Futures Point To A Weaker Open

November 06, 2003

INTEREST RATES

OVERNIGHT CHANGE to   4:20 AM: BONDS +2 It remains clear that the Treasury
market is going to give the benefit of the doubt to the bull camp. While the
ISM non-manufacturing report probably isn’t as telling as the Challenger
layoff report, it is clear that a number of indicators are confirming the
recovery and that the jobs issue is a lone dissenting force. Even a Fed
official suggested yesterday that conditions are in place for an improvement
in the jobs issue.

STOCK INDICES

OVERNIGHT CHANGE to 4:20 AM :S&P-550 DOW -44 NIKKEI -285 FTSE -4 Yesterday
stocks managed to track lower off the residual of a softer than expected
layoff report and probably because of the uncertainty in Iraq. Today the
market is using the Bank of England rate hike as a justification for dumping
stocks. We concede that investors might be right in standing aside ahead of
the US monthly payroll report on Friday, because that report can basically
confirm or deny the recovery theme but to track lower off a rate hike is
seeing the glass as half empty.

FOREIGN
EXCHANGE

Dollar: We classify the
action today as marking of time, or a coiling of sorts for the action on
Friday morning. Considering the entrenched down trend in the Dollar prior to
the recent bounce, it would seem that the US economy has to prove it is very
strong just to discourage more selling. The US Administration wants the Dollar
to fall and the market seems content to worry about jobs even in the face of a
number of readings improving on the US economy. We are almost willing to take
the change in the ongoing claims report this morning, as a de-facto reading
for the monthly report Friday morning. If the ongoing claims show another big
rise that would suggest to us that the time is right to buy some December at
the money Dollar puts. However, because the evidence for recovery is stacking
up in other areas, we can’t suggest that anyone sell Dollar futures into the
Friday report. In the event that the Friday report is ultra strong (a payroll
gain in excess of 70,000) the Dollar could launch into a significant long-term
short covering rally.

EURO:
Undermining the Euro this morning were slightly disappointing GDP readings for
the 2nd quarter which suggest that the Euro zone comes into the recovery swing
much slower than other economic zones. We also think that the numbers this
morning from the US stand a better chance of sinking the Euro, than do the
numbers due out Friday morning. We are not sure that the Euro should fail at
critical chart support levels, but we do see the trade favoring the bear tilt.
In order to shut off the sellers, the December Euro needs to rise above
114.88. 

YEN: A
massive decline in the Nikkei overnight would seem to undermine the Yen today,
especially if the Dollar is going to show some strength off its productivity
numbers. Adding to the downside in the yen are Leading indicator readings for
September that came in below expectations but were still technically in the
expansionary posture. In other words, the fundamentals present today, won’t
discourage selling in the Yen. A chart failure takes place with a decline
below 90.82.

SWISS:
The Swiss might have found a level that can support prices, as the break off
the October high has been quite significant and that market is extensively
oversold. However, we can’t rule out a slide to 72.92 but that could be
considered a solid low price.

POUND:
The BOE raised interest rates by 1/4 point this morning and that seems to have
provided a lift to the currency. The Pound has been falling since the October
high off the prospect of a hike and now the fear and selling should lift. Use
this weeks low as a critical low.

CANADIAN DOLLAR: The Canadian is in a prime position to buy a call as the
recent correction has deflated premiums, balanced the technical condition of
the futures and should be a better risk and reward play into an extremely
critical volatility window on Friday. December options have only 29 days until
expiration so be sure to buy first out of the money calls.

METALS

OVERNIGHT CHANGE to 4:20
AM:GLD+0.10 ,SLV-2.0,PLAT+1.50 London A.M. Gold fix $381.90 -$.25 LME COPPER
STKS 509,225 tons -1,850 tons COMEX Gold stocks 2.91 ml Unchanged Comex Silver
stocks 118.2 ml oz Unchanged OVERNIGHT: Minor gains in Asia were done in the
face of Japanese selling.

GOLD:
We continue to get the sense that the gold market is broadening its focus
beyond the Dollar. However, we are not sure that gold will see aggressive
upside action unless the macro economic outlook shifts to a view of rapidly
expanding growth or that the recovery is going to falter because of the
jobless situation. In other words, a slow and gradual recovery is probably the
least supportive development for gold.

SILVER:
The silver chart looks like it is prepared fail with at least a decline back
to $492. We are still not sure if the silver market has a focused view from
which to garner a trend. In fact, we are not detecting any fundamental
correlation from the daily ebb and flow, which leads us right back to the
technicals as the driving force behind prices.

PLATINUM: While platinum didn’t manage a new high for the move overnight, it
continues to foster a bullish attitude by the pattern of trade. Reports that
South African Mining profits are being pinched by a soaring Rand, would seem
to suggest that there might be less capital available for expansion of
platinum production than might have been expected. Resistance is seen at $765,
with support coming in close at $755.   

The
copper market continues to show choppy action this morning, as some in the
trade are beginning to question how much more prices can rise without a clear
signal from the US that the jobless situation won’t trip up the COPPER:
recovery. Some copper company officials have also suggested that prices are
becoming a little too expensive for the type of physical demand being seen in
the US. Apparently the majority of recent physical demand and the driving
force behind the copper rally have come compliments of the Pacific Rim.

CRUDE COMPLEX

OVERNIGHT CHG to    4:20 AM   :CRUDE+26   ,HEAT+29  ,UNGAS+41 We are a little
surprised that energy prices managed to soar so aggressively but we do not
think that the direction of prices was misguided. As we attempted to suggest
yesterday, time is passing for the US to see a big enough inventory
rebuilding, to discourage winter volatility.

NATURAL GAS

Supposedly the natural gas market managed to rally off colder weather
forecasts but we think that the short fund position simply didn’t want to
tolerate any more pressure and decided to exit shorts. We also think that the
regular energy complex provided the incentive to bottom natural gas prices.