to 237.8 million bushels from 260.0 million. Spring wheat was lowered to 626.9 million from 633.0 million. On the quarterly Grain Stocks report pegged all-wheat stocks as of September 1st at 2.459 billion bushels, about 35 million bushels above trade expectations.

PRICE OUTLOOK: The report news was slightly supportive but may not change the trend.

Energy Market Commentary – 2010.09.29

by on September 29, 2010

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CRUDE OIL MARKET FUNDAMENTALS: November crude oil prices rebounded from Tuesday’s late day sell-off, but once again fell short of upside resistance at $77.17. Crude oil received an early boost from a weaker U.S. Dollar, a jump in Chinese Purchasing Managers’ data to new five month highs and a surprisingly large draw in private crude oil inventory figures Tuesday afternoon. It seems that the crude oil support of late comes from growing expectations that the U.S. Fed will move to shore up the U.S. economy, which in turn has also hammered the U.S. dollar to new eight month lows overnight. Crude inventory data released Tuesday afternoon showed a much larger than expected decline in stocks of 2.415 million barrels, which compares to the latest expectations of a 500,000 to 600,000 barrel draw. It appears that the crude oil market is somewhat suspect of that number and is awaiting confirmation from today’s EIA data. In the meantime, inventory data out of Japan indicated that crude oil inventory levels declined by over 200,000 barrels in the latest week, and that marked the fifth weekly decline. As a point of reference, Japan’s refinery utilization rates are estimated just below 74%, which compares to 87.8% in the U.S. There also seemed to be optimistic comments from the IEA overnight, that forecasted crude oil prices to rise above $80 per barrel “if” global growth rates run above 3.0% to 3.5%. November crude oil posted an inside day range Tuesday that seemed to disappoint traders with its failure to overcome Monday’s price high of $77.17. So far this morning, prices have once again challenged that upside resistance area and have been unable to overcome it. The bulls have a slight advantage to start, but are in a must perform situation, where a decline below $75.50 would reinvigorate the bear camp and create downside potential towards $74.00.

GASOLINE: November RBOB prices managed to breakout into new six day highs during Tuesday’s session, but reversed and closed down on the session. The afternoon weakness has spilled over into this morning’s trade and that provides a mixed trade to start. Part of the late day weakness stems from concerns over increasing gasoline supplies into the mid-western U.S., which was highlighted by Explorer Pipeline Co.’s decision to reroute gasoline north of Tulsa Oklahoma. This comes in response to a supply glut created in response to the Enbridge pipeline closure earlier this month. Meanwhile, gasoline inventory data released Tuesday afternoon showed a shockingly large build of 3.18 million barrels, which compares to expectations for only a 600,000 to 800,000 barrel build. Despite the bearish number, it seems the market is awaiting this morning’s EIA report for confirmation. SpendingPulse released their latest weekly survey that pegged average retail gasoline demand at 8.978 million barrels per day. This demand figure is down 0.3% compared to the previous week and compares to last week’s EIA gasoline demand figure of 8.847 million barrels. Technically, November RBOB is flirting with Tuesday’s late day lows near the $1.9350 area. The tone seems somewhat negative and a move below this short term support shelf, would put the bears in the driver’s seat, with the potential for a further slide down toward $1.9220. However, a rally in prices back above the $1.9540 area has the potential to usher in a push toward $1.9700.

HEATING OIL: November heating oil had a gap higher open which provided a higher price high overnight. The combination of a plunging U.S. Dollar and industry statistics released Tuesday afternoon that showed an unexpected draw in distillate stocks are providing some underlying support this morning. While some estimates suggest that weekly distillate inventories declined by 2.814 million barrels, expectations for this morning’s EIA data call for a build of 300,000 to 500,000 barrels. There also seems to be support coming from the European middle distillate market, which firmed up Tuesday on talk that Asian imports to the region were smaller than originally expected. As a result of the reduced short term supply outlook, various spread relationships have rebounded from their lows of the week. Technically, November heating oil prices are coming off from a positive technical pattern (double bottom) that targets a further upside push toward $2.1700. Positive price action so far this morning has carried prices out above a technical pattern on the daily charts and clearance of $2.1660 opens the door for a run toward $2.20.

