As the emini S&P futures contract (basis June) bottomed on 2/5/10, the market has rallied for the last several weeks. We believe the market may be becoming a bit overbought. We are not looking for a major correction in the market, but more of a minor retracement.

Initial support is found in the 1142 to 1139 range. If this is broken, the next level of support is found in the 1137 to 1134 range. If 1136.50 is taken out, there is potential the market could reach 1128 to 1122.

Initial resistance is found at 1149 to 1152. The next level of resistance is 1154 to 1157. There is very strong resistance at 1160.

We received a buy signal on crude (basis April) on 2/16/10. After crude broke above the $80.00 to $80.40 range last week, we see the next level of resistance at $81.90 to $82.50. If that level is broken, the next resistance level is $82.70 to $83.00.

Our first target of $80 was hit. Our next target is $82.70 to $84.50. It is possible we could see $88 to $92.

Nearby support for the market is found at $81.40 to $81. If that level is broken, the next support level is $80.30 to $80.00.

As we wrote about on 3/4/10, the equity markets were waiting for the release of the February jobs report. There was a general sense last week that the unemployment rate and jobs growth could be a higher rate and increased negative jobs growth due to weather related issues.

The market was expecting 9.8% unemployment and a job loss of 50,000 to 150,000. If the data reported no more than 100k jobs lost, the market probably would not have moved much. If the data was greater than 100k jobs lost, than there was a higher probability of a sell off. The released data showed unemployment stable at 9.7% and only 36,000 jobs lost instead of the expected 50k to 150k. The data also reported temporary employment and hours worked increased.

The released data could be perceived as a relief for the markets of an economy in transition from recession to recovery is finally beginning to show stronger legs. However the U-6 rate of unemployment did increase from 16.5% to 16.8%.

We now believe the resistance level of 1100 to 1108 (basis March) has now become a strong support level. There is a high probability the market will retest the highs made on 1/15/10 of 1147.25 very soon. As we noted on 3/4/10, our next price goal is 1145 to 1168. Major resistance in the 1220 area.

In the immediate future, the next level of resistance is 1137 to 1143. If this level is broken, the next level of resistance is 1146 to 1150.

The next leg of support for the market would be 1132 to 1128. If the selling persists the next level of support would be 1125 to 1120.

In the recent move, the S&P emini futures (basis March) bottomed at 1040.75 on 2/5/10. On 2/11/10 we received a buy signal and are still holding the buy signal. Since 2/18/10 the market hit a major resistance of 1100 to 1108 and could not close above 1106 until 3/1/10 and reached a high of 1125 on 3/3/10.

The question: Has the previous resistance level now become the new support level? The markets are waiting for today's initial job claims and the Feb Unemployment Rate to be released tomorrow.

If the market does hold this area the next resistance level is 1122 to 1124. The next resistance level after that is 1127 to 1129. Our next goal would be 1145 to 1168. This would test the highs set on 1/19/10. If the market continues on its next leg upward, 1220 should be a very major area or resistance.

Support can be found at 1117 to 1114. If taken out, the next support level would be 1109 to 1104. If 1101 is taken out, the market could see a correction.

On 2/11/10 we received a signal to go long the emini DJ futures (basis March). Since 2/18/10 the market has moved sideways as it reached a major resistance point. Our initial goal for this move was 10338 to 10429. At this time the high of the move has been 10434.

2009 ended the year at 10387. Now that the market has returned from the 2010 low of 9791 on 2/5/10, the market is struggling to decide if it should move higher. As some of the recent economic reports have disappointed expectations, its just one more reason for the market to struggle in its decision of direction.

The market will be looking next to the initial jobless claims and durable goods orders for an idea of direction.

The market needs to break above 10380 for the next up leg to be possible. Then our next goal would be 10520 to 10570.

The first level of resistance is 10370 to 10400. The next major resistance level is 10420 to 10450.

The first level of support is 10290 to 10258. The next level of support is 10205 to 10170.

After several weeks of the grain markets falling, the past few days we began to receive buy signals in the corn, soybeans and wheat futures markets (basis March).

On 1/8/10 we received a sell signal in soybeans and followed by sell signals in corn and wheat on 1/12/10.

On 2/8/10 we received buy signals in soybeans and corn. This was followed with a buy signal in wheat on 2/10/10.

During this period corn fell about $0.55, soybeans fell $1.19 and wheat fell $0.71. The rallying dollar has been a driving force on the falling grain prices. As the U.S. dollar index had a breakout move on 1/19/10. We are now looking at a possible sell signal in the dollar index futures at least in the short term. If the dollar should continue to rally, it could cap the grains from moving higher.

Corn (basis March) has an initial resistance at $3.64 to $3.74. If the market should move higher we have a target of the move to $3.96 to $4.12. Corn has an initial support of $3.60 to $3.53.

