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W E D N E S D A Y M O R N I N G E X T R E M E M A R K E T S
A complimentary service from INO.com ( http://www.ino.com/ ) CDCD FREE: NetFutures' exclusive eStarter Kit CD-ROM CDCD http://www.ino.com/specials/netfutures/ Andrew, KEY EVENTS TO WATCH FOR: 9:00 AM ET. Redbook weekly survey of US retail sales (Previous week: +1.3%) 9:00 AM ET. Bank of Tokyo-Mitsubishi weekly US chain store sales (Previous week: +0.5%) 12:30 PM ET. Treasury releases results of $20 billion, 14-day cash management bill auction. 1:00 PM ET. Federal Reserve Bank of Dallas President Robert McTeer speaks on the economy to the Frost Bank. 1:30 PM ET. Treasury releases results of $10 billion , 2-year note auction. 6:30 PM ET. ABC/Money Magazine releases consumer confidence polls. KEY HEADLINES: US May consumer confidence at 115.5 verses April's revised at 109.9. US consumer confidence rebounds unexpectedly. US consumer spending picks up, but income growth slows. US personal incomes rose 0.3% in April, consumer spending up 0.4%. Bank of Canada cuts rates by another quarter point. Bush asks $150 million from Congress for low income energy aid. The STOCK INDEXES & MARKETS The NASDAQ and S&P 500 were lower overnight as selling pressure continues due to weakness in technology stocks. Both the Nasdaq and June S&P 500 have broken out below this spring's uptrend lines thereby increasing the odds that short-term tops have been posted. Momentum indicators have also turned bearish warning traders and investors alike that additional weakness into early-June appears likely. Meanwhile, the Dow closed modestly higher on Tuesday due to light short covering ahead of the close. Nevertheless, the recent breakout below this spring's uptrend line that crosses near 11,100 signaled that a top has been posted. If the decline off last week's high continues, May's reaction low crossing at 10,774.10 is the Dow's next target. European markets were lower in overnight trading due to spillover pressure from Tuesday's poor performance on Wall Street and ongoing weakness in the euro. The UK FTSE-100 was down 53.90 points at 5810.00 while the German DAX-30 was down 43.98 points at 6067.35 as of 11:00 BST. The Nikkei closed sharply lower overnight as it broke out below May's reaction low crossing at 13,694 to renew its decline off May's high. The door is open for additional weakness with the 38% retracement level of this spring's rally crossing at 13,363 being the next likely downside target later this spring. Momentum indicators remain bearish signaling that additional weakness near-term is possible. The overnight sell off was triggered by a downgrade of high-tech stocks by analysts. The Nikkei closed down 2% or 280.54 points to 13,493.35. INTEREST RATES June bonds opened higher overnight as they consolidated some of Tuesday's losses. June bonds may continue to drift sideways ahead of Friday's employment report amidst a lack of fresh economic news to trade off of. Nevertheless, momentum indicators remain bearish warning traders that a test of May's reaction low crossing at 98-24 is still a potential target later this spring. If this support level gives way, weekly fib support crossing at 98-07 is a target. The German bond market or Bunds were lower overnight in response to the latest money supply figures for the euro-zone. The annual rate of M3 growth in April was 4.7% compared with 4.6% in March. The June Bunds were last down 0.07 at 106.15. Japanese government bond markets were slightly higher overnight but remains locked within a narrow trading range. Light support came from weakness in the Nikkei. The lead June 10-year JGB futures closed at 140.19 yen, up 0.11 while the yield on the benchmark No. 231 June 10-year cash bond stood at 1.280%, unchanged as of 1520 JT. The ENERGY MARKETS were mostly higher in overnight trading due to light short covering as the products consolidated some of Tuesday's losses. Additional support came from concerns over Iraq's threats to curtail oil exports. This week's API inventory data review is as follows. Crude oil and unleaded gasoline stocks are expected to have risen 1.2 million barrels last week, while distillate stocks are anticipated to have climbed 0.6 million barrels. Refinery operations are seen unchanged to up 0.55 percentage points of capacity. July crude oil was higher overnight as it continues to rebound off last Friday's low on Iraq output concerns. However, July continues to consolidate below broken trendline support crossing near 29.25. It would take multiple closes above this broken support level to temper the near-term bearish outlook in July crude. Until then, the rebound appears to be corrective as the door has been open for sideways