Low Volume Gains to Continue But the Bull Case Isn't That Impressive

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): S&P 500 +40, DOW +2

A big range up extension in the prior trading session seems to have come because of ideas that a hawkish Fed, must mean that the Fed is confident that the US economy is recovering. It also appears as if the market continues to get a consistent lift from merger and acquisition activity and that might be why the market has seemingly managed to rise in the face of slack scheduled economic readings. In fact, we suspect that the market will be confronted a series of slightly disappointing economic readings over the coming three trading sessions but we are not sure that is going to foment much in the way of negative sentiment toward equity prices. Some traders will suggest that failing to hold the bulk of the sharp run up in the prior trading session, hints at a bit of exhaustion in the bull camp. Given the bullish bias in sentiment, it might take a series of weaker than expected private jobs figures, to prompt a noted profit taking wave in the equity markets. In fact, given the tone of Fed members recently, it is even possible that the Fed Beige book release early this afternoon will provide the stock market with a minimal lift. Unless something patently negative surfaces in the headlines this morning, we expect profit taking selling to be minimal and therefore the bull camp looks to retain an edge.

S&P 500: So far the pattern of higher lows and higher highs leaves the bull camp in control of the stock market. Surprisingly, the markets aren't being undermined by hawkish Fed dialogue or even by slack US scheduled data flows. Therefore, the market probably won't be undermined as a result of potentially slack US private jobs data today. While we aren't sure that the March S&P will have the buying fuel to test the 1125 level today, it is possible that the S&P might test that level before the Friday morning jobs number spooks some weak handed longs out of position.

DOW: While the Mini Dow forged another new high for the move and sharp thrust higher in the prior trading session, the market gave back a moderate portion of that rally into the close yesterday. However, we see critical support at 10,381 and then again down at 10,371 in the March Mini Dow contract, with the bull camp seemingly retaining an edge. It is possible that early private jobs data will provide a slight undermine, but we just don't get the impression that the market is going to be turned downward off today's data. Upside resistance in the March Mini Dow is seen up at 10,500. 

NASDAQ: One shouldn't be surprised that the Nasdaq mounted an aggressive run up in the prior trading session, as merger and acquisition activity seemed to be providing the Nasdaq will a distinct lift. However, the Nasdaq seemed to reach an overdone technical and perhaps even fundamental level, with the rally yesterday and then ended up giving up a large portion of the gains into the close. With the market waffling around the 1852.25 level in the morning trade today that would seem to make the 1850 level as a critical pivot point in the early trade today. We don't see the justification for a sharp upside extension in prices, but we do think that the March Nasdaq will manage to entrench and build support around the 1850 pivot point. 

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) 03/03/2010: Momentum studies are trending higher but have entered overbought levels. A positive signal for trend short-term was given on a close over the 9-bar moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The near-term upside objective is at 1127.85. The next area of resistance is around 1122.50 and 1127.85, while 1st support hits today at 1112.30 and below there at 1107.45.

S&P E-MINI (MAR) 03/03/2010: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. 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 objective is at 1127.62. The next area of resistance is around 1122.50 and 1127.62, while 1st support hits today at 1112.50 and below there at 1107.63.

NASDAQ (MAR) 03/03/2010: Momentum studies are trending higher but have entered overbought levels. The market's short-term trend is positive on the close above the 9-day moving average. It is a mildly bullish indicator that the market closed over the pivot swing number. The near-term upside objective is at 1872.62. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 1862.25 and 1872.62, while 1st support hits today at 1842.25 and below there at 1832.63. 

DOW (MAR) 03/03/2010: Rising stochastics at overbought levels warrant some caution for bulls. The market's close above the 9-day moving average suggests the short-term trend remains positive. Market positioning is positive with the close over the 1st swing resistance. The near-term upside target is at 10493. The next area of resistance is around 10467 and 10493, while 1st support hits today at 10393 and below there at 10346.  

MINI-RUSSELL 2000 (MAR) 03/03/2010: The rally brought the market to a new contract high. 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. Market positioning is positive with the close over the 1st swing resistance. The nearterm upside objective is at 656.3. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 652.7 and 656.3, while 1st support hits today at 642.9 and below there at 636.6.

CRUDE OIL COMMENTARY

WILL NEED BULLISH INVENTORY & ECONOMIC NEWS FOR OIL TO BREAK UPSIDE RANGE

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): CRUDE +39

CRUDE OIL MARKET FUNDAMENTALS: Crude oil has seen a choppy two sided trade overnight but the market seems to have a positive bias since oil has so far held up fairly well despite the bearish API reading. API reported a jump in oil stocks that were twice as high as expectations but the trade seems to be instead focusing on a much sharper than expected decline in distillate stocks. A weaker Dollar and firmer Euro have also provided some price support to crude oil in the early going on rising investor risk appetite. Also, news that Greece has adopted more austerity measures seems to be providing a bit of macro economic optimism to the oil markets. But so far the buying conviction in crude oil up at these high price levels hasn't been that strong leaving the market still looking a bit fragile. While macro economic sentiment seems to have improved, the demand outlook for oil remains sketchy typified by news that Japanese crude oil stocks fell to a three month low on week refinery demand and inventory adjustments ahead of Japan's fiscal year end in March. Oil markets have been closely following the ebb and flow in the equity market and overnight gains in oil have likely been limited by a lack of clear direction in equities which have only managed to edge higher at times despite the positive news on Greece. But crude oil may be in a holding pattern ahead of a variety of market impacting reports on inventories, US service sector growth and private employment. Most traders are expecting the EIA report to show a 1.3 million barrel gain in oil stocks and a rise in gasoline stocks, but a nearly 1 million barrel drop in distillate supplies. But in the end, the economic news and outside market influences may have more of an impact on oil market direction, especially if the inventory report comes in close to expectations. While April crude oil has consistently failed up at these price levels, the market has also held around the 40 day moving average on price breaks which comes in at $78.04 today. Yesterday's probe above the February high would also seem to give April crude oil more of an upward tilt. We get the sense that crude oil will make another upside run attempt this session and seeing a close over yesterday's high will put April crude oil on course to test the January high. But if another failed rally attempt is seen, we suspect the $78.00 in April crude oil is likely to hold.

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) 03/03/2010: Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The market's close above the 9-day moving average suggests the short-term trend remains positive. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside target is now at 76.97. The next area of resistance is around 81.05 and 82.34, while 1st support hits today at 78.37 and below there at 76.97.

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