Futures Point To A Higher Open
INTEREST RATES
Market closed for Holiday!
STOCK INDICES
The stock market did a good job of skirting the
potential negative influences normally seen off a move to raise US interest
rates. While it will be important to hold above the prior two days lows on the
charts, the market should exhibit less volatility in the coming sessions, partly
because of the Holiday today and partly because energy prices are coming into
the session this morning somewhat weak. The weekly energy inventory report
failed to live up to early expectations that called for a moderately large crude
stocks build, but crude stocks did manage to build slightly and that continues a
pattern that diffuses the bull case in energy prices.
DOW
Overnight the December Dow is already well into new highs for the move and has
reached the highest level since mid June. Critical support in the December Dow
comes in at 10,397 and resistance isn’t seen until 10,470.
S&P
The December S&P has a significant base of support on the charts at 1162.60 and
seems to be prepared to move to an even higher trading range. The trend is up
and the next resistance isn’t seen until 1177. Overnight the December S&P
reached the highest level since March of 2002 and that highlights the improving
view for the future. Buy 200-300 point breaks with the expectation that prices
might rise into the end of the month.
FOREIGN EXCHANGE
US DOLLAR
With the Pit closed today due to the Veterans Day
Holiday, we suspect that daily ranges will be narrow in electronic trading,
especially since there are no US economic reports scheduled. However, the
downward path in the Dollar is tempered because of the US Trade Deficit release
yesterday and because of concern for the European and Japanese economies. In
other words, on both sides of the ocean it would seem like the ultra lower US
Dollar is beginning to provide a countervailing force. In other words, the US
economy is generally thought to be growing, while the markets are beginning to
wonder if the Euro zone and Japanese economies will actually be able to sustain
growth, especially against a distinct disadvantage in exchange rates. The Dollar
has already bounced significantly but we doubt that it will be able to alter the
trend without more significant proof of US growth. Resistance is seen at 84.76.
EURO
German 3rd quarter GDP growth really slowed and if
it were not for strong domestic activity, the number might actually have
contracted. Therefore, it is clear that growth is being knocked down by the high
Euro exchange rate. Therefore, one might expect a correction back toward 128.00.
German 3rd quarter GDP was only up 0.1%!
YEN
Japanese machine orders for September reportedly
declined by a sharp 1.9% overnight and that development probably sunk the Nikkei
and is keeping a lid on the Yen. With the sharp decline in the Yen yesterday,
the market has already compensated for the soft economic view and the overall
trend in the Dollar will dictate the direction of the Yen.
SWISS
Less flight to quality impetus and an overbought
technical condition should put some pressure on the Swiss, but due to light
trade we doubt a major move is in the offing.
BRITISH POUND
The Pound is under liquidation pressure and might be
set to slide to 182.50 because of the short covering in the Dollar. Even if the
Pound falls to 182.50 that wouldn’t really breakdown the recent uptrend pattern.
CANADIAN DOLLAR
Like the rest of the currency markets, the Canadian
sees a little back and fill off the temporary pause in the Dollar slide. While
the Canadian was significantly overbought around the highs this week, it is
already moderately off the highs and correcting its technicals quickly. However,
until the trade returns to normal, it will be difficult to determine whether a
major change is taking place.
METALS
OVERNIGHT
London Gold Fix $435.10 -$1.75 LME COPPER
STOCKS 68,625 metric tons -1,550 tons COMEX Gold stocks 5.332 ml -14,235 oz
COMEX Silver stocks 102.9 ml -121,622 0z
GOLD
The gold market managed to avoid a liquidation
window yesterday, as the Fed could have talked up the Dollar in an effort to
discourage the capital exodus from the US, but in the end no such comment was
made. However, there are signs that the Dollar might not continue to decline at
such an aggressive pace, as numbers outside of the US are beginning to soften
and that could discourage Dollar selling. For instance, early this week the ZEW
expressed concern about the German export sector, and that is partially the
result of a soaring Euro.
SILVER
Because gold action is sloppy, the silver market
probably experiences a little back and fill. Like gold, silver is overly long in
the small spec and fund positioning but unless critical chart support levels are
violated, we see no reason for silver to come under aggressive liquidation. One
would think that generally optimistic economic views would underpin silver above
key support at $7.375.
PLATINUM
The big problem with platinum is that it has lost
its upward momentum on the charts. Furthermore, we are really disappointed that
favorable dialogue about Asian demand early in the week didn’t spark a more
significant rally. In fact, with the recent copper rally, platinum hardly showed
any reaction and that suggests the market is without residual buying interest on
the sidelines.
COPPER
While the rest of the metals markets have shown
weakness in the face of Dollar strength and the US interest rate hike, the
copper market has remained right on an upside breakout point on the charts. For
the 4th day in a row, the Asian Press is reporting tight supply conditions and
with the Shanghai exchange reporting stocks on Friday morning and the Chinese
government thought to be prepared to take delivery on the December contract, we
suspect that the market will get even more evidence of tightness. Therefore, the
market remains poised to rise toward 140 and would have a much stronger head of
steam today if world equity market action were more supportive.
CRUDE COMPLEX
The weekly inventory report was somewhat bearish
but maybe not as bearish as the trade was factoring in prior to the report.
Crude stocks managed to rise but some in the trade were expecting an increase of
3 million barrels or more. Therefore, it is not surprising that the crude oil
market fell following the report and the products bounced.
NATURAL GAS
The natural gas market showed fleeting
short-covering activity Wednesday and in the end the market was lifted by the
strength in the regular energy complex. We also think that natural gas saw some
spillover support because of the product tightness issue, as that insinuates
possible spill over buying for natural gas this winter. Reports that more Gulf
of Mexico gas output had come back on line Tuesday night, after being put off
line by Hurricane Ivan, were known to the market during the session Wednesday,
but yet prices showed only minimal weakness.