TODAY’S ENERGY MARKET GUIDANCE: A slight bullish bias off the Dollar and marginally supportive fundamental developments.

Cotton Market Commentary – 2010.09.28

by on September 28, 2010

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After surging to new contract highs yesterday, including a limit move in the December contract, cotton posted another new contract high overnight. This took the December contract past the 106.00 level despite modest strength in the dollar. This leaves the next significant resistance at the 1995 highs starting at 111.25 and ranging up to 117.20. Harvesting and crop maturation continues to run at a faster than normal pace in the US and the crop quality rating declined last week for cotton that remains unharvested according to the USDA’s latest Crop Progress report. The good-to-excellent rating stood at 55% as of Sunday, down 3% from the previous week. The drop can be explained in part by hot and dry weather in a number of areas in recent weeks, along with the fact that higher quality fields may be getting harvested early. Harvest progress stands at 19% versus a 5-year average of 14%. Bolls are opening on 78% of the crop versus a 5-year average of 63%. Moderate to locally heavier rains fell yesterday from eastern Alabama through Georgia and the Carolinas with areas to the west remaining mostly dry. Rain is expected to linger in the SE with heavier amounts due in the Carolinas, especially near the coast, by late Wednesday or early Thursday. This could be a problem in areas where bolls are open which includes over 80-90% of the crop in Georgia and the Carolinas. Some traders are already looking forward to Thursday’s Export Sales report from the USDA, with expectations of another total that exceeds the average needed each week to reach the USDA’s current export projection. The average needed stands at just 145,800 bales. Last week’s sales were 505,100 bales. Stocks registered for delivery against the ICE contract were unchanged yesterday at 16,669 bales.

TODAY’S GUIDANCE: Buyers yesterday consisted in large part of the same mix of end users and investors that has driven the market higher since mid July. Mills were also a prominent feature in the buying mix. China’s decision to release another 400,000 tonnes of cotton from its reserves this month was seen as a positive force since it suggests tight supplies ahead of a delayed harvest there. China made a point of issuing a multi-agency report that pointed to a slowing rate of increase in domestic usage in coming months. This suggests that supplies will tighten further into the end of 2010/11. It also suggests that current, near record, price levels are only making a modest dent in usage. This leaves more room to rally. First support is now near 103.34 to 103.93 with the next significant support near the 99.37 to 99.62 area in the December contract. Next resistance is near 111.26 to 117.20.

Coffee Market Commentary – 2010.09.28

by on September 28, 2010

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Diminished weather concerns for crops in Vietnam and Brazil for the coming year, along with ideas that the Colombia production will continue to improve in the months just ahead, may be a negative set-up for the coffee market. Supply fundamentals look somewhat bearish ahead and speculators still hold a hefty net long position in the coffee market. The COT reports as of September 21st showed Non-Commercial traders were net long 40,892 contracts, a decrease of 2,945 contracts for the week. Trend-following fund traders were in a long liquidation mode over the previous week but still held a net long position of 30,882. The selling trend of the fund traders is considered a bearish short-term force. December coffee was able to grind out a moderate gain for the session yesterday as it found strength from the weaker Dollar, but was unable to move away from the trading range of late last week. A tropical storm that hit several coffee production areas in Central America provided the main fundamental support for the market. Honduras traders do not see much in the way of damage from heavy rains of the past week. News that coffee exports from Vietnam during the 2009/10 season rose by over 5% over last season kept some pressure on prices during the session. Traders see the 2010/11 harvest in Vietnam up about 5% from last year and this may be seen as a negative force in the months ahead with much of the crop harvested in the November to January time frame. Vietnam is offering new crop coffee on the world market now. Rains this week in Brazil could spark widespread flowering for the 2011 crop and this could ease concerns about potential tightness next year. ICE daily exchange stocks were down 10,194 bags yesterday to 1.969 million with 10,742 bags pending review.

