Futures Point To A Flat Open
INTEREST RATES
The Treasury market was undermined by the events
last week but did manage to avoid what could have been an even more aggressive
liquidation. In fact, given the pace of the US numbers and the impressive run of
earnings report successes, we were a little surprised that June bonds managed to
hold above consolidation support at 107-00. In fact, the June bonds appeared to
find decent support around the Friday lows of 107-05.
STOCK INDICES
While the stock market finished last week
moderately above the prior week, the market did have a mid week correction that
knocked some of the wind out of the bulls sails. It is clear that the interest
rate fear is robbing the stock market of some investment interest, but with the
US corporate earnings flow turning up the bullish buzz, the interest rate threat
is losing some of its fizzle. We suspect that the market will soon become
calloused against the inevitable rate hike, especially if the 130 corporate
earnings reports due out this week, carry the ball.
DOW
The Dow comes into the week with a minimal net spec position and would seem to
be technically capable of rising to near term resistance of 10,536. The June Dow
sees a critical pivot point at 10,501 and could begin to gather some momentum,
with a trade back above 10,528. There are several key Dow stocks reporting
earnings this week and that should give the market a reason to add to the recent
recovery bounce.
S&P
Like the DOW, the S&P comes into the action this week, with a minimal spec long
position and that should allow the market to forge some upside. We see the range
in the June S&P this week to 1135.70 to 1150.00. We continue to see the 1150
level as an extremely critical pivot point, as the market has had trouble at
that level on numerous occasions. The bias is up, buy 200-300 point corrections,
looking for at least a return to 1150. Position traders can buy the June S&P
down at 1135.40, with an 1150 objective. Risk fresh long positions to 1128.20.
FOREIGN EXCHANGE
US DOLLAR
We still get the sense that the Dollar is fighting
the upside trend and is doing so even though its regularly scheduled economic
reports are good and US corporate earnings are stellar. The Dollar seems to need
a steady diet of higher US rate talk, in order to fuel consistent upside action.
The US Fed seems to be standing in the way of a more aggressive upside thrust in
the Dollar, as they continue to downplay the potential for a near term rise in
rates. In other words, the Fed is doing a good job of cushioning the US from the
eventual pattern of higher interest rates. By the Fed playing down the rate hike
potential, the Forex market is not as convinced that US yields will rise
methodically. The June Dollar should have decent support around 91.00 but a
failure to close above 90.78 could be seen as a significant undermine. The path
of least resistance is pointing up.
EURO
The Ifo is suggesting this morning that the German
economy is still not out of the woods and that the German economy is still being
driven primarily by exports. In other words, a number of Euro zone countries
need the effect of the weaker Euro, to insure a transition to recovery. It
should be noted that the German Ifo Index did rise and that probably discouraged
the Euro from the overnight lows. The pattern of lower lows should continue with
near term objectives in the June Euro of 116.95. It should also be noted that
the G& meeting seemed to turn up the pressure on the ECB to cut interest rates
and that should foster more downside in the Euro ahead.
YEN
Apparently the G7 meeting over the weekend talked up
the need to leave global rates low, just to insure the recovery and with the
Japanese stock market reaching the highest level since August of 2000 overnight,
it is clear that the Yen is justified in its recent bounce. However, the trend
in the Yen seems to be pointing down, with significant resistance at 92.32.
^next^
SWISS
A significant new low for the move last night,
leaves the Swiss in a downward pattern. While the market was oversold around the
lows overnight it should still be considered a sale on a return to 76.19, with
an eventual target of 75.48.
BRITISH POUND
The June Pound regains a critical level with a rise
back above 177.82. The CBI reported lackluster April Industrial output and weak
total order book readings and that is made even more negative by the news that
the UK might expand its troop commitment in Iraq. Therefore, we would give the
Pound some room but would be prepared to get short on a rise above the critical
pivot at 177.82.
CANADIAN DOLLAR
In retrospect, we are a little concerned about the
lack of a big bounce in the Canadian. In fact, unless the Canadian regains
73.90, in the June contract we are fearful that more downside is ahead. A trade
below 73.40 could shift control back to the bears.
METALS
OVERNIGHT
London A.M. Gold Fix $396.50 +$.25 LME
COPPER STOCKS 156,625 -1,625 tons COMEX Gold stocks 4.07 ml +47,443 oz Comex
Silver stocks 123.2 ml Unchanged
GOLD
Fortunately for gold bulls, the Dollar was turned
off a sharply higher overnight move and comes into the opening of the US gold
trade, 50 points below its overnight high. The fact that an Iraqi oil port was
attacked by suicide bombers should create some uncertainty and provide gold with
some buying interest. However, continued fears of higher interest rates in the
US and China probably keeps buying interest at a reduced level.
SILVER
About the most that can be said above silver is that
it managed to forge a higher low with the low last week. Some might suggest that
silver has also managed to bounce off the low last week but given the magnitude
of the slide some short covering is to be expected. The net spec and fund long
in silver comes in at 86,000 contracts, which is a moderate reduction but
because the silver market fell massively after the report mark off date, the net
spec long position still appears to be vulnerable to more liquidation.
PLATINUM
The COT report showed the net spec and fund long to
be 4,400 contracts but it should be noted that platinum declined almost $100 an
ounce (to the overnight low) since the report was measured. Therefore, the spec
long position in platinum should be significantly flattened. However, trend line
support in platinum still comes in below the market down at $826.
COPPER
While the copper market has recoiled from the recent
lows it remains vulnerable. The weekly COT report showed the net spec and fund
long in copper to be 21,000 contracts but that is overstated because of the
massive slide that took place after the report was measured. In fact, we suspect
that copper comes into the session today net spec long less than 14,000
contracts.
CRUDE COMPLEX
While the no rumor on the summer gasoline waiver
issue sparked the energy complex back toward contract highs last week it would
seem like the basic fundamentals are shifting toward the bear camp. However, we
are not sure if the market is going to see the attempted terrorist action
against an Iraqi export terminal as a reason to interject a more significant
premium into prices. With Reports of record crude cargo departures from the
Middle East in the first week of April and periodically large weekly US crude
stock increases, there is the foundation of a rebuilding pattern.
NATURAL GAS
With a little concern toward the regular energy
complex and the Agricultural demand for natural gas already well through the
marketing chain, we have to think that natural gas is vulnerable in the near
term. Like the unleaded market, the natural gas market should have a little
seasonal demand pressure and with the small specs recently long in excess of
33,000 contracts one can’t rule out a compacted technical failure. With the
small spec long position bordering on 35,000, it is clear that the market is
over extended.