Futures Indicate A Strong Open
METALS
OVERNIGHT
CHANGE to 4:15 AMÂ Â Â Â :GLD-3.00
,SLV-0.8Â ,PLAT+0.20 Â London
Gold Fix $361.30 -$4.60 LME Copper Warehouse stks
740,600 tns -4,000 tns Comex
Gold stocks 2.474 -225 oz COMEX Silver stocks 105.0 ml oz -2,375,971 oz
OVERNIGHT: Lower price action as a higher Dollar and stocks hurt gold interest.
GOLD:
The focus of the day will be the Presidents statement that he supports a strong
Dollar as that undermines a gold market that was already partially defeated by
strong gains in the equity market. As was the case for most of the early 90’s, significant
gains in global equity markets has a way of downgrading the desire to buy
gold. The weekly COT report showed the small spec and fund long in gold to be
102,000 contracts, which we think is down from the recent high of 112,000
contracts, that might have been in place around the highs on May 27th.
SILVER:
The net spec long in the silver market was 54,000 contracts last week, down
slightly from the prior reading and now even lower considering the weak action
since May 27th. We see a near term down side targeting of $4.46 in July silver
but with volume and open interest already falling sharply, we doubt that the
market is primed for a free fall. We would begin to look for a low in silver
when open interest declines below 77,000 contracts.
PLATINUM:
As usual the COT report showed only a moderate long small spec and fund position
but with the massive slide seen since the report we have to think that the specs
are now net short this market. We would have thought that platinum would have
been supported by what appears to be a stronger macro economic view being thrown
off by the international stock markets. In fact, it would seem that the trade is
now expecting to see better
US
economic
information as a result of the improved attitudes. July platinum might forge a
solid low this week down around the $620 level but open interest needs to
liquidate. Â
COPPER:
The copper market should probably finish off the upside run to that 80.60 target
we have been talking about for three weeks, as the macro economic outlook is
bright to start the week and copper fundamentals are conducive to more gains.
Critical support is seen at 78.00 and resistance is pegged at the long side
objective of 80.60. Chinese copper futures hit an 11-week high overnight and
that helps set the stage for an upward extension.
CRUDE
COMPLEX
OVERNIGHT
CHG to  4:15 AM Â
:CRUDE +30Â ,HEAT+58Â
,UNGA+56 Â July crude oil is positioned to test $30 this week, as
prices were able to hold support at $29 on Friday with the market shrugging off
bearish news on crude stocks and the possible restart of Iraq exports. In other
words, the markets action suggests that the bulls remain in control.
NATURAL
GAS
A firm
cash market and follow through buying based on bullish technical signals,
drove July natural gas prices through resistance at 6.200. This market also
flatly rejected a bearish stocks report and instead focused on total stocks
maintaining levels sharply below year ago.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS
-19 A heavy slate of economic news this week combines with what appears to be a
constantly improving macro economic outlook. However, the bond market has not
had a habit of looking over its shoulder to the equity market action. It would
almost seem like the bonds and stocks have diametrically opposed views on the
direction of the economy, but some reconciliation would seem to be at hand.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+570 DOW +48Â NIKKEI
+122 FTSE +40Â The Press is hyping the bull case this morning, with some
outlets even suggesting that the positive sentiment in the stock market is
expected to foster an improvement in the coming economic numbers. With the
recent COT report readings showing the small spec and fund positions in the Dow
and S&P to be net short, it would seem that the technical position of the
market is pretty good coming into the week. We have to think that the bulls are
going to dominate the trade, as greed (the fear of missing good rates of return)
attracts fresh buying.
FOREIGN
EXCHANGE
DOLLAR:
The President came to the aid of the Dollar by suggesting that he favors a
strong Dollar. One would think that the words of the President would have little
influence on the massive international foreign exchange market but considering
the consolidative
action since the middle of May and that massively oversold status of the US
Dollar, its not surprising that the Dollar bounced
this morning. We still think that to turn the trend up in the Dollar the
US
economy
and the
US
stock
market will have to clearly offer better rates of return because the world seems
to want to “hate” the Dollar. In the near term, we have to think that
an extension in the
US
stock
market rally will be beneficial to the Dollar. However, in the end, we don’t see
the merit in buying the Dollar considering the risk and reward setup. For the
coming sessions we have no doubt that the Dollar might try to forge an upside
breakout and that might make a long put play attractive.
EURO:
The euro has solid support around the recent consolidation lows and above the
old gap at 115.69 but we do have to think that the pressure will be on the Euro
to start the week. Economic reports overnight showed the Euro zone business
climate to be soft despite the end of the war. The trade is suggesting that the
ECB has room to cut rates and that German manufacturing is still a major
concern. We would not characterize the action in the Euro as one where the trade
is an interested seller but instead would-be buyers of the Euro are simply
backing away. Expect some minor weakness but no major failures in the euro.
YEN:
Weakness in the Euro has helped the Yen forge a weak near term low. However, the
recent path in the Yen is down but in order to put the Yen down to 83.00 chart
support the Dollar will have to forge an upside breakout on its charts. A
favorable Japanese auto sales reading overnight might serve to put a little more
underpin in prices than was seen toward the end of last week.
SWISS:
A bad chart trade in the Swiss probably comes directly off the vastly improved
macro economic feeling and the idea that the Swiss run is finished. Therefore we
see the Swiss sliding down toward chart support of 75.73.
POUND:
We are really surprised that the Pound has failed this morning, considering the
economic information out and the strong performance last week in the currency.
However, it is clear that the current fundamental mix isn’t capable of
supporting the Pound above the 162.90 level.
CANADIAN:
It would seem that the Canadian has gotten its act back together and if the US
Dollar weren’t showing such strength, the Canadian might already be back to the
recent highs. Traders might move back into fresh longs on the Canadian but could
consider holding some July Canadian put options as insurance against a trend
failure.