TODAY’S GUIDANCE: Improving weather in Brazil may weigh on the market over the near-term and could spark increased long liquidation selling from speculators. Without help from outside market forces, the market looks vulnerable to increased selling pressures from funds. Resistance for December coffee comes in at 186.05 with 173.70 and 165.95 as next key support levels.

Sugar Market Commentary – 2010.09.28

by on September 28, 2010

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A significant improvement in Brazil weather and less support from outside market forces could slow the uptrend in sugar. Trade house short-covering may have been the key base of support recently as open interest is down significantly over the past month. With the October futures expiring at the end of this month, open interest may stabilize soon. However, it may be some concern for the bulls to see the steep drop in open interest at a time when the market is in a steep uptrend. March sugar closed sharply higher on the session (up 2.3%) with the market now up 11.9% from Tuesday’s lows. The market has been up for four sessions in a row, and it pushed to the highest level for nearby futures since early February. Ideas that the trade is having trouble getting a handle on the production losses seen recently from India, China and Pakistan has helped support more active trade house buying recently and funds continue to be strong buyers in sugar. Rains this week in the largest and second largest producing states in Brazil failed to provide much in the way of selling from commercial traders and the lack of commercial selling on the rally may be adding to the bullish tone. Strong demand indications and some growing concern that China has been a more aggressive buyer on the world market in recent months has helped support the solid uptrend. Non-Commercial and Non-reportable combined traders held a net long position of 185,135 contracts as of last Tuesday and this leaves the market in an overbought condition. Traders will get a better sense on the size of the India crop and the potential needs for China over the near-term.

TODAY’S GUIDANCE: The market is a bit overbought but with some supply tightness and signs of stronger than expected global demand, there appears to be more upside potential ahead. There is still no technical sign of a near-term top. Close-in support for March sugar comes in at 24.30 and 23.95 with 25.48 and 25.70 as next resistance on the weekly charts.

TODAY’S MARKET IDEAS: The market is overbought and outside forces look weak to start the day.

Commodity Outlook – 2010.09.27

Commodity Outlook – 2010.09.27

by on September 27, 2010

Below is an excerpt from our most recent Newsletter. To receive access to this story, with trade strategies, and our daily coverage of 16 markets, visit futures-research.com for your free 2 week trial!

According to the US Fed and the Bank of England (BOE), the outlook for the economy remains highly suspect. However, it also seems as if the BOE, the US Fed and a long list of commodity markets are starting to catch a whiff of inflation. For some, the combination of ongoing slowing and rising prices fosters fears of stagflation. The central bankers who are tending toward the use of extra quantitative easing probably want to play up the prospect of deflation, as that seems to give them more room and justification for their actions. While some might suggest that historical rallies in cotton, sugar, coffee, corn, soybeans, beef, gold, silver, platinum and copper could be the result of internal fundamental supply and demand conflicts, there haven’t been many times in history that such a broad-based and historically significant rally ended up being a fluke. Certainly the run-up in gold is somewhat suspect because of the speculative component that is assumed to be in place in that market, but with so many unrelated and usually uncorrelated markets rising at one time, one could come to the conclusion that commodity supplies really are tight enough to push prices up, even in the face of a suspect global economy. We have banged the drum for some time on our belief that many commodity prices are too cheap or too close to their costs of production. It is now becoming even more apparent that global demand can draw down supplies very quickly.

In markets like grains and exotic foods (the soft commodities) it is also becoming clear that even minor supply-side setbacks have become significant events. Washington and the regulators would like to suggest that prices are being inflated by speculation, but that still doesn’t take into account that the cost of production for almost all commodities has risen. The speculators see that, and that is what is pulling money toward commodities. If commodity prices aren’t lifted by speculation, commodity production and supply won’t rise fast enough to meet surging global demand. As recently as June of this year corn prices for 2011 delivery were trading close to their cost of production. With the world supply set to contract even in the face of a record 2010 crop, it was clear that corn needed to rally aggressively or it would risk losing production area to cotton, soybeans or perhaps even wheat.

In the gold market one noted analyst recently suggested that the cost of production at some South African gold mines might be more $900 per ounce. That in by itself suggests that $1,270 gold prices are not as expensive as many would like to think.

