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F R I 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. May unemployment report (April: Jobless rate 4.5%, non-farm payroll jobs -223,000, earnings +0.4%; Forecast: 4.6%, payrolls -18,000, earnings +0.3%) 9:40 AM ET. May Economic Cycle Research Institute's future inflation gauge (April: 107.4) 9:45 AM ET. May Foundation for International Business and Economic Research leading inflation index (April: 97.6) 10:00 AM ET. April construction spending (March: +1.3%; Forecast: +0.2%) 10:00 AM ET. May NAPM manufacturing index (April: 43.2, price index 48.9: Forecast: 43.7, price index 48.3) 4:15 PM ET. Commercial/Industrial loans. KEY HEADLINES: Pirelli denies any Lucent offer but is monitoring developments. Prudential denies any current interest in acquiring Stilwell Fncl. Euro-zone May manufacturing PMI contracts to 48.3 from April's 49.2. Frances's Trichet says global 2001 outlook has sizable uncertainties. Exxon, Shell set to lead key Saudi gas projects, says report. Shares in Dutch telecom KPN slump on report of $4.2-4.7 billion rights issue. Sodexho Alliance launches $846 million, 1-for-6 share rights issue. French consumer confidence plunges in May. The STOCK INDEXES & MARKETS The NASDAQ and S&P 500 were lower overnight following Thursday's minor short covering bounces. Ongoing weakness in high-tech stocks amidst earnings concerns due to a continued slowing of the U.S. economy leaves the doors open for additional weakness near-term. Traders will be paying close attention to this morning's unemployment report for further signs of a slowing economy. Meanwhile, the Dow's short covering bounce and mid-range close on Thursday leaves the door open for sideways to lower prices into early-June. 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 as they took their lead from U.S. equity markets, which were also lower overnight. Losses were tempered by the latest Euro-zone March retail sales report that showed overall sales for the year are up 1.6% on the year. However, retail sales were down 0.4% on the month. Retail sales in all sectors were weak compared to February's figures. The UK FTSE- 100 was down 13.50 points at 5782.60 while the German DAX-30 was down 37.58 points at 6085.68 as of 11:06 BST. The Nikkei was nearly steady overnight as traders were reluctant to take a major position ahead of the weekend and the U.S. May unemployment report due out this morning. A modest rebound in high-tech stocks, which have taken a beating in recent days, tempered some of the overnight losses. Nevertheless, the Nikkei posted a second close below the 38% retracement level of this spring's rally that crosses at 13,363. This week's breakout has opened the door for a possible test of the 50% retracement level crossing at 12,995 later this year. Momentum indicators remain bearish signaling that additional weakness near-term is possible. The Nikkei closed down 0.30 points to 13,261.84. INTEREST RATES September bonds were slightly higher overnight as it extended Thursday's short covering gains. However, trading was subdued ahead of the release of May's unemployment report later this morning. Momentum indicators are turning bullish following Thursday's rally signaling that sideways to higher prices into early- June are possible. However, it will take multiple closes above this spring's downtrend line crossing near 100-00 before a bottom can be confirmed. The German bond market or Bunds were higher overnight following the release of the euro-zone retail sales report that showed overall sales are up 1.6% on the year. Additional support came from light short covering ahead of the release of the U.S. non-farm payroll and the National Association of Purchasing Management data due to be released later this morning. The June Bunds were last up 0.42 at 106.47. Japanese government bond markets declined slightly overnight due to light profit taking ahead of the weekend. The lead June 10-year JGB futures closed at 140.52 yen, down 0.07 while the yield on the benchmark No. 231 June 10-year cash bond stood at 1.245%, up 0.005 as of 1515 JT. The ENERGY MARKETS were mostly lower in overnight trading with the exception of unleaded gas. Trading was rather subdued after Thursday's wild price action. The markets are looking ahead to next week's OPEC meeting in Vienna where they will decide whether or not to raise crude oil output or keep it unchanged. Their decision will depend on Iraq's implementation of its threats to stop oil exports in case the U.N. Security Council adopts the so-called "smart sanctions". July crude oil was lower overnight as it is working on a possible inside day. July is challenging the 38% retracement level of this year's rally crossing at 28.26. Multiple closes below this support level and last week's low at 28.10 would open the door for a larger-degree decline ahead of next week's OPEC meeting. Momentum indicators are bearish signaling that sideways to lower prices are possible. July heating oil was lower overnight as it is working on a possible inside day. A second close below this spring's uptrend line crossing near 77.60 would confirm a top and trend change has taken place. 