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T H U R 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: 8:30 AM ET. USDA weekly grain exports sales reports. 8:30 AM ET. State unemployment claims for the week ended Saturday (Previous: +15,000 at 407,000; Forecast: 400,000.) 8:30 AM ET. Federal Reserve Bank of Dallas President Robert McTeer speaks to Texas Tech 2001 Scholarship Breakfast-topic TBA. 9:00 AM ET. May New York purchasing managers report (April: 45.4.) 10:00 AM ET. May Chicago purchasing managers report (April: 38.9.) 10:00 AM ET. April help-wanted index (March: -5 to 66.) 10:00 AM ET. Chicago Fed national activity index. 11:30 AM ET. Cleveland Fed Bank President Jerry Jordan speaks on a less fragmented financial services industry to the Ohio Banker's Association; Columbus, Ohio. 12:30 PM ET Treasury releases results of $35 billion, 14-day cash management bills auction. 2:30 PM ET. Treasury announces size of 13- and 26-week bills. 4:30 PM ET. Money supply statistics. KEY HEADLINES: Fed.'s McTeer say's he is unsure when US economic growth will pick up. Fed.'s McTeer: US second quarter growth is unlikely to be much more than the first quarter's 1.3%. O'Neill says Fed, Bush administration have acted to boost the economy. Fed.'s Moskow: It's crucial for consumer spending to hold up. Redbook says US May retailer sales were up 0.6% from April. US weekly chain store sales fell 0.1% for week ended May 26. Financier Soros says ECB too slow on interest rate decisions. Dow Jones industrials close below 11,000 due to sell off in tech stocks. From Intel to Starbucks, Nasdaq owners to gain from exchanges IPO's. The STOCK INDEXES & MARKETS The NASDAQ and S&P 500 were modestly higher overnight due to light short covering as both markets consolidated some of this week's losses. I would not be surprised to see the Nasdaq try and test if not fill Wednesday's gap at 2170.58 on Thursday. Nevertheless, this week's trendline breakout along with the downturn by momentum indicators strongly suggests that additional weakness into early-June appears likely. May's reaction low crossing at 2057.99 is the Nasdaq's next target. The Sept. S&P was also higher overnight due to short covering following Wednesday's gap down and lower close. Wednesday's low fell short of testing May's reaction low at 1256. If this support is broken, it would open the door for a larger-degree decline during the first half of June. Momentum indicators are bearish, which suggest that additional weakness is possible. Meanwhile, the Dow closed sharply lower on Wednesday confirming the recent breakout below this spring's uptrend line that crosses near 11,100. 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 mixed in overnight trading as overnight gains on Wall Street tempered some of this week's losses. The UK FTSE- 100 was down 14.20 points at 5782.70 while the German DAX-30 was up 33.83 points at 6075.05 as of 10:01 BST. The Nikkei gapped down and closed sharply lower overnight as it broke out below the 38% retracement level of this spring's rally crossing at 13,363. If the decline continues, the 50% retracement level crossing at 12,995 is the Nikkei's next target. Momentum indicators remain bearish signaling that additional weakness near- term is possible. The overnight sell off was due to continued selling pressure of high-tech stocks. The Nikkei closed down 1.7% or 231.21 points to 13,262.14. INTEREST RATES September bonds opened higher overnight as they continue to drift sideways ahead of Friday's employment report. Trade volume remains thin as Sept. bonds found light support on expectations for additional weakness in the equity markets on Thursday. Momentum indicators are turning neutral warning traders to use caution as a short-term low may be in or near. If the decline off last week's high resumes, May's reaction low crossing at 98-06 is Sept.'s next target. The German bond market or Bunds continue to suffer from the euro's fall to its lowest level against the US Dollar in six months. The June Bunds were last down 0.24 at 105.83. Japanese government bond markets were higher overnight due to weakness in the Nikkei. The lead June 10-year JGB futures closed at 140.59 yen, up 0.40 while the yield on the benchmark No. 231 June 10-year cash bond stood at 1.240%, down 0.040 as of 1515 JT. The ENERGY MARKETS were mostly lower in overnight trading as worries about refiner's ability to meet summer driving demand continue to abate. This week's API inventory data review is as follows. Crude oil stocks fell sharply last week by 3.976 million barrels while unleaded gasoline stocks rose by 1.611 million barrels last week. Distillate stocks including heating oil rose by 1.919 million barrels. Refinery capacity was up 1.00 percentage point of capacity at 95.3%. July crude oil was lower overnight as it extended Wednesday's decline due to spillover weakness from unleaded gas. Closes below last week's low at 28.10 would confirm the recent breakout below this spring's uptrend line. If the breakout is confirmed, the late-April reaction low crossing at 27.25 is July's next target. Momentum