Futures Point To A Weaker Open
METALS
GOLD:
While gold might periodically show signs of strength we are just not convinced
that this market has the story to track consistently higher. As we have
suggested several times over the last two weeks, the gold market needs a change
of conditions in order to mount a sustainable rise. For instance, the Dollar
rise needs to be reversed, the equity market needs to rise sharply as a sign
that physical demand for gold is set to rise, or the equity market needs to fall
sharply suggesting that flight to quality considerations are on the rise again.
SILVER:
Given the support from the gold market overnight, the silver could forge a rise
of its own. Near term resistance in the September contract is seen around $4.60
and then again up at $4.67. Silver might rise in the coming session but we get
the sense that the market is simply fluctuating within a range defined as $4.44
and $4.62.
PLATINUM:
A quasi gap higher move overnight suggests that platinum is capable of making
gains without strong performance in the equity market. However, the gains
yesterday came on the lowest volume since April 10th and that means the gains
are suspect. We just can’t get over the concern that platinum prices at $660
an ounce are very expensive, especially since the only supply concern is ongoing
Russia
red
tape. Therefore, longs should be wary. Â
Â
COPPER:
Overnight the copper market does not appear to be shaking the weakness seen
during the session Monday. Chinese copper futures ended down, as selling was
documented from short term pit traders.
Mexico
reported
its April copper output to have increased 20.9% to 25,292 metric tons, which is
a significant reading and a minor negative for the market.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE -16Â ,HEAT-63Â
,UNGA-54 Â The energy complex streaked higher off news that Nigerian
workers would in fact go on strike. The workers strike in
Nigeria
is expected to continue
another day as workers are evidently upset with the price of petroleum products.
NATURAL
GAS
For the
most part, Hurricane Bill was a bust for the bull camp. In fact, with some
weather forecasters calling for a cool down following the 4th of July, the
natural gas market might be vulnerable to another liquidation washout.
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15 AM
:BONDS +6 We have to think
that the lack of direction in the equity market is allowing the bond and note
markets to forge decent consolidation support. In other words, if the stock
market were forging consistent gains, it would have been a lot tougher for the
bonds to put the brakes on the late June slide. Now it would seem that the trade
is floating bullish estimates for the Thursday morning Non farm payroll report.
STOCK
INDICES
OVERNIGHT
CHANGE toÂ
4:15 AM
:S&P-130
DOW +0 NIKKEI +195 FTSE -20Â The bull camp simply failed to show up for the
action Monday. In fact, after posting a 15% gain for the quarter, the market
limped off weakly to close the quarter. In looking at the charts, one can get a
sense of the confusing view toward the economy, as the S&P and Dow are
barely managing to avoid a roll over to the downside.
FOREIGN
EXCHANGE
DOLLAR:
With the
US
stock
market unable to put on a happy face and a number of countries posting favorable
economic readings, the Dollar comes under pressure. Not only did the Japanese
“wow†the market with favorable readings but
Italy
is also
suggesting they will see sustained growth before the end of the year. In our
opinion, the
US
economy
was thought to be the lone growth zone in the late June rally. Now it would
appear that minor growth is being seen in a number of places and the outlook for
the
US
is
being called into question. Therefore, the Dollar looks set to decline back
toward the middle of the May and June consolidation. In fact, if the US Dollar
can’t manage to get a lift off the 9:00 numbers this morning, that might mean
that the numbers Wednesday and Thursday put even more pressure on the Dollar.
Therefore, we have to think that the September Dollar is set to decline to at
least 94.00 and maybe even 93.60, if the
US
stock
market comes under aggressive liquidation interest. In the mean time, the course
of the Dollar looks weak enough that traders might even be able to sell a lower
opening.
EURO:
The travails of the Dollar mean that the Euro sees short covering and possibly
some fresh long interest. In fact, until the Euro manages a rise back above
116.00, it really hasn’t even encountered chart resistance. With the German
Chancellor calling for the ECB to do its part by cutting rates, it is clear the
impetus is to force the ECB to act. We think that the ECB will fight the move to
“do more†because they already cut 50 basis points in June. In our opinion,
another rate cut in the Euro zone would simply fuel the Euro higher and the ECB
really doesn’t want that outcome. In the meantime, expect consistent gains in
the Euro through Thursday morning.
YEN:
The Tankan survey was very good and the Nikkei managed a stellar rally. In fact,
Japanese auto sales in June actually rose and that is an anomaly in recent
readings. Therefore, traders might begin to take a slightly different view
toward the Yen. In other words, could the Japanese economy be seen as a point of
investment opportunity? Shorts in the Yen might want to begin running tight
stops, especially with the 83.35 level giving off the appearance of solid
support.
SWISS:
The Swiss looks to follow the Euro higher in a short covering effort of its own.
However, the Swiss will have to fight a heavy tide of overhead resistance.
POUND:
The June PMI reading in the
UK
came
out positive and that dovetails with positive technical action for a rally
potential. Since the Dollar is weakened and the Pound recently oversold, the mix
could yield a quick rise to 166.00. If Dollar losses become aggressive then the
Pound might find the resolve to rise to 166.80.
CANADIAN:
The action overnight is exactly what the bull camp in the Canadian has been
waiting on. Given a breakdown in the Dollar, the Canadian should probably forge
a rise to the June 25th high of 74.34 and even higher if the Canadian economy
can turn out some positive payroll numbers of its own.Â