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Stocks: Optimism Surrounding EU Talks; Positive Asian Econ News

by Dave Hightower on October 24, 2011

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Global equity markets are on a higher track this morning supported by more optimism surrounding European debt crisis talks and positive economic data out of Asia. It seems the one item agreed on at this weekend’s EU summit was that the ECB would not backstop EFSF funds. The market still wants to believe that European officials are closer to a deal on bank recapitalization and how to leverage EFSF funds. Flash Purchasing Managers’ data out of China broke a 3-month streak of contraction, and that was seen as a positive that helped to rally base metals and resource related shares early this morning. It also helped the Chinese Shanghai Composite Index broke a 4-day losing streak. Favorable export readings out of Japan, on a boost in demand for automotive parts, also lent a positive early morning tone. Meanwhile, interest rate markets in Europe showed a different reaction to yesterday’s EU summit, with German Bunds reversing early morning losses and rallying to new highs on the session. Perhaps some of that early morning reversal came from disappointing PMI data out of Europe. There was also talk from a major Wall Street firm indicating that the US faced another credit downgrade by year’s end. This morning’s US economic calendar presents the latest read on Chicago Manufacturing, which is expected to show only a fractional gain on the month.

S&P 500: The December S&P 500 is on a higher track this morning as it extends last week’s bullish chart breakout to the upside. It seems that the combination of well-received meetings in Brussels over the weekend, along with friendly economic data out China overnight have given the bulls some early morning firepower. However, anxiety is building ahead of a final decision on the European debt situation on Wednesday. This heightened anxiety is highlighted by an index of Greek bank stocks, which plunged by 15% during the early morning hours, fearing a deeper markdown Greek government bonds held in the private sector (haircuts are now ranging from 40 to 50%).With a little more than 20% of the S&P 500 companies reporting earnings, nearly three-fourths have beaten street estimates. Texas instruments reports their quarterly earnings after the bell today, with EPS expected to show about a 20.0% decline from the year ago quarter. The trade is expected to keep a close eye on the earnings for a read on chip demand ahead of the holiday season. The Commitments of Traders Futures and Options report as of October 18th for S&P 500 stock index showed non-commercial traders were net long 5,749 contracts, an increase of 7,523, which represents a change from a net short to net long position. Non-commercial and non-reportable traders combined held a net short position of 11,737 contracts, a decrease of 6,037 on the week. The bull camp holds the cards to start this morning, looking for more bullish confirmation to extend gains out of the past 2.5 months trading range.

DOW: The December E-mini Dow extended Friday’s gains during the initial morning hours and have reached their highest level since August 2nd. The positive action has helped confirm a technical breakout on the charts above the 2.5 month trading range, which would normally give the all clear for a sustained rally higher. However, the reluctance of a number of momentum indicators to confirm the breakout, Euro zone uncertainty and average trading volumes detract from the bullishness. Caterpillar reports earnings before the Wall Street open and is expected to show a 26% gain in EPS compared to the year ago quarter. Probably even more important will be the company’s forward outlook in the face of growing economic headwinds. Meanwhile, the Commitments of Traders Futures and Options report as of October 18th for Dow Jones Index $5 showed non-commercial traders were net long 8,739 contracts, a decrease of 3,476. Non-commercial and non-reportable traders combined held a net long position of 6,681 contracts, a decrease of 1,200 on the week. It is possible that the speculative selling trend during last week’s congestion was probably the result of profit-taking from the October rally. The early edge goes to the bull camp this morning, with potential upside targeting coming in at 12,097 based on the recent congestion pattern.

NASDAQ: The December NASDAQ established a higher high during the early morning hours and sits just 38 points below last week’s high. In addition to optimism surrounding the EU Summit over the weekend, the NASDAQ could be benefiting from news that Google has been out looking for financial backing for a potential bid for Yahoo. The Commitments of Traders Futures and Options report as of October 18th for Nasdaq Mini showed non-commercial traders were net long 37,971 contracts, an increase of 24,457. Non-commercial and non-reportable traders combined held a net long position of 11,749 contracts, which reflects a shift from a net short to a net long position. While the buying trend of the speculators is seen as a positive force, those figures could be overstated, as the NASDAQ slipped nearly 30 points after the report was conducted. The bulls have the early advantage this morning, with key resistance at 2388.50.

TODAY’S MARKET IDEAS: The December E-mini Dow and S&P 500 have confirmed a close above the recent 2.5 month trading range, which on the surface is bullish. It is a step closer in leaving the October low as an intermediate bottom. However, there still remain a number of unresolved issues overhanging the market: US Economic growth prospects and concrete steps to resolve the European debt crisis. For now, both factors have seen some positive press, but more is needed to justify the higher price levels. Sentiment is beginning to flash bearish warning signals, like a put to call ratio that is reflecting excessive bullish optimism. A key theme to watch in today’s trade is for a noted pick up in fund buying interest now that the major indices have broken out of their respective trading ranges. Volume was average Friday, but for a significant push out of the range probably needs to see greater participation. We maintain a positive short-term bias, but remain suspect over another leg higher at this juncture.

