Futures Point To A Higher Open

INTEREST RATES

Market closed for Holiday!

STOCK INDICES

The stock market did a good job of skirting the potential negative influences normally seen off a move to raise US interest rates. While it will be important to hold above the prior two days lows on the charts, the market should exhibit less volatility in the coming sessions, partly because of the Holiday today and partly because energy prices are coming into the session this morning somewhat weak. The weekly energy inventory report failed to live up to early expectations that called for a moderately large crude stocks build, but crude stocks did manage to build slightly and that continues a pattern that diffuses the bull case in energy prices.

DOW
Overnight the December Dow is already well into new highs for the move and has reached the highest level since mid June. Critical support in the December Dow comes in at 10,397 and resistance isn't seen until 10,470.

S&P
The December S&P has a significant base of support on the charts at 1162.60 and seems to be prepared to move to an even higher trading range. The trend is up and the next resistance isn't seen until 1177. Overnight the December S&P reached the highest level since March of 2002 and that highlights the improving view for the future. Buy 200-300 point breaks with the expectation that prices might rise into the end of the month.

FOREIGN EXCHANGE

US DOLLAR
With the Pit closed today due to the Veterans Day Holiday, we suspect that daily ranges will be narrow in electronic trading, especially since there are no US economic reports scheduled. However, the downward path in the Dollar is tempered because of the US Trade Deficit release yesterday and because of concern for the European and Japanese economies. In other words, on both sides of the ocean it would seem like the ultra lower US Dollar is beginning to provide a countervailing force. In other words, the US economy is generally thought to be growing, while the markets are beginning to wonder if the Euro zone and Japanese economies will actually be able to sustain growth, especially against a distinct disadvantage in exchange rates. The Dollar has already bounced significantly but we doubt that it will be able to alter the trend without more significant proof of US growth. Resistance is seen at 84.76.

EURO
German 3rd quarter GDP growth really slowed and if it were not for strong domestic activity, the number might actually have contracted. Therefore, it is clear that growth is being knocked down by the high Euro exchange rate. Therefore, one might expect a correction back toward 128.00. German 3rd quarter GDP was only up 0.1%!

YEN
Japanese machine orders for September reportedly declined by a sharp 1.9% overnight and that development probably sunk the Nikkei and is keeping a lid on the Yen. With the sharp decline in the Yen yesterday, the market has already compensated for the soft economic view and the overall trend in the Dollar will dictate the direction of the Yen.

SWISS
Less flight to quality impetus and an overbought technical condition should put some pressure on the Swiss, but due to light trade we doubt a major move is in the offing.

BRITISH POUND
The Pound is under liquidation pressure and might be set to slide to 182.50 because of the short covering in the Dollar. Even if the Pound falls to 182.50 that wouldn't really breakdown the recent uptrend pattern.

CANADIAN DOLLAR
Like the rest of the currency markets, the Canadian sees a little back and fill off the temporary pause in the Dollar slide. While the Canadian was significantly overbought around the highs this week, it is already moderately off the highs and correcting its technicals quickly. However, until the trade returns to normal, it will be difficult to determine whether a major change is taking place.

METALS

OVERNIGHT
London Gold Fix $435.10 -$1.75 LME COPPER STOCKS 68,625 metric tons -1,550 tons COMEX Gold stocks 5.332 ml -14,235 oz COMEX Silver stocks 102.9 ml -121,622 0z

GOLD
The gold market managed to avoid a liquidation window yesterday, as the Fed could have talked up the Dollar in an effort to discourage the capital exodus from the US, but in the end no such comment was made. However, there are signs that the Dollar might not continue to decline at such an aggressive pace, as numbers outside of the US are beginning to soften and that could discourage Dollar selling. For instance, early this week the ZEW expressed concern about the German export sector, and that is partially the result of a soaring Euro.

SILVER
Because gold action is sloppy, the silver market probably experiences a little back and fill. Like gold, silver is overly long in the small spec and fund positioning but unless critical chart support levels are violated, we see no reason for silver to come under aggressive liquidation. One would think that generally optimistic economic views would underpin silver above key support at $7.375.

PLATINUM
The big problem with platinum is that it has lost its upward momentum on the charts. Furthermore, we are really disappointed that favorable dialogue about Asian demand early in the week didn't spark a more significant rally. In fact, with the recent copper rally, platinum hardly showed any reaction and that suggests the market is without residual buying interest on the sidelines.

COPPER
While the rest of the metals markets have shown weakness in the face of Dollar strength and the US interest rate hike, the copper market has remained right on an upside breakout point on the charts. For the 4th day in a row, the Asian Press is reporting tight supply conditions and with the Shanghai exchange reporting stocks on Friday morning and the Chinese government thought to be prepared to take delivery on the December contract, we suspect that the market will get even more evidence of tightness. Therefore, the market remains poised to rise toward 140 and would have a much stronger head of steam today if world equity market action were more supportive.

CRUDE COMPLEX

The weekly inventory report was somewhat bearish but maybe not as bearish as the trade was factoring in prior to the report. Crude stocks managed to rise but some in the trade were expecting an increase of 3 million barrels or more. Therefore, it is not surprising that the crude oil market fell following the report and the products bounced.

NATURAL GAS
The natural gas market showed fleeting short-covering activity Wednesday and in the end the market was lifted by the strength in the regular energy complex. We also think that natural gas saw some spillover support because of the product tightness issue, as that insinuates possible spill over buying for natural gas this winter. Reports that more Gulf of Mexico gas output had come back on line Tuesday night, after being put off line by Hurricane Ivan, were known to the market during the session Wednesday, but yet prices showed only minimal weakness.