Oil, which fell sharply last week to test support above $100, is rallying 1.6% to near the $105 p/barrel mark. Even natural gas futures are seeing a bid today as the front-month contract gains 1%.

Despite some usual signs of risk, currency markets are offering a muted reaction. EUR/USD is down 20 pips on the day to 1.3320, while USD/JPY has dropped 70 pips to 82.17.

In unusual options activity, there is interest in Carmax (KMX) April $34 calls, seeing large trading volume over the open interest. KMX is trading up 0.75%, while the April $34 calls are higher by 18%.

Click Pic for Video Recap

Crude hit an intraday high shortly after noon – hitting a high of $104.15 before dropping $1 to close trading at $103.12. Natural gas fell another 1.3% in trading to a fresh 10-year low of $2.1220.

Some seasonalities to keep in mind for April:

– First day of trading in April is up 14 of the past 17 years
– April is historically the best month for the DJIA, averaging 2% gain since 1950
– 30yr TSY bonds make seasonal lows towards the end of April
– EUR has weakened in April for three of the past four years

By Mark Meadows 

Crude futures are holding below resistance at $103.80, but in positive territory for the session. Natural gas futures, which hit a 10-year low yesterday, are relatively flat on the session.

Here are some breakdowns at the moment of rough estimates for quarterly performance:

DJIA: +8.1%
S&P 500: +12.1%
NASDAQ: +19.0%
Crude: 4.7%
Natural Gas: -28.2%

Relative to the US$, here is a breakdown of currency performance. As you can see, JPY was the only major currency to cede ground against US$ over the quarter:

NZD: +5.6%
CHF: +3.9%
EUR: +3.0%
GBP: +2.9%
CAD: +2.2%
AUD: +1.7%
JPY: -6.9%

With end of quarter trade this afternoon, we could see a barrage of orders coming through towards the end of the day, adding to intraday volatility and perhaps presenting some interesting trading opportunities.

Equity markets are bid in pre-market activity. S&P 500 futures are trading nearly 6 handles higher to 1,404, while DJIA futures gained 50 to 13,128. With the quarter ending today, we look at the 1,400 level in S&P futures as an indication of whether bullish sentiment will continue in April. RIMM shares, which initially fell 2% following a fourth quarter loss, are currently indicated to open 1% higher.

Oil and Natural Gas are both 0.5% higher to $103.60 and $2.1570. Expect front-month crude futures to experience some resistance at $103.80/90 – formerly a point of support.

EUR/USD rallied into the close with the rise in equity markets.

RIMM earnings will be released today, and the stock was moving higher in after-market activity before it was halted.

Tomorrow, end of quarter flows will dominate. In terms of levels, a close above 1,400 in the S&P would be bullish moving into April.

Today is looking a lot like yesterday – with Crude and Equity futures down, and some JPY buying and EUR selling in the currency markets. The Crude front-month contract is down 2%, falling below support under the $104 p/barrel level. Looking at the oil patch, natural gas futures can’t find a bid, with the front month futures falling 5% today.

Equity futures are moving toward the top of their daily range – which has been smaller than usual. S&P 500 futures are down nearly 10 handles to 1,395.64 at the moment. The DJIA is holding at 13,075. BBY, which reported earnings today, is down $2 (7.25%) but roughly $0.70 off the low of the day. After the bell, eyes will turn to RIMM’s earnings. RIMM is flat on the trading session.

Japan is slowly creeping closer and closer to a debt crisis. Some in the currency markets have noticed as the dollar has strengthened somewhat sharply against the YEN in the last few weeks. The Fukushima nuclear disaster has obviously not helped the struggling Japanese economy. The country has massive cleanup and rebuilding costs to take care of due to the tsunami and related flooding of the reactors. This is driving the Japanese debt load even higher than it was before. It is estimated that in the next year, the debt to GDP ratio will be an astonishing 230% up from a little under 220% this year. Compare this to the United States whose debt to GDP ratio is now a little over 100% and you can see why you should be concerned about Japan. Even Greece’s debt to GDP ratio is lower at around 160%. Granted Greece is a lot smaller economy than Japan and they have tax collection problems among others.

How To Invest With This Concern
This really isn’t an easy answer. Japan does have several strikes against it including a very old and aging population and a shrinking tax-paying workforce, however the global economy seems to be improving so this could delay the inevitable for who know how long.

You can see a possible train wreck coming, it’s just a matter of when. I knew we were in an internet bubble back in the late 90’s but I didn’t know when it would burst. I just avoided internet and most technology stocks. I knew we were in a housing bubble in the mid 2000’s but I didn’t know when or how it would end. I just didn’t own housing or related stocks.
I figured they both would burst at some point but wasn’t smart enough to know when to short them. As they say the market can stay insane longer than you can stay solvent.
What I am doing with regards to Japan is adding it to my checklist when I look at stocks for my long term portfolio. The big thing is to avoid companies that have a decent amount of sales to Japan or reliant on Japan. While a crisis could be years off and these stocks could still go up for now, it’s a risk I’d rather take off the table.

I know there will be a problem at some point, I just don’t know when or what will trigger it. It’s best not to try to time it and short Japan, rather to just be cognizant of companies that have sales or risks associated with Japan.

by Ben Hoben

Oil futures are down slightly with chatter continuing that select nations might release some of their petroleum reserve stock. Prices are trading just south of the $105 mark. USD/JPY is also losing ground in correlation with these moves in equity and oil markets, down 0.7% to 82.25.

But, perhaps the most important piece of news is that CNBC is talking about DOW 17,000. Time to press the panic button?