Stocks: Euro Zone Concerns Pressure the Markets

by Dave Hightower on September 19, 2011

Progress on the Euro zone debt crisis took two-steps backwards over the weekend, and that has heightened the fear element in the market and pressed global equities lower. While there were modest gains in the Japanese Nikkei following Friday’s rally on Wall Street, European shares came under heavy selling pressure Monday morning. The combination of German Chancellor Angela Merkel losing a regional election over the weekend and minimal progress among EU leaders at a 2-day meeting in Poland has compromised sentiment. It also appears that global financial markets were dealt another blow to confidence with Greece’s Prime Minister canceling his visit to the US. Some viewed the cancelled meeting as a sign that the debt crisis might be worse than expected. Meanwhile, the bottom line is that the European debt situation has not improved and there are still no concrete plans to deal with the crisis. Two catalysts this week worthy of shifting sentiment, include a meeting among BRIC leaders later this week to discuss euro zone support and a 2-day FOMC meeting that could result in new stimulus measures to bolster the struggling US economy. President Obama is expected to introduce his new deficit reduction plan today to help finance his new jobs bill. The package is expected to go to the Super-Committee, but so far new tax proposals on the wealthy, inspired by Warren Buffett have been met with mixed emotions.

S&P 500: The December S&P 500 starts in the red this morning as it appears to be ending last week’s five-day winning streak. The December S&P 500 rallied slightly more than 8.0% from last week’s low to Friday’s close to challenge the August 31st high. We think it takes something rather significant to power beyond the August 31st high of 1223.00. European bank shares came under heavy selling pressure this morning, led by SocGen and UBS. UBS indicated that they have covered all of the positions highlighted in the unauthorized trading losses, but they seem to have come with a larger price tag approaching $2.3 billion. Commodity related shares are under pressure this morning, seemingly in response to a lack of progress in Europe over the weekend that triggered concerns of slowing commodity demand. The Commitments of Traders Futures and Options report as of September 13th for S&P 500 showed non-commercial traders were net short 51,648 contracts, an increase of 2,702. The commercial traders were net long 69,419 contracts, an increase of 11,168. Non-commercial and non-reportable traders combined held a net short position of 69,417 contracts, an increase of 11,165 contracts in their positioning. This is just 1,000 contracts less than the fall 2007 extreme and could be nearing extremely oversold territory. Meanwhile, the 4.0% rally in the S&P 500 since the report window closed, could be the result of squeezing those new shorts out of the market. For this morning, the December S&P 500 has support below at 1182.50.

DOW: The December E-mini Dow had a gap lower open Sunday evening and has slipped back to the 11,250 area. Dow stocks received a lift last week on reports that United Technologies was tapping into the credit markets for as much is $20 billion. There also appears to be chatter that United Technologies may be considering the acquisition of aircraft supplier, Goodrich, which some viewed as a positive. However, fears of a spreading European debt contagion and lack of control by European officials has drastically shifted sentiment this morning in favor of the bear camp. The Commitments of Traders Futures and Options report as of September 13th for Dow Jones Index $5 showed non-commercial traders were net long 11,244 contracts, a decrease of 344. The Commercial traders were net short 9,783 contracts, an increase of 1,099. Non-commercial and non-reportable traders combined held a net long position of 9,783 contracts. This represents an increase of 1,099 in the net long position held by these traders. The technical action in the December E-mini Dow favors the bear camp, with near-term targeting below at 11,250. There is gap resistance above the market at 11,351 to 11,444.

NASDAQ: The December NASDAQ has taken a negative turn below Friday’s low this morning and is down nearly 2% from Friday’s high. This comes in the wake of last week’s five-day trough to peak rally of 9.0%. While most of the early morning action has been driven by a risk-off attitude stemming from the euro zone debt crisis, there is a chance that shares of Netflix could recover from last week’s 26.3% slide. Netflix is expected to split its business into two units, separating streaming movies from the DVD mail service. The Commitments of Traders Futures and Options report as of September 13th for NASDAQ Mini showed non-commercial traders were net long 9,927 contracts, an increase of 456. Non-commercial and non-reportable traders combined held a net long position of 34,441 contracts, an increase of 950 on the week. The bears have the early edge in the December NASDAQ, with support below at 2248.50 and then at 2239.25.

