The Bulls Seem to Be Undaunted By the Proximity to Weather Impacted #'s

OVERNIGHT CHANGES THROUGH 6:05 AM (CT): S&P 500 +390, DOW +30

Despite open concern of a slack US payroll reading later this morning, the equity market has generally held within striking distance of its recent highs. Perhaps the markets were cheered by the news that the Chinese intended to stick with an appropriate easing stance. While dialogue from the Germans would seem to make things worse, rather than better for their fellow EU member Greece, the Greece situation seems to have generally remained under control. At least in the early European equity market action today the trade saw support from natural resource companies. In looking back, one has to be impressed with the action in the equity market over the last month, as many rallies seem to have come in the face of disappointing economic numbers. It is also clear that the trade is building a case, that weather might have made this month's payroll loss bigger than it might have been otherwise. Therefore, while the market is partially overbought from a technical perspective and a slack number should initially pressure prices somewhat, one should not be surprised to see the market eventually shake off a bad number sooner than might have been expected. On the other hand, a surprisingly small job loss reading might evoke a very big range up move in stock prices. In conclusion, we think the odds of a knee-jerk reaction setback in stocks through the US numbers are high, but the trade might be able to throw off anything but a seriously bearish number (meaning anything more than 75,000 in jobs lost).

S&P 500: The March S&P in the early going today has managed to forge a fresh another new high for the move and in the process it reached the highest level since January 21st. Up trend channel support in the March S&P is seen all the way down at 1103.45, but we suspect that the market could actually manage to hold at closer-in support of 1118.60, especially if the US numbers show a decline of only 50,000 or 60,000 in the jobs number. 

DOW: The Mini Dow would seem to be poised to reach the highest level since January 21st but unfortunately the market might see some temporary back and fill action into and through the US numbers this morning. Up trend channel support in the March Mini Dow is seen at 10,335 today and then again up at 10,362 on Monday. Given a pattern of lower lows this week, one can probably say that the Mini Dow has at least partially corrected the overbought situation that was in place at the start of the week. In conclusion, the technical picture still looks bullish, but the fundamental track clearly has a temporary vulnerability just ahead. 

NASDAQ: The Nasdaq this week has basically carved out a consolidation zone that is bound by 1844 and 1863 but the odds are good that the market will see a breakout on both sides of that range over the coming trading sessions. We have to give the bear camp the initial edge today, as the prospect of disappointing readings from the US payroll report seem to be rather high. However, as mentioned before we suspect that this market will be able to discount and throw off a modestly disappointing reading. Unfortunately for the bull camp, up trend channel support isn't seen until 1810, with that support level rising to 1815 on Monday. We suspect that the March Nasdaq will respect close-in support of 1840 today, as long as the job loss is less than 75,000.

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) 03/05/2010: 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. The daily closing price reversal up on the daily chart is somewhat positive. Market positioning is positive with the close over the 1st swing resistance. The near-term upside target is at 1132.75. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 1132.40 and 1132.75, while 1st support hits today at 1122.60 and below there at 1113.15. 

S&P E-MINI (MAR) 03/05/2010: Rising stochastics at overbought levels warrant some caution for bulls. The close above the 9-day moving average is a positive short-term indicator for trend. The upside closing price reversal on the daily chart is somewhat bullish. The market has a slightly positive tilt with the close over the swing pivot. The next upside target is 1130.12. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 1127.25 and 1130.12, while 1st support hits today at 1117.75 and below there at 1111.13.

NASDAQ (MAR) 03/05/2010: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's short-term trend is positive on the close above the 9-day moving average. The upside closing price reversal on the daily chart is somewhat bullish. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside target is at 1873.25. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 1868.50 and 1873.25, while 1st support hits today at 1851.50 and below there at 1839.25.

DOW (MAR) 03/05/2010: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's short-term trend is positive on the close above the 9-day moving average. The upside daily closing price reversal gives the market a bullish tilt. Market positioning is positive with the close over the 1st swing resistance. The near-term upside objective is at 10455. The next area of resistance is around 10437 and 10455, while 1st support hits today at 10379 and below there at 10338.

MINI-RUSSELL 2000 (MAR) 03/05/2010: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's short-term trend is 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 target is at 657.3. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 655.2 and 657.3, while 1st support hits today at 649.0 and below there at 644.8. 

CRUDE OIL COMMENTARY

UPWARD BIAS BUT DIRECTION WILL HINGE ON EMPLOYMENT REPORT AND $ ACTION

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

CRUDE OIL MARKET FUNDAMENTALS: Crude oil has seen a firmer trade in the early overnight action with stronger global equity markets and a better oil demand view helping the market bounce back from yesterday's currency connected sell off. Crude oil gained on optimism for China's oil demand to remain strong after the country's Premier indicated that monetary conditions would remain loose while an active fiscal policy would be maintained. This has alleviated some concern that oil demand from the world's second largest consumer would be crimped if China started to aggressively tighten monetary policy. A steady to slightly weaker Dollar overnight has taken the currency connected selling pressure off oil markets seen in yesterday's session. Oil is also being supported by a more optimistic macro economic view being thrown off by the gains in global equity markets tied to yesterday's stronger than expected news on US retailer sales and a drop in US jobless claims which seems to have improved oil demand sentiment in the overnight trade. A report forecasting a sizable drop in OPEC exports in the four weeks to March 20th may also be helping to improve the supply outlook. Stepped up Nigerian militant attacks on oil facilities, tensions over Iran's nuclear program and threats of a tanker attack in a major shipping lane in Singapore have also provided geopolitical risk support to oil prices. With crude oil bouncing back overnight it clearly seems as if oil markets retain an upward price bias. The chart action for April crude oil has been positive with the market setting higher lows and generally higher highs over the last five sessions while price breaks so far haven't seen any follow through. Eventually we see April crude oil retesting the January highs. But since the bull camp still needs to over come some obstacles including an overbought technical condition and high fuel supplies a much more optimistic view toward a recovery in oil demand will need to take hold. Today's highly anticipated employment report will provide additional economic insight and certainly influence oil price direction with most traders looking for payrolls to decline by about 65,000. Therefore, given the oil market's sensitivity to the currency action we suspect a bullish surprise may need to be seen in today's employment data that also doesn't cause a significant run up in the dollar in order for April crude oil to make a push above this week's highs. Otherwise, given the market's overbought condition, crude oil could be hit by profit taking if the Dollar traders sharply higher off the economic news.

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) 03/05/2010: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. 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 near-term upside objective is at 81.82. The next area of resistance is around 81.17 and 81.82, while 1st support hits today at 79.79 and below there at 79.05.

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