An example of a storm brewing in the future can be seen in the milk market, where the price paid to farmers was so cheap throughout 2008 and 2009 that the US dairy industry saw a massive contraction. Since the demand for milk continues to increase globally, the contraction in the US dairy herd will probably means that prices in the coming year will have to explode. Since the dreaded speculators don’t usually frequent the milk market, that potential crisis will continue to fester until the required response in the market serves to reduce demand and rebuild production.

In the meantime, we think that strength in industrial and food-based commodities are justified but that a combination of a sharply weaker Dollar and promises of more easing are destined to bring about a temporary bubble in prices. However, the trend in prices over the long turn probably has to stay up to secure needed supplies. Therefore traders should adopt a long futures mentality, with the addition of periodic options protection in the face of classically overbought technical signals.

Cattle Strategies – 2010.09.27

Cattle Strategies – 2010.09.27

by on September 27, 2010

Below is an excerpt from our most recent Newsletter. To receive access to this story, with trade strategies, and our daily coverage of 16 markets, visit futures-research.com for your free 2 week trial!

In our last issue, we warned of a possible near term high in the cattle market and pointed out the extremely overbought and record high net long position of the fund trader. A bearish Cattle on Feed report was all it took to spark a sharp break in cattle futures, and long liquidation selling from fund traders emerged to drive the market lower in the three sessions following the report. The long liquidation from speculators is likely to be a more lasting bearish force than the 1-month jump in placements. A continued downward correction over the near term looks like a buying opportunity, as high corn values are likely to cause a sharp drop in placements of cattle into feedlots into the fall. This will tighten the outlook for available slaughter supply into the spring which could be a good foundation for another leg higher in cattle prices into the first part of 2011. A cheaper US dollar and continued expansion in the global economy are factors which could add to the potential tightness.

The USDA monthly Cattle on Feed report for September 17th was a bearish surprise for traders, who were generally expecting limited movement of cattle onto feedlots. Traders were looking for on-feed supply for September 1st to come in around 1% above last year, so the news that the on-feed supply was 2.8% higher was bearish against expectations and even above the high end of the range of estimates. Placements in August were 7.1% above last year compared to trader expectations for a slight decline. Keep in mind December corn was at 432 on August 31st when the USDA survey was taken, so the corn rally so far in September (and even a further run higher in October) should cause placements to drop.

Strong seasonal demand in the spring is the primary reason that April and June cattle trade at a premium to other months. It is also the reason that cash cattle generally push higher into the spring even though higher placements of cattle in the fall normally result in higher production in the second quarter of the year. In the recent supply/demand update, the USDA predicted 2nd quarter 2011 beef production to be 6.3 billion pounds, down 3.8% from 2010 and the lowest 2nd quarter production in six years.

The upside is normally limited for cattle in years in which we see a sharp increase in production from the 1st to the 2nd quarters. Production normally increases about 400 million pounds for the quarter, but the increase in 2011 is expected to be only 250 million pounds, the smallest increase since 2000 (see chart). If we see small placements this fall, 2nd quarter production is likely to come in even lower the current USDA estimate. High grain prices could keep spring cattle weights down, which would also cause production levels to come in below expectations.

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Currency Market Commentary – 2010.09.24

by on September 24, 2010

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DOLLAR: The Dollar has been unable to sustain a recovery overnight, and has fallen back towards the low end of the recent sell off. While overseas events have made for a bumpy overnight trading session, it is likely that the post-FOMC meeting statements by the Fed are mainly responsible for the Dollar being on the verge of even more new lows. Although they have only laid the groundwork for a future move towards quantitative easing, the market has shown little confidence that near-term US economic numbers are going to prevent the Fed from cranking up the printing presses again. Today’s US economic numbers may be able to stem the tide, but at this point the Dollar may be ready for a fresh extension of this current down move. The Dollar may find support near the 79.75 area, but sentiment will have to change drastically in order to avoid new lows.

