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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: 1:00 PM ET. Philadelphia Fed Bank President Anthony Santomero speaks to Risk Management Association on U.S. economy in Philadelphia. 4:15 PM ET. Commercial/Industrial loans. KEY HEADLINES: German Industrial production falls again and below forecasts. Sterling hits a new low as the Labour victory brings EMU to fore. UK's Blair to open second term with Cabinet reshuffle. Eurostat: Euro-zone 1st estimate Q1 GDP up 0.5% verses Q4 2000. Takenaka unsure if Japan will hit 1.2% target growth in 2000-01. Japan's May domestic wholesale price index down 0.6% on the year. ECB president tells newspaper he wants to boost bank's credibility. Italy Treasury to cut 2001 GDP growth target to 2.4% says report. Frances's Schneider shares fall after raising bid for rival Legrand. The STOCK INDEXES & MARKETS The NASDAQ and S&P 500 were higher overnight as they extend Thursday's gains. Momentum indicators remain bullish signaling that the rebound off last week's low is likely to continue into mid-June. Closes above May's highs would renew this spring's rallies. Until then one should view present rallies as corrective bounces. Meanwhile, the Dow posted an upside reversal on Thursday following Wednesday's corrective break. Momentum indicators are bullish signaling that additional gains during June are possible. European markets were higher in overnight trading despite a decline in Germany's decline in industrial production and the continued fall in sterling. Modest support due to gains on Wall Street led by chip- related stocks along with a reassuring report from Intel Corp helped underpin European stock markets overnight. The UK FTSE-100 was up 18.90 points at 5967.20 while the German DAX-30 was up 70.70 points at 6254.95 as of 11:00 BST. The Nikkei closed higher overnight as high-technology stocks benefited from the Nasdaq's rally overnight and Intel Corp.'s positive performance update. Overnight gains confirmed Thursday's upside reversal as the Nikkei extended this week's rebound following a test of the 50% retracement level crossing at 12,995. Friday's gains have turned a number of oversold momentum indicators neutral to bullish signaling that a short-term bottom has likely been posted. The Nikkei closed up 152 points to 13,430. INTEREST RATES September bonds were slightly lower overnight due to spillover selling following Thursday's round of profit taking, which led to a key reversal down. Additional weakness during the day session would confirm Thursday's bearish reversal pattern thereby increasing the odds that a short-term top has likely been posted. Momentum indicators are bullish but poised to turn bearish with additional weakness. The German bond market or Bunds were lower overnight. Dealers and technical traders will be watching to see if the lower prices realized over the past two sessions are enough to draw real money investors into the markets. The risk in the market is still focused on the euro and there is enough uncertainty there to keep investors on the sidelines. The Sept. Bunds were last down 0.03 at 106.48. Japanese government bonds closed lower overnight as traders closed out their long positions ahead of the current lead June futures last trading day on Monday. Firmness in the Nikkei weighed on JGB futures. The ENERGY MARKETS were mostly higher in overnight trading due to short covering triggered by refinery snags caused by stormy weather in the U.S. Gulf. Additional support came from news that Exxon's Baytown, Texas 110,000 bpd catcracker shut down on Wednesday for repairs. July crude oil was higher overnight in narrow trading as it continues to consolidate above this year's uptrend line, which crosses near 27.10. Momentum indicators are bearish but oversold warning traders to use caution as a short-term bottom might be near. Closes above Monday's high crossing at 28.74 would temper the near-term bearish outlook in July crude. July heating oil was higher overnight as it is working on a potential inside day. July's inability to close below Wednesday's low, which now appears to have marked a double bottom sets the stage for a possible short covering bounce in the near future. Closes below Wednesday's low would set the stage for a test of May's reaction low crossing at 74.55. Momentum indicators are bearish but becoming oversold warning bears that a corrective bounce is possible. July unleaded gas was higher overnight due to light short covering as it continues to consolidate below broken trendline support. Momentum indicators are bearish but oversold hinging that a pause or corrective bounce is possible near-term. If the decline resumes, April's reaction low crossing at 85.40 is July's next target. July Henry Hub natural gas was lower overnight in narrow trading as it continues to consolidate above last week's low. Closes below this support level would renew this year's decline while opening the door for a possible test of the 62% retracement level of the 1999/2001 rally crossing at 3.64 later this month. Momentum indicators are turning bearish once again signaling that additional weakness is possible. CURRENCIES The September Euro is working on a possible inside day but was slightly lower overnight as it continues to extend this week's narrow trading range. Closes below 84.16 would renew this spring's decline. Momentum indicators are neutral to bearish thereby leaving the door open for additional weakness. It would take closes above this week's high crossing at 85.85 to temper the near-term bearish outlook in the euro. The September British Pound plunged to a new 15-year low overnight following the Labour Party's victory this week. This week's breakout below long-term chart support crossing at 139.52 has opened the door for a test of the February 1986 low at 136 later this spring. Momentum indicators are bearish signaling sideways to lower prices are possible near-term. The September Swiss Franc was lower overnight as it extends its decline following Wednesday's key reversal down. Closes into new lows would set the stage for a possible test of weekly chart support crossing at .5508 later this year. The ADX (a trend-following indicator) remains in a bearish mode signaling that additional weakness is still possible. The September Canadian Dollar was higher overnight as it is challenging the 62% retracement level of this year's decline crossing at .6573. Multiple closes above this resistance level would confirm a breakout thereby opening the door for a possible test of February's gap, which begins at .6600. Momentum indicators are bullish signaling that sideways to higher prices during the first half of June are possible. The September Japanese Yen turned lower overnight thereby ending Thursday's corrective bounce. With a short-term top now in place, the door is open for sideways to lower prices into mid-June as the September yen is resuming this spring's trading range. Stochastics