Futures Point To A Lower Open
11/16/2004
INTEREST RATES
One has to be really impressed with the Treasury
market, as it continues to hold up against somewhat decent US economic readings
and suggestions from the Fed that even more rate hikes are ahead. Some traders
suggest that the Fed comments are actually supporting Treasury prices, as the
promise of constant monitoring by the Fed, would seem to suggest that growth
isn’t going to get the chance to swing out of control. In fact, given the
uncertainty over the recovery, the still present concern for high energy prices
and the shadow of the threat of higher interest rates, we can understand why the
bear camp hasn’t been able to garner even minor control over the Treasury
market.
STOCK INDICES
While the market failed to charge higher Monday
in the face of a flurry of buyout moves and sharply lower energy prices, the
general bullish tilt remains in place. However, anytime the stock market
consolidates and forges a quasi double top on the charts that is cause to
suspect more profit taking. Since the Treasury market can’t seem to settle on a
distinctly positive view on the economy and the market still isn’t quite sure
that energy prices will continue to soften, we can understand a wait and see
attitude on the part of some buyers.
DOW
While the December Dow has critical close-in support at 10,532, that level
probably won’t hold if the PPI is at the top end of expectations, or Home Depot
fails to inspire confidence. A lower support point and a possible fresh long
entry point comes in today down at 10,475. In the event that the December Dow
manages a new high, with a trade above 10,562, some recent short sellers might
be compelled to exit and that could evoke a quick probe up to 10,630.
S&P
Despite the big run of the last month, the COT report shows a flat spec and fund
long position and that is very encouraging for the bull camp. However, since the
market is exhibiting a back and fill attitude, we suspect a correction is in
order to 1180. In the end, the trend is up and buyers should be buying breaks.
FOREIGN EXCHANGE
US DOLLAR
So much for the intervention dialogue, as the Dollar
has quickly returned to the vicinity of the recent lows. It would seem that the
series of Cabinet resignations yesterday undermined the Dollar, as did
conflicting US economic numbers. In fact, the Dollar didn’t even find any
support from Fed comments about more interest rate hikes in the future.
Therefore, the job of the currency markets is to pull out that intervention
threat, by lower Dollar action ahead. However, we don’t get the sense that
coordinated intervention is cocked and ready to go and that could mean that
another significant new low in the Dollar will be seen soon. In fact, unless
there is an ultra hot inflation report this morning from the US and that were to
suddenly change views in the marketplace, we suspect that the Dollar is headed
to 82.00.
EURO
Following the recent correction, the Euro has
certainly corrected an overbought condition. Therefore, it would seem like the
Euro is poised both technically and fundamentally to rise to a new high for the
move. Certainly comments from the ECB will make it difficult to hold new highs,
but we doubt that such dialogue will be seen ahead of a thrust upward.
Therefore, aggressive traders should buy a minor break back to 129.70, looking
for new highs.
YEN
The Yen is poised for new highs and with the BOJ
predicting favorable outcomes for the Chinese and US economies, there would seem
to be little to prevent the Yen from rising to a new high. We doubt that the BOJ
will be prepared to intervene, even with the Yen reaching 96.00 and that should
leave the near term trend pointing upward for a while.
SWISS
While we don’t sense a flight to quality scenario,
we do think that the Swiss is poised to rise in sync with the Euro. Therefore,
traders should be buyers of a minor dip to 85.20, with expectations for a new
contract high in the near term.
BRITISH POUND
While the UK CPI was up only slightly, it was in
line with expectations and that should leave the Pound in an upward bias. The UK
economy was showing signs of inflation from high energy prices and considering
the recent softening in energy prices, the trade isn’t concerned about ultra
aggressive rate action in the UK. Therefore, the path of least resistance is
pointing up in the Pound.
CANADIAN DOLLAR
In our opinion, the Canadian is at an ultra critical
pivot point. We suspect that the trend remains up, so long as the December
Canadian manages to hold above 83.40. The last two consolidation patterns have
not extended more than 7 sessions and that means the Canadian is primed for a
major decision today or Wednesday!
METALS
OVERNIGHT
London Gold Fix $437.95 -$1.55 LME COPPER
STOCKS 67,125 metric tons -425 tons COMEX Gold stocks 5.352 ml Unchanged COMEX
Silver stocks 102.1 ml Unchanged
GOLD
Despite seeing gold drift down toward the bottom of
the up trend channel, the February gold has managed to recoil away from the
overnight lows. Despite the slightly disjointed attitude in the Asian gold
market, it still seems like the Asian players have remained bullish toward gold.
Certainly seeing the gold manage to mostly ignore the Dollar rise yesterday was
a supportive development and with a number of inflation readings showing signs
of strength and the US slated to see a PPI report this morning, we would expect
the positive bias in gold to continue.
SILVER
The silver market is also managing to hold just
above critical channel support this morning, which comes in at $7.503. With the
net spec and fund position at 85,000 contracts, within 12,000 contracts of the
all time record high level the silver market is also moderately overbought.
Therefore, we can’t rule out a temporary correction back to $7.36 and possibly
down to $7.25, in the event that gold slips into a more moderate correction.
PLATINUM
After an impressive upside breakout last week, the
platinum market is falling back away from the recent highs. Certainly, seeing
both gold and silver soften, has taken some of the momentum out of the bull case
in platinum but with the market waiting on the private supply and demand report
one might expect wider trading ranges ahead. Therefore, one can’t rule out a
temporary correction to $860 basis the January contract.
COPPER
The copper market saw a moderately large corrective
dive overnight and that came primarily off the idea that the Chinese government
might be poised to sell some copper. Surprisingly the copper market is faced
with exactly the opposite of what was assumed last week. In fact, the trade saw
talk last week that China was set to take delivery of copper from the Shanghai
exchange and now the rumors are suggesting that the Chinese government might put
some supply back onto the market.
CRUDE COMPLEX
The Press is beginning to use the term glut to
describe supply conditions and that certainly fosters additional selling. Talk
that Iran might be fostering a price-war, by undercutting Middle East sales
offers, is yet another significant threat to the bull camp. As if the negatives
confronting the energy market over the last 5 sessions weren’t rampant enough,
it seemed like abnormally mild US weather was providing an added layer of
pressure to prices early Monday morning.
NATURAL GAS
With recent mild weather and massive looses in crude
oil, the natural gas market naturally needed to adjust lower. However, with the
natural gas market rejecting the extreme lows Monday afternoon, it was clear
that some players decided to cover shorts rather than sit around waiting for
even lower prices ahead. We suspect that January natural gas is probably still
carrying some wounded small spec longs, as the last COT report showed the small
spec long to be rather large at just under 40,000 contracts as of last Tuesday.