Futures Point To A Slightly Stronger Open
INTEREST RATES
OVERNIGHT
CHANGE to 04:18 AM:BONDS-6 The Treasury market gave a little ground off the
highs yesterday, but really didn’t give ground in relative proximity to the
release of favorable economic numbers. In other words, the strong Empire State
figures seemed to have very little to do with the bonds and notes falling back
off their highs Monday morning. We do note that corporate issuance is meeting
with solid demand (as noted in the recent Ford issue) and that highlights the
ongoing investment in current Treasury yields and that also explains the general
upward tilt in Treasury prices since the November low.
STOCK INDICES
Overnight, the trade might gather some long interest this morning and attempt to
bounce, but we fear that buying interest will dry up once prices return to the
consolidation lows forged last week. Consolidation lows in the Dow come in at
9,759 and at 1050 in the December S&P. In general, a short covering wave might
be joined by some value hunting but unless something more significant is thrown
off from the macro economic front, we are doubtful that the market will do much
more than forge a decent bounce.
FOREIGN EXCHANGE
EURO: The
Euro seems to be poised for a near term technical test and a trade back below
117.17 could prompt stop loss selling by longs that rushed into position last
week. The October CPI reading of +0.1 in the Euro zone is really discouraging
for a currency that is competing with emerging growth in other countries.
However, until the December Euro falls below that critical pivot of 117.17 the
bulls might be able to hang on.
YEN:
Apparently the Japanese might be preparing to upgrade their economic outlook
again and that could effectively truncate the negative sentiment thrown off by
the terrorism threat over the weekend. However, the bias in the currency would
seem to be slightly lower today and a hold above 91.70 is necessary to avoid a
liquidation wave.
SWISS:
The Swiss would appear to be in the midst of a wide trading range bound by 74.90
and 76.00. In fact, the Swiss might need to hold above close-in support of 75.40
to shut off a minor liquidation tilt.
POUND:
After an aggressive early overnight bid, the Pound seems to have faltered,
possibly because inflation numbers failed to show a quickening of activity in
the UK. It is also possible that demonstrations against the Prime Minister and
the US President will serve to pressure the Pound over the coming sessions, as
the US President visits the UK. Critical near term support in the Pound could be
tested this week down at 167.87.
CANADIAN
DOLLAR: The trade continues to talk about commodity currencies being under
pressure, but we don’t think that argument holds water given the ongoing
strength in most commodity prices. While the Canadian has once again forged a
significant technical correction, that action should put the currency in a
better position to rally in the coming sessions. Expect a return to the recent
highs but a close below 75.90 would be a failure.
METALS
GOLD:
Supposedly gold managed a slight recovery overnight, off a softer Dollar and
possibly some bargain hunting. Certainly the magnitude of the break Monday will
discourage some would be buyers BUT the onus will be on the bull camp to prove
that more long players won’t be forced from position in the near term. We
continue to think that the market will forge above $400 but the trade has made
that level out to be a critical psychological level that must be taken out
quickly.
SILVER:
In order to get back above a critical pivot point the March silver needs to
regain $4.31 this morning but we still think that silver has to have positive
leadership from gold and a weaker Dollar to return to the recent highs. A
critical pivot point in the December Dollar Index for both gold and silver is
seen down at 91.50. Because of the slack macro economic outlook, the rise in
COMEX silver stocks and the lack of consistent daily price correlation to any
specific fundamental factor, we can’t advocate holding long silver positions at
this junction.
PLATINUM:
The platinum market managed to reject the correction Monday and is already back
above the mid point of a wide trading range yesterday. However, until the
platinum manages to regain 768 it isn’t even back into the old up trend channel.
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A massive
break in copper highlights the overbought status of a market that rallied 13
cents in almost 1 month. We COPPER: also think that copper is partially
responding to the slight downgrade in the pace of recovery in the US economy.
Supposedly, copper producers were holding off on restarting idled production
because the demand outlook for the US has remained soft.
CRUDE COMPLEX
OVERNIGHT
CHG to 04:18 AM:CRUDE-20, HEAT-10, UNGAS-21Â The trade is seeing some slight
pressure because some in the trade think that increased imports are on the way
to the US and that this week’s crude oil stocks could mount a slight rise. We
think the supply fears are being prompted by news that Saudi Arabia has
reportedly booked up to 10 million barrels of crude into the US for delivery in
the coming 4 to 6 weeks.
NATURAL GAS
The mild
or below normal temps certainly inspired the trade to attack natural gas and
with another potential injection looming later in the week, more downside action
is expected. In fact, with temps expected to be mild well into the 4th week of
November, the small specs are certainly under the liquidation gun.