Cannon Trading Futures Blog: Daily Support and Resistance Levels

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• The European stock markets are closed today for the Easter Monday holiday. The Asian and Pacific markets that were open today put in a strong showing, with the Nikkei index closing +1.48%, China's Shanghai and Shenzhen 300 closing +2.23%, and South Korea closing +1.16%. The Asian stock markets were boosted by optimism about the US economy after last Friday's stronger than expected US unemployment report.

• The key events on this week's US economic calendar include Wednesday's FOMC meeting minutes, Thursday's March import price report expected +0.8%), and Friday's three reports which include the Feb trade deficit report (expected -$60 bln vs -$59.1 bln in Jan), March PPI report (expected +0.7% overall and +0.2% core), and early-April US consumer confidence report (expected -0.9 to 87.5). Various Fed governors and regional Fed presidents have a heavy speaking schedule this week. Fed Chairman Bernanke is scheduled to speak on Wednesday in New York on market discipline and regulation. The Treasury on Thursday will sell $6 billion in 10-year TIPS notes. Q1 earnings season kicks off this week with companies such as Alcoa reporting on Tuesday (consensus 76 cents) and GE reporting on Friday (consensus 44 cents).

• US unemployment report stronger than expected - US March unemployment report is much stronger than expected – Last Friday's March unemployment report was much stronger than market expectations. March payrolls rose +180,000 versus market expectations of +130,000. Feb payrolls were revised higher by 16,000 to +113,000 from +97,000. Moreover, the March unemployment rate fell -0.1 point to 4.4% versus expectations for a +0.1 point rise to 4.6%. The March unemployment rate of 4.4% matched last October's 5-3/4 year low and indicated that the US labor market remains tight, with potential wage inflation risks. Last Friday's Feb average hourly earnings report of +4.0% was down from Feb's +4.1% and was in line with market expectations, but was still only mildly below December's 8-1/2 year high of +4.3%. The stronger labor market surprised the market and suggested that consumer and business confidence remains generally strong.

• Fed policy - The back-month federal funds futures contracts rose sharply on last Friday's unemployment report, with the March 2008 fed funds futures contract rising 15 bp to 4.89% from 4.74% last Thursday. The stock market was closed last Friday for the Good Friday holiday. In the wake of the March unemployment report, the market is now discounting virtually no chance of a 25 bp easing at the next FOMC meeting on May 9 and only a small 8% chance of an easing at the following meeting on June 27-28. The market now isn't fully discounting a 25 bp easing until December 11, and is only discounting the odds at 50-50 for an overall 50 bp easing to 4.75% by March 2008.