Futures Point To A Higher Open

11/26/2004
 

INTEREST RATES

Apparently the Treasury market is under pressure this morning because of comments made by an academic advisor to the People's Bank of China, who suggested that the rate of growth of purchases of US Treasuries has slowed. According to the Chinese Business News, China currently holds 180 billion of US Treasuries but the official who made the comments said he arrived at that opinion through data provided by the US Fed and that he personally doesn't have any idea what the Bank of China's will or won't do with respect to US Treasuries. Currently US bonds are 33% of the Chinese total foreign reserve holding and that would seem to be a rather large percentage, especially when one considers that 80% of China's foreign reserve assets are in Dollar denominated investments.

STOCK INDICES

While European stocks were a little lower overnight, it would not seem like the market is in an overly pessimistic mode. However, spot gold prices are on the rise and the Euro is also on the rise, off comments that the ECB is set to allow the Euro to climb even higher against the Dollar before any intervention is seen. The trade might also be partially undermined by overnight rumors that China might be slowing the growth of investment in US Treasuries.

DOW
Critical pivot point support in the December Dow comes in at 10,501 and an upside breakout takes place today with a rise above resistance at 10,562. While the fear of an international disinvestment debacle could undermine the Dow, that issue is not dominating sentiment this morning and without the outside distraction of higher gold and oil futures action today, it is possible that the bull camp will maintain the upper hand. Top of the uptrend channel in the December Dow comes in at 10,620.

S&P
For the S&P we see an extremely critical pivot point at 1178.10 and upside resistance up at 1186.10. In order to avoid a broadening top pattern, the December S&P might have to manage a trade up to 1188.20 today. If optimism from the retail sector puts the S&P above 1186.10 in the morning trade, we suspect that the market will manage a probe above 1190 before the end of the session.

FOREIGN EXCHANGE

US DOLLAR
While the Dollar didn't instantly fall apart this morning off talk that the Euro zone was prepared to allow an even further slide in the Dollar, the Dollar has mounted yet another new low. It seems that contract with Euro zone officials, or mere speculation of what officials are thinking has left the market with the opinion that intervention is simply not in the offing. With other overnight rumors suggesting that China might be slowing it's purchases of US Treasuries, it would seem like the Dollar has another leg down ahead. In the wake of the rumors swirling out of Europe overnight, a number of banks have lowered their targeting on the Dollar, with some suggesting an 80.00 Dollar might be in the cards. While the US doesn't have anything in the way of scheduled reports due out today, it is possible that an ultra strong performance in the US stock market might discourage a full scale attack on the Dollar. Since the last G20 meeting it would seem like the focus has shifted toward the lack of stimulus in the Euro zone, and away from the deficit problem in the US. Many analysts are suggesting that significantly lower Dollar action is going to increase the chance of global inflation and could already be kicking up US export activity. However, in the near term, expect the down trend in the Dollar to continue.

EURO
The trade was surprised that the ECB wasn't in a position to slow the climb in the Euro. In fact, sentiment seems to have accepted a move to yet another significantly higher level in the Euro. We are already seeing signs of slowing in the Euro zone, with money supply growth slowing, exports slowing and some economists moving to target negative growth sometime early in 2005. However, right now the market is simply not ready to stop buying the Euro off some macro economic indication like slowing money supply. With a little extension of the range this morning, today's range in the Euro might become one of the widest daily ranges of the year and that could suggest some type of decision point ahead. In the near term, we suspect that the Euro will be able to manage a rise to 135 before the ECB even gets in position to make a decision on intervention. We suspect that the political residual from the Iraq debate is a factor that has slowed down the decision to intervene.

YEN
Overnight the Yen exploded up near 98.00 and so far that hasn't brought on the BOJ and some now wonder if the line in the sand is 100.00. Weaker Japanese stock prices show that the currency is undermining sentiment, but as of yet we don't get the sense that the situation is at an inflection point. Critical support comes in at 97.13 and resistance is seen at 97.49.

SWISS
The only resistance one can locate on the charts comes in off the monthly charts up at the 1994-1995 highs of 89.90. Even without flight to quality concerns, the Swiss is managing impressive gains and that alone suggests even more gains are ahead.

BRITISH POUND
The UK 3rd Quarter GDP was unchanged at +0.4% but it was noted that the industrial sector was softening possibly because of the rising Pound. The next resistance point on the charts comes off the monthly chart at 191.02. With the overnight high all the way up at 190.19, the market would seem to be capable of making more gains.

CANADIAN DOLLAR
The trend is up and the Canadian has avoided extremely overdone technical status, with periodic corrections and mostly balanced gains. Therefore, the path of least resistance is pointing up, with a near term objective of 85.65 and near term support seen at 84.87.

METALS

OVERNIGHT
London Gold Fix $448.65 +$1.65 LME COPPER STOCKS 62,050 metric tons -300 tons COMEX Gold stocks 5.373 ml +15,602 oz COMEX SILVER stocks 102.8 ml Unchanged

GOLD
Markets Closed for Holiday!

SILVER
Markets Closed for Holiday!

PLATINUM
Markets Closed for Holiday!

COPPER
Markets Closed for Holiday!

CRUDE COMPLEX

Markets closed due to Holiday. API/DOE Crude Oil Stks Est +1 to +2 ml bls Act change API -1.2 ML DOE +100K API/DOE Distillate Stks Est +500k to +1 bls Act change API +1.8 ML DOE +1.0 ML API/DOE Gasoline Stks Est +1.5 ml to +2.5 ml bls Act API +2.9 ML DOE +1.8 ML API/DOE Refinery Oper Rate Est +0.2 to +.3 API 93.2 Prev 93.9 DOE 92.9 Prev 93.5

NATURAL GAS
Markets closed due to Holiday.