Futures Point To A Flat Opening
INTEREST RATES
OVERNIGHT
CHANGE to
4:22 AM
BONDS
-1 — The bond market stands poised to breakout to the upside, especially if the
numbers today show any notable weakness. We have to think that the weakness in
the stock market contributed to the gains in the bonds Wednesday. Therefore, a
trade back below 838 in the March S&P could spark renewed long interest in bonds
today.
STOCK INDICES
OVERNIGHT
CHANGE to 4:22 AM: S&P +20,
DOW +6, FTSE
+41, NIKKEI -27.5 –Â It is pretty clear that
the recovery off the February low was purely technical in nature, as the
fundamental outlook for stocks remains negative. In fact, with the weak housing
numbers Wednesday and more layoffs in the chip sector, it would appear that the
world economy remains in a “soft spot”. Even with a Fed member suggesting that
the worst of the unemployment problem might be behind the
the stock market wasn’t stirred into a buying posture.
FOREIGN EXCHANGE
DOLLAR: About the only strong trend in play would seem to be the
Canadian gaining on the Dollar. In our opinion, seeing the Canadian rally means
that the US Dollar pressure will not be severe. In fact, unless the US and UK
strike out miserably with the UN use of force resolution and decide to move
forward with an attack, we don’t see the US Dollar coming out of the last months
consolidation to the downside. Certainly, US numbers were slightly disappointing
yesterday, but we don’t get the sense that the market is as confident in
pressing the short side of the Dollar as was seen in early January. In fact, it
is possible that the
numbers today give the Dollar a chance to bounce slightly. We continue to get
the sense that a “use of force” measure at the UN could increase the odds that
Saddam seeks asylum. In the event that Saddam seeks asylum, one would not want
to be short the Dollar. In the near term, it makes no sense to buy the Dollar
because of a small probability that Saddam will seek asylum. Expect the Dollar
to waffle in a range bound by 99.60 and 100.93.
EURO: For the time being we suspect that the
Euro will respect support of 106.74 and might even make a bid at resistance of
108.39. However, we suspect that coming economic information from the EU will
turn more would be buyers away from the Euro. In fact, the strong gains being
posted in the Canadian and the on again, off again buying of the Nikkei suggests
that other areas might be getting some of the flight to quality long interest
that was previously directed toward the Euro. An upward bias but a less
impressive upward bias is seen ahead.
YEN: Apparently some forces within
are calling for additional moves to combat deflation,
especially since
is trying to convince the G7 it is countering the deflationary problem in its
country. The fact that Japan showed an increase in household spending (+.8%
Oct-Dec) indicates to us that they are in fact doing better against deflation!Â
Therefore, we suspect that the Yen will maintain an upward bias, with near term
resistance seen at 85.00. While the BOJ said they would not ask for G7
intervention, that stance might change if the Yen rises above 85.30 in the
coming weeks.
SWISS: The Swiss bounced off critical moving
average and trend line support and now appears poised to recapture some flight
to quality long interest. However, we have to think that upside momentum is
toned down and that 74.00 resistance could limit the upside.
POUND: Soft retail sales readings (-1%
January) show that the economy is weakening from the levels seen in early 2002.
With the
expecting a new resolution before the end of the week, the trade is bearish
toward the Pound, for the same reasons it is bearish toward the Dollar. Maybe
the recent lows will hold but a failure to hold 158.72 could mean a slide to
157.50.
CANADIAN: The chart doesn’t lie and the
upside breakout overnight hints at a strong status for the Canadian. It is our
opinion that the Canadian economy is strong enough to merit part of the long
interest but that the real reason behind the rally is that the Canadian is
seeing flight to quality long interest. It is also possible that some
money is moving toward the Canadian. Near term upside targeting is seen at
67.10.
METALS
OVERNIGHT CHANGE to 4:22 AM:
GLD +1.90, SLV
+1.5, PLAT +4.20,
CP +.85; London Gold Fix $351.10,
+$3.90; LME Copper Warehouse
stks
825,675 ton, -550 tns;
Comex Gold stocks 2.269 ml, +104,995 oz;
COMEX Silver stks
107.6 ml oz, Unchanged; OVERNIGHT: The Japanese were light buyers possibly off
Korean military tensions
GOLD: It would seem that the war tilt is
back on and the gold market is once again the prime benefactor of the renewed
anxieties. We see the basis for the increased war tilt as the
moved to order its citizens out of
We also noted some attention given to stories about
possibly trying to import illegal arms by boat and that would certainly turn
more of the international community toward the
position on war.
SILVER: Â Taking its cue from the gold
market, silver appears to be poised to climb back above $4.70. We are really
impressed with the silver markets action of the last 7 days, as it didn’t weaken
in the face of significant stock market weakness and at times silver even
managed to distance itself from gold weakness. Since open interest declined from
103,574 contracts to 90,355 contracts on the recent break, we have to assume
that the small spec and fund long were also reduced, leaving the market in a
slightly improved technical position.
PLATINUM: With open interest tailing off and
the trade unresponsive to the recent Russian export news, it is clear that
platinum isn’t in an aggressively bullish mood. Weakness in South African
platinum mining stocks, is said to be the result of
currency considerations, but we suggest any weakness in the stocks would be met
with strong investor interest if platinum itself were in vogue. In other words,
the recent selling wave is probably complete, but we sense a lack of power
behind the coming recovery in prices. Critical resistance is seen at $663.8
April. Â
COPPER: Chinese copper futures were lower
overnight but the trade did document some type of buying interest and that gives
the
session hope. In fact the early action shows a gap up move in copper, possibly
because of Japanese physical interest and Japanese buying in
We just don’t buy into the idea that copper is to be bought in the face of
coming war but the market likes to play that card.
CRUDE COMPLEX
OVERNIGHT
CHG toÂ
AM
CRUDE -21,
HEAT -26, UNGA +21,
N-GAS +21 –Â The war track was apparently
kicked back into gear yesterday by suggestions that the
was ordering all its citizens out of
and the Gulf region. However, there were also exile stories that surfaced again
Wednesday afternoon and that could have mitigated the upside tilt.
NATURAL GAS
The trade
and fund buyers continue to push the natural gas higher into overbought status.
With the gains this week, we have to think that natural gas is about to reach
the proximity of a modern day record in spec long positioning.