TODAY’S MARKET IDEAS: US equity markets begin the new week under pressure, largely in response to fresh Euro zone debt concerns and risk of the contagion spreading across the global market place. There is an apparent safety bid present in debt markets, and after last week’s gains pushed markets into short term overbought territory, suggests that more near term downside is possible. The December S&P 500 has a support shelf below at 1182.50, and if violated has the potential for a slide targeting 1155.00 level. The December S&P 500 has resistance above at the August 31-September 1 high trade from 1204.00 to 1219.00. This corresponds to 11,591-11,474 in the December E-mini Dow. We remain suspect that US indices can continue their march higher without a fresh positive news development.

Stocks: Soft Economic Data Out of EU; Market Waits on US Numbers and Fed

by Dave Hightower on September 1, 2011

Global equity markets have taken a negative turn during the initial morning hours, weighed down by a round of soft European economic data. The Japanese Nikkei extended its winning streak with a rally and close back above the 9,000 level. While PMI data out of China showed a level of improvement an unexpected decline in export orders sparked concerns over softening global demand. Global slowdown fears were amplified by German PMI Manufacturing data that fell by more than expected. Manufacturing activity in Europe also slipped for the first time in two years in August. While there seemed to be a level of optimism in the US markets yesterday, an active economic calendar this morning has the potential to bring recession fears back into focus. This also comes at a time when global markets try to handicap the Fed’s next move. There is an active flow of US economic data this morning, with Weekly Jobless Claims expected to show a fractional decline compared to last week. US equity markets will be closely following the results of the August ISM Manufacturing figures that are expected to slip below the 50 level and to show the first decline in two years.

S&P 500: While it seems that the September S&P 500 has begun to take weak economic readings better, they still face the latest bout of data for the month of August. After a bout of sluggish European Manufacturing data this morning, the market faces US Manufacturing PMI figures, which are expected to slip below the 50-level for the first time in 2 years. The soft manufacturing trend from overnight has weighed on commodity markets like crude oil and copper, and that is likely to be a negative for those related shares this morning. While bank stocks were higher in London following reports that the government would hold-off on new regulations until the next election (2015), US markets reacted to a surprise leadership change at the Bank of New York. The September S&P 500 showed positive technical action with its move above 1219.00, but it was unable to close above that level. The early edge goes to the bear camp, with the potential for more downside targeting 1199.80.

DOW: The September E-mini Dow rallied to its best level since August 4th yesterday, which marked an 8-day advance of nearly 1,000 points. The index has come under a level of pressure this morning following a dose of weak economic readings across the Atlantic, and that has tamped down M&A news that IBM was acquiring a Canada-based risk analytics firm for about $400 million. The Dow also seems to be coming to grips with yesterday’s decision by the US Department of Justice to block the merger between AT&T and T-Mobile. The early edge goes to the bear camp, with the potential for a further slide to correct the recent advance. Short term targets on the down side today stand at 11,415.

NASDAQ: The September NASDAQ has come under a modest selling pressure during the early morning hours. This comes in the wake of an impressive 12.1% rally off the August 22nd low that might have gotten ahead of itself in the short term. While the market has gone on to price in the prospects of more stimulus measures from the Fed, yesterday’s round of improved economic data may have detracted from that view. Shares of the NASDAQ are also reacting to reports late Wednesday from Novellus that cut Q3 revenue targets in the wake of continued weakness in PC demand. The early bias in the September NASDAQ is down, with short term support coming in at 2221.00 and 2201.00.

TODAY’S MARKET IDEAS: US equity markets have embraced prospects for more stimulus measures from the Fed and a marginal improvement in yesterday’s economic readings. But improvement in economic data has the potential to sway the Fed to delay pursuing more QE. Soft European economic readings this morning and expectations that data in the US will also be soft provides the bear camp with the early advantage. US equity markets have also become short term overbought and vulnerable to the downside. We see potential for the markets to correct this week’s gains ahead of Friday’s Non-Farm Payroll data, which leaves downside targeting in the September E-mini Dow at 11,450, and 1195.00 in the September S&P 500.

Stocks: Impressive Tuesday Action, but not Enough To Turn Short-Trend

by Dave Hightower on August 24, 2011

World equity markets enter the US trading session under pressure, following a Moody’s downgrade of Japan’s sovereign debt rating, weak German confidence readings and uncertainty surrounding the Fed’s next step. Shares of the Japanese Nikkei slipped more than 1.0% overnight on the one-notch downgrade to its credit rating. Market sentiment took another negative blow in the wake of a much weaker than expected German (Ifo) Consumer Confidence reading, which casts doubts of a speedy recovery in the region. The primary equity market focus for the coming days is locked in on Friday’s Jackson Hole meeting. The latest round of disappointing US economic data has provided added hope for more stimulus measures to revive the struggling US economy. For now, it seems that the market expects Fed Chairman Bernanke to introduce some form of help to the market, perhaps extending the duration of debt on its balance sheet, but not necessarily QE3. These hopes are vulnerable to disappointment if the Fed fails to deliver. Economic data this morning includes Durable Goods Orders, which are expected to show a level of improvement in July.

