The Financials Pit Review: By PitGuru Kalvin O’Brian

U.S. Economy

The S&P 500 has pulled back below the 1400 mark but with key reports due out this week a bigger move could be coming. Friday’s unemployment report will likely be the catalyst. Last week the US Commerce Department announced on Friday that personal incomes were up .2% in April along with consumer spending increasing .2% - in line with expectations. There was a revision to March personal incomes increasing the number from .3% to .4%. Other reports including the GDP and new home sales were not as dismal as they could have been. A stronger dollar and a sell off in crude oil if sustained through this week will help give this market support. Overall I think that we will correct the movement we have seen today and be trading higher by week’s end. Continue to keep close stops as this market has shown that it can be very choppy.

Currencies

The tides appear to be turning according to State Street Corp. and Bank of New York Mellon Corp; the largest money managers for institutions, more dollars were bought then sold this year by institutional investors. This could be an bullish indicator - according to State Street the dollar gained in 71% of the quarters over the past 10 years when they were net buyers. After hitting a record low vs. the euro on April 22 the dollar has rallied 3%. I believe the statistics; the dollar should follow the percentages according to State Street and continue to climb.

Real GDP was down .1% in the first quarter according to Statistics Canada. Even though this market was up 1.7% from a year ago the numbers were weaker than expectations. In fact this was the weakest performance in almost half a decade. The economy is shrinking in this northern nation and cannot avoid a slowdown in the US affecting its exports. Consumer confidence is also slipping locking in the impression that a recession could be looming. Look for crude and gold to try and help the Canadian, but I remain short. We will be below the $1 by week’s end.

Although the yen has been amazingly strong at times the numbers have not been great for April. The unemployment rate in Japan increased from 3.8% to 4.0% in April. Household spending also dropped 2.7% in April from a year ago. Lower numbers also continued with consumer prices also down .1% in April, but up .8% from a year ago according to Japan’s Statistics Bureau. Despite that there could be some room short term to play a pop up to around the 98 area.

The Energies Pit Review: By PitGuru Joe Marshall

The trend for July crude oil is up, but with recent action looking a little shaky. Wednesday’s reversal from a very bullish inventory number set the tone for the next week or so and that tone points lower. The 123.50 area is an important trend line and if you break last week’s low of 125.96 we could see it quickly. Rallies bumping up against 132 should turn back down. Right now this market is on a level playing field with relative strength indicators running neutral. The feeling here is we will test those support numbers we talked about; rallies should be sold.

The trend for July natural gas is sideways-up. Friday’s bounce off of the 1150 number is not really enough to get excited about. This market had plenty of opportunities last week to blow off on the upside, but could not sustain action above 12 dollars long enough to get the traction. Rallies should stall against 12-1220 area, but the down side seems limited. Sounds like a temporary trading range, between 1125 and 1225.

The trend for July RBOB gasoline is up. Support in the 328-330 area is proving a tough nut to crack, but rest assured it will be tested again this week. Rallies up against 345 should turn back down. Look for continued choppy trade. One or two days of action contained by 340 should give you a test of 325.

The trend for July heating oil is sideways-up, but with recent action looking weak. This market is 35 cents off of the high made just five sessions ago. I guess we know where the resistance is. Friday’s close of 366.67 - just below last Thursday’s low of 367.44 - is short term negative.