Futures Point To A Lower Open
11/23/2004
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INTEREST RATES
The Treasury market continues to weather
potentially damaging dialogue from the international investment front, but
traders don’t seem to be that concerned about a mass exodus from US Treasuries
because of a falling Dollar. However, with the Dollar sitting just above its
contract lows into the opening today, we suspect that a few buyers will balk at
fresh longs. On the other hand, the market is expecting to see some weak numbers
from existing home sales, which were pulled downward in recent surveys.
STOCK INDICES
While European airline stocks were showing some
bounce early this morning (off the expectation of lower energy prices) it would
certainly help the broad market if the talk of increased November OPEC oil
production would actually translate into a considerable flat price decline in
energy prices. In the near term, the stock market seems to be somewhat off
balance with the concern for the Dollar still present in most conversations. We
also get the sense that the market lacks a conclusively positive attitude, as
the recent correction probably scared off some would-be buyers.
DOW
In order to totally shake off the doldrums and foster an upward pulse, the
December Dow needs to manage a climb above 10,503 and possibly even 10,515 and
then the bulls might attempt to run the market up aggressively. Some traders see
the 10,500 level as an extremely critical bull/bear line, and for that reason
the early trade today might set the tone for the rest of the week.
S&P
The S&P certainly posted a big enough recovery yesterday to put the bear camp on
notice. Therefore, we suspect that a minimal combination of lower energy prices
and favorable existing home sales could see the S&P rise back toward 1182.70.
FOREIGN EXCHANGE
US DOLLAR
The Dollar is drifting back toward new lows into the
US opening, despite talk that the BOJ might be getting closer to some type of
intervention. On the other hand, the G20 meeting is fading into the background
and that could mean that more and more traders are again confident in attacking
the Dollar. We suspect that the Dollar will fall to new low levels and remain at
those lower levels, unless the US stock market soars and energy prices fall
sharply. We are not sure that a soaring US stock market and lower energy prices
will have any impact on the Dollar, but right now that is about the only thing
we can think will turn the trend around. Even the intervention threat doesn’t
seem to alter the direction of the Dollar. Therefore, we expect to see new lows
in the Dollar today.
EURO
Apparently the market shunted aside the sharp
reduction in the Euro zone trade surplus yesterday as unimportant. Even with a
rather anemic German 3rd quarter GDP reading of +0.1% this morning, the market
seems to be content to plow money into the Euro. The Germans even reported
significantly slower exports but right now, the market is not ready to change
its fundamental view. Therefore, the technicals rule and the Euro looks poised
to make a new high.
YEN
A holiday might have sparked the overnight rumors
regarding BOJ intervention and that talk probably has the Yen under some
restraint. Critical support in the Yen comes in at 96.83, but we are not
convinced that traders are going to pile into the long side of the Yen, like
they might in the Euro and the Swiss. Therefore, a choppy consolidation trade
might be expected in the Yen in the coming sessions.
SWISS
The Swiss sits poised near new highs on the charts
and with a moderate overnight correction, it would seem that the market will
easily posted a new high at some point this week. Near term critical support is
pegged at 86.12 and that level should probably be bought.
BRITISH POUND
A massive upward thrust overnight gives the Pound a
follow through potential, especially since some players are viewing the Pound as
less of a risk against the Dollar than the euro. In short, it would seem like
the Pound is headed to 187.50.
CANADIAN DOLLAR
The big upward spike yesterday seems to have left
the Canadian temporarily overbought but a minor correction overnight has righted
the ship and could leave the Canadian ready for new highs before the close
today. A new low in the Dollar should mean a new high in the Canadian. Near term
targeting is seen up at 84.67.
METALS
OVERNIGHT
London Gold Fix $447.00 Unch LME COPPER
STOCKS 62,350 metric tons —1,600 tons COMEX Gold stocks 5.357 ml Unchanged COMEX
Silver stocks 102.8 ml Unchanged
GOLD
More minor declines were seen in the Pacific Rim
region, but Chinese gold prices managed to make new highs, which would suggest
that the Chinese continue to be a stalwart supporter of the bull track in gold.
In fact, it is possible that all the talk about a floating Yuan is serving to
foster alternative stores of value like gold in China. On the other hand, the
Chinese optimism hasn’t translated into a positive early US gold track, but with
the Euro making a surge as we write this comment it is possible that the US gold
track will improve into the pit opening.
SILVER
The silver is showing negative chart action with the
high early this week causing prices to recoil and the pattern of lows showing
almost upward momentum. The silver market also has a significant net spec long
and could be considered even more vulnerable than gold, as gold is the primary
market and silver is simply catching a ride from gold. Therefore, one might
expect a break in gold to cause silver to give ground and possibly even out
distance gold on the downside.
PLATINUM
While open interest is high in all metals markets,
seeing ultra high open interest in a thinly traded market like platinum is
concerning. In the wake of recent negative dialogue from China regarding some
metals imports, we are little concerned that platinum is lacking some of the
fundamental push that brought prices up to such high historical levels.
Furthermore, with platinum prices basically tracking sideways since the
beginning of August, it is clear that platinum is lacking a clearly bullish
fundamental outlook.
COPPER
Surprisingly the copper market has managed to shake
off the negatives floated in the action Monday to see a slightly positive early
trade this morning. However, the Chinese action was inconclusive to lower
overnight and the market did note the sharp profit taking dive on Monday and
that makes some players leery of entering thinning holiday type conditions. On
the other hand, the general tilt of the market remains up and the overnight LME
stocks managed another moderate decline, putting the stocks down to only 62,000
tons.
CRUDE COMPLEX
Once again the heating oil market seemed to tug
down the entire complex and that is significant considering that the market is
supposed to be concerned about a winter shortage. While the market exploded last
Friday off the talk that OPEC was poised to cut back production in the December
10th meeting, comments from the UAE Oil Minister yesterday that they remain
committed to supplying the world with enough oil, seemed to turn sentiment
around prior to mid session on Monday. Even after the market saw talk that a
Shell refinery was setting up for some maintenance work, the products remained
weak.
NATURAL GAS
The natural gas market showed a big range Monday but
eventually closed weaker. Given the failure in the regular energy complex
Monday, the mild weather and recent comments by some OPEC members yesterday that
send crude prices even lower, we would step aside from fresh long plays. In
fact, until one can expect to see consistent support from the weather, we have
to think that prices might be able to manage a slide all the way down to the top
of the May through September consolidation pattern around $6.96.