Futures Point To A Stronger Open

November 07, 2003

INTEREST RATES

OVERNIGHT CHANGE to   4:15 AM :BONDS -2 Even though Treasury prices finished
at the lowest level since October 21st yesterday, we still get the sense that
buyers are waiting on the sidelines in the event that the numbers this morning
fail to live up to expectations. While the positioning of the trade would seem
to diffuse the downside and ignite the upside, in the event of a poor number
this morning, there would certainly be a wave of selling if the number is a
“headline positive”. In other words, if the talking heads and the market in
general comes away from the number, with the slightest inkling of a turnaround
in the jobs sector, Treasury prices should thrust down below the October lows.

STOCK INDICES

OVERNIGHT CHANGE to 4:15 AM:S&P+50  DOW +11 NIKKEI +76 FTSE +45 The stock
market comes into the session today “nicely corrected” and in pretty decent
technical condition to withstand a volatile monthly employment report
reaction. While both the Dow and S&P futures have overnight prices that amount
to new highs for the year, the 3 1/2 day correction off the November 3rd high,
should have balanced the market and refreshed the amount of money waiting to
buy on the sidelines. We have said for almost three weeks now, that prices
should grind higher, pullback slightly and then grind to even higher levels
and that is exactly what should continue to happen.

FOREIGN
EXCHANGE

Dollar: The Dollar moved
above a critical moving average this week and for many, that is enough to
suggest that the trend has shifted upward. However, we have to give the down
trend another 2 hour look but have already suggested that it doesn’t make
sense to be short futures into this morning’s reports. In other words, the
penalty of being wrong in a short play is simply too great. Maybe the market
is expecting too much, too soon, out of the US job sector and in that case do
yourself a favor and make the play with an at the money put on the Dollar
Index. We would really be shocked if the numbers showed patently weak readings
today, as the breadth of the recovery evidence is pretty substantial. However,
there is that economic maxim that the jobs are the very last thing to recover
in the cycle. Even in the face of a strong reading, we doubt that the December
Dollar deserves to run much above an old gap closure at 95.13 but one might
argue that the Dollar deserves to trade back in the July and August
consolidation (96.00 to 98.00) in the event of ultra strong numbers. The
strong number mark off should be any jobs gain in excess of 75,000 jobs.

EURO:
As suggested early this week, the Euro has to prove that it isn’t headed lower
and the Euro doesn’t come into the action today with a significant amount of
supportive economic data. In fact, the Euro might only be bailed out from a
new low for the move, by a very poor set of US numbers. In other words, “as
expected” or “better then expected” US payrolls puts the Euro down toward the
next target of 113.18.

YEN:
The near term path is down in the Yen but that action comes almost exclusively
on the heels of the strength in the Dollar. Favorable auto sales readings in
Japan countervail the stubbornly weak household spending issue. In fact, the
household spending problem in Japan is almost as big of a problem as the
payroll issue in the US. The Yen probably finds support off the moving average
line at 90.31 today.

SWISS:
There is the potential that the Swiss could be a little oversold and therefore
more downside might be difficult come by without a clear cut signal from the
US. In any regard, we would hold out for a decline to 72.00 but would consider
banking short profits, if the US numbers aren’t above expectations.

POUND:
We are actually surprised that the Pound hasn’t found support and therefore
today becomes an extremely critical junction. Maybe the Pound needs to slide
to consolidation support of 165 before a bottom and with the prospect of the
US numbers today maybe there is more downside. Buy a Dec 168 call for 90 or
better in an attempt to pick a bottom but we are not ready to suggest buying
futures.

CANADIAN DOLLAR: The Canadian regains moving averages with a move above 74.66
today but as we suggested yesterday, this is a classic set up to use calls
instead of futures. It is possible that strong US numbers resume pressure on
the Canadian. The trend is up but risk control could be a very wise tool
today.

METALS

OVERNIGHT CHANGE to  4:15
AM:GLD+0.60 ,SLV+1.3  ,PLAT+3.00, CP -40 London A.M. Gold fix $381.00 -$.90
LME COPPER STKS 511,075 tons +1,850 tons COMEX Gold stocks 2.91 ml Unchanged
Comex Silver stocks 118.2 ml oz Unchanged OVERNIGHT: The Asian action saw
tightened ranges with a minor downward bias.

GOLD:
It seems to us that Australian and Japanese traders are poised to turn on gold
with a liquidation wave. That view is based on the idea that gold has
certainly been tied directly to the Dollar and in general gold has faded in
the face of favorable economic readings from the US. The link between gold
selling and a stronger economy mostly comes from the fact that a good economy
has resulted in the Dollar breaking out to the upside.

SILVER:
Silver has close in support at $4.95 and then again at $4.92 and fortunately
it hasn’t had a tight correlation with gold, or we would be a little more
bearish toward prices today. In a surprise rally above $5.07 today, December
silver would regain a critical pivot point and could then encounter short
covering. However, we are not sure the funds are going to be willing to step
up for silver unless prices return to the $4.90 level first.

PLATINUM: The platinum market continued to consolidate this weeks gains but it
might be impacted by the US numbers. There hasn’t been a significant
correlation between platinum gains and the improving world economy but at
these lofty prices we would think that platinum would be vulnerable to slack
readings. 

The
copper market comes into the session under profit taking fire but hopeful that
US numbers can turn the tide. COPPER: With the international copper markets
down hard (Chinese copper was limit down) we have to think the early edge goes
to the bear camp. Furthermore, it should also be noted that Shanghai copper
stocks increased by 15,956 tons in the latest week and that is beginning to
spin off as a pattern.

CRUDE COMPLEX

OVERNIGHT CHG to    4:15 AM   :CRUDE +23  ,HEAT+58  ,UNGAS+58 Energy prices
were unable to hold all of the early gains yesterday but did manage to climb
above the post API/DOE reaction highs. Therefore, the market seems to have
consolidated the recent price adjustment and established a slightly higher
trading range.

NATURAL GAS

Prices
were mauled by the combination of another injection and because of profit
taking in the regular energy complex. The trade was certainly put off by the
fact that the annual supply deficit narrowed to just 10 bcf and the total
working storage tally continues to rise above the 3.1 trillion cubic feet
level.