F R I 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:

8:30 AM ET. May unemployment report (April: Jobless rate 4.5%,
non-farm payroll jobs -223,000, earnings +0.4%; Forecast: 4.6%,
payrolls -18,000, earnings +0.3%)

9:40 AM ET. May Economic Cycle Research Institute's future inflation
gauge (April: 107.4)

9:45 AM ET. May Foundation for International Business and Economic
Research leading inflation index (April: 97.6)

10:00 AM ET. April construction spending (March: +1.3%; Forecast:
+0.2%)

10:00 AM ET. May NAPM manufacturing index (April: 43.2, price index
48.9: Forecast: 43.7, price index 48.3)

4:15 PM ET. Commercial/Industrial loans.

KEY HEADLINES:

Pirelli denies any Lucent offer but is monitoring developments.

Prudential denies any current interest in acquiring Stilwell Fncl.

Euro-zone May manufacturing PMI contracts to 48.3 from April's 49.2.

Frances's Trichet says global 2001 outlook has sizable uncertainties.

Exxon, Shell set to lead key Saudi gas projects, says report.

Shares in Dutch telecom KPN slump on report of $4.2-4.7 billion
rights issue.

Sodexho Alliance launches $846 million, 1-for-6 share rights issue.

French consumer confidence plunges in May.

The STOCK INDEXES & MARKETS

The NASDAQ and S&P 500 were lower overnight following Thursday's
minor short covering bounces. Ongoing weakness in high-tech stocks
amidst earnings concerns due to a continued slowing of the U.S.
economy leaves the doors open for additional weakness near-term.
Traders will be paying close attention to this morning's unemployment
report for further signs of a slowing economy. Meanwhile, the Dow's
short covering bounce and mid-range close on Thursday leaves the door
open for sideways to lower prices into early-June. If the decline off
last week's high continues, May's reaction low crossing at 10,774.10
is the Dow's next target.

European markets were lower in overnight trading as they took their
lead from U.S. equity markets, which were also lower overnight.
Losses were tempered by the latest Euro-zone March retail sales
report that showed overall sales for the year are up 1.6% on the
year. However, retail sales were down 0.4% on the month. Retail sales
in all sectors were weak compared to February's figures. The UK FTSE-
100 was down 13.50 points at 5782.60 while the German DAX-30 was down
37.58 points at 6085.68 as of 11:06 BST.

The Nikkei was nearly steady overnight as traders were reluctant to
take a major position ahead of the weekend and the U.S. May
unemployment report due out this morning. A modest rebound in
high-tech stocks, which have taken a beating in recent days, tempered
some of the overnight losses. Nevertheless, the Nikkei posted a
second close below the 38% retracement level of this spring's rally
that crosses at 13,363. This week's breakout has opened the door for
a possible test of the 50% retracement level crossing at 12,995 later
this year. Momentum indicators remain bearish signaling that
additional weakness near-term is possible. The Nikkei closed down
0.30 points to 13,261.84.

INTEREST RATES

September bonds were slightly higher overnight as it extended
Thursday's short covering gains. However, trading was subdued ahead
of the release of May's unemployment report later this morning.
Momentum indicators are turning bullish following Thursday's rally
signaling that sideways to higher prices into early- June are
possible. However, it will take multiple closes above this spring's
downtrend line crossing near 100-00 before a bottom can be confirmed.

The German bond market or Bunds were higher overnight following the
release of the euro-zone retail sales report that showed overall
sales are up 1.6% on the year. Additional support came from light
short covering ahead of the release of the U.S. non-farm payroll and
the National Association of Purchasing Management data due to be
released later this morning. The June Bunds were last up 0.42 at
106.47.

Japanese government bond markets declined slightly overnight due to
light profit taking ahead of the weekend. The lead June 10-year JGB
futures closed at 140.52 yen, down 0.07 while the yield on the
benchmark No. 231 June 10-year cash bond stood at 1.245%, up 0.005 as
of 1515 JT.

The ENERGY MARKETS were mostly lower in overnight trading with the
exception of unleaded gas. Trading was rather subdued after
Thursday's wild price action. The markets are looking ahead to next
week's OPEC meeting in Vienna where they will decide whether or not
to raise crude oil output or keep it unchanged. Their decision will
depend on Iraq's implementation of its threats to stop oil exports in
case the U.N. Security Council adopts the so-called "smart
sanctions".

