Futures Point To A Slightly Stronger Open

• September 8, 2003
• TradingMarkets Editors

INTEREST
RATES

OVERNIGHT
CHANGE to   4:15 AM :BONDS -8
It seems a little strange that stock prices have managed to hold up, at the same
time that the Treasury market is sensing such concern over the jobless recovery.
Therefore, bond traders should be watching stock prices closely. In the event
that stock prices continue to rise we see the Treasury market simply limited by
the action but if the stock market were to register concern over the jobless
recovery that could be cause for Treasuries to rise toward the August highs.

STOCK
INDICES

OVERNIGHT
CHANGE to  4:15 AM:S&P+190 DOW
+22 NIKKEI +32.9 FTSE +18 Apparently the stock market isn’t too concerned
about the struggling US job market, as it managed to weather last Friday’s news
with only minor selling pressure. So far, the market is convinced that the
monthly unemployment report is a lagging indicator and that eventually the
economy will begin to add jobs. We think the positive attitude toward stocks
will maintain, as long as the US and global economies are showing positive
progression.

FOREIGN
EXCHANGE

Dollar:
The Dollar remains under the gun this morning with prices hovering near last
weeks lows into the opening this morning. However, we continue to be surprised
that the trade hasn’t taken it to the Dollar, off that dismal unemployment
report last week. We also don’t see much in the way of bullish information to be
released early this week, as the US President reconfirmed that the US is stuck
in a long battle in Iraq and Afghanistan. Some markets were of the mind that the
US was getting close to the end in Iraq. In the near term, the Dollar looks to
slide back down to the early August lows. In other words, the September Dollar
looks set to slide to 96.00. In order to reverse the downside thrust started
last week before the payroll report was released, the US economy is going to
have to show itself to be the strongest in the G7 and that would be a monumental
task.

EURO:
While the Euro is rising off the Dollar woes, it would not seem like the Euro is
regaining the status of a MOST favored currency. In other words, the Euro is
getting a knee jerk reaction from the liquidation in the Dollar, not from the
idea that the Euro zone is the place to be in the coming months. In fact, unless
the Dollar really stumbles, we see the September Euro running into significant
overhead resistance coming in up at 111.42.

YEN:
A massive range down overnight was rejected, which suggests to us that the BOJ
was an early seller but once the Monday morning trade came into play, the market
rushed in to test the resolve of the BOJ intervention effort. We see the range
in the Yen this week as 86.50 to 84.96 and that is certainly a forecast for
volatility. In the near term, we see the September Yen attempting a rally up to
the top of the projected trading range.

SWISS:
Considering the persistent rise in gold and the weakness in the Dollar, we
suspect that the Swiss is primed to climb back into the July trading range that
was bound by 72.18 and 74.50. In other words, be long the Swiss but use a stop
at 71.74. Unfortunately the Swiss doesn’t look to get flight to quality interest
and therefore the pace of gains might be measured and slow.

 

POUND:
With an Industrial production reading for July coming in a little stronger than
expected, the Pound is given a slight fundamental lift to start the week. Near
term support comes in at 158.18 and then again down at 157.50. Given the Dollar
outlook the Pound could easily see 160 pricing this week. CANADIAN DOLLAR: With
the market forging an upside breakout last week and volume and open interest
rising on the breakout, we have to think that the Canadian is primed to run
toward 74.00. Since the Canadian is getting support from the US dollar slide,
the Canadian could have easy gains until the point where the US September Dollar
reaches 96.00.

METALS

OVERNIGHT
CHANGE to   4:15 AM:GLD-1.30
,SLV-2.0  ,PLAT-4.20, CP -10 London
Gold Fix $376.40 +$5.40 LME Copper Warehouse stks 612,575 tns -1,875 tons Comex
Gold stocks 2.727 ml oz Unchanged Comex Silver stks 105.8 ml +51,386 oz
OVERNIGHT: Gold futures in Tokyo were mixed but Chinese gold prices were higher.

GOLD:
With New York gold rising to the highest level since early February it would
seem that the market is anticipating a sustained decline in the Dollar and is
apparently unconcerned about the ongoing overbought futures condition. The
recent COT report showed a net spec and fund long of nearly 171,000 contracts,
which is almost 40,000 contracts above the old level set early in the year on
the run to $391. The funds alone come into the week net long 125,000 contracts
(if one adjusts for the action since the COT report was measured).

SILVER:
Gold is providing pretty good leadership to silver but recently we have seen
some negative stock builds into the COMEX warehouse. It should also be noted
that silver is also carrying a massive spec and fund long of 75,000 contracts,
but apparently both gold and silver have the ability to add even more longs. In
a word, it would appear that investment interest is returning to the precious
metals.

PLATINUM:
A big gap down trade would seem to undermine platinum and with the net spec and
fund long 7,000 contracts on a total open interest of only 9,279 contracts, it
is clear that platinum is extensively overbought and over extended. However, in
order to see platinum forced below channel support of 700.7, we suspect that
world equity markets would have to send off a signal that the world recovery is
in trouble.  

COMMITMENT
OF TRADERS ANALYSIS – FUTURES & OPTIONS 
Aug 26 – September 2, 2003

              
LARGE SPEC         
COMMERCIAL          
NON-REPORTABLE

          
      NET                 
NET                  
NET

           
POSITION   NET CH   
POSITION    NET CH   
POSITION   NET CH

SILVER         
45003     -799     
-77522     -3728      
32519     4527

COPPER         
31399     2454     
-41455     -3258   
   10057     
806

GOLD          
123118    26097    
-170939    -29861      
47822     3764

PLATINUM        
5944      102      
-6987      -345       
1043      243

 

The
International Copper Study Group this morning pegged first half 2003 refined
copper deficit to be 217,000 tons and that is supportive considering that some
producers are still concerned about slack demand. With both LME and Shanghai
copper prices up sharply overnight the COPPER: US copper market certainly looks
to start the week in the same strong posture that it finished last week. The COT
report showed the net spec and fund long to be 41,000 contracts but with the
market adding almost 200 points since that report was measured we suspect that
the net spec long is closer to 46,000 contracts.

CRUDE
COMPLEX

OVERNIGHT
CHG to    4:15 AM  
:CRUDE +4   ,HEAT+35 
,UNGA+34 While energy prices managed to bounce up from their lows
late last week, the action wasn’t very impressive. In fact, from a technical
perspective the energy complex continues to look very vulnerable on the charts.

NATURAL
GAS

The big
dichotomy in natural gas continues with the funds net short 38,330 contracts and
the small specs net long 25,999 contracts. In other words, the showdown for the
determination of the coming trend has yet to play out.