Futures Point To A Stronger Open

November 10, 2003

INTEREST RATES

OVERNIGHT CHANGE to 04:10 AM:BONDS+2 Since the Treasury market was already net
spec short 31,000 contracts as of last Tuesday; the decline last week could
have taken the market down to an extreme oversold situation. In our mind,
there had to be something standing in the way of the downside potential last
week, because the fundamental numbers certainly justified more of a decline
than was ultimately seen. Maybe the trade was focused on the loss of jobs in
the manufacturing sector, which highlights the overly skeptical conditioning
of the marketplace.

STOCK INDICES

OVERNIGHT CHANGE to 04:10 AM:$+19, YEN+50, SF-40, CA+15, EU-51 

Dollar:
If the US Treasury and US stock markets don’t think that interest rates are
set to rise and are not going to give credit for the pace of the US recovery,
one has to wonder how the US Dollar could rise above last week’s highs? In
other words, what type of report could be seen in the near term that would
prompt the Dollar to rally sharply! Therefore, the market might be set to
investigate where support in the Dollar will be forged. The December Dollar
Index looks to have a critical pivot zone at the 93.00 level and might decide
to return to a range bound by 92.99 to 92.40. In fact, unless the US stock
market begins to factor some outstanding growth prospects, or the US Fed
begins to send off a change of attitude on raising interest rates, the Dollar
should have little support.

FOREIGN
EXCHANGE

Dollar: If the US Treasury
and US stock markets don’t think that interest rates are set to rise and are
not going to give credit for the pace of the US recovery, one has to wonder
how the US Dollar could rise above last week’s highs? In other words, what
type of report could be seen in the near term that would prompt the Dollar to
rally sharply! Therefore, the market might be set to investigate where support
in the Dollar will be forged. The December Dollar Index looks to have a
critical pivot zone at the 93.00 level and might decide to return to a range
bound by 92.99 to 92.40. In fact, unless the US stock market begins to factor
some outstanding growth prospects, or the US Fed begins to send off a change
of attitude on raising interest rates, the Dollar should have little support.
We do think that the Dollar will manage to perform against the European
currencies but we doubt that the Dollar will be able to rise against the Yen
and the Pound.

EURO:
In the near term, we would expect the Euro to drift back down toward the
recent lows of 113.65 and if the US stock market manages a rise to new high
ground, we suspect that the Euro will make a new low for the move. Right now
the Euro just can’t compete with the US economy but the trade isn’t completely
accepting of sustained economic growth in the US and that is the only thing
keeping the Euro from a new low for the move.

YEN:
The recent elections in Japan resulted in a slight loss of power by the
current administration and that could make it difficult to direct the recovery
and possibly difficult for the government to go beyond budget on the
intervention effort. In the near term, the Japanese economic pace and the
failure to see the Dollar come into strong favor, means that the Yen is set to
rise, possibly into new high ground. In fact, about the only thing that we
thought would hold the Yen down was a big US payroll number and now that isn’t
even capable of holding down the currency. Therefore, we see a test of at
least 92.85. 

SWISS:
After the bounce last week, the Swiss is primed for a return to new lows for
the move. The economic differential is clearly in favor of the bears and the
only thing holding back the Swiss from more significant declines, is the idea
that interest rates might remain attractive in Switzerland. Initial downside
targeting is 72.47.

POUND:
Minor gains in inflation readings seemed to temper the gap up attempt
overnight in the Pound. We also see the UK home price stats as a little
limiting for the Pound. However, we have to think that the Pound made a solid
low last week and is now set to rise to at least 168.21.

CANADIAN DOLLAR: Gap and go is the rule of the day in the Canadian. We see the
old highs targeted as the US payroll report wasn’t able to deflate the
Canadian and now it would appear that the bull camp has clear sailing to at
least the old highs.

METALS

OVERNIGHT CHANGE to 04:10
AM:GLD+0.30, SLV-1.30,PLAT+3.00 London A.M. Gold fix $382.85 +$1.85 LME COPPER
STKS 508,325 tons -2,750 tons COMEX Gold stocks 2.96 ml +56,232 Comex Silver
stocks 118.2 ml oz -1,024 oz OVERNIGHT: More Japanese buying overnight helped
gold mount a positive trade.

GOLD:
This morning the gold market has mounted a slight upside breakout but did not
manage to hold all of the gains. The COT report showed the spec and fund
position (using options and futures) to have reached 158,000 contracts, which
is a level that is hovering moderately below the old speculative high of
170,000 to 180,000 contracts. An article on de-hedging suggests that the pace
of hedge lifting is slowing.

SILVER:
After peaking out above resistance of $5.07 the silver market has once again
lost momentum and set back in the range. We see the $5.02 level as a critical
pivot point with even lower support seen down at $4.93. However, like gold,
the silver market is having trouble getting the trade focused on a consistent
theme.

PLATINUM: The platinum market continues to grind ahead in its up trend
pattern. The evidence of a growing economy is apparently enough to
persistently push prices up considering that the market sees nearly a fixed
supply condition. The top of the channel in the January platinum contract
comes in up at $768.3.  

COMMITMENT OF TRADERS ANALYSIS – FUTURES & OPTIONS  Oct 28 – Nov 4, 2003

               LARGE SPEC          COMMERCIAL           NON-REPORTABLE

                 NET                  NET                   NET

            POSITION   NET CH    POSITION    NET CH    POSITION   NET CH

SILVER          30158    -2777      -57587      2111       27428      665

COPPER          44339     -786      -56223       906       11884     -119

GOLD           112863    -4633     -158938      3389       46075     1244

PLATINUM         5270       87       -6664      -288        1395      202

 

Reports
of Chinese liquidation is something that will give the bulls a second thought,
considering that prices in general have been down consistently since last
weeks early high. Since the outlook on the COPPER: economy is improving and
prices are balking, we suspect that prices simply got too expensive for some
players. The COT report showed the fund and small spec position to be 56,000
contracts long but that positioning is certainly overstated given the
correction off the recent high.

CRUDE COMPLEX

OVERNIGHT CHG to 04:10 AM:CRUDE+41, HEAT+100, UNGAS+79 A suicide attack on
Saudi Arabia could underpin the market and help to consolidate the gains
posted last week. Seeing attacks on the most prolific oil exporter is
something that the market can hardly downplay, especially when one considers
the historically tight level of US supplies.

NATURAL GAS

It is
clear that colder temps and good economic prospects served to countervail
selling pressure generated by the recent inventory report. It is a little
discouraging to bull players to see the annual deficit narrow to an
insignificant level and that deficit might completely go away this week with
what we think will be the last injection.