S&P 500: The September S&P 500 rallied as much as 50 points from Monday’s low to the overnight high, but seems to have lost some of that upside momentum. While growing hopes for added support for the US economy from the Fed at Friday’s Jackson Hole gathering provided the early lift, it may take more concrete action to actually inspire a more sustainable rally. Meanwhile, BHP Billiton reported record earnings, nearly a 90% increase in yearly profits and raised their full-year profit outlook above street estimates. The positive results could be offering a level of support under the S&P 500 this morning and that could present a positive for related mining shares within the index. The short term charts turned friendly for the bull camp with yesterday’s upside break action above 1153.00. This leaves the bulls with a slight advantage for more upside today. Downside support comes in at 1140.00.

DOW: The September E-mini Dow established a higher high during the initial morning hours, as it extended late day gains from Tuesday. However, the September E-mini Dow came under selling pressure overnight following more capital funding concerns for Bank of America, with some insiders indicating that the company may need an extra $50 billion in coming weeks to meet new global capital standards. While a number of cyclical and defensive names in the Dow Jones Index garnered support during Tuesday’s session, it might be difficult for the market to attract that support again this morning. There is a shelf of support beneath the market at the 11,020 level. A decline below this level on the downside puts the edge in favor of the bears for a deeper slide targeting 10,860.

NASDAQ: The September NASDAQ broke up out of its recent congestion pattern, but failed to follow through during the overnight and early morning hours. While it is possible that the market is consolidating yesterday’s nearly 4.0% gains, we think that it takes something more definitive to propel tech shares higher. Shares of Micro Technology slipped 1.0% in overnight action, and that may be an indication for more profit-taking ahead after yesterday’s gain. The September NASDAQ has short term support below at 2070.00, with stiff resistance above 2170.00.

TODAY’S MARKET IDEAS: US equity markets showed impressive upside action during Tuesday’s trade, but that was not enough to turn the short term trend in favor of the bulls. Sentiment within the market appears to have priced in a recession and has begun to price in prospects for another form of QE, but it probably takes steady improvement of economic data to offer more upside. This morning’s economic readings on July Durable Goods Orders are expected to improve from their June reading, but more disappointment there could send the major indices in search for the Monday’s lows. Perhaps it takes another test of the August lows before the market can embark on any meaningful rally attempt.

Stocks: Plenty of Negatives Weigh on the Market; Volatility

by Dave Hightower on August 8, 2011

One of the worst US economic fears came to fruition over the weekend when S&P Ratings lowered their credit rating on US debt from AAA to AA+. While this is the first time that such a rating downgrade has happened, there remains a great deal of demand for US Treasuries in a world of few alternatives that have the liquidity and safety. Global equity markets reacted negatively to the downgrade as well as to fears of a global economic slowdown. These fears were highlighted in the gold market, which surged to new contract highs above $1700.00 ounce. Asian equity markets took the brunt of the selling, with the China Shanghai index losing more than 4.0% and the Japanese Nikkei closing down by more than 2.0%. European equity markets fared slightly better in the early morning hours, as they drafted a level of support from the European Central Bank’s decision to purchase Spanish and Italian government debt. This has helped contain fear premiums in the region and relieved pressure on related sovereign debt spreads. Additionally, an emergency meeting among G-7 financial leaders affirmed their stance to provide stability and liquidity in the financial markets, and that may have helped to offset some of the initial negativity. At the very least, it shows that financial leaders are willing to take further action if needed. A lack of fresh economic data points in the US this morning is expected to keep the market focused on slowdown fears and the S&P downgrade. Still, the knock-on effects of the S&P downgrade are unknown and may take some time materialize.

S&P 500: The September S&P 500 established a new low for the decline overnight and has challenged the lower end of the November consolidation zone (1156.10). The outside market tone has grown more uncertain over the weekend, with the latest rating downgrade to US debt, and the full impact of that downgrade has not been fully priced into the market just yet. Meanwhile, a number of European bank stocks benefited from the ECB’s purchase of Italian and Spanish bonds overnight, but the impact that might have on US bank shares is unknown. The Commitments of Traders Futures and Options report as of August 2nd for S&P 500 Stock Index showed non-commercial traders were net short 16,379 contracts, an increase of 18,139. This represents a change from a net long to net short position. The Commercial traders were net short 36,897 contracts, a decrease of 12,249. Non-commercial and non-reportable traders combined held a net long position of 36,897 contracts, a decrease of 12,249 in their net long positioning. Again, these figures could be understated after the index fell another 6.5% since the report was conducted. This also suggests that the S&P 500 may have more downside to go to turn the net spec positioning to a short status. Some traders point to the 1150.00 level as the next downside stopping point for the S&P 500. Meanwhile, the weak economic backdrop continues to foster a sell on strength mentality.

