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DAW Trading specializes in commodity, futures and options clearing and execution. More importantly we specialize in you, the client! That is why we give you the power of choice with 7 different trading platforms. Test-drive our proprietary platform, DAW Edge, today.

Long-term technical outlook: $SPX is still in an extremely bullish market pattern according to point and figure technical analysis. Current pattern calls for a price objective of about 1490 for the index, given the market does not make a reversal back under 1365, with strong volume.

If you cannot view the S&P 500 Cash Chart ($SPX), go here.

Short-term technical outlook: Neutral to bullish. Traders have had success selling the S&P’s into rallies; especially intraday bursts that come on light volume. But that is about to change. Wedge formation on daily chart has become more prolific and appears vulnerable for breakout to upside.

If you cannot view the S&P 500 Futures Chart, go here.

Fundamental outlook: Bank stocks have undeniably been the benefactor from the Fed’s rate cuts. $BANK has had a tremendous recovery off the lows set last month. I see financials, along with new tech, being the leaders as we head into what I expect will be good summer for investors. Banks could get another lift on March 18th when the Fed may again cut rates. 

If you cannot view the Bank Stocks Index Chart ($BANK), go here.

Semiconductor Index , ($SOX), has continued to take a pounding thus far this year. Recently a string of poor earnings and downgrades from some major brokers has set the index back to levels not seen since 2004. Analog Devices is trying to provide some leadership for tech. The chip maker reported on February 21st better than expected profits, thanks largely due to the sale of two smaller businesses they owned. Spotlight now turns to National Semiconductors who has their earnings conference call scheduled for March 6th. Overall, the $SOX appears to be forming a rising bottoms pattern and could rally back somewhere close to trend line at 420.

If you cannot view the Semiconductor Index Chart, go here.

CRB Index: Commodity prices have been a major drag on stocks. CBOT grains have seen record prices across the board this winter. High demand for alternative fuels has been the driving force behind the rally. But one has to wonder the usefulness of using food for fuel with grain prices now sky high.

Wheat has really been the headliner. Minneapolis wheat futures extended well above $20 this winter due to supplies and transportation troubles. The USDA just recently raised export estimates for 2008 leading to another series of limit-up days for wheat. Farmers will make their intentions known to the USDA which will then release the data for the public on March 31st. The report is likely to show a big increase from last year in acreage for both corn and wheat.

If you cannot view the CRB Index Chart, go here.

Crude oil continues to cut into corporate profits, especially now that crude futures are trading near the $100 level with comfort. A few ‘big name’ energy traders have publicly predicted lower oil prices based on worldwide recession concerns, but that has not helped thus far erase the bullish presented by growing demand from China and India, Venezuela’s announcement to cut off oil shipments to Exxon, and the still shaky geopolitical conditions in the Middle East. The Oil Stock Index ($OIX) recently broke-out above a 45-degree trend line coming off a double top established at the 905 level. The double top highs now seem like the target for the index.

If you cannot view the Oil Index Chart ($OIX), go here.

‘Recession’ has been a popular term thrown out by many Wall Street analysts when predicting the market’s future. Weak economic data tends to support their theories, however, the economic stimulus package recently approved by Congress added along with an environment where the Fed is aggressively easing interest rates and the conditions are closer to ‘stagflation’; a condition I have been warning about for almost a year.

If you cannot view the Real GDP Graph, go here.

‘Stagflation’ brings slow growth and rising inflation readings. The index that tracks ‘stagflation’ is called the "Misery Index". Started back in the 1960’s, the index is simply the sum of the inflation rate and the unemployment rate. In early 1980’s, during President Carter’s administration, the index went soaring to all-time highs and reached a high of 21.98. Although the index is substantially off from record highs, the index currently is at about 9.75, it has increased for six straight months, an indication that ‘stagflation’ is place. In order to have a recession, the economy would need to have negative growth for two straight quarters. That has not taken place. It has not been since 2001 when the American economy has had a quarter with negative growth; and one needs no reminder of the events that year that led to this financial data.

It appears that the worst of the housing crisis is behind the market and already priced in. Recently, Standard and Poor’s took bond insurers MBIA and AMBAC off negative credit watch; meaning the companies will be able to keep their triple A credit status and not default on bonds issued. This took a tremendous burden off the minds of investors who worried about the companies’ future and the future of muni bond insurers in general. This does not necessarily mean that these companies are out of the woods and will return to business as usual; not with the likes of Warren Buffet taking up the business.

While some have offered the opinion that the U.S. slowdown will bring down other parts of the world, but that has not been the case so far. Brazil, China, India and Russia are prime example of countries booming right now. According to the First Deputy Prime Minister of Russia Dmitry Medvedev, Russian GDP was 8.1% for 2007. Estimates for 2008 are somewhere close to 8.8-8.9%.

Bottom line: Traders should continue labors to catch short-range movement in prices. Being flexible with short-term trades will be vital to any success in 2008 for traders. Sign up today for a free trial to my daily recommendation and stay up to speed with the market on a daily basis.

There is substantial risk of loss in futures trading; therefore only genuine risk funds should be used for such trading. Futures and options trading are not suitable investments for all individuals. Past performance is not necessarily indicative of future results.

Information contained above has been obtained from sources believed to be reliable, however, no assurance to its accuracy is made. Nothing contained herein shall be construed as an offer to buy or sell commodity futures or options on commodity futures. Opinions expressed herein are the opinions of the author only and not the opinion of the firm the author may be affiliated or associated with.

Eric Reinholtz is a Senior Market Strategist with DAW Trading. Mr. Reinholtz relies heavily on his expertise in charting markets for his exact entry and exit scenarios. Mr. Reinholtz’s focus targets very realistic money-making strategies more so than cryptic buy & sell signals that can get flashy publicity, but have little to do with actual portfolio alignment. He believes a professional way of approaching the markets should emphasize scaling-in during serious purges (ideally after bases are built), and scaling-out gradually into strength (ideally into extended parabolic moves), happily not worrying about "milking" the last percent out of a move.

At the Leading Edge of Service and Technology for all Levels of Futures Trading

DAW Trading specializes in commodity, futures and options clearing and execution. More importantly we specialize in you, the client! That is why we give you the power of choice with 7 different trading platforms. Test-drive our proprietary platform, DAW Edge, today.