EURO: The December Euro has been revived during the past few hours, and may be ready for a new high for this rally. A surprising rise in a private survey of German Business sentiment may have been the trigger for this turnaround, but the general weakness in the Dollar has provided much of the strength for this up move. With many of the December Euro’s potential problem areas likely to be quiet this late in the week, there may be little standing in the way of new highs. The December Euro is likely to test those highs around the 1.3440 area later today, but it may be vulnerable to an end-of-week pullback if the Dollar can find some support later on.

YEN: The December Yen has come all the way back from heavy overnight losses, and has been able to make a post-intervention high during a very volatile overnight session. A massive sell off last night was thought to be another round of Bank of Japan currency intervention, but a lack of official confirmation so far has given a green light for the market to reverse those losses. While this sort of price action would normally be a very positive sign for the December Yen, the one thing that we can be sure of is that the market is clearly wary of being long when potential intervention is in the air. The December Yen could see a further move up towards the 119.00 level later today, but any sort of test of the recent highs may take some time to occur.

SWISS: The December Swiss has made a new 21/2 year high for the third day in a row, and it is now less than 2 cents away from an all-time high. While this recent strength may not be pleasing to the Swiss National Bank, the fact that it has come mostly at the expense of the Dollar, and not the Euro, may keep them away from any sort of currency intervention program. The December Swiss may see a fresh high later today, but there is also a chance of end-of-week profit-taking as well.

POUND: The December Pound does not seem to be receiving the same benefit from Dollar weakness as its European neighbors, with the market having difficulty moving back towards yesterday’s highs. There are signs that the Bank of England may start up some quantitative easing of its own, as recent UK economic data has been lukewarm at best and UK officials have been very downbeat in their views of the economy. The December Pound may test resistance near the 1.5710 level this morning, but do not be surprised if the market turns over and starts an extended move towards the downside.

CANADIAN DOLLAR: The Dec Canadian has been able to recover from overnight lows, but has shown a limited ability for recovery so far due to the weakness of the US Dollar. Today’s Canadian employment numbers have a good chance to lift the market, but gains may be limited unless both the US and Canadian equity markets show some additional strength today. The Dec Canadian may find the 97.00 resistance level this morning, but it may have trouble extending further beyond that area.

TODAY’S MARKET IDEAS: The Dollar is likely to be weak throughout the day, but may see some benefit if today’s US economic data avoids any really bad numbers. The December Swiss should continue to make new highs for this move.

Bond Market Commentary – 2010.09.24

by on September 24, 2010

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Yesterday an unexpected jump in US Initial Jobless Claims to 465,000 fueled a rally in the Treasury markets, as the poor economic data was seen as a prod to the Fed to move even quicker toward the pursuit additional QE2. However, the Treasury markets did give back part of the gains in the face of the better than expected August US Existing Home Sales data that were also released. Given that the two main focal points of the US economy, employment and housing gave off mixed information yesterday that probably left the trade mostly uncertain on the actual track of the economy. Not surprisingly, the Treasury market finished the Thursday trade almost unchanged from the Wednesday close. However, with the U.S. Treasury announcing the size of next week’s auction of 2, 5 and 7-Year Notes totaling $100 billion yesterday, the market might be partially limited because of impending supply flows.

On the other hand, Asian Treasury market action early today showed an initial positive tilt and that suggests the slowing crowd might still have come away from the economic data this week with an ongoing expectation of slowing. Some traders suggest the existing home sales result from Thursday, combined with some minor weakness in equity prices overseas, will underpin US Treasury prices into another round of critical US economic data later this morning. General expectations from economists and analysts call for today’s numbers to potentially follow the same pattern as yesterday, with Durables coming in soft early and New Home sales coming in positive later in the trading session. Therefore, some players expect an early rally to be reversed, with the initial gains in the US equity market potentially dampening the early positive tilt.

The market will also see a speech from the Fed’s Lacker at 1:00 cst, with another Fed speech seen after the Friday close. In conclusion, the Fed’s FOMC statement still resonates for the bull camp but the bear camp appears to have been bailed out because of news from the housing sector. While the currency markets continue to expect additional intervention from the BOJ and that is expected to help the short end of the yield curve over the near term, the currency market action this morning doesn’t seem to project an imminent move from the BOJ, but there were rumors that a Japanese official might have been forced out and that should keep the threat of intervention on the front burner throughout the Friday US trade.

