Early Technical Balancing Should Run Its Course Fairly Quickly Today

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): S&P 500 -60, DOW -1

World stock markets showed some weakness overnight and that weakness might have come from any number of minor bearish themes. First of all, it is possible that the markets were simply banking some profits and were in need of technical balancing. It is also possible that news of a quake in the Asian region, sparked some weakness, or it is possible that fresh restrictions on borrowing in China provided a slight financial tremor. In looking at the developments from Greece overnight, it would seem as if that situation was mostly under control and therefore not the source of the sideways to lower overnight price action. One could also suggest that a very minimal rise in Euro zone GDP and or a decline in UK Halifax house price report were discouraging and possibly a source of minor selling in stocks. Our gut suggests that the initial weakness today, is the result of the Chinese tightening and the need to technically balance stock prices. In looking forward, we are slightly positive as the scheduled numbers today look to be indicative of ongoing growth and since the US Fed Beige Book yesterday afternoon also conceded to growth across most US Federal Reserve districts, the overall macro economic view should remain positive. However, it would seem like the US Administration is once again poised to push for the Volcker rule and that should be considered a limiting development.

S&P 500: Unfortunately for the bull camp, up trend channel support is seen all the way down at 1100.30, with a closer-in support level seen at 1112.80. We see a critical pivot point this morning into the scheduled US data, as the market has already managed a slight technical correction and the failure to bounce off decent US numbers and the initial results from the Greek auction would suggest that the bull camp is losing its desire. In short, be a buyer into the scheduled data, but don't tolerate a return below the early low of 1113.50.

DOW: The March Mini Dow showed some patently bearish technical action overnight as it managed to take out the prior two session's lows. However, up trend channel support in the March Mini Dow is seen at 10,308 and that up trend channel support line rises to 10,335 on Friday. The market seems to be partially undermined, as a result of the renewed push for the Volcker exclusion and that might mean the US scheduled data will have to be distinctly positive this morning in order to rekindle speculative buying interest in the market, especially ahead of the ultra critical monthly payroll report on Friday morning. Be a buyer of up trend channel support, but don't tolerate a slide below 10,269.

NASDAQ: The March Nasdaq comes into the action this morning waffling around both sides of the 1850 level. Critical support is seen down at 1842.75 today and a failure of that level could promote noted stop loss selling pressure. Apparently some players are fearful of the monthly US payroll report on Friday morning and that should make today's rather active flow of scheduled data rather important. In fact, unless the Greek debt sours from an initial favorable standing we suspect that liquidation pressure might be limited and easily reversed by US scheduled data flows.

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) 03/04/2010: 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. It is a mildly bullish indicator that the market closed over the pivot swing number. The next upside target is 1129.07. The next area of resistance is around 1123.55 and 1129.07, while 1st support hits today at 1113.85 and below there at 1109.68. 

S&P E-MINI (MAR) 03/04/2010: 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. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The nearterm upside objective is at 1129.50. The next area of resistance is around 1124.00 and 1129.50, while 1st support hits today at 1114.00 and below there at 1109.50.

NASDAQ (MAR) 03/04/2010: 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. The market's close below the pivot swing number is a mildly negative setup. The next upside target is 1868.50. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 1860.00 and 1868.50, while 1st support hits today at 1844.00 and below there at 1836.50.

DOW (MAR) 03/04/2010: 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. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside objective is 10449. The next area of resistance is around 10436 and 10449, while 1st support hits today at 10396 and below there at 10368.

MINI-RUSSELL 2000 (MAR) 03/04/2010: The market made a new contract high on the rally. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. 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 next upside objective is 657.3. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 653.6 and 657.3, while 1st support hits today at 646.2 and below there at 642.6.

CRUDE OIL COMMENTARY

OVERBOUGHT TECH CONDITION ISN'T LIKELY TO PREVENT MORE GAINS ON BULLISH ECON NEWS

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): CRUDE +17

CRUDE OIL MARKET FUNDAMENTALS: Crude oil has seen a softer trade in the early overnight action, but so far the selling interest seems to lack conviction. In fact, the market is starting to gain some upside traction after bouncing from overnight lows. Earlier weakness in oil was likely tied to a stronger Dollar and the weak equity market action overnight which likely inspired some profit taking in oil after yesterday's strong price run up. Lingering concerns over Greece's debt problem even after new austerity measures were adopted this week may also be weighing on the oil markets. Early weakness in oil may have been due to a report showing China's bank lending fell significantly in February as monetary tightening started to take effect and a report that China's refineries will trim crude runs by 5.6% this month for maintenance. Oil markets could also be feeling a bit jittery over the US government's push toward financial market reform since the latest version includes limiting bank's proprietary trading. But overall oil market's appears to have regained a more positive view towards oil demand and as long as that sentiment holds, an upward price bias is likely to remain in place. The Fed in their Beige Book report said they saw a modest recovery taking hold and yesterday's better than expected reading on service sector growth certainly seemed to improve the macro economic view. In fact seeing oil markets shrug off the 4 million barrel jump in crude oil stocks and a rise in gasoline supplies to instead focus on the 3% gain in total product demand suggest a bullish mindset has taken hold. But with April crude oil continuing to show signs of struggling up at these high price levels, it's likely the market will need to see positive readings from today's economic reports on jobless claims, factory orders, productivity and pending home sales to make another push higher and avoid extensive profit taking ahead of Friday's key employment data. While high fuel supplies remain a  stumbling block for the bull camp, the market will likely be able to overcome this obstacle if a better macro economic view is embraced since that will improve the demand outlook for oil. Although April crude oil seems to be a bit short-term overbought, seeing the market set higher highs and higher lows over the last five sessions indicates a clear upward bias and that also suggests price dips back to support levels should be buying opportunities. We suspect the sideways trade in oil is helping the market correct its overbought condition and that an eventual test of the January high will be made.

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) 03/04/2010: The crossover up in the daily stochastics is a bullish signal. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's short-term trend is positive on the close above the 9-day moving average. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside objective is at 82.44. The next area of resistance is around 81.87 and 82.44, while 1st support hits today at 80.09 and below there at 78.87.

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