Holding Head Up….
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM:
BONDS +11
— The
bonds continue to be poised to rally as the uncertainty toward the equity market
picks up where it left off last week. In fact, with rising concern toward bank
stocks, it’s possible that financial anxiety is even
higher than the levels seen last week. Bottom of the up trend channel comes in
today at 112-14, but with a thin economic report slate, the bonds will take most
of their direction off the stock market.
STOCK INDICES
OVERNIGHT
CHANGE to
S&P
-660,
NIKKEI -339, FTSE -37 — This is one of those days where the bear camp seems to
have everything it needs to punish prices even before the
market opens. With the French tanker explosion over the weekend, the stock
market is on edge about the potential for soaring energy prices. The market is
also concerned about bank stocks, as several key banks are writing off bad loans
at a quickening pace and that has in turn led to bank earnings downgrades.
FOREIGN EXCHANGE
DOLLAR: It must be that the
trade is paying up for the dollar because of the threat of war, as the economic
numbers out of the Euro zone this morning could have turned the tables on the
dollar. As it stands, the dollar is rising toward near-term resistance of 108.53
and is seemingly in favor vs. most other currencies. As we suggested in mid-day comments last Friday, the world seems to believe in the
dollar but the
doesn’t seem to believe in itself. We wonder just how long the dollar can rise
in the face of declining US equity prices! Therefore, if and when the December
dollar climbs to 108.53, we would suggest that traders bank profits, or acquire
some hedge protection against the longs. It must be that the war premium is
being put into the dollar most likely because of the President’s speech tonight.
EURO:
The euro is close to a downside breakout on the charts, with near-term support at
97.42. German August manufacturing orders rose +1.7% if adjusted and were down
2.2% if not adjusted, and that might be why the euro
failed to see support off the numbers. Supposedly, capital goods orders fueled
the rise in the German manufacturing sector in August. In other words, the euro
might be a good buy once the warmongering benefit in the dollar has run its
course. In the meantime, use a critical pivot point at 97.42 and then again at
96.85.
YEN: The
yen has forged a downside breakout right alongside the Nikkei, which is under
extreme pressure. With the
economy on the brink, the Japanese economy is thought to be falling in the void
already. Supposedly, the BOJ indicated that the most recent meeting did not
bring forth calls for easing and the Finance Minister was quoted as saying that
he is concerned about the Japanese stock market. We have to think that the yen
is headed to the June low of 80.25.
SWISS:
While the charts don’t present a bullish case, we have to think that the Swiss
is about to come into its own. The flight-to-quality issues would seem to be
surfacing on a number of fronts and could explode at any time. Therefore,
traders should be buying the Swiss on the current correction or looking to buy
and hold long-term call options on the currency.
POUND:
For the time being it would appear that the
economy is slowing enough that recent longs into the pound will exit. Overnight,
the
released less-than-stellar August manufacturing figures and the trade is very
disappointed about the prospects in the
In other words, the slowing that surfaced in the
is now clearly surfacing in the
Near-term downside target in the pound is 154.48.
CANADIAN:
For a change, the Canadian is seeing extreme negative sentiment benefit its
currency. Maybe it’s the surprise rise in the dollar, or maybe it’s the rising
threat of war, but the Canadian isn’t as weak as one would expect given the
circumstances. In any regard, a trade below 62.50 is seen in the week ahead.
METALS
OVERNIGHT CHANGE to 4:15
AM: GLD +0.30, SLV
+2.5, PLAT -1.40; London Gold Fix $322.35, -$.70;
LME Copper
Warehouse
stks
865,150 tns, -1,100 tns;
Comex
Gold stocks 1.892, Unchanged; COMEX Silver stocks 107.4 ml oz, Unchanged; OVERNIGHT:
Higher gold action in Asia and Europe, mostly off weak
equities.
GOLD: The
COT report, as expected, showed an ongoing overbought condition, but with the
small specs actually lowering their net long by 6,087 contracts, the nearly
92,000 contract combined speculative long doesn’t look as extreme. In any
regard, it would seem that the gold will start the week out on a positive note
with equity markets, and more importantly banking issues, dominating financial
market sentiment. With rumors swirling on several key banks and write downs of
bad loans trickling into the headlines it would appear that uncertainty is a
little higher than the levels seen last week.
SILVER:
Silver comes into the session this morning 11 cents above the deflated and
double-dip recession pricing of $4.40 and 21 cents below the anxiety high of
$4.72 posted on Sept. 24. The silver market actually saw its small spec
and fund long narrow by 7,000 contracts in the latest COT report. We have to
think that silver will respect support of 447.5, especially if rumors are
confirmed that the French tanker was attacked by a small boats loaded with
explosives.
PLATINUM:
We would have to think that platinum will remain under pressure as the stock
market woes hits platinum demand views. For a thinly traded market, having 3,006
fund longs might make platinum vulnerable to a washout, especially if the stock
market continues to foster significant concern toward the global economy. With
extremely concerned about the West Coast port strike, one can expect Asian
platinum demand to decline. A logical correction point for Jan platinum comes in
at 550 and 545.
COPPER:
It was only a matter of time before copper forged into new contract lows and
with the dismal outlook for the stock market today, we would expect to see more
losses in copper. The West Coast port strike probably doesn’t have a direct
impact on copper, but in a roundabout way that could temper Asian buying of
copper. About the only positive copper has going for it is that the funds were
already net short 20,000 contracts last week and are probably short close to
25,000 contracts heading into the session today.
CRUDE COMPLEX
OVERNIGHT
CHG to
CRUDE +21, HEAT
+55, UNGA +55 — The energy market
will remain poised to react to the Presidential address tonight on
It would seem that the President will not be deterred from his aggressive
approach toward
but with the opposition from Congress and adverse public opinion, it is possible
that the only result of the speech is that the
Administration demands strong action from the UN, instead of unleashing a
military operation.
NATURAL GAS
The
natural gas market has certainly corrected some of the overbought condition seen
around the highs last week. According to the COT report, the natural gas fund
and small spec position was long 41,000 contracts, with hardly any net fresh
longs added in the latest week.