Soybeans (basis March) has an initial resistance of $9.49 to $9.60. If the market should move higher we have a target of the move to $9.75 to $9.90. And a secondary target of $10.30 to $10.58. Soybeans have an initial support of $9.32 to $9.17.

Wheat (basis March) has an initial resistance of $5.05 to $5.30. If the market breaks above this level we have a target of the move to $5.42 to $5.48. Wheat has an initial support of $4.94 to $4.77.

In recent comments we have been calling for a major support area in the emini DJ futures (basis March) in the 9900 to 9800 area.  On 2/4/10 the market reached a low of 9955. On 2/5/10 the market reached a low of 9791. 9900 to 9800 is a major support range.

If the market continues to sell off the next support area is 9780 to 9680 and potentially could push towards 9520 to 9350. If the market should begin to move higher the next resistance level is 9945 to 9970.

As noted in earlier comments, we began to receive sell signals in the equity markets on 1/19/10 and a confirmation of the signal on 1/20/10. In the past several weeks we discussed the emini S&P futures contract (basis March) to find support in the 1059 to 1040 area.

On 2/4/10 the market reached a low of 1059.25. On 2/5/10 the market reached a low of 1040.75. The jobs report released on 2/5/10 was a combination of positive and negative information, thus making the report complicated to understand and causing increased volatility on Friday.

The equity and forex markets have recently taken a stronger focus on the increased sovereign debt issues of Portugal, Ireland, Italy, Greece and Spain (P.I.I.G.S.), especially Greece and the potential for contagion to other European countries and emerging markets. The global capital markets have reacted by selling stocks and buying the U.S. dollar.

The 1059 to 1040 area is a major support area. The market could move sideways in this area if there is no further negative news. Even with some positive news, the market will probably be at least initially cautious of taking the next leg upward.

If the market doesn’t hold the recent lows, then the next support area is 1039 to 1030. The next major support level is 960 to 945. 1000 in the S&P is a psychological number, if the market falls below 1000 it would probably be enough of a psychological shock to shake more of the longs out of the market and a strong probability of building the next base assuming we don’t see a double dipping recession.

If the market should begin to move higher, the next resistance level is 1075 to 1078.

Wed night we came very close to triggering longer term buy signals in the emini S&P futures, DJ futures and NASDAQ futures (basis March). But all three markets turned south overnight. Once the surprising increase in initial claims were released Thursday morning, the markets kept pushing lower and tested the lows of last week and then broke below those lows. The spot equity markets fell by -2.6% to -3.11%.

On 2/3/10 we wrote the markets may be nearing a trigger point for the next leg upward, but we also stated the markets were looking a little overbought for the short term and could correct down to the major support level.

Since 1/24/10 we have talked about the emini S&P March contract maintaining a major support level at 1059 to 1040. On 1/29/10 the market reached a low of 1066.50. On 2/4/10 the market reached a low of 1059.25. The market has not seen this price level since 11/6/09.

If the March emini S&P does not hold the 1040 area, then the next major support would be around 950. This price level has not been seen since the end of July.

In the emini DJ March contract we have been calling for the market to reach the major support level of 9900 to 9800. On 2/4/09 the DJ emini March futures reached a low of 9955. If 9800 is broken we could see 9680 to 9500 as the next level.

This week has experienced a heightened expectation for economic reports, especially the Jan unemployment report set for release on 2/5/10. Many economists are expecting at least a flat job growth and as much as a 15,000 job growth for Jan. The range of estimates has run from -40k jobs loss to +75k jobs growth. However many traders are beginning to think the report will show a surprising job loss.

Regarding the U-3 unemployment rate, the market is expecting 10% to 10.1% with a range of 9.9% to 10.2%. If confidence of job seekers increases it would not be surprising to see the U-3 rate increase to 10.2% as many in the labor force move from the U-6 definition of unemployment to the U-3 definition. if the U-6 increases or decreases will be the real key to confidence of job seekers and where unemployment may be heading, not the U-3 definition.

However its not just jobs that are on the mind of traders, its also increasing worries about Europe's sovereign debt default as credit default markets are increasing, especially Greece, Portugal and Spain. Many believe the worries of debt default could expand to Hungary and Poland. Recent days have experienced a major fall in the Euro.

If the dollar continues to rally that should also put continued pressure on commodities. If commodities fall, so should the A$ and C$.

As this article is being written at midnight Chicago time, in the overnight markets Asian and Australian equity markets are down nearly -3%.

Today the futures equity markets hit the major support levels we have been discussing for  a while as you will see in our past writings. Everyone is focused on tomorrow's jobs report. Economists are looking for flat to about 15,000 jobs growth. Many traders are beginning to think we could see a surprising job loss.

Check back later for Part 2