DOW: The September E-mini Dow had a gap lower open Sunday evening and fell to new low for the decline. The S&P Ratings downgrade has weighed heavy on mining and industrial stocks in overnight action as they brace for the negative impact on global growth prospects. Slowing global growth concerns pressured crude oil prices lower overnight, and that is a factor likely to weigh on energy-related components within the index. The Commitments of Traders Futures and Options report as of August 2nd for Dow Jones Index $5 showed non-commercial traders were net long 18,704 contracts, a decrease of 7,013. The Commercial traders were net short 22,513 contracts, a decrease of 9,506. Non-commercial and non-reportable traders combined held a net long position of 22,513 contracts, a decrease of 9,505 on the week. It is possible that theses figures are understated after the E-mini Dow tumbled more than 700 points since the report window closed. The early morning tone continues to favor the bear camp, with Fibonacci support coming in at 11,190 and 10,792. Near term resistance comes in at 11,590.

NASDAQ: The September NASDAQ extended last week’s weakness during the initial morning hours and fell to levels not seen since November 30, 2010. Tech related shares have come under a great deal of pressure in recent sessions as they try to adjust to slower growth. These shares have also come under pressure from an aggressive liquidation trade as uncertainty within the market grows. Some of that liquidation was highlighted in the latest Commitments of Traders Futures and Options report as of August 2nd for the Mini NASDAQ. Non-commercial traders were net long 61,273 contracts, a decrease of 17,270. The Commercial traders were net short 67,934 contracts, a decrease of 19,083 contracts. Non-commercial and non-reportable traders combined held a net long position of 67,935 contracts, down 19,081 on the week. The report coincided with a reading on the September NASDAQ of 2288.25, and prices have fallen by more than 150 points since, which suggests a greater level of long liquidation selling. The September NASDAQ has a level of support below the market from the November 2011 lows at 2084.25.

TODAY’S MARKET IDEAS: Economic slow down fears, along with debt concerns in both Europe and US have not gone away, and that keeps a big negative hanging over equity markets this morning. Volatility and uncertainty is expected to remain elevated, and that is expected to keep trading conditions difficult. The trends in both the September E-mini Dow and S&P 500 remain in favor of the bear camp, with downside support coming in at 10,915 and 1150.00. Near term resistance on the September E-mini Dow comes in at 11,590 and 1223.50 for the September S&P 500.

Stocks: US Debt Ceiling Concerns; Europe Debt Concerns; QE3?

by Dave Hightower on July 14, 2011

Heightened risk aversion keeps global equity markets on edge, especially after warnings of a downgrade to US credit ratings if a debt ceiling deal is not reached. Moody’s came out late Wednesday and warned of the growing threat that a US Debt deal would not be reached by the August 2nd deadline, leading to a US default on its obligations. This weighed on global equity markets overnight and detracted from the optimism created by QE3 prospects, expressed by Fed Chairman Bernanke during Wednesday’s testimony. Fed Chairman Bernanke goes in front of the Senate this morning and is expected to acknowledge a persistently weak US economy and potential for more stimulus. It probably takes something more than yesterday’s comments to manufacture another rally today. While that news was well received yesterday, equities are also more keyed in on US deficit reduction talks that are expected to continue today. Equity markets are concerned by a number of big picture items, including the European debt crisis, US debt ceiling debate and the start of second-quarter earnings season. That uncertainty has fostered flight to safety movement into precious metals. Some of that uncertainty surrounding Q2 earnings will be answered today with results from JP Morgan early this morning and Google this afternoon.

S&P 500: The September S&P 500 established a lower low overnight in the wake of Moody’s US credit downgrade warning but has since returned back toward unchanged levels. It is possible that the index garnered a level of support from positive action in the shares of YUM Brands after the company reported earnings and raised their full-year outlook. In addition to an active economic calendar this morning, with expectations for a slight decline in initial jobless claims and fractional increase in June PPI, the market will be watching earnings from JP Morgan this morning. Analysts are expected to pay closer attention to the company’s future business prospects rather than actual earnings. Wednesday evening’s breakdown leaves the bear camp with the advantage this morning. Resistance above comes in at 1315.00 and 1320.50. Key support below stands at 1305.00 and the 1290.00 area.

DOW: The September E-mini Dow extended Wednesday’s late session slide but has since turned back into positive territory. Ideas that another round of stimulus could be in the cards for the US economy, if conditions warrant, helped lift the Dow to session highs yesterday. The Dow Jones Index also garnered support from sizeable gains in the energy sector, which benefited from a rally across the energy complex. Weakness in the September E-mini Dow this week has been contained by retracement support of 12,370, which leaves it a key downside level today. The short term trend favors the bears, with resistance above at 12,490 and 12,625.