indicators are bearish signaling that sideways to lower prices are possible. July heating oil was lower overnight and is below this spring's uptrend line crossing near 77.60. Multiple closes below this uptrend line are needed to confirm a top and trend change has taken place. Spillover selling from unleaded gas continues to pull the rest of the complex lower. If a trendline breakout is confirmed, May's reaction low crossing at 74.55 is July's next target. Momentum indicators are bearish signaling that additional weakness is possible. July unleaded gas was sharply lower for the fifth day in a row in overnight trading as spread unwinding continues and concerns over summer gasoline supplies ease. Overnight losses led to a breakout below the March/May uptrend line crossing near 93.25. Multiple closes below this support level would open the door for a test of May's reaction low crossing at 91.20 later this spring. Momentum indicators remain bearish signaling that additional weakness into early-June is possible. July Henry Hub natural gas was lower overnight despite Wednesday's upside reversal, which was due to short covering following this week's spike below last October's low crossing at 3.86. Multiple closes below this support level would 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 corrective bounce is possible. CURRENCIES The September Euro posted a new low for the year overnight and has broken out below last November's low crossing at 85.00. If the decline continues, a test of last October's lows crossing at 83.77 is possible later this spring. The daily ADX (a trend-following indicator) is bearish signaling that sideways to lower prices are possible into early-June are possible. The September British Pound opened sharply lower overnight due to light profit taking as it consolidated some of its gains off last week's low. Nevertheless, momentum indicators are turning neutral to bullish, which suggests that a short-term low might be in place. I am looking for sideways trading to continue into the early-part of June. The September Swiss Franc opened to new contract lows in overnight trading signaling that this year's decline is resuming. A lower close during the day session would confirm the recent breakout below last October's low crossing at .5643 while opening the door for a possible test of weekly support crossing at .5488 later this year. The ADX (a trend-following indicator) has entered a bearish trend mode signaling that sideways to lower prices into June are possible. The September Canadian Dollar was lower overnight following Wednesday's key reversal down. The stage is set for a test of this spring's uptrend line crossing near .6440. Multiple closes below this support level would confirm a trend change has taken place while opening the door for sideways to lower prices during the first half of June. Momentum indicators are bearish warning traders that additional weakness is possible. The September Japanese Yen was lower in narrow trading overnight as it continues to consolidate below trading range resistance that crosses at .8425. Stochastics and RSI remain bullish but are nearing their respective overbought zones signaling that time might be running out for bulls. Closes above.8483 are needed to confirm an upside breakout of this spring's trading range. PRECIOUS METALS August comex gold was lower overnight but is working on a possible inside day following Wednesday's sharp loss and spike below April's uptrend line crossing near 267.50. Multiple closes below the uptrend line would confirm a breakout while opening the door for a test of this spring's low crossing at 257.30 later this year. Stochastics and RSI are bearish signaling that additional weakness into June is likely. July silver was steady overnight as it is working on a possible inside day to consolidate some of Wednesday's sharp losses. However, Momentum indicators have turned bearish signaling that additional weakness near-term is possible. If the decline off last week's high continues, a test of trading range support crossing at 4.31 is July's next target later this year. July copper was lower overnight as it continues this week's sharp decline. July's inability to post a short covering bounce on Wednesday underscores the weak tone of the market as the door is open for additional weakness and a possible test of May's low at 74.75 later this spring. Momentum indicators are bearish signaling that sideways to lower prices into early-June appears likely. GRAINS July corn was fractionally higher overnight as traders await this morning's export sales report. Pre-report estimates range from 700,000 to 950,000 metric tonnes. While this week's export inspection report on Tuesday was higher than the previous week, it was still well below the pace needed to meet the latest USDA export projection. Traders are expecting to see the USDA to lower their export projection for this year in the upcoming June supply/demand report. Any further cuts in export demand will only add to the bearish carryout level, which is currently projected at 1.989 billion bushels by this fall. Cool/wet weather