and RSI have turned bearish signaling that additional weakness is likely. PRECIOUS METALS August comex gold was higher in overnight trading as it continues to extend the narrow trading range, which has formed around the 75% retracement level of the decline off May's high crossing at 267.20. Closes above 269.60 are needed to temper the near-term bearish outlook in August gold. If the decline resumes, the reaction low crossing at 263.20 is August's next target. Stochastics and RSI are bearish but oversold warning bears not to press their hand as a low may be near. July silver was slightly higher in narrow trading overnight as it consolidates above trading range support crossing at 4.31. Closes below this support level crossing at 4.31 would open the door for a possible test of weekly support crossing at 4.15 later this month. Momentum indicators are bearish signaling that additional weakness near-term is possible. July copper plunged to new contract lows overnight thereby renewing its decline off May's high and is challenging weekly support crossing at 74.10. Closes below this support level could lead to a test of weekly support crossing at 72.70 later this month. Momentum indicators are bearish signaling that sideways to lower prices are still possible. GRAINS July corn was lower overnight due to light profit taking following Thursday's low-range close. Uncertainties over extended weather forecast and ideas that it's too early to push the panic button despite declining crop conditions weighed on corn prices late Thursday and in the overnight trade. I would not be surprised to see additional profit taking during the day session, as traders are unlikely to press the long side of the market ahead of the weekend. Next Monday's crop conditions report will likely show another decline in ratings due to this week's cool/wet weather across the Midwest. It would take closes above Thursday's high at 2.01 1/2 to set the stage for a test of May's high crossing at 2.11 1/2 later this month. Early calls are for July corn to open a 1/2 to 1 cent lower this morning. July wheat was fractionally higher in overnight trading due to spillover support from Thursday's strong export sales and continued hot/dry conditions across China. Additional support came from wet conditions across portions of the Plains, which has slowed winter wheat harvest. Wednesday's test of the contract low at 2.58 1/2 may have also marked a double bottom. However, it will take closes above last Friday's high at 2.72 before this is confirmed. Stochastics and RSI are diverging and turning bullish hinting that a short-term bottom may be in place. I am looking for an inside day as traders are unlikely to take a major position ahead of the weekend. Early calls are for July wheat to open steady to 3/4 of a cent higher this morning. SOYBEAN COMPEX July soybeans were lower in overnight trading due to light profit taking following Thursday's steady close. Uncertainties over the extended weather forecasts for the Midwest leave the market vulnerable to additional profit taking during the day session. The cool/wet conditions that have dominated Midwest weather this week should be reflected in next Monday's planting progress report. At the same time, emergence concerns and slow crop development along with continued strong demand should continue to underpin both old and new-crop prices. Momentum indicators are bullish but nearing their respective overbought zones warning bulls to use caution. Early calls for July soybeans to open 2 to 2 3/4 cents lower this morning. July soybean meal was also lower overnight due to light profit taking following Thursday's spike above the 62% retracement level of this winter's decline crossing at 169.40. Additional weakness during the day session is needed to confirm Thursday's downside reversal, which would then increase the odds that a short-term top might have been posted. At the same time strong domestic and foreign demand along with a tight cash market will continue to underpin the meal market thereby limiting near-term downside risk. Early calls are for July soybean meal to open a $1.00 to $1.10 lower this morning. LIVESTOCK August hogs closed modestly higher on Thursday due to improving cutout values and spillover strength from bellies. Light fund and cash connected buying also underpinned today's rally. Today also marked the official start of the Goldman roll as they were selling July and buying August. If the rally resumes, April's high crossing at 65.95 is August's next target. Closes below last week's gap at 64.00 would strongly suggest that a short-term top has been posted. August cattle extended this week's decline closing lower for the fourth day in a row. However, a short covering bounce ahead of the close tempered some of today's losses leading to a mid-range close. A short covering bounce on Friday is possible as traders bank some of this week's short profits. Momentum indicators have turned bearish signaling sideways to lower prices into mid-June are possible. FOOD & FIBER July coffee closed lower on Thursday due to bearish short-term weather forecasts for Brazil's coffee growing region. July remains poised to test the late-May low crossing at 57.10. Closes below this support level would renew this year's decline. However, momentum indicators are oversold hinting that a short-term low is in place or near. Closes above 60.80 are needed to temper the near-term bearish outlook in the market. July cocoa closed into new lows for the week thereby confirming the recent breakout below this spring's trading range, which crosses at 955. Today's new low close for the month has renewed the decline off May's high while setting the stage for a test of fib support crossing at 862 later this month. July sugar closed lower on Thursday thereby confirming yesterday's key reversal down. Today's loss was enough to keep momentum indicators bearish, as the stage is set for a possible test of last week's low at 839. Closes below this support level would renew the decline off May's high and open the door for a test of fib support crossing at 832 then 808 later this month. July cotton closed lower on Thursday as it continues to consolidate above psychological support crossing at 40-cents. Closes above this year's downtrend line crossing near 43.95 are needed to confirm a bottom and trend change has taken place. Momentum indicators are neutral to bullish signaling that sideways to higher prices near-term are possible. _____________________________________________________________________ Legendary Trader Battles The Trend and Claims Victory _____________________________________________________________________ Dear Andrew: At last, a genuine market indicator that makes trading futures a whole lot easier and a ton more profitable . . . Now it can be yours! Over 30 years of trading experience is packed into this remarkable new video from the INO.com Learning Center . . . 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