NASDAQ: The September NASDAQ established a new 8 session low overnight, but has since reversed into positive territory. Tech-related shares got a big boost in Wednesday’s session on an improvement in risk appetites and prospects for QE3. That positive tone has since been watered down by a potential downgrade to US credit ratings. Google reports their quarterly results after the close today and is expected to show fractional improvement from last year. The trade will likely keep a close watch on the company’s efforts within the social networking space. Shares of Amazon could get a boost in today’s trade after they announced plans to introduce a new tablet computer in October. Early morning trade in the NASDAQ has been choppy, and leaves the bear camp with a slight edge after this week’s slide. Resistance comes in at 2365.50, with 100 day moving average support below at 2314.00.

TODAY’S MARKET IDEAS: A threat to the US credit rating, breakdown in US debt ceiling talks and the prospect for another round of quantitative easing have kept the market volatile. This morning’s economic calendar could put slow down fears front and center if the 7:30 AM CT numbers disappoint. There is also the threat that the European debt situation comes back into focus ahead of weekend meetings and as the market grows impatient waiting for a solution. The market will also receive some big earnings results in the session that are also worthy of attention. The intermediate term trends in the September E-mini Dow and S&P 500 favor the bears to start.

Stocks: Quad-Witching and Greece Situation Enhances Volatility

by Dave Hightower on June 17, 2011

Global equity markets are once again on a lower track this morning as they continue to grapple with the Greek debt situation and quadruple-witching option expiration. The Greek debt problem continues to saddle risk appetites, which was highlighted by a plunge in crude oil prices to their lowest levels since late January overnight. The growing unease helped to pressure China’s Shanghai composite index to its lowest level since October. There was talk overnight of a potential hike in Chinese interest rates again over the weekend, and that could be another factor working against the bulls this morning. The Japanese Nikkei was also lower and fell to its lowest levels since March 29th. Not only is the Greek debt crisis worrying overseas investors, there remains concerns over a resolution to the US debt ceiling debate. European shares were lower at the same time their volatility index reached a new 3-month high, which reflects an ongoing level of fear and diminished buying interest. While there seemed to be a minor lift in US indices following Thursday’s favorable Initial Jobless Claims data and a surprise jump in Building Permits, the ongoing Greek debt situation continues to undermine market sentiment. This morning’s US economic calendar will show the latest on June Consumer Sentiment and June Leading Economic Indicators

S&P 500: The September S&P 500 traded lower during the initial morning hours, but it has since reversed course and registered a higher high on the session. Perhaps some of the added lift this morning comes from fresh merger news, with Capital One planning to buy ING’s US retail banking unit for $9 billion in cash and stock. Meanwhile, the CBOE Volatility index was up by more than 6.0% yesterday and reached its highest level since March 16th, and that action suggests there is still a high level of fear in the market over a potential Greek debt default. Banks stocks remain under pressure on concerns that a potential Greek debt default could lead to greater write-offs that may have them in search of added capital to boost balance sheets. While it is possible for an extended corrective rally this morning, the short term trend favors the bear camp.

DOW: The September E-mini Dow made a higher high overnight as it attempts to build on Thursday’s late day gains. Banks stocks within the index continue to struggle with their exposure levels to Greek debt, and that remains a drag on the Index. Bank of America made the news wires late Thursday evening after its CIO did not know the extent of damaging documents compromised through recent Wikileaks. Overnight weakness in the crude oil market could also be a factor that pressures energy related shares within the Dow. In the meantime, the September E-mini Dow has turned the tide during the early morning hours in favor of the bulls, with a move above downtrend channel resistance of 11,940. Next upside resistance comes in at this week’s high of 12,050.

NASDAQ: The September NASDAQ began the overnight trade on a weaker track and stood about 8% below the early June high. Some of that weakness comes from disappointing quarterly results from Research in Motion late Thursday, which showed first quarter profits down by more than 9.0% compared to year ago levels. The company also lowered forward guidance and announced upcoming layoffs, which pressured its shares lower by over 14% in the overnight action. The tech sector may also get some play from a multi-billion dollar lawsuit, as Oracle goes after Google over patent infringements, and that casts another negative for tech related shares this morning. The September NASDAQ remains in a downtrend pattern, with support this morning coming in at 2175.00. It probably takes a rally back above 2213.00 to begin to turn the charts in favor of the bulls.

TODAY’S MARKET IDEAS: Today’s session represents quadruple-witching option expiration that is likely to bring about added volatility, especially after an 8.4% break in the S&P 500 off of the May high. Resistance in the September E-mini Dow comes in at 12,000, with a swing high above at 12,050.

