Futures Point To A Gap Lower
INTEREST RATES
After the usual two-day reaction to the payroll
report, the Treasury market appears to be ready to bounce. However, we doubt
that the fundamental case offers much in the way of support for a sustained
rally in prices, as the numbers Monday were patently bearish and could have been
cause for a slide back to the recent lows. In fact, with the ISM
Non-manufacturing readings reaching the highest level ever and Manufacturers
profits rising, one might suspect that even more job gains are ahead.
STOCK INDICES
04/06 OVRNIGHT CHG to 04:06 AM:S&P-190, DOW-24,
NIKKEI +121, FTSE+1 The stock market continues to be bullishly biased, but the
momentum isn’t exactly something that is causing the bull camp to become overly
aggressive. We continue to think that the post unemployment report reaction has
been disappointing, but that the market is still positively poised for even more
gains. In fact, if the market can get a strong kick-off to the upcoming earnings
cycle, with a good Alcoa report today, that could be just enough to foster more
upside gains.
DOW
With the Dow closing above a critical moving average last week and the beginning
of the earnings season, we have to think that the bulls are in control. With
Alcoa the first Dow stock to report, we would expect the June Dow to mount a
rise toward the next critical pivot point of 10,600. Initial resistance in the
coming session is seen at 10,533 but the market seems to be in the process of
grinding back to the old highs.
S&P
The June S&P has managed to climb above critical pivot point resistance at 1140
and now appears to be headed to the top of the February/March consolidation up
at 1160. We see no reason why prices shouldn’t rise to new highs for the year.
In fact, the S&P is lagging behind the Nikkei on the current rise, as the Nikkei
reached the highest level since August of 2000 in the overnight action.
FOREIGN EXCHANGE
US DOLLAR
For some reason the Dollar has failed to extend its
rise off the April 1st low. Even in the face of very soft German unemployment
numbers, it would seem that the Dollar is failing. Some traders suggest that
political baggage off the Iraq situation is undermining the Dollar, while others
suggest that the US economy has to prove that it has turned the corner. We
suspect that a decline to 89.05 will be met with buying interest in the Dollar
and that the Alcoa earnings and the Challenger layoff report will provide
support to the Dollar today. However, it does seem like the Dollar lacks broad
based favor, even if the numbers support a bull case. In short, the trend in the
Dollar has been down for so long, that the trade is unwilling to rush into the
Dollar.
EURO
The euro seems to have made a solid reversal off the
recent low of 119.59 and considering the ability to rally, in the face of a very
disappointing rise in German unemployment readings, it is clear that the markets
are not attaching too much significance to the economic differential. March
jobless claims in Germany increased by 44,000 and the labor office suggests that
there is no turnaround in sight! Therefore a minor bounce in the Euro to 121.42
would not be that surprising but once the Euro bounces technically, we will be
looking for a short entry point!
YEN
The sharp decline in the Yen continues despite the
ongoing rise in the Nikkei. Therefore, we have to assume that a down trend
pattern is in effect in the Yen. Near term downside targeting in the Yen comes
in at 93.72 but it would seem like the overnight lows of 93.47 put the Yen in an
excessively oversold technical standing. The Yen closes below a critical moving
average with a decline below 93.11.
^next^
SWISS
Like the Euro, the Swiss has managed a technical
bounce off the lows posted Monday. Therefore, a bounce to 77.62 is possible but
we would consider that a point to get short the Swiss.
BRITISH POUND
Given the weakness in the Dollar and the technical
action in the Pound since the low Monday, we suspect that the Pound is primed
for a recovery to 1.85. It should also be noted that the Pound climbs back above
a critical moving average with a trade above 182.94.
CANADIAN DOLLAR
Canadian Dollar correlation to the US Dollar is
providing a negative impact and with the Canadian sitting just above critical
support on the charts, the bulls are concerned. However, we suspect that support
of 75.63 is going to hold up and that the June Canadian is capable of rising to
the top of the range at 76.42.
METALS
OVERNIGHT
GLD+1.20, SLV+1.80, PLAT-1.00 London A.M.
Gold Fix $419.95 -$3.60 LME COPPER STOCKS 179,125 -2,725 tons COMEX Gold stocks
3.78 ml +60,012 oz Comex Silver stocks 122.2 ml +376,956 oz
GOLD
Apparently a slightly lower US Dollar into the US
opening has allowed gold to bounce despite the fact that the London fix was
lower and Asian metals action was soft. In fact, Chinese gold was slightly lower
overnight, as the general view there is that the US Dollar is set to rise. With
Germany posting a rather large increase in unemployment readings, the macro
economic differential between the US and the Euro zone is pointing toward even
more Dollar gains against the Euro in the near term.
SILVER
Even though the silver market is off significantly
from its recent high, it would still seem to be positively poised. Trend line
support in May silver comes in down at $7.913, with the top of the trend coming
in up at $8.33. Unlike gold, silver should be favorably influenced by action in
the equity market today and could even climb despite a possible rise in the
Dollar.
PLATINUM
Both platinum and copper are behaving as if they
have lost upside momentum, despite the fact that the outlook for the US economy
is improving. With the Nikkei rising to the highest close since August of 2001,
one would expect Asian demand for platinum to provide enough support for the
platinum market to avoid a big downside breakout on the charts. However,
platinum remains just above a critical chart failure point and a close below 888
could be considered a key failure.
COPPER
The copper market suffered a major technical blow
yesterday, as a number of longs threw in the towel. Many traders pointed to a
rising Dollar as the culprit but we have to think that Chinese buying interest
continues to dictate the overall direction of copper prices. Overnight Chinese
copper prices slid the limit and that would seem to undermine the market into
the opening today.
CRUDE COMPLEX
While retail gasoline prices continue to soar,
big oil companies blame US gasoline rules, high crude prices and OPEC. Yesterday
retail gasoline prices were reported to have increased 2.2 cents to a new record
$1.78 and that is 15 cents above year ago levels. Surprisingly gasoline prices
are significantly above normal while stocks will probably end the week pretty
close to year ago levels.
NATURAL GAS
It would seem that the natural gas market is finally
giving into the weakness in the regular energy complex. However, one would have
expected the colder than normal US weather to support the natural gas market
overnight but even with a cold 6 to 10 day forecast prices are showing weaker
action into the opening this morning. In the near term, the June natural gas
market looks to slide toward lower support of $5.78.