A Minimal Bullish Tilt But the Bouce Feels Like Technical Balancing

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): S&P 500 +280, DOW +33

The world equity markets are showing some positive direction this morning in the wake of news that Greece and the EU seem to be getting along. With various German and Greek officials giving off the impression of cooperation overnight, that could take the Greece situation out of the headlines temporarily and in turn allow for a technical/fundamental bounce in equity prices. However, after the initial short covering bounce, we suspect that the market will need to see some help from the US economic front. While Personal Spending and Income might post a small rise in the early number flows, we are somewhat fearful of the second set of readings today from Construction Spending and ISM Manufacturing. In other words, what the first set of numbers gives to the bull camp, we suspect that the second set of economic readings will probably take away from the bulls. In fact, with the Non Farm payroll report looming ahead and the market at times last week, seemingly tracking off the prospect of "keeping rates low", instead of tracking off the hope for confirmation of forward growth in the economy, traders need to monitor the knee jerk reactions in stocks to scheduled data flows very closely. In short, it wouldn't be impossible for the stock market to return to a posture, where weak numbers manage to lend some support to stock prices. Pushed into the market we suspect that the market will have a positive bias today, but the ability to rally off slack numbers might be limited.

S&P 500: The S&P has shown a positive bid early in the trade today, but we also get the sense that the bull camp burned a lot of fuel in forging the initial thrust up move. We see a critical pivot point at 1105.60 in the March S&P today but the market appears to have a difficult task ahead in shaping anemic economic readings into something definitively positive. At this point we would be surprised to see the March S&P manage a quick rise above initial resistance of 1111.00. The Commitments of Traders Futures and Options report as of February 23rd for S&P 500 Stock Index showed Non-Commercial traders were net short 69,384 contracts, an increase of -4,942 contracts. The Non-reportable traders were net long 56,449 contracts, an increase of 7,222 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 12,935 contracts and that should leave the S&P with a bit of technical short covering buying capacity.

DOW: While the bull camp might appear to have an early edge today, we still see the market holding under a critical bull/bear line of 10,374 in the March Mini Dow. We can't rule out an upside extension to resistance of 10,421 in the beginning of Month euphoria, which is initially accentuated by the slightly more favorable Greece debt situation. Therefore, a weak rally is possible but the market will have to show the ability to rise consistently in the wake of the 9:00 numbers to fully extend the bulls early control. The Commitments of Traders Futures and Options report as of February 23rd for Dow Jones Index $5 showed Non-Commercial traders were net long 15,257 contracts, an increase of 10,620 contracts. The Non-reportable traders were net long 1,530 contracts, an increase of 627 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 16,787 contracts. This represents an increase of 11,247 contracts in the net long position held by these traders.

NASDAQ: The Nasdaq is showing some positive extension of last week's recovery attempt and all we can garner from that action is that the trade continues to be relieved with the Greece situation and perhaps from the idea that the Fed is indeed still on hold. Therefore we can't argue against an upside continuation toward resistance up at 1832.50, and as long as the March Nasdaq holds above 1814 we will generally be upbeat toward stock prices. The Commitments of Traders Futures and Options report as of February 23rd for Nasdaq Mini showed Non- Commercial traders were net long 39,075 contracts, an increase of 21,000 contracts. The Non-reportable traders were net short 2,922 contracts, a decrease of 3,867 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 36,153 contracts. This represents an increase of 24,867 contracts in the net long position held by these traders. 

STOCKS TECHNICAL OUTLOOK:

Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report.

S&P 500 (MAR) 03/01/2010: The market now above the 40-day moving average suggests the longer-term trend has turned up. Momentum studies are trending higher but have entered overbought levels. The market's close above the 9-day moving average suggests the short-term trend remains positive. The close over the pivot swing is a somewhat positive setup. The near-term upside target is at 1113.50. The next area of resistance is around 1109.30 and 1113.50, while 1st support hits today at 1098.70 and below there at 1092.30. 

S&P E-MINI (MAR) 03/01/2010: The market now above the 40-day moving average suggests the longer-term trend has turned up. Rising stochastics at overbought levels warrant some caution for bulls. A positive signal for trend short-term was given on a close over the 9-bar moving average. The close over the pivot swing is a somewhat positive setup. The next upside objective is 1114.37. The next area of resistance is around 1109.50 and 1114.37, while 1st support hits today at 1098.00 and below there at 1091.38.

