Futures Point To A Higher Open
8/17/2004
INTEREST RATES
The Treasury market showed surprising weakness
Monday despite news early in the session that the Empire State Manufacturing
Index had declined sharply. However, later in the session Monday, with stock
prices soaring and the NAHB Index showing an improvement, the early slide in
Treasury prices seemed to be justified. However, it would seem that the majority
of the economic reports due out of the US today are expected to show some
improvement and that could help consolidate the weakness seen on Monday.
STOCK INDICES
The stock market surprised the trade with a
stellar short covering bounce on Monday. While softer energy prices provided the
early basis for the bounce, it seemed that corporate news also managed to
provide some additional lift. While we are not sure that equity prices can
continue to expect support from weak energy price action, we are pretty sure
that the stock market won’t be able to manage an extension of the gains if
energy prices strengthen.
DOW
Surprisingly the September Dow has managed to rise all the way back to the top
of the August consolidation. In order to turn the big picture trend in the Dow
up, the September contract will have to manage a rise above the down trend
channel line at 10,032 today and at 10,019 on Wednesday. Surprisingly a number
of short term technical indicators like stochastics are signaling a buy, despite
the rather large rally yesterday! Therefore, it would seem like this market has
the ability to extend the upside probe.
S&P
Like the Dow, the S&P seems to have positive signals coming from short term
indicators! While the big picture trend remains down, it would only take a rise
back above the down trend channel at 1089.50 today and 1087.85 on Wednesday to
turn the trend up. If the early numbers today are as expected, the S&P might be
capable of rising to 1083.
FOREIGN EXCHANGE
US DOLLAR
The Dollar has showed almost no reaction to the weak
economic numbers released from Europe overnight. Later in the session, we expect
the US to post as expected economic readings and that would seem to give the
Dollar an edge in the macro economic differential debate. However, the currency
markets are not tracking tightly off the economic report front, as they appear
to be mostly without a clear focus. In fact, it almost seems as if the money is
flowing to the country with the slowest economic look! Technically if the
September Dollar fails to hold above the 88.00 level, it is possible that it
begins a slide all the way down to the July lows. Short term technical
indicators call for more declines in the Dollar and that downside pressure could
rekindle itself if the Industrial Production and Capacity Utilization readings
from the US fail to live up to expectations. The trend is down in the Dollar,
but momentum is lacking.
EURO
While the Euro might have thin resistance at a quasi
double top of 123.78, the currency doesn’t appear to be showing much weakness in
the face of several extremely disappointing economic readings. In addition to a
0.4% decline in June Industrial Output, the German ZEW showed the lowest
sentiment reading in 13 months. Given the early numbers today, we suspect that
the Euro might be capable of sliding to 122.84 in the wake of US numbers later
on but then we expect the Euro to find support on the charts.
YEN
Overnight the Yen has managed to rise above the
moving average and with short term technical indicators pointing higher, the Yen
might be able to use the recent consolidation as a base from which to work
higher. With US numbers today expected to be slightly higher that could embolden
the Yen for an additional push higher.
SWISS
The Swiss appears to have a triple top around 80.87
and given the outside setup today, we have to think that the path of least
resistance is down in the Swiss. Near term downside targeting in the Swiss is
seen at 80.15 but closer in support at 80.28 might hold.
BRITISH POUND
The Pound didn’t seem to do much with the advantage
it held Monday morning. In fact, the Pound seems to be primed for a minor
corrective slide, with a near term target of 182.40.
CANADIAN DOLLAR
Despite seeing a soft auto sales reading on Monday,
the Canadian continues to push upward into a new higher trading range. As long
as the US Dollar lacks a definitive trend, the Canadian should be able to rise.
However, one can’t rule out temporary corrections back down to 76.46.
METALS
OVERNIGHT
London Gold Fix $401.45, +$2.15 LME
COPPER STOCKS 80,175 mt tons -4000 tons COMEX Gold stocks 4.709 ml -899 COMEX
Silver stocks 112.9 ml +1.977 ml oz
GOLD
The strong close in gold prices Monday despite a
slight improvement in the Dollar shows that the bulls are in full control. With
the Dollar holding to a relatively narrow range Monday, other factors seem to be
supporting precious metals including more intense fighting in Najaf ahead of the
peace talks between political and religious leaders. In addition, a rising stock
market may have eased deflation concerns.
SILVER
With solid support at $6.50, Dec silver could climb
to test $7 this week. With less overhead resistance, Dec silver may see price
gains come a little easier than gold. In fact, a rise in industrial production
may be supportive to silver over gold, especially if the Dollar sees a sideways
trade off the data.
PLATINUM