Given that the Fed seemed to raise its concerns for inflation slightly in the last FOMC statement, it is possible that ongoing strength in gold and grain prices is starting to increase inflation fears, with some economists even starting to toss around the idea of stagflation! Typically, the Treasury market would take more direction from the Durable goods report than the New Home sales figures, but with the housing data today potentially bolstered by the better than expected existing home sales from yesterday there might be more confusion and consolidation today than definitive trending price action.

Stock Market Commentary – 2010.09.24

by on September 24, 2010

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While there was some mixed to lower equity market action overnight, the US market appears to be poised to start the Friday action out on a positive footing. Some traders are suggesting that ongoing merger and acquisition hopes were lifting US prices, but it is also possible that positive German and Australian economic data is providing a fresh burst of optimism. It is also possible that intervention hopes are actually providing the bulls with some fodder this morning. If the bulls are reacting to the flow of positive data overnight, that be a sign that favorable US existing home sales news from yesterday actually served to improve the economic environment and therefore the outlook for the economy might not be as soft and sloppy as was expected in the wake of the FOMC statement early in the week. Typically the prospect of additional easing is a very powerful tonic for the equity markets and at times in the past the stock market has risen consistently off slack numbers and the perpetual anticipation of upcoming Fed action. Some players suggest that the recent correction has balanced the overbought technical condition and that the Thursday lows might be seen as some form of value zone or key pivot zone.

S&P 500: The S&P is clearly lagging behind the Nasdaq in the early Friday action and perhaps the S&P is poised to take its direction from lower caps stocks today. For some reason, the US markets seem to view the prospect of BOJ currency intervention as a positive, as the European equity markets were generally soft even though the German Ifo business index posted a gain. Some in the bull camp look at recent consolidation lows around 1117.20 as a key area on the downside today but the reaction to the US durable goods report early today might simply set the tone for the day.

DOW: The December Mini Dow is showing some bounce this morning after two consecutive lower closes. Favorable same store sales figures from McDonalds yesterday combined with the better than expected US existing home sales figures and that seems to have given the bull camp some footing. Some traders are suggesting that the 10,600 level is being seen as some type of value zone but the trade will certainly get a wave of fresh information on the US economy from durables and New Home sales. Unfortunately, economists expect the US data points to be offsetting today and it would appear that there won’t be a vote on the extension of the tax credits before the mid term elections and that could be something that disappoints the bull camp. If the December Mini Dow were closer to the bottom of the last two months range, as opposed to the upper end of the last two months trading range, the delay in addressing the tax cuts issue wouldn’t be that undermining for stock prices.

NASDAQ: The Nasdaq starts the Friday session out relatively close to the recent highs and seemingly outperforming the rest of the market on the upside. Talk of ongoing merger and buyout action, combined with the idea that tech sector companies might be able to thrive in a slow but forward moving economy seems to be giving the bull camp some confidence. However, the bear camp will suggest that the December Nasdaq has a quasi double top at 2001.00 and that the market must rise and close above that level today to confirm the up trend pattern of the last 1 1/2 months remains in place. Apparently the markets in the early going today are poised to take soft numbers as a sign of potential Fed easing, while better than expected numbers are seemingly taken as a sign that the economy still has some forward momentum.

TODAY’S MARKET IDEAS: The bull camp seems to want to push up prices early today but the market will have to see a slightly better than expected Durables report or the trade will have to spin the impact of that report into hopes of further easing. We are inclined to take the early action in the Nasdaq as the prevailing bias, as a new high for the move in the Nasdaq early today might embolden the bulls and put the bears back on their heels. However, in order for the bull camp to gain a definitive edge probably requires some form of bullish surprise and the news of a delay in a vote on the tax cuts is clearly a development that takes some of the bullish bias out of the marketplace. In fact, we have to think that several large daily gains in equity prices over the last month were the result of hopes of some type of tax cut extension! Be bullish but don’t tolerate any violation of consolidation support in the S&P of 1117.20.

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