NASDAQ (MAR) 03/01/2010: The cross over and close above the 60-day moving average indicates the longerterm trend has turned up. Momentum studies are trending higher but have entered overbought levels. The close above the 9-day moving average is a positive short-term indicator for trend. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The near-term upside objective is at 1834.12. The next area of resistance is around 1828.25 and 1834.12, while 1st support hits today at 1809.75 and below there at 1797.13.

DOW (MAR) 03/01/2010: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's short-term trend is negative as the close remains below the 9-day moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The nearterm upside target is at 10375. The next area of resistance is around 10345 and 10375, while 1st support hits today at 10293 and below there at 10270.

MINI-RUSSELL 2000 (MAR) 03/01/2010: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. The daily closing price reversal down puts the market on the defensive. It is a mildly bullish indicator that the market closed over the pivot swing number. The near-term upside target is at 637.4. The next area of resistance is around 633.3 and 637.4, while 1st support hits today at 624.1 and below there at 619.1.

CRUDE OIL COMMENTARY

OVERBOUGHT, NEEDS FRESH BUYING INCENTIVE TO HOLD UP OIL OTHERWISE BIG BREAK POSSIBLE

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): CRUDE +33

CRUDE OIL MARKET FUNDAMENTALS: Crude oil initially saw follow through strength overnight from last Friday's gains on what looked to be renewed macro economic optimism for a recovery in fuel demand this year, but the market has backed away from overnight highs just ahead of the US open. April crude oil made a push back above the $80 price level in the early overnight action partly on positive sentiment tied to last week's data showing an upward revision in 4th quarter GDP growth to the fastest rate in over six years. Optimism for rising global fuel demand has been stoked by a report that Saudi Arabia plans to significantly raise exports to India as the country expands it refining capacity. Crude oil has also had strong ties to equities and with global stock markets up overnight on ideas that Greece will receive debt help from other EU members, a return of investor risk appetite certainly seemed to be benefiting the oil markets in the early going this morning. It also appears that the oil markets may have been  seeing some spill over strength from gains in other raw industrial commodities such as copper which is up overnight on a tighter supply outlook following the earthquake in Chile over the weekend. In fact, Chile announced they will need to import fuel due to earthquake damage at several refineries. Part of the gains in oil overnight may be due to escalating geopolitical tensions since an Iranian military official threatened to cut off fuel supplies to Europe and said its missiles could reach any enemy with these threats coming ahead of this week's IAEA meeting in Vienna to discuss how to proceed with Iran's unwillingness to back away from its nuclear program. April crude oil has now rallied back to price levels where the market has failed at several attempts to push through. While an upward bias seems to have taken hold late last week in the crude oil market, the upside traction in oil also looks to have been stymied by a much stronger Dollar overnight and perhaps news that tighter monetary policy and less government spending in China appears to have slowed manufacturing there last month. We are also a bit skeptical that the market's macro economic optimism will hold considering the weak reading last week on US housing, slump in consumer sentiment and jump in jobless claims doesn't particularly paint a strong fundamental backdrop to sustain a move higher in oil prices since fuel supplies remain high. The Feb 23rd COT report with options for crude oil also showed funds increased their net long position by 12,302 contracts and small traders increased their net long position by 9,366 contracts to a combined net long position of 168,008 contracts as of early last week. Daily technical indicators have also risen to an overbought extreme following the price run up from the February low. And we also suspect the oil market could become more undermined by the currency action since the dollar looks to be on the verge of breaking above key levels. Also with funds already holding a heft net long position in crude oil, we suspect the oil market with be vulnerable to profit taking unless there are some bullish surprises in today's economic news on manufacturing, construction and personal income in order to inspire fresh buying of crude oil up at these high price levels. In fact, don't be surprised to see April crude oil back more aggressively away from these higher price levels if outside market influences start to turn less supportive or today's economic news disappoints as that could easily pressure the market back towards $77.50.

ENERGY COMPLEX TECHNICAL OUTLOOK:

Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report.

CRUDE OIL (APR) 03/01/2010: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The close above the 9-day moving average is a positive short-term indicator for trend. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside target is at 81.44. The next area of resistance is around 80.61 and 81.44, while 1st support hits today at 78.39 and below there at 76.99.

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