July crude oil was lower overnight as it is working on a possible
inside day. July is challenging the 38% retracement level of this
year's rally crossing at 28.26. Multiple closes below this support
level and last week's low at 28.10 would open the door for a
larger-degree decline ahead of next week's OPEC meeting. Momentum
indicators are bearish signaling that sideways to lower prices are
possible.

July heating oil was lower overnight as it is working on a possible
inside day. A second close below this spring's uptrend line crossing
near 77.60 would confirm a top and trend change has taken place. If a
trendline breakout is confirmed, May's reaction low crossing at 74.55
is July's next target. Momentum indicators are bearish signaling that
additional weakness is possible.

July unleaded gas was slightly higher due to light short covering
overnight following Thursday's high-range close. A higher close
during the day session would increase the odds that Thursday's spike
below May's reaction low crossing at 91.20 might have marked a double
bottom. Momentum indicators remain bearish signaling that additional
weakness into early-June is possible.

July Henry Hub natural gas was lower overnight following Thursday's
downside reversal and is below last October's low crossing at 3.86.
Multiple closes below this week's low crossing at 3.67 would open the
door for a possible test of fib support crossing at 3.64 later this
month. Ongoing seasonal weakness and the replenishing of natural gas
inventory supplies is expected to keep downside pressure on the
natural gas market into early-summer. The daily ADX (a
trend-following indicator) remains in a bearish modes signaling that
additional weakness near-term is possible.

CURRENCIES

The September Euro is working on a possible inside day but was
slightly lower overnight following Thursday's breakout into new lows
for the year. If the decline continues, a test of last October's lows
crossing at 83.77 is possible later this month. The daily ADX (a
trend-following indicator) is bearish signaling that sideways to
lower prices are possible into early-June are possible.

The September British Pound opened modestly higher overnight due to
light short covering as it consolidated some of Thursday's losses. A
higher close during the day session would increase the odds that
Thursday's decline was only a minor setback leaving the door open for
additional short covering off last week's low. Momentum indicators
are turning neutral to bullish, which suggests that sideways to
higher prices into early-June are possible. If the rebound off last
week's low resumes, trendline resistance crossing near 1.4290 is
September's next target.

The September Swiss Franc opened lower in overnight trading following
Thursday's breakout into new contract lows. The recent breakout below
last October's low crossing at .5643 has opening the door for a test
of weekly support crossing at .5488 later this month. The ADX (a
trend-following indicator) has entered a bearish trend mode signaling
that additional weakness during June is possible.

The September Canadian Dollar was higher overnight thereby confirming
Thursday's upside reversal. The late-week rebound has set the stage
for a test of May's high crossing at .6541. Multiple closes above
this resistance level are needed to renew this spring's rally.
Momentum indicators have turned bullish signaling that sideways to
higher prices during the first half of June are possible.

The September Japanese Yen was higher overnight as it extended
Thursday's rally, which confirmed an upside breakout of this spring's
trading range. If this spring's rally continues, minor resistance
crossing at .8702 is a potential target later this month. The daily
ADX (a trend-following indicator) has entered a bullish trend mode
signaling that additional gains near-term are possible.

PRECIOUS METALS

August comex gold was higher overnight due to light short covering
following Thursday's breakout below April's uptrend line crossing
near 267.50. This week's closes below the uptrend line have confirmed
a breakout and opening the door for a test of this spring's low
crossing at 257.30 later this year. Stochastics and RSI are bearish
signaling that additional weakness into June is likely.

July silver was slightly higher overnight due to light short covering
as it consolidates some of its losses of the past four trading
sessions. Follow-through short covering during the day session is
possible as short traders bank some of this week's profits ahead of
the weekend. Nevertheless, momentum indicators have turned bearish
signaling that additional weakness near-term is possible. If the
decline off last week's high continues, a test of trading range
support crossing at 4.31 is July's next target later this year.

July copper was lower overnight extending this week's decline.
However, Thursday's mid-range close leaves the door open for two-
sided trading on Friday as a short covering bounce ahead of the
weekend is possible. If this week's decline continues, a test of
May's low crossing at 74.75 is possible later this month. Momentum
indicators are bearish signaling that sideways to lower prices into
early-June appears likely.