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 slightly higher due to light short covering overnight following Thursday's high-range close. A higher close during the day session would increase the odds that Thursday's spike below May's reaction low crossing at 91.20 might have marked a double bottom. Momentum indicators remain bearish signaling that additional weakness into early-June is possible. July Henry Hub natural gas was lower overnight following Thursday's downside reversal and is below last October's low crossing at 3.86. Multiple closes below this week's low crossing at 3.67 would open the door for a possible test of fib support crossing at 3.64 later this month. Ongoing seasonal weakness and the replenishing of natural gas inventory supplies is expected to keep downside pressure on the natural gas market into early-summer. The daily ADX (a trend-following indicator) remains in a bearish modes signaling that additional weakness near-term is possible. CURRENCIES The September Euro is working on a possible inside day but was slightly lower overnight following Thursday's breakout into new lows for the year. If the decline continues, a test of last October's lows crossing at 83.77 is possible later this month. 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 modestly higher overnight due to light short covering as it consolidated some of Thursday's losses. A higher close during the day session would increase the odds that Thursday's decline was only a minor setback leaving the door open for additional short covering off last week's low. Momentum indicators are turning neutral to bullish, which suggests that sideways to higher prices into early-June are possible. If the rebound off last week's low resumes, trendline resistance crossing near 1.4290 is September's next target. The September Swiss Franc opened lower in overnight trading following Thursday's breakout into new contract lows. The recent breakout below last October's low crossing at .5643 has opening the door for a test of weekly support crossing at .5488 later this month. The ADX (a trend-following indicator) has entered a bearish trend mode signaling that additional weakness during June is possible. The September Canadian Dollar was higher overnight thereby confirming Thursday's upside reversal. The late-week rebound has set the stage for a test of May's high crossing at .6541. Multiple closes above this resistance level are needed to renew this spring's rally. Momentum indicators have turned bullish signaling that sideways to higher prices during the first half of June are possible. The September Japanese Yen was higher overnight as it extended Thursday's rally, which confirmed an upside breakout of this spring's trading range. If this spring's rally continues, minor resistance crossing at .8702 is a potential target later this month. The daily ADX (a trend-following indicator) has entered a bullish trend mode signaling that additional gains near-term are possible. PRECIOUS METALS August comex gold was higher overnight due to light short covering following Thursday's breakout below April's uptrend line crossing near 267.50. This week's closes below the uptrend line have confirmed a breakout and 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 slightly higher overnight due to light short covering as it consolidates some of its losses of the past four trading sessions. Follow-through short covering during the day session is possible as short traders bank some of this week's profits ahead of the weekend. Nevertheless, 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 extending this week's decline. However, Thursday's mid-range close leaves the door open for two- sided trading on Friday as a short covering bounce ahead of the weekend is possible. If this week's decline continues, a test of May's low crossing at 74.75 is possible later this month. 