Futures Point To A Flat Open

INTEREST RATES

With the Fed still suggesting that inflation is
under control and that productivity is preventing an inflation spike, the market
is less concerned about a near term rate hike. It is also clear that the initial
claims rise was a big help to the bull camp. With a number of Fed speeches
today, we would expect more of the company line to flow, and that company line
looks to be supportive to Bonds and notes.

STOCK INDICES

The stock market just can’t seem to chain
together its bull stories and when the market seems to get on a positive roll,
something surfaces to dash the bull hopes. Just as the markets appeared to be
ready to bounce yesterday, sentiment was dealt a blow by a much softer than
expected initial claims report. Since the issue of jobs, jobs, jobs, is a
constant hue and cry, the claims debacle can’t be discarded until the US economy
is given some countervailing information.

DOW

The Dow charts aren’t real impressive but yet maybe one can expect recent
support of 10,350 to hold up the market. We want to be long this market but
realize that longs might have to risk positions to 10,278 and maybe even 10,250.
However, the Dow seems to be much weaker than the S&P recently and therefore Dow
traders might take their lead from the S&P action today.

S&P

We see solid support in the June S&P coming in at 1117.60, with a closer-in
pivot point support at 1124.70. The market seems to be caught between a rock and
hard place, as the fear of rising rates, is robbing the trade of a rally window.
In short, the bulls want good numbers today, but strong numbers feed the rate
hike camp. Maybe a series of soothing Fed comments will allow prices to rally as
they should. It should be noted that the June S&P regains a moving average today
at 1129.15.

FOREIGN EXCHANGE

US DOLLAR

The Dollar was recently overbought and the fact that
the US initial claims were so disappointing, simply took the steam out of the
Dollars sails. This morning it would seem like slightly soft Euro zone numbers
set the table for renewed strength in the Dollar, especially if the US can
produce some strong heavy industry figures from Industrial production. The trade
is onto the idea that the world economy is gathering pace and that less
intervention might be required in Asia and it is also aware that the US Fed is
willing to tolerate a little higher inflation. Therefore, today is a very
critical day for the Dollar and with the Dollar sitting in a breakout zone, it
will be very critical for the Dollar to continue to make gains, as that would
solidify the idea that the currency is in an uptrend. We have said for months
that the Dollar cannot rally unless it has a strong economy. Industrial
production above +.4% and Capacity Utilization above +1% should give the Dollar
more power.

EURO

After a fleeting bounce overnight, the Euro has been
derailed. The flow of economic numbers overnight seem to be a double negative,
as inflation rose sharply and yet growth is slowing. Apparently consumer
spending slowed and that tripped up growth. Because the ECB would seem to need
lower rates, the appearance of inflation is a troubling situation. In order to
put the Euro down sharply the trade will still need to see the US economy as
ultra strong, because that Dollar discount is still present. Near term support
is seen at 119.23 and that is a failure point.

YEN

We think the Yen has found near term support,
especially since the Bank of China is backing away from the idea of tightening.
In order to shift the trend in the Yen back up, the market would have to regain
92.92. In order to restart the downside action, US numbers have to be really
hot.

^next^

SWISS

The pattern of lower highs remains intact, despite
the recent attempt to bounce. We suspect that the Swiss is primed for another
new low for the move in the coming sessions.

BRITISH POUND

The Pound is on the verge of a technical failure but
the fundamental numbers this morning would seem to argue against the downside
tilt. Critical pivot point support comes in at 177.50 but the market must hold
that level through the US numbers. The big picture trend seems to be pointing
down.

CANADIAN DOLLAR

If the Canadian manages to avoid a trade below 73.95
today, the currency should have a bottom. However, the early US numbers are
surely a major test of the bullish resolve in the Canadian. This is a perfect
place to sell 1 Sept Canadian futures and to buy 3 Sept Canadian 76 calls for
92.

METALS

OVERNIGHT

London A.M. Gold Fix $399.75 +$1.75 LME
COPPER STOCKS 159,900 -2,950 tons COMEX Gold stocks 3.96 ml Unchanged Comex
Silver stocks 122.6 ml +422,597 oz

GOLD

News that the Chinese central bank might hold off on
tightening credit seemed to give gold a better environment this morning. It also
seems that the markets are less convinced that the Dollar is going to continue
to soar, as the US initial claims report seemed to deflate economic optimism.
While we suspect that gold will show a moderate liquidation of the spec position
in the COT report tonight, that report will certainly overstate the positioning
due to the fact that gold fell another $9 since the report was measured.

SILVER

Surprisingly the silver market looks to be on better
footing than gold on the charts. In fact, maybe the silver will be able to
transition to a physical commodity focus and benefit from the idea of an
expanding global recovery. Therefore, the silver will need to see a strong
reading from the US Industrial production readings this morning.

PLATINUM

A series of lower lows would seem to leave platinum
in a vulnerable condition. There would not seem to be solid support in July
platinum until $912. News that China wasn’t sure if tightening was required to
slow their economy also takes some of the liquidative tilt off the platinum mkt.

COPPER

The copper market comes into the action today in a
vulnerable stance. However, it is possible that ultra strong US economic reports
provide a lift to prices but the numbers will have to be strong. Shanghai copper
stocks increased by a minimal 767 tons, which is slightly negative because the
copper market is looking for any sign that Chinese demand continues to be strong
and that report doesn’t provide any assistance.

CRUDE COMPLEX

The energy complex supposedly rose sharply
Thursday on news of a series of refinery problems. The fact that refiners are
also going down for scheduled maintenance also added to the upward tilt.
However, it could take an ongoing series of supply glitches to continue driving
prices higher.

NATURAL GAS

In contrast to the unleaded market, the natural gas
market seems to be a little weaker on the charts and doesn’t seem to have a
wildly bullish fundamental setup. Furthermore, the natural gas market did see a
build in the weekly inventory report and that suggests a beginning to the
injection season. We also think that the crude oil market will have to literally
explode in order to pull natural gas higher, as the two markets seem to be in
the process of de-linking.