GRAINS

July corn was fractionally higher overnight as traders await this
morning's export sales report, which was delayed due to the Memorial
Day holiday on Monday. Pre-report estimates range from 800,000 to
1,000,000 metric tonnes. Thursday's rally was triggered by
end-of-the-month short covering and rising concerns over cool/wet
conditions across the western Corn Belt, which has slowed early crop
development and has forced some producers to replant portions of the
crop that have been drowned out. Thursday's high tested May's
downtrend line crossing at 1.93 1/4. Multiple closes above this
resistance level would signal that a short-term low has likely been
posted. Also a higher close on Friday would increase the odds that
the recent breakout below weekly support crossing at 1.91 1/2 might
have marked a bear trap. Early calls are for July corn to open steady
to 3/4 of a cent higher this morning.

July wheat was higher in overnight trading due to rising concerns
over potential disease problems with the hard red winter wheat crop
in Kansas. This week's closes above broken support crossing at 2.65
have tempered the near-term bearish outlook in the market while
opening the door for a possible test of May's downtrend line crossing
near 2.72 later this month. This morning's export sales report is not
expected to show a significant increase in export demand, which has
been less than stellar all year. Pre-report sales estimates range
from 350,000 to 450,000 metric tonnes. Early calls are for July wheat
to open 1 to 2 cents higher this morning.

SOYBEAN COMPEX

July soybeans were higher in overnight trading due to spillover short
covering from Thursday's strong rally. Rising concerns over cool/wet
weather across the heart of the U.S. Soybean Belt, which is causing
emergence problems along with delayed planting triggered Thursday's
rally. Additional support comes from demand, which remains strong and
should force the USDA to raise this years export projection in the
June supply/demand report. Multiple closes above recent highs
crossing at 4.53 1/2 would confirm an upside breakout of this
spring's trading range while opening the door for a possible test of
March's high crossing at 4.77 3/4 later this month. Pre-report
estimates for this morning's export sales report range from 200,000
to 300,000 metric tonnes. Early calls are for July soybeans to open
steady to 2 to 3 cents higher this morning.

July soybean meal was higher overnight due to follow-through short
covering from Thursday's strong rebound. Thursday's close above
broken trendline support has tempered the near-term bearish outlook
in the market. Closes above last Friday's high crossing at 168 would
renew this spring's rally making the 62% retracement level of this
winter's decline crossing at 169.40 July's next target. Pre-report
sales estimates range from 100,000 to 150,000 metric tonnes. Early
calls are for July soybean meal to open 20 to 40-cents higher this
morning.

LIVESTOCK

August hogs closed higher for the third day in a row on Thursday and
above the 62% retracement level of this spring's decline crossing at
63.40. While a setback is possible on Friday due to light profit
taking ahead of the weekend, this week's rally has opened the door
for a possible test of April's gap crossing at 64.90 later this year.
Momentum indicators have turned bullish signaling that sideways to
higher prices into early-June are possible.

August cattle gapped up and closed above the 75% retracement level of
this year's decline crossing at 73.83 on Thursday. Today's rally
renewed May's advance and set the stage for a test of January's high
crossing at 75.00 later this spring. Expectations for steady to $1.00
higher cash trades this week triggered today's rally. Momentum
indicators are bullish but have become overbought warning traders to
use caution as a top may be near.

FOOD & FIBER July coffee plunged below April's low crossing at 58.80
on Thursday thereby renewing this year's downtrend. Today's move to
new lows opened the door for a test of long-term support crossing at
51.70 later this year. Moderating temps across Brazil's coffee
growing region along with abundant supplies by North American
roasters and huge exchange stocks continue to weigh on coffee prices.

July cocoa closed lower on Thursday and below trading range support
crossing at 955. Session lows fell just short of testing the 62%
retracement level of this winter's rally crossing at 929. I would not
be surprised to see a short covering bounce on Friday that could lead
to a test of broken support at 955. However, momentum indicators
remain bearish signaling that additional weakness into early-June is
possible. If the decline continues, the 75% retracement level at 862
is July's next target.

July sugar posted an inside day with a lower close as it tried to
consolidate some of this week's losses. However, the door to lower
prices remains open following Tuesday's trendline breakout. While
another day or two of consolidation is possible, the door is open for
additional weakness into early-June with 832 then 808 being possible
targets.

July cotton closed slightly higher on Thursday as it continues to
consolidate above psychological support crossing at 40-cents. Talk of
lost cotton production in west Texas provided minor support. However,
beneficial rain farther south in west Texas tempered gains. The Delta
and Southeast are expected to see more rain next week with most of
the U.S. cotton crop in good shape. Pre-report export sales estimates
range from 100,000 to 150,000 bales.
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