Futures Point To A Mixed Open
INTEREST RATES
01/30 OVERNIGHT CHANGE to 04:30 AM:BONDS+4 While
we were a little disappointed in the bonds markets ability to bounce yesterday,
in the face of supportive scheduled economic information, it would not seem like
the market is totally without some upside potential. However, one might conclude
that Treasuries will get less Central Bank support because of the Dollar
strength and that simply robs the market of upside momentum. Maybe the bonds and
notes were looking forward to the GDP reading in their hesitancy yesterday, as
that report is expected to show a preliminary expansion of 4.7%.
STOCK INDICES
01/30 OVRNIGHT CHG to 04:30 AM:S&P+160, DOW6,
NIKKEI +4.1, FTSE+15 While the big range down recovery yesterday qualifies as a
bottoming formation, we think that stocks will need a little help from the US
numbers to effectively shut off the prevailing profit taking tilt. The GDP is
expected to come at +4.7% and that should be a number that stands head and
shoulders above most of the G7 countries. We can remember a number of Wall
Street economists predicting that the massive 3rd quarter GDP number could not
be repeated and they are basically correct, but when one considers the recent
recovery in the Dollar and the substandard growth rate being seen in the Euro
zone, that should leave US stocks in favor.
DOW
We are no longer confident that the Dow will bottom before the S&P, as the
overnight Dow chart action suggests that more minor selling could be expected.
Trend line support comes in at 10,420, but in order to avoid a more significant
failure, the March Dow has to maintain the pattern of higher lows from the
January low and that requires holding above 10,414.
S&P
The S&P is surprisingly showing more positive resolve than the Dow and that
hints at divergence, which usually means that consensus is lacking. However, the
chart action in the S&P discourages sellers and with a positive GDP reading
today, we wouldn’t be surprised to see the market take out the highs posted
Thursday. We would have preferred to see a major range down reversal yesterday,
but instead the market formed a slightly less impressive bottom! Critical
support is pegged at 1129.90 and 1128.20. An upside pivot point is regained with
a rise into the 1132.00 to 1133.50 zone.
FOREIGN EXCHANGE
US DOLLAR
The Dollar ran up to the high posted Thursday and
fell back, suggesting that the bull tilt remains in place but might lack follow
through capacity. While US economic numbers haven’t been a major influence on
daily trade action in the Dollar, we have to think that a favorable GDP reading
this morning will benefit the Dollar. In other words, when the trend was down,
the market simply discounted favorable economic readings, but with the recent
strength, a strong 4th quarter GDP reading from the US should highlight a
favorable economic differential between the Dollar and the Euro. However, the
main reason the Dollar might react favorably to the GDP reading today, is that
Euro zone numbers released overnight were not very impressive. A critical
downside pivot point on the Dollar is 87.69, while a move above 88.32 could
bring about another massive wave of short covering buying.
EURO
Germany posted weaker retail sales readings for
December and the Euro zone showed only minimal gains in economic sentiment
readings. With the Euro hovering just above a critical downside breakout on the
charts, traders will have to be watchful around the US GDP release. In fact, a
GDP growth from the US in excess of +4.7% should keep the pressure on the Euro.
While the Euro might have critical pivot point support at 123.57, we would not
be surprised to see a slide down to the January low of 123.15 in the session
today.
YEN
Commentary from Japan overnight would seem to foster
light buying of the Yen as the Japanese hinted at the need to end the easing
stance. In other words, the BOJ might have seen the bull case for the Yen
boosted. The Nikkei was slightly higher overnight and the Japanese economy
posted a moderate decline in the Japanese unemployment rate. In other words,
fundamental information favors the bull camp but the intervention efforts, or
the threat of intervention continues to keep a lid on the market. As long as the
Dollar is independently strong, the Yen probably can’t get the momentum to
breakout to the upside. However, a Dollar slide back below 87.55 could be the
signal that an upside breakout is in fact coming.
SWISS
The chart pattern in the Swiss remains negative. We
see the Swiss sliding down to 79.10 early and then eventually sliding down to
the January low of 78.67. In order to shut off the downward tilt, the March
Swiss needs to regain 79.65.
BRITISH POUND
A lower low overnight would seem to leave the Pound
pointing downward. In fact, we see a near term downside targeting of 179.50.
Lower consumer lending and lower mortgage lending would seem to add to the
liquidation tilt in the Pound.
CANADIAN DOLLAR
While we expected the Canadian to slide all the way
down to 74.33, it is possible that the Canadian made a temporary bottom on
Thursday. However, in order to see the lows hold, the Dollar will have to
weaken. In short, there is too much risk and not enough reward to get long.
^next^
METALS
OVERNIGHT
GLD+2.10, SLV+0.50, PLAT+5.70 London A.M.
Gold Fix $401.30 -$8.70 LME COPPER STOCKS 363,600 -5,275 tons COMEX Gold stocks
3.50 ml -5001 oz Comex Silver stocks 124.2 ml Unchanged
GOLD
Despite seeing a couple gold companies report lower
production for the third quarter and for all of 2003, the market wasn’t lifted
significantly in the Asian trade. It would seem that Australian traders remain
slightly negative toward prices suggesting that the overnight bounce is a chance
to get short. However, Lihir Gold reported a 9.3% output decline on 550,772
ounces and even though that was as expected output, that is a minor support to
futures prices.
SILVER
The silver market managed to hold up in the January
consolidation pattern and is behaving much better than the gold market.
Extremely critical support comes in at $616.5, while a trade above $6.34 could
give the bulls enough confidence to return to the bull posture. While silver
seems to be trading independent of gold, it is not immune to gold weakness.
PLATINUM
The platinum had a delayed reaction to the precious
metals washout but eventually posted a massive washout just like gold and
silver. While platinum seemed to violate channel support lines, we are less
concerned about a major top in platinum. The trend line pivot point comes in
today at $780.3 in the April.
COPPER
While the action on the chart is a little negative
the copper market still seems to be getting supportive information from the
supply front. LME copper stocks declined all week long and the Shanghai copper
stocks posted a decline of 11,845 on the week. Certainly the market is a little
concerned that one of the labor disputes is going to be resolved today but that
probably won’t push the May copper down below 110.70.
CRUDE COMPLEX
The energy market remained under pressure,
despite the presence of cold temps in the Midwest and the prospect of a winter
storm over the coming weekend. However, the regular energy complex had to see
the less than expected draw from natural gas inventories (during the session
Thursday) and that in a way adds to the negative sentiment. Even if the mild
temps fail to materialize next week, we suspect that the energy complex will
find it difficult to muster aggressive long interest.
NATURAL GAS
We are actually surprised that the natural gas
market didn’t break down Thursday off the less than expected inventory draw.
With a draw of only 195 bcf and another increase in the annual surplus, the
market could easily have failed but the presence of slightly colder temps than
was expected Thursday in the Midwest provided support. The market is also
finding support off the idea that another winter storm is expected over the
weekend.