Futures Point To A Stronger Open

• October 20, 2003
• TradingMarkets Editors

INTEREST RATES

OVERNIGHT
CHANGE to   4:15 AM :BONDS -6  The weekly COT report in bonds showed a massive
short spec position of nearly 39,000 contracts (as of last Tuesday) and since
then the market faded aggressively and then recovered. Therefore, the market is
moderately oversold but until the net short supercedes 50,000 contracts, the net
short position isn’t at a historical record. We do see the 106-00 level as a
support zone, especially since the US economic report slate is thin to start the
week.

STOCK INDICES

OVERNIGHT
CHANGE to 4:15 AM:S&P+260 DOW +11  NIKKEI +123 FTSE +11 It would seem like the
market is going to get a positive start to the week because of several favorable
earnings reports. However, the market needed the favorable fundamental lift
because the technical posture of the market following the breakdown last
Thursday and Friday, could have left the market in a compromised position.
Certainly, the surprise threat of terrorism seen last Friday morning, fostered
the selling wave and certainly took prices lower than they would have went on
their own accord.

FOREIGN EXCHANGE

Dollar: It is not clear what
the market thinks of the developments at the APEC conference, as the Chinese
seemed to suggest that the Yuan could eventually be pegged higher but that
changes were not expected in the short term. It seems like the market realizes
the need for such a large country of commerce like China, to see its currency
float, but apparently the structural changes necessary for that to happen are a
long way off. In the mean time, the US currency has seen a slide in US equity
prices and a minor terrorism threat and that would seem to favor the bear camp.
However, it is clear from the overnight action that the Dollar attempted a sharp
decline and that decline was rejected. Therefore, the Dollar is apparently
hemmed into a range bound by 92.22 and 93.18. The trend is down but the Dollar
doesn’t seem to be ready to resume the trend. If the December S&P falls back
below 1034, that could be a signal for the Dollar to make a new low for the
move. 

EURO: A
much weaker Euro zone trade surplus suggests that the soaring Euro is having an
impact on import/export business and that would seem to be a drag on the
recovery effort. Therefore, we suspect that the Euro comes into the week in a
slightly vulnerable posture. However, support under the market looks significant
around 115.62 and therefore, the market probably won’t resume the downside
action unless the outlook toward the US recovery is upgraded aggressively by
events this week. Traders might buy the December Euro on a slide to 115.83 and
look to risk the position to 114.80.

YEN: A
massive range in the Yen overnight, with a lower result, would seem to suggest
that the BOJ has been involved in the market again. If the December Yen manages
a trade below 91.00, that could mean a quick slide back down to 90.70 but we
have to think that market forces will support the Yen at current levels and
forge a low soon. Because the APEC conference didn’t yield a hard verdict
against the Chinese currency, we don’t see the trade changing its bullish
opinion toward the Yen. 

SWISS:
Critical support in the December Swiss comes in at 74.80 and the weakness in the
Euro seems to be keeping the Swiss under a liquidation watch. Unfortunately, the
Swiss has significant support under it about 40 points under the current market
and that makes short term sales unattractive.

POUND:
The Pound continues to have an upward bias. Not only has the market shown a
pattern of higher lows, but it would seem like the Pound is primed to forge a
new higher range in the coming week.

CANADIAN
DOLLAR: A very nice up trend channel is fleshed out on the charts in the
Canadian Dollar. As long as the daily action in the US Dollar avoids wild
swings, the Canadian can forge even more gains. The top of the channel in the
December Canadian comes in up at 76.70. +

METALS

OVERNIGHT CHANGE to   4:15
AM:GLD+0.00 ,SLV+0.0 ,PLAT+4.70, CP +85 London A.M. Gold fix $371.45 -$.35 LME
COPPER STKS 542,825 tons -2,525 tons COMEX Gold stocks 2.81 ml -199 oz Comex
Silver stocks 113.0 ml oz +3,911,444 oz OVERNIGHT:  Lower Gold prices in Asia
mostly off a firming US Dolla

GOLD: The
gold market enters the week in a partially damaged technical condition, with the
market probing to the lowest level in nearly two months before bouncing
slightly. Also the weekly COT report in the gold market showed a minor increase
in the spec long position, which puts the net spec long at 142,0000 contracts.
Therefore, the gold market continues to maintain an overbought condition.

SILVER:
The silver market has a real problem with the most recent increase in COMEX
stocks, as the new total of 113 million ounces is a level that really has to
discourage fresh longs. In fact, considering the sluggish action of both gold
and silver over the last 3 weeks, it is not a good combination to see rising
stocks and an ongoing large small spec and fund long position. Certainly silver
reduced its net spec position by 5,400 contracts in the recent COT report, but
the net long as of October 14th, was still lofty at 50,000 contracts.

PLATINUM:
The platinum market managed a gap higher probe overnight and would seem to be
prepared to test new high ground this week. However, seeing platinum rise
despite the lackluster performance in gold and silver, deflates the potential
bullishness slightly. Trend line support comes in today at $719.6, with
resistance seen up at $736.3 in the January contract.   

COMMITMENT OF TRADERS ANALYSIS – FUTURES & OPTIONS  Oct 7 – Oct 14, 2003

     
         LARGE SPEC          COMMERCIAL           NON-REPORTABLE

                 NET                  NET                   NET

            POSITION   NET CH    POSITION    NET CH    POSITION   NET CH

SILVER          23194    -3969      -51408      5423       28214    -1453

COPPER          48142     8279      -61109     -7113       12967    -1165

GOLD            99662      -26     -142616      -641       42954      667

PLATINUM         5050     -554       -6398       310        1348      244

 

With LME
copper posting a 3 year high overnight, a positive tone is set for the US copper
session. However, the weekly COT report in COPPER: copper showed a net spec long
of 61,000 contracts and that is certainly a new modern day net spec long record.
With the bullish tilt toward copper so conclusive, the overly long spec position
probably won’t diffuse the upside but that large long will be a consideration if
the market begins to violate any significant support on the charts.

CRUDE COMPLEX

OVERNIGHT
CHG to    4:15 AM   :CRUDE -37  ,HEAT-99  ,UNGAS-94 The energy complex starts
the week out on a vulnerable note, with the most recent crude stock build
ringing in the ears of the market. However, the weekly COT report surprisingly
showed crude oil to be much longer in the fund category than expected, with the
funds adding in 47,041 contracts of longs in the five sessions leading up to the
October 14th mark off date.

NATURAL GAS

Given the
bearish revelations on supply in the regular energy complex and the continued
narrowing of the annual working storage deficit in natural gas we now think that
prices can fade even lower in the last two months trading range. With the
weather outlook pretty normal and the regular energy complex coming into the
recent washout a little longer than expected, the natural gas market remains
vulnerable.