Stocks: Fundamental and Technical Tracks Look to Remain Down

by Dave Hightower on June 3, 2011

The stock market has tried to throw off the slowing mentality this week but the flow of weak data has been fairly consistent. The market seems to be of a mind, that last month’s bulge in energy prices wounded the US consumer and that the numbers this morning will reflect the headwinds facing the recovery. With the markets also seeing fresh legal action against a major US investment bank, slack retail sales views, uncertainty off the US budget situation and residual fears off the Greek debt problems, there seems to be at least 3 or 4 bearish themes populating the headline flow. Therefore investors could take a large measure of direction from the payroll readings this morning, as there has to be some hope of growth and momentum, to decide to weather the risk presented in the current marketplace. With Moody’s yesterday indicating that they might cut ratings on a number of US Banks and the markets coming away from this week’s trade with fresh concerns for the US housing sector, the market might need to see a patently weak payroll reading and a sharp range down move on the charts to fully adjust stock prices for the new slower reality.

S&P 500: While the June S&P has managed to hold above the Thursday low in the early Friday morning US action, the technical picture from the charts doesn’t look that encouraging. Some traders see a developing pattern of lower highs and lower lows and given the flow of macro economic and political news this week, that pattern seems to be justified from a fundamental perspective. Some traders aren’t ready to call for a key low in the S&P until there is an exhaustion failure on the charts, with a reversal within the same session. In fact, the odds of a temporary test of the sub 1300 level looks possible today in the aftermath of the payroll release.

DOW: While the June Mini Dow initially managed to respect the prior session’s low in the early Friday trade, a recent pattern of lower lows has settled onto the charts. With a ratings threat against some US banks, the trade accepting of slowing activity and recent damage on the charts, the bear camp would seem to hold most of the cards to start the last trading day of the week. Big cap stocks might also be somewhat undermined by ideas that China might be poised to raise interest rates again. Down trend channel support in the June Mini Dow is seen at 12,169 today, with that level falling down to 12,161 on Monday.

NASDAQ: With an initial slide in the early action today, the bear camp this morning probably feels like it has the technical picture working in its favor this morning. With Walmart apparently seeing the need to revise its strategy to win back customers and the market recently presented with some poor retailing numbers this week, it is clear that investors are accepting of the idea that high energy prices have indeed dampened activity in the US economy. Therefore the non farm payroll readings this morning might take on a significant role in the market today, especially given the initial attempt to push the NASDAQ down overnight. Some traders see a critical pivot point at 2317.00 this morning but to turn the tide back in favor of the bull camp might require a rise back above 2327.00.

TODAY’S MARKET IDEAS: The fundamental and technical tracks look to remain down with the market seeking fair valuation. With growth suspect and the end of easing anticipated at the end of the month, it could take some dovish commentary from key Fed officials to actually shut off the downward track in equity prices. In fact, when one adds in the budget mess in Washington and the tightening bias from China, a number of roads seem to lead to even lower equity prices ahead.

Stocks: Impressive Rebound Inspite of Macroeconomic Negatives

by Dave Hightower on May 25, 2011

Global equity markets spent most of the overnight and early morning hours under pressure, as concerns mounted over the Greek debt situation and because of slowing US economic growth. The Japanese Nikkei fell to its lowest level in two months overnight and the Chinese Shanghai index fell to its lowest level since late-January. Global equity markets seem to be factoring in a series of negative fundamentals, including Chinese tightening pressures, the end of the Fed’s QE2 program in June and a lack of fresh earnings news. However, European shares turned into positive territory during the early morning hours, helped by bargain hunting on shares beaten down due to the regions debt situation. Meanwhile, the focus in the US turns to this morning’s April Durable Goods report for another read on the health of the US economy. This follows a disappointing Richmond Fed survey yesterday, which contracted and followed a similar slow-growth theme suggested by last week’s Fed surveys in Philadelphia and Chicago.

S&P 500: During the last 4 sessions the June S&P 500 has made its lows of the session toward the end of the day and finished weak. That downside action in the wake of this morning’s early low and subsequent 8-point bounce might suggest the market could be ready to correct the recent slide. Concerns over slowing US economic growth and a sluggish labor market present the S&P 500 with a negative, but the June S&P 500 could be embarking on an upside attempt to correct the 43 point break from last week’s high. The US Treasury reduced their 96% stake in AIG by selling 200 million shares during yesterday’s offering. News that Chrysler paid back all of its bailout contributions from the US and Canada could be another sentiment booster for US equities. The bears maintain their edge but are being challenged. A little more upside this morning above the 1317.50 level would help tip the scale in favors of the bulls.