to lower prices into early-June. Momentum indicators are bearish signaling that sideways to lower prices are possible. If July's decline resumes, the reaction lows at 28.03 then 27.25 are July's next targets. July heating oil was higher overnight as it is working on an inside day to consolidate some of Tuesday's loss. A higher close during the day session would leave Tuesday's key reversal down unconfirmed. If the decline continues, a test of this spring's uptrend line crossing near 77.30 is July's next target. Multiple closes below this uptrend line are needed to confirm a top and trend change has taken place. Momentum indicators are bearish warning bulls that additional weakness is possible. July unleaded gas is working on an inside day in overnight trading due to light short covering. Nevertheless, the setback from last week's high has turned momentum indicators bearish signaling that additional weakness into early-June is possible. If the decline continues, trendline support crossing near 93.25 is July's next target. July Henry Hub natural gas was lower overnight as it extends this spring's decline. Tuesday's breakout below last October's low crossing at 3.86 has opened the door for a possible test of fib support crossing at 3.64 later this spring. The daily ADX (a trend-following indicator) remains in a bearish modes signaling that additional weakness near-term is possible. However, momentum indicators have become extremely oversold warning bears to use caution as a low might be near. CURRENCIES The June Euro was lower overnight but is working on an inside day as it consolidates above last November's low crossing at 84.73. If the decline resumes, a test of last October's lows crossing at 83.53 is possible later this spring. The daily ADX (a trend-following indicator) has entered a bearish trend mode signaling that sideways to lower prices are possible into early- June. The June British Pound was slightly lower, overnight as it consolidates some of Tuesday's gains. Momentum indicators are turning neutral to bullish following the rebound off last week's low, which suggests that a broad double bottom might be in place. Nevertheless, multiple closes below trading range support crossing at 1.4112 would open the door for a possible test of last fall's low at 1.4052 later this spring. The June Swiss Franc was lower in overnight trading as it is working on an inside day. June continues to consolidate above the contract low crossing at .5603. Multiple closes below this support level would renew this spring's decline while opening the door for a possible test of weekly support crossing at .5488 later this year. Momentum indicators are bearish but becoming oversold warning traders to use caution as a broad double bottom might be forming. The June Canadian Dollar was lower overnight due to light profit taking and may be forming a possible downside reversal. However, it will take multiple closes above .6548 or below .6425 to clear up near-term direction in the market. Momentum indicators are turning neutral to bullish hinting that a minor low might be in or near. The June Japanese Yen was lower in narrow trading overnight but remains below trading range resistance that crosses at .8339. Closes above.8433 are needed to confirm an upside breakout of this spring's trading range. Momentum indicators are bullish signaling that additional gains near-term are possible. PRECIOUS METALS August comex gold was lower overnight as it extends its decline off last week's spike high due to long-liquidation. Stochastics and RSI are bearish signaling that additional weakness into June is likely. This week's breakout below broken resistance crossing at 276.20 has opened the door for a test of trendline support crossing near 271.70 later this spring. July silver was lower overnight and is below trading range resistance crossing at 4.525. Multiple closes below 4.525 would signal that May's short covering rally has likely come to an end. Momentum indicators are turning neutral to bearish hinting that a short-term top has likely been posted. July copper was slightly higher overnight due to light short covering following Tuesday's sharp decline. Upside potential during the day session appears limited as the tone of the market has turned decidedly bearish following Tuesday's sell-off. Momentum indicators are turning bearish signaling that sideways to lower prices into early-June appears likely. If the decline continues, May's low at 74.75 is July's next target. GRAINS July corn was steady overnight as it consolidates below weekly support crossing at 1.91 1/2. Multiple closes below this key support level are needed to confirm a breakout thereby opening the door for a possible test of last summer's low