Futures Point To A Slightly Stronger Open
INTEREST RATES
OVERNIGHT
CHANGE to 04:19 AM:BONDS+3 The Treasury market continues to forge higher highs
and with short-term technical indicators remaining in a buy mode, one can hardly
argue against more stepwise price gains. The trade is expecting slightly weak
macro economic numbers today and the looming trade war with China has to be
considered supportive to Treasuries because that could serve to derail the
global economic recovery. However, it should be noted that the Chinese hold
massive quantities of US Treasuries and those holdings could easily be used as a
club against the US Administration.
STOCK INDICES
Overnight
Asian stocks prices were lower off the trade war threat, as investors are
concerned that protectionist actions by two major trade powers will end up
discouraging economic activity. If the trade issue were the only problem, one
might consider looking for a near term bottom in stock prices, but as it stands,
the pace of growth is becoming even more suspect. It should also be noted that
the stock market doesn’t have a history of making key bottoms off consolidation
patterns, or following a series of minor daily losses.
FOREIGN EXCHANGE
EURO: The
Euro managed to rise to another new high against the Dollar and in the near
term, the Euro zone doesn’t even have to produce strong numbers to see even more
gains. In fact, despite the soaring currency exchange rate, the Euro zone still
managed to post a trade surplus and that means the economy isn’t being
dramatically impacted by the rising exchange rate! Therefore, one can hardly
limit the propensity for more Euro gains but one can hardly even project upside
targeting because of a lack of historical reference. In conclusion, traders must
simply stick with the trend and be long!
YEN: The
Japanese economy is beginning to be buffeted by the fear of a US/Chinese trade
war. We also think that the lackluster US economic action is another undermine
for the Japanese economy. Therefore, the Yen might not participate in the upside
at the same pace as the Euro or the Swiss. We also think that intervention
threats are also discouraging additional gains in the Yen. Being long the Yen at
current levels is really unattractive from a risk and reward perspective.
SWISS:
The Swiss is certainly short term overbought and vulnerable, but we would have
to think that an all out Asian trade war with the US, would give the Euro and
the Swiss a big advantage. Look to buy a correction in the Swiss to 76.64.
POUND: We
have to wonder if political issues will pressure the Pound over the coming
sessions. We also think that the Pound is extensively overbought and that the
trade is capable of pushing the December Pound back down to 169.07.
CANADIAN
DOLLAR: While the Canadian might be exhibiting trouble with technical resistance
off the recent highs, the market should be able to punch into new high ground.
The Canadian remains in a buy mode off most short term technical indicators and
the fundamental tilt would also seem to promote a return to new high ground.
METALS
GOLD:
After the gold market managed to regain half of the losses posted on Monday, in
the action Tuesday, it appeared as if the gold market found new life. With the
U.S. Dollar touching the lowest level since January 1997 Tuesday afternoon, the
bull camp certainly looks to have the edge.
SILVER:
The silver market should continue to get support from the gold market but
short-term technicals in silver became overbought quicker than we expected.
While the bias in prices might be up, the risk and reward of fresh longs is
pretty unattractive. Lastly it should be noted that COMEX silver stocks rose and
now stand above 120 million ounces and that should discourage some fresh buying
interest.
PLATINUM:
The platinum market continues to trade in the general direction of gold and
silver but remains in a well defined up trend pattern. Near term support is
767.5 Jan.Â
The
overnight action in copper is certainly a technical failure and a trade back
below 92.20 could unleash aggressive COPPER: stop loss selling. We also have to
suggest that the fundamental outlook is also pretty negative, with the Chinese
trade war threat a potential killer for the bull trend. Certainly the threat of
a Canadian copper strike is supportive but if the world’s biggest buyer refuses
to buy US copper, that leaves the US market vulnerable.
CRUDE COMPLEX
OVERNIGHT
CHG to 04:19 AM:CRUDE-15, HEAT-26, UNGAS-50Â Supposedly, the energy market
rallied off fears of a refinery problem in California. We also saw rumors
swirling that the trade was buying gasoline because there were fears that the
new energy Bill would result in gasoline shortages off the elimination of MTBE
as an additive.
NATURAL GAS
After
some initial weakness, the natural gas market managed to reject the selling
pressure and close respectively on Tuesday. The trade remains fearful of the
upcoming inventory readings, but is finding support from reports of snow
forecasts for the plains and significantly firmer regular energy complex price
action.