DOW: After an early evening sell-off to the lowest level since April 20th, the June E-mini Dow has put up a nice 100 point rally. It seems that the overnight trade was plagued by a number of negative headlines over a potential re-structuring of Greek debt, but there appeared to be a measure of bargain hunting buying as the index challenged downside support levels. It is also possible that a positive earnings report from Costco early this morning may have contributed to the attempt to recover. The short term trend in the June E-mini Dow continues to point down, but a rise back into the prior session’s range this morning could turn the tide in favor of the bulls. A further push this morning above the 12,365 level would open the door for potential move toward 12,450.

NASDAQ: The June NASDAQ traded sharply lower during the overnight session and broke down to a new 5-week low. Prices managed to recover from their worst levels this morning and could be in the process of forming an intermediate term low. Perhaps ideas that US lawmakers could be closer to raising the debt ceiling, after proposing 1-Trillion in budget cuts may be a factor helping to lift sentiment this morning. A move back above 2302.00 that holds today, could provide evidence of a larger upside advance to come. Upside resistance for the June NASDAQ stands at 2311.00 today, and then again up at 2325.00.

TODAY’S MARKET IDEAS: In the face of a number of larger macroeconomic negatives, US equities have managed an impressive rebound from their worst levels. Short term oversold momentum indicators with this morning’s reversal action could be setting the stage for at least a multi-day bounce. Some analysts indicate that the major indices could be reaching fairly valued levels worthy of investment, and that could be a factor that provides an added lift on signs of a turn. Perhaps a favorable read on this morning’s April Durable Goods report could be the bull catalyst. Key upside level in the June S&P come in at 1317.50 and 12,365 in the June E-mini Dow.

Stocks: Global Markets Under Pressure

by Dave Hightower on May 12, 2011

Global equity markets are on the defensive once again during the initial morning hours as yesterday’s commodity liquidation trade continued. Asian shares were lower across the board, fueled in part by concerns over China’s next step with monetary policy and whether the country’s growth story may falter. Weakness in commodity markets, like copper reaching its lowest level since December and silver’s 14.1% slide from Tuesday’s highs have pressured mining related shares in European trade again this morning. Adding to the weak tone was disappointing European Industrial Production data that showed a decline in March compared to expectations for a modest gain. There also remained concerns over Greek debt restructuring as well as fresh warnings from the IMF that urged the ECB to hold off on hiking interest rates and calling for more reform to limit the debt crisis from spreading. Some analysts said that weakness across most asset classes left no place to hide and prompted many to cut risky positions, which has further contributed to the liquidation trade.

S&P 500: The June S&P continued to decline from Wednesday’s negative reversal and ongoing liquidation trade during the early morning hours. This puts the index closer to the May 5th low of 1325.50 and makes that level a likely downside testing area this morning. In addition to broad weakness in commodity related names, financial sector shares were also under pressure. While there was news regarding AIG’s debt offering of around $9 billion, it was nearly half previous estimates and makes it more difficult for the Treasury to exit their position (bailout funds) with a profit. The bears have the edge to start this morning with the key downside pivot level of 1325.50. Clear penetration below this level would bring the 1300.00 area back into focus.

DOW: The June E-mini Dow fell to a new 5 session low this morning and has closed in on last week’s low of 12,467 in the process. In addition to weakness in energy and industrial related names, the Dow came under more downside pressure following disappointing guidance from Cisco Wednesday afternoon. Cisco reported an 18% drop in third quarter profits and lowered its sales and growth prospects below street expectations going forward, and that seemed to add to the prevailing bearish tone. Wednesday’s bearish wide range reversal and downside follow through this morning provide the bear camp with the early advantage. The June E-mini Dow has support below at last week’s low of 12,467, which corresponds with a 50% retracement level from the late April rally at 12,454.

NASDAQ: The June NASDAQ has fallen within 10 points of its May lows of 2363.50 during the early morning hours. While news that Intel planned to hike their quarterly dividend by 16% may have normally been viewed as a positive, worries over economic growth and sustainability of recent gains in the NASDAQ inspired profit-taking. Perhaps economic data this morning on April Retail Sales provides NASDAQ shares with something positive, but for now sentiment favors the bears. Downside resistance in the June NASDAQ lies at 2363.50.

TODAY’S MARKET IDEAS: US equity markets face a weak outside tone driven by an ongoing liquidation trade in risk assets. The major US indexes are approaching a key support level provided by last week’s low and further penetration below that level could set the stage for an even deeper slide. At the same time, it probably takes a disappointing sweep in this morning’s US economic data on April Retail Sales, Producer Prices and weekly Jobless Claims to fuel a decline worthy of more downside momentum. There were reports that China hiked their bank reserve requirement ratio, which could be another negative blow to the commodity trade that manifests itself in weaker related shares this morning. Key pivot levels below in the June S&P 500 come in at 1325.50 and 12,467 in the June E-mini Dow.

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