Futures Point To A Flat Open
11/15/2004
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INTEREST RATES
While Treasury prices seem to have found some
recent long interest it would not seem like the general flow of macro economic
information is supporting the bull case. In fact, with Japanese stock prices
showing solid gains overnight and the general attitude toward the stock market
so positive, we have to think that Treasuries gains will have to continue
fighting against the tide. Overnight another new low for the move in energy
prices would seem to give the macro economic condition an additional lift, but
it is possible that the concern toward a Dollar crisis is in a perverse way
giving the bulls confidence.
STOCK INDICES
While the Merck situation continues to hang
around the neck of the market, it would seem like the bullish bias continues
into the opening this morning. Overnight the Nikkei made a significant upward
thrust and it would seem like energy prices are in the process of sliding to
even lower levels. Therefore, the overall macro economic condition remains
positive, especially with some buyout news already showing up in the early
headlines this week.
DOW
The December Dow is once again into a new high for the move in the overnight
action. The next upside resistance comes in at 10,727 and solid support is seen
at 10,533. About the only draw back to the current condition is the fact that
the Dow is becoming short term overbought. Given the economic report slate, the
proximity to the holiday kick off and lower energy prices, traders should stick
with the up trend.
S&P
There would seem to be very little resistance until the even numbered 1200
level, with near term support pegged at 1172.90 and at 1163.50. The next trend
line resistance point comes in all the way up at 1252, as that trend is the top
of the channel off the 2002 low!
FOREIGN EXCHANGE
US DOLLAR
The trend in the Dollar is still down even though
the US Treasury Secretary advocated a strong Dollar. As mentioned in other
comments this morning, the Treasury Secretary really didn’t say anything new and
therefore the bounce off the low doesn’t look to be anything other than a short
term knee jerk reaction. The fact that the Treasury Secretary refused to comment
on the potential for a Dollar crisis, in some ways undermines the Dollar even
further. However, if the US economy can continue to recover, that could
discourage steep additional losses in the Dollar. So far, most economists don’t
think that the sharply lower US Dollar exchange rate, is serving to help
stimulate the US economy and in turn improve the trade balance. In the near
term, the fear of a Dollar crisis lingers and that favors the bear camp. We
suspect that the Dollar will find it extremely difficult to manage a climb above
84.17.
EURO
Without intervention threats this morning, we doubt
that the Euro would have recoiled so far away from the overnight high. However,
with the US comments this morning, coming on the heels of some disgruntled ECB
dialogue last week, the bull camp in the Euro has to be shaken slightly. In
fact, if energy prices fall further, and some of the Euro gains coming because
of the concern lodged against the US economy, it is not surprising that the Euro
is weak this morning. We do not think the trend has been altered but we do think
that the Euro could slide to consolidation support of 128.98.
YEN
The Japanese stock market jumped up overnight and
did so because of optimism toward the US economy (a main export target). The
Japanese Finance Minister hinted at intervention if necessary and that has
altered the bullish bias in the Yen in the short term. The Yen is also
overbought but we are not sure that current conditions are capable of turning
the Yen completely toward the downside.
SWISS
Like the rest of the currencies, the Swiss has also
seen a significant overbought condition. Unfortunately the Swiss doesn’t have
significant trend channel support point until 84.45.
BRITISH POUND
A pattern of lower highs since the November 8th high
is undermining the market from a technical perspective. Near term support is
targeted down at 184.79 and then again down at 184.52.
CANADIAN DOLLAR
The Canadian might be in for a wild ride this week,
as the market appears to have lost upside momentum, with the most recent
consolidation pattern. Near term critical support comes in at 83.27 and a major
failure takes place with a slide back below 83.06.
METALS
OVERNIGHT
London Gold Fix $439.50 +$2.60 LME COPPER
STOCKS 67,550 metric tons -975 tons COMEX Gold stocks 5.352 ml +19,832 oz COMEX
Silver stocks 102.1 ml -765,856 oz
GOLD
With the US Treasury Secretary giving the Dollar a
slight lift with comments about a strong Dollar, we can understand a sloppy
start to the week. However, the US Treasury Secretary really didn’t come up with
anything new and that might make the Dollar reaction temporary. With the
Japanese gold market managing to make another 16 year high overnight, it would
seem like the world remains generally positive toward gold.
SILVER
Top of the up trend channel in December silver comes
in at $7.683 and the middle of the channel comes in at $7.53. In the near term,
we suspect that silver will have even more interest in the revival of physical
demand and the economy than will the gold market. We also think that the silver
market will need at least a moderately hot set of inflation readings this week,
in order to continue posting new highs.
PLATINUM
Last week the Japanese were willing to bid up
platinum in advance of a coming private report. Therefore, the market is already
pent up for a change in the Johnson Matthey supply and demand balance
prediction, which in a sense puts the platinum market back into a deficit
condition. Given that the rest of the metals are showing signs of strength, we
can’t argue against additional upside in platinum, but like silver, platinum
longs in at current levels would seem to have a little less attractive risk and
reward setup.
COPPER
The copper market comes in to the week fresh off a
strong prior week, and apparently poised to climb to even higher levels.
However, the Chinese market overnight was slightly weaker but the Press is
reporting steady Asian cash premiums, when compared to last week. On the other
hand, with the Nikkei managing a massive upside thrust overnight and the
marketplace generally optimistic toward future growth, we see nothing to alter
the recent trend in copper.
CRUDE COMPLEX
While tensions in the Middle East continued to
flare recently, it would not seem like the energy complex is overtly concerned,
as the market late last week failed to respond to news that a Northern Iraqi Oil
well was attacked. We continue to think that the market is set to fall further,
especially since critical crossroad support was violated overnight. Furthermore,
it would seem like the markets attempt last week to return to ultra high prices
found plenty of opposition.
NATURAL GAS
Like the regular energy complex, the path of least
resistance is pointing down and we wouldn’t be surprised to see January slide
back below critical support at $7.70. However, in the event that January natural
gas manages a slide all the way back down to the top of the May through
September consolidation zone of $7.40, we will be prepared to call for a
cyclical low and suggest a long term bull play. From the weather forecasts, it
would not seem like the weather is going to be that supportive and in order for
the natural gas market to turn around quickly, it might take some international
supply threat and more positive bullish leadership from crude oil than is
currently being seen.