Futures Point To A Higher Open
11/29/2004
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INTEREST RATES
The conflict in the Treasury market is rising
steadily with recent bull attempts to push up prices, being met with growing
concerns of rotation away from US investments. Since the markets closed last
week, it would seem that one of the world’s largest bond fund managers has
become a little concerned about US Treasuries and has suggested that investors
choose German Bunds over US Treasuries. Fortunately for the bull camp in
Treasuries, recent US economic numbers haven’t been conclusively strong but they
have been just positive enough to assume that the recovery continues.
STOCK INDICES
Despite a major earthquake in Japan, stock prices
there managed to post a rather impressive rise and that seems to have translated
into a generally optimistic US opening tilt. In fact, the market seems to have a
positive tilt despite the world’s largