W E D N E S D A Y   M O R N I N G   E X T R E M E   M A R K E T S
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Andrew,

KEY EVENTS TO WATCH FOR:

12:45 PM ET. Fed Governor Laurence Meyer addresses the National
Association for Business Economics New York Chapter on the question
"What happened to the new economy?"

6:30 PM ET. ABC/Money Magazine releases its consumer confidence
polls.

KEY HEADLINES:

Bristol-Myers near $8 billion deal for DuPont unit, says report.

Cadbury Schweppes near $600 million purchase of Orangina.

BP, Exxon, Shell selected for $18 billion China pipeline bid, says
report.

GE may divest Honeywell jet unit on antitrust concern, says report.

Japan PM Koizumi says US missile defense study is worthwhile.

MIDEAST: Israel Press: Israel, US reach deal on settlement freeze.

China Press: US to separate WTO talks from security issues.

Mexico says it determines duties on US corn imports.

Napster details tentative record label deal as court hearing looms.

Search is on for US navy officer after Philippine communist rebel
attack.

Bank of England seen leaving interest rates at 5.25%.

French budget deficit rises to $22.2 billion in April.

The STOCK INDEXES & MARKETS

The NASDAQ and S&P 500 were mixed overnight in thin trade as both
markets are poised to consolidate some of this week's gains.
Tuesday's rallies were underpinned by positive earnings outlooks in a
number of technology companies along with ideas that the worst as far
as the economy goes may be behind us. Momentum indicators are turning
neutral to bullish signaling that sideways to higher prices during
the first half of June are possible. Meanwhile, the Dow extended
Monday's rally thereby signaling that the setback from May's high has
ended. A higher weekly close for the Dow would increase the odds that
this spring's rally is resuming.

European markets were mostly higher in overnight trading as they
followed US equity markets higher. The UK FTSE-100 was up 14.90
points at 5937.40 while the German DAX-30 was up 2.84 points at
6244.97 as of 11:00 BST.

The Nikkei closed lower overnight after early gains faded ahead of
the close. Ongoing concerns over high-technology earnings dragged the
market back to just below where it had started the day. The Nikkei
tested the 50% retracement level crossing at 12,995. Momentum
indicators are bearish but becoming oversold hinting that a
short-term bottom might be in or near. The Nikkei closed down 7.16
points to 13,174.84 overnight.

INTEREST RATES

September bonds were lower overnight due to light profit taking as it
consolidates some of its recent gains following last week's trendline
breakout. While a day or two of consolidation is possible, momentum
indicators remain bullish signaling that sideways to higher prices
into early-June are possible. If the rebound off last week's low
continues, the 38% retracement level of this spring's decline
crossing at 101-15 then the 50% retracement level crossing at 102-16
are potential targets later this month.

The German bond market or Bunds were higher overnight in thin trading
as there is little market moving economic news scheduled for release
today. The June Bunds were last up 0.05 at 107.15.

Japanese government bonds closed lower overnight as market
participants took profits after Tuesday's climb to a near-record
high. The lead June 10-year JGB futures closed at 140.50 yen, down
0.28, while the yield on the benchmark No. 231 June 10-year cash bond
stood at 1.225%, up 0.035, as of 1510 JT.

The ENERGY MARKETS were lower in overnight trading following the
release of this week's API data. The report showed that crude oil
supplies rose by 3.409 million barrels last week. Gasoline stocks
rose by 3.161 million barrels while distillate stocks were up 4.103
million barrels. US refineries operated at 97.1% verses 95.3% last
week.

July crude oil was lower overnight following the latest API data,
which showed an increase in stocks compared with expectations for a
decline in stocks by the trade. July is trading below the 38%
retracement level of this year's rally crossing at 28.26. Closes
below last week's low at 27.55 could lead to a test of this year's
uptrend line, which crosses near 27.10 later this month. Momentum
indicators are bearish but nearing their respective oversold zones
warning traders to use caution as a short-term bottom might be near.

July heating oil was lower overnight due to Tuesday's bearish API
inventory report, which showed a larger-than-expected increase in
stocks. Overnight losses helped confirm Monday's downside reversal as
the stage is set for a test of May's reaction low crossing at 74.55
later this month. Momentum indicators are bearish signaling that
sideways to lower prices during the first half of June are possible.

July unleaded gas was lower overnight in response to Tuesday's
bearish inventory report. Overnight losses have led to a breakout
below this year's uptrend line, which crosses near 90 cents. Multiple
closes below the uptrend line would confirm a top and trend change
has taken place. Momentum indicators remain bearish signaling that
sideways to lower prices near-term are still possible.

July Henry Hub natural gas was lower overnight due to spillover
selling following Tuesday's key reversal down. Traders will be
watching this week's AGA inventory data for near-term direction.
However, it does appear as though the short covering bounce off last
week's low has come to an end.

CURRENCIES

The September Euro was higher overnight following Tuesday's upside
reversal that was triggered by rumors of central bank intervention to
support the currency. A higher closes during the day session is
needed to confirm Tuesday's bullish reversal pattern but closes above
last week's high crossing at 85.70 are needed to temper the bearish
outlook in the market. Momentum indicators are oversold and turning
neutral to bullish hinting that a low may be in place.

The September British Pound plunged to a new contract low overnight
signaling the resumption of this year's decline. This week's trading
range breakout has opened the door for a test of last fall's low on
the weekly chart, which crosses at 139.52 later this month. Momentum
indicators are bearish signaling lower prices during the first half
of June are likely.

The September Swiss Franc was slightly higher overnight as it
extended Tuesday's rebound off last week's contract lows. Closes
above this spring's downtrend line crossing near .5676 are needed to
confirm a short-term bottom has been posted. The ADX (a trend-
following indicator) is turning down signaling that a low is in or
near.

The September Canadian Dollar was higher overnight following
Tuesday's key reversal up. Closes above May's high crossing at .6541
are needed to confirm an upside breakout of May's trading range and
renew this spring's rally. Momentum indicators are bullish signaling
that sideways to higher prices during the first half of June are
possible.

The September Japanese Yen was lower overnight thereby confirming
Tuesday's key reversal down. The yen filled last week's gap at .8425
thereby increasing the odds that a short-term top has been posted.
Stochastics and RSI are turning bearish following a test of their
respective overbought zones warning trader's to use caution as a
short-term appears to have been posted.

PRECIOUS METALS

August comex gold was slightly higher in overnight trading following
Tuesday's upside reversal. August continues to consolidate around the
75% retracement level of the decline off May's high, which crosses at
267.20. Closes above 269.60 are needed to temper the near- term
bearish outlook in August gold. If the decline continues, the
reaction low crossing at 263.20 is August's next target. Stochastics
and RSI are bearish but becoming oversold warning bears not to press
their hand as a low may be near.

July silver was higher overnight due to light short covering as it
continues to rebound off Monday's low. Nevertheless, the door remains
open for a test of trading range support crossing at 4.31 later this
month. Multiple closes below the lower boundary of this spring's
trading range crossing at 4.31 would open the door for a possible
test of weekly support crossing at 4.15 later this month. Momentum
indicators are bearish signaling that additional weakness near-term
is possible.

July copper was steady overnight. A lower close on Wednesday would
bring into question whether or not this week's bounce off May's low
has come to an end. Closes below Monday's low would open the door for
additional weakness and could lead to a test of weekly support
crossing at 74.10 later this spring. It will take closes above 77.20
to temper the near-term bearish outlook in the market. Momentum
indicators are neutral to bearish signaling that sideways to lower
prices into early-June appears are still possible.

GRAINS

July corn was lower overnight as traders have shifted their focus
from declining crop conditions due to cool/wet conditions across the
Midwest and instead are focusing on extended weather forecast calling
for warmer/dryer conditions by early next week. Additional pressure
came from weather forecast for China, which are calling for increased
chances for precip over the next few days, which would help alleviate
some the trades dry weather concerns. Tuesday's downside reversal
sets the stage for a test of last week's gap that led to a trendline
breakout. If the gap at 1.93 1/4 is filled, it would signal a likely
end to the present short covering rally. A higher close on Wednesday
would help set the stage for a possible of May's high crossing at
2.11 1/2 later this month. If you can remember 1993, it was not until
fall that the trade finally realized that too much moisture can cut
yields. We may be facing the same situation this year meaning that it
could be some time before the market finally begins to build in a
weather premium because of too much rain in the Midwest, which has
lowed yield prospects. Early calls are for July corn to open 1 cent
lower this morning.

July wheat was lower in overnight trading as it extended this week's
decline due to forecasts calling for improving weather conditions
across the plains by early next week. Additional pressure is coming
from a pick up in harvest in southern Oklahoma. Yield reports are
mixed but generally inline with pre-harvest expectations. The rising
U.S. Dollar has contributed to sluggish export demand for U.S. wheat,
which has offset lower planted acreage and expectations for a decline
in ending wheat stocks. A lack of threatening weather in other wheat
producing regions of the world is also weighing on wheat prices. I
would not be surprised to see a higher close on Wednesday as the
market consolidates some of this week's gains. However, I am bearish
longer-term and see July wheat exceeding May's low and possibly
testing long-term support crossing at 2.50 before the expiration of
the contract. Early calls are for July wheat to open steady to 1 cent
lower this morning.

SOYBEAN COMPEX

July soybeans were lower in overnight trading following Tuesday's
poor close. Bearish weather forecasts calling for warmer/drier
conditions to move into the Midwest by early next week have offset
support from this week's decline in crop conditions. Closes below
Monday's low crossing at 4.48 3/4 would signal that the recent
trading range breakout proved to be a bull trap. Momentum indicators
are still bullish signaling that sideways to higher prices near-term
are possible. Early calls for July soybeans to open 1 to 1 1/4 cents
lower this morning.

July soybean meal was lower overnight due to spillover weakness from
soybeans and bearish extended weather forecast. Overnight lows tested
Tuesday's gap but did not fill it. July meal is at an important
crossroads. Multiple closes above the late-May high at 168 are needed
to renew this spring's rally. Closes below last week's low crossing
at 159.60 would increase the odds that a short-term top has been
posted. Momentum indicators are neutral to bearish warning traders to
remain patient and let the market point the direction of the next
trending move. Early calls are for July soybean meal to open 30 to
50-cents lower this morning.

LIVESTOCK

August hogs closed lower on Tuesday on ideas that meat packers will
reduce slaughter thereby pressuring the cash market. Additional
pressure came from ideas that August has become slightly overbought
technically. However, today's mid-range close leaves the door open
for sideways trading on Wednesday. If the rally resumes, April's high
crossing at 65.95 is August's next target. Closes below last week's
gap at 64.00 would strongly suggest that a short-term top has been
posted.

August cattle closed slightly lower on Tuesday as traders await
direction from the cash market. The recent rally in futures appears
to have priced in $76 cash bids. Momentum indicators have become very
overbought warning bulls to use caution a the market might be forming
a broad double top with January's high.

FOOD & FIBER July coffee closed higher on Tuesday thereby confirming
Monday's key reversal up. Today's rally also turned a number of
oversold momentum indicators neutral to bullish thereby increasing
the odds that last week's low might have marked a short-term bottom.
Closes above May's downtrend line crossing near 62.10 are needed
before this is confirmed.

July cocoa closed higher on Tuesday due to light short covering
following Monday's upside reversal. Nevertheless, July remains below
broken trading range support crossing at 955. Multiple closes above
this broken support level are needed to temper the near-term bearish
outlook in the market. Momentum indicators are bearish but becoming
oversold warning bears to use caution when pressing the short side of
the market.

July sugar closed slightly lower on Tuesday in narrow trading as it
continues to consolidate above last week's apparent double bottom.
Momentum indicators are bearish but becoming oversold hinting that
additional short covering off last week's low is possible. If the
decline resumes, fib support crossing at 832 then 808 are targets.

July cotton posted an inside day with a slightly lower close on
Tuesday. Additional weakness would increase the odds that the short
covering bounce off last week's low may have run its course. It will
take closes above this year's downtrend line crossing near 43.95 to
confirm that a bottom and trend change has taken place. Until then,
the overall downtrend remains intact.
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