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, which was delayed due to the Memorial Day holiday on Monday. Pre-report estimates range from 800,000 to 1,000,000 metric tonnes. Thursday's rally was triggered by end-of-the-month short covering and rising concerns over cool/wet conditions across the western Corn Belt, which has slowed early crop development and has forced some producers to replant portions of the crop that have been drowned out. Thursday's high tested May's downtrend line crossing at 1.93 1/4. Multiple closes above this resistance level would signal that a short-term low has likely been posted. Also a higher close on Friday would increase the odds that the recent breakout below weekly support crossing at 1.91 1/2 might have marked a bear trap. Early calls are for July corn to open steady to 3/4 of a cent higher this morning. July wheat was higher in overnight trading due to rising concerns over potential disease problems with the hard red winter wheat crop in Kansas. This week's closes above broken support crossing at 2.65 have tempered the near-term bearish outlook in the market while opening the door for a possible test of May's downtrend line crossing near 2.72 later this month. This morning's export sales report is not expected to show a significant increase in export demand, which has been less than stellar all year. Pre-report sales estimates range from 350,000 to 450,000 metric tonnes. Early calls are for July wheat to open 1 to 2 cents higher this morning. SOYBEAN COMPEX July soybeans were higher in overnight trading due to spillover short covering from Thursday's strong rally. Rising concerns over cool/wet weather across the heart of the U.S. Soybean Belt, which is causing emergence problems along with delayed planting triggered Thursday's rally. Additional support comes from demand, which remains strong and should force the USDA to raise this years export projection in the June supply/demand report. Multiple closes above recent highs crossing at 4.53 1/2 would confirm an upside breakout of this spring's trading range while opening the door for a possible test of March's high crossing at 4.77 3/4 later this month. Pre-report estimates for this morning's export sales report range from 200,000 to 300,000 metric tonnes. Early calls are for July soybeans to open steady to 2 to 3 cents higher this morning. July soybean meal was higher overnight due to follow-through short covering from Thursday's strong rebound. Thursday's close above broken trendline support has tempered the near-term bearish outlook in the market. Closes above last Friday's high crossing at 168 would renew this spring's rally making the 62% retracement level of this winter's decline crossing at 169.40 July's next target. Pre-report sales estimates range from 100,000 to 150,000 metric tonnes. Early calls are for July soybean meal to open 20 to 40-cents higher this morning. LIVESTOCK August hogs closed higher for the third day in a row on Thursday and above the 62% retracement level of this spring's decline crossing at 63.40. While a setback is possible on Friday due to light profit taking ahead of the weekend, this week's rally has opened the door for a possible test of April's gap crossing at 64.90 later this year. Momentum indicators have turned bullish signaling that sideways to higher prices into early-June are possible. August cattle gapped up and closed above the 75% retracement level of this year's decline crossing at 73.83 on Thursday. Today's rally renewed May's advance and set the stage for a test of January's high crossing at 75.00 later this spring. Expectations for steady to $1.00 higher cash trades this week triggered today's rally. Momentum indicators are bullish but have become overbought warning traders to use caution as a top may be near. FOOD & FIBER July coffee plunged below April's low crossing at 58.80 on Thursday thereby renewing this year's downtrend. Today's move to new lows opened the door for a test of long-term support crossing at 51.70 later this year. Moderating temps across Brazil's coffee growing region along with abundant supplies by North American roasters and huge exchange stocks continue to weigh on coffee prices. July cocoa closed lower on Thursday and below trading range support crossing at 955. Session lows fell just short of testing the 62% retracement level of this winter's rally crossing at 929. I would not be surprised to see a short covering bounce on Friday that could lead to a test of broken support at 955. However, momentum indicators remain bearish signaling that additional weakness into early-June is possible. If the decline continues, the 75% retracement level at 862 is July's next target. July sugar posted an inside day with a lower close as it tried to consolidate some of this week's losses. However, the door to lower prices remains open following Tuesday's trendline breakout. While another day or two of consolidation is possible, the door is open for additional weakness into early-June with 832 then 808 being possible targets. July cotton closed slightly higher on Thursday as it continues to consolidate above psychological support crossing at 40-cents. Talk of lost cotton production in west Texas provided minor support. However, beneficial rain farther south in west Texas tempered gains. The Delta and Southeast are expected to see more rain next week with most of the U.S. cotton crop in good shape. 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