Cannon Trading Futures Blog: Daily Support and Resistance Levels

• Dec S&Ps this morning are trading -1.70 points due to lower T-note prices (-3.5 ticks) and higher crude oil prices (+57 cents). The US stock market last Friday closed mildly lower (Dow -0.38%, S&P 500 -0.37%, Nasdaq Composite -0.23%). Bearish factors last Friday center on long liquidation pressure and concern about the weaker dollar. Bullish factors included the slightly higher close in T-note prices and the sharp 93-cent sell-off in crude oil prices last Wednesday.

• European stocks today are trading moderately lower (Stoxx -0.69%, FTSE -0.51%) as the strong euro dampens revenue prospects for Europe's exporters and as the market reacts to higher crude oil prices today. The Nikkei index today closed +0.96% as the Japanese stock market was helped by the dovish comment by BOJ chief Fukui and was able to shake off concerns about the recent rally in the yen against the dollar (which will hurt Japanese exports to the US).

• Wal-Mart (WMT) is down -0.5% this morning in European trading after reporting over the weekend that Nov same-store sales fell -0.1%, which was the worst showing in more than a decade. The market was also concerned about the initial Thanksigiving holiday shopping reports which suggested that consumers are focusing on bargains.

• ExxonMobil (XOM) is up +0.3% this morning in European trading after this morning's sharp rally in oil prices.

• GM is trading slightly lower by -0.1% in European trading this morning after a report in the Wall Street Journal citing research group IRN Inc as predicting that 2007 US vehicle sales will drop to the lowest level since 1998.

• Lowe's may see some support today from news that Bank of America raised its rating on the stock to "buy" from "neutral."

• Avon Products (AVP) may see some strength today after a favorable weekend article in Barron's which cited a Citigroup analyst as saying that Avon's stock may reach $37 in improving margins, although there are still concerns about sales person recruiting problems because of proposed FTC rules. Avon on Friday closed +0.13 at $33.28.

• This week’s US economic calendar is very busy. Tuesday brings comments by Treasury Secretary Paulson which could affect the dollar, Oct durable goods (expected -5.0%), the Conference Board’s Nov US consumer confidence index (expected +0.6 to 106.0), Oct existing home sales (expected -0.6%), comments by Fed Chairman Bernanke on the US economy, and the 2-year T-note auction. Wednesday brings the Q3 GDP revision (expected revised upward to +1.8% from +1.6%), Oct new home sales (expected -2.3%), the 5-year T-note auction, and the Fed’s Beige Book report ahead of the Dec 12 FOMC meeting. Thursday brings the Oct core PCE deflator (expected +2.3% vs +2.4% in Sep), and the Chicago Fed Purchasing Managers index (expected +0.9 to 54.4). Friday brings comments by Fed Chairman Bernanke, the Nov ISM manufacturing index (expected +0.6 to 51.8), and Nov US auto sales (expected 16.4 mln units vs 16.2 mln units in Oct).

• Fed policy - Expectations for Fed policy eased slightly last week after the weaker than expected Univ of Michigan US consumer confidence report of 0.2 to 92.1 (vs expectations of +1.0 to 93.3). The market is currently discounting no chance of a rate change at the next two FOMC meetings on Dec 12 and Jan 30-31. The market is discounting a 36% chance of a 25 bp rate cut to 5.00% at the following meeting on March 20-21 and is fully discounting that rate cut to 5.00% by June. The market is discounting a 54% chance of a further 25 bp rate cut to 4.75% by September.

• Dec T-note prices this morning are trading -3.5 ticks on news of strong retailer sales over the Thanksgiving weekend. T-notes are also being hurt by the weak dollar and concern that it may dampen foreign demand at this week's 2-year and 5-year T-note auctions. T-note prices last Friday closed slightly higher by 2.5 ticks on upward momentum from last week's rally which was prompted by weak US economic data. The main bearish factor last Friday was the sharp sell-off in the US dollar which undercuts the value of US-denominated securities for foreign investors.

• The dollar this morning is mixed with the dollar/yen up +0.15 yen and the euro/dollar up +0.23 cents. The dollar today is seeing some short-covering. The yen today was undercut by BOJ chief Fukui's dovish comments. The dollar late last week fell sharply on weaker US interest rate differentials and concern about whether China will step up its dollar diversification program.

• Jan crude oil prices this morning are trading +57 cents. The main bullish factor this morning is a London newspaper report citing Saudi Oil Minister Ali al-Naimi as saying that OPEC at its December 14 meeting may implement another production cut if oil prices fail to stabilize on the Oct 20 cut. The Nymex was closed last Friday during the Thanksgiving holiday. Jan crude oil prices last Wednesday fell sharply by -93 cents due to Wedesday's DOE report which showed a sharp 5.2 mln bbl increase in crude oil inventories. Product inventories were mixed with a 1.4 mln bbl rise in gasoline inventories and a 1.2 mln bbl decline in distillate inventories. Crude oil prices also reacted negatively on Wednesday to warm weather crossing the midwestern and northeastern US.

Earnings reports (confirmed releases for companies with market caps above $1 bln listed by mkt cap): DCI-Donaldson (IBES consensus earnings estimate: $0.425 per share). OHI-Omega Healthcare (.170)