across the western Corn Belt continues to slow early crop development however, the latest planting progress report shows that 95% of the crop has been planted making this a non-issue. The recent breakout below weekly support crossing at 1.91 1/2 has opened the door for a possible test of last summer's low crossing at 1.74 1/2 later this year. Early calls are for July corn to open steady to a 1/4 cent higher this morning. July wheat was fractionally higher in overnight trading following Wednesday's downside reversal. Light support came from light position squaring ahead of the release of this morning's export sales report and news that Japan bought 100,000 metric tonnes of July wheat. Pre-report sales estimates range from 200,000 to 400,000 metric tonnes. It will 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 steady to 3/4 of a cent higher this morning. SOYBEAN COMPEX July soybeans were fractionally higher in overnight trading due to short covering as it consolidated some of this week's losses. This week's trendline breakout confirmed that a double top was posted with last Friday's high. The latest planting progress report came in above the five-year average, which eased planting concerns. Demand remains strong, which should force the USDA to raise this years export projection in the June supply/demand report. However, increased-planted acreage in the US along with a lack of threatening weather continues to offset the strong demand outlook. Pre-report sales estimates range from 150,000 to 250,000 metric tonnes. Momentum indicators are bearish signaling that sideways to lower prices into early-June appear likely. Early calls are for July soybeans to open steady to a 1/2 cent higher this morning. July soybean meal was higher overnight due to short covering following this week's trendline breakout. While domestic and foreign demand remain strong, this week's break in soybeans brought some reality back to the market that there are still plenty of soybeans around. A short covering bounce on Thursday is possible if today's export sales report comes in at or above expectations. Pre-report estimates range from 75,000 to 150,000 metric tonnes. Momentum indicators are turning bearish signaling that sideways to lower prices into early-June appear likely. Early calls are for July soybean meal to open 20 to 30-cents higher this morning. LIVESTOCK August lean hogs closed up $1.65 at $63.35. Prices closed near the session high. The strong rebound continued, after limit-up gains seen Tuesday. The market just got too extended on the downside, especially in the wake Friday's bullish USDA Hogs & Pigs report. Fund buying was featured Wednesday, sources said. Prices broke out above and negated a steep five-week-old downtrend. The bulls now have the near-term edge. However, I would not be surprised to see some sideways consolidation in the coming sessions. Next resistance lies at $64.00. First support is located at the 62.00 level. August live cattle closed off $0.45 at $73.70. Speculative traders took profits after the recent big runup had pushed the market into oversold territory. I would not be surprised to see more of a downside correction soon. Prices pushed to a fresh four-month high Tuesday. Resistance lies at the $74.50 level. First support lies at the $73.40 level. SOFTS July N.Y. sugar closed 15 points lower at 8.59 cents today. Prices today dropped to another fresh four-week low as the recent higher volatility at higher price levels has proven bearish. Also, the rare and usually bearish broadening formation continues to play out on the daily bar chart. Bears have the technical edge at present. However, the market is overdone on the downside at present, on a technical basis. Next support comes in at 8.40 cents. First resistance is now seen at 7.72 cents. July N.Y. coffee closed 65 points lower at 59.15 cents. Prices came within 10 points of the contract low set in April. Bears rule. Bulls can only hope for a strong rebound from the present price level, which would signal a big double-bottom reversal. Still, given the upcoming frost season in South America, I suspect the downside from present levels will be limited in the coffee market. Speculative short-players won't want to get too brave at this time of year. First support comes in at the contract low of 58.80 cents. First resistance is now seen at 63.00 cents. July N.Y. cocoa closed $39 lower today, at $964. More technical damage was inflicted by the bears as prices hit another fresh three-week low, as there was follow-through selling from Friday's gap-lower trade. The bears are in control, but the market is short-term overdone on the downside at present. Next support comes in at $955. First resistance is now seen at $1,009. July cotton closed 32 points lower at 40.72 cents. Prices hit a fresh contract low just yesterday, in the wake of a bearish USDA cotton consumption report last Friday. Cotton is in a strong bear market and any rebounds will be selling opportunities for the bears--for now. Next support lies at 39.95 cents--the contract low. 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