crossing at 1.74 1/2 later this year. Tuesday's planting intentions report showed that 95% of this year's corn crop is in the ground compared with the five-year average of 92%. The crop conditions report showed that 80% of the corn has emerged with 5% poor, 25% fair, and 70% good- excellent. Yesterday's export inspection report came in at 32.383 million bushels, which was above the previous week's level but is still below the pace needed to meet the latest USDA export projection. Traders are now looking for the USDA to lower its export projection in the June supply/demand report, which would only add to the bearish carryout level for 2001-02. Early calls are for July corn to open steady this morning. July wheat was higher in overnight trading as last week's cool-wet conditions have improved winter wheat conditions slightly. However, the latest export inspection report continued to show slow export demand, which have off set supply concerns this spring. It would take multiple closes above broken support crossing at 2.65 to temper the near term bearish outlook in July wheat. Until then, the door remains open for a test of weekly gap support crossing at 2.56 then the long-term pivot level at 2.50 later this spring. Early calls are for July wheat to open 2 to 2 3/4 cents higher this morning. SOYBEAN COMPEX July soybeans were fractionally higher in overnight trading due to short covering following Tuesday's breakout below this spring's uptrend line. The latest planting progress report showed that 70% of the bean crop has been planted, which is 6 points above the five-year average. While a short covering bounce is possible during the day session on Wednesday, odds now appears as though last Friday's high marked a double top on the daily chart. Momentum indicators are turning bearish from overbought positions signaling that sideways to lower prices into early-June appear likely. Early calls are for July soybeans to open steady to a 1/4 of a cent higher this morning. July soybean meal was higher overnight due to short covering following Tuesday's trendline breakout. Multiple closes below trendline support crossing near 162.60 are needed to confirm this week's breakout. At the same time, momentum indicators are turning bearish from overbought conditions thereby increasing the odds that a short-term top has likely been posted. Early calls are for July soybean meal to open 20 to 50-cents higher this morning. LIVESTOCK June hogs closed sharply higher on Tuesday following last Friday's announcement by the USDA that the government was easing its ban on livestock and uncooked meat from the EU. Today's rally strongly suggests that last week's lows marked a double bottom with the early-May lows, which coincided with the 38% retracement level of the 2000-01 rally. Momentum indicators are turning neutral to bullish with today's rally signaling that sideways to higher prices into early-June are possible. August cattle closed higher on Tuesday and above the 75% retracement level of this year's decline crossing at 73.83. Today's rally renewed May's advance while opening the door for a likely test of January's high crossing at 75.00 later this spring. Momentum indicators have become overbought but remain bullish signaling that additional gains near-term are possible. FOOD & FIBER July coffee posted an inside day with a slightly lower close as it consolidated some of last Friday's losses. The door remains open for a test of April's low crossing at 58.80. Closes below this support level would renew this year's decline and set the stage for a possible test of long-term support crossing at 51.70 later this year. July cocoa closed lower on Tuesday following last Friday's gap down, which signaled that a broad double top has been posted. Momentum indicators have turned bearish signaling that additional weakness into early-June is likely. I would not be surprised to see a short covering bounce on Wednesday as July might try and consolidate some of its recent losses. July sugar closed sharply lower on Tuesday and below trading range support crossing at 879. Multiple closes below 879 are needed to confirm today's breakout and trend change. Stochastics and RSI are bearish signaling that sideways to lower prices near-term are possible. I would not be surprised to see a short covering bounce on Wednesday as July might try and test broken support before extending its decline. July cotton posted an upside reversal on Tuesday due to light short covering. Early session weakness led to a spike below psychological support crossing at 40-cents. Multiple closes below the 40-cent support level could lead to an eventual test of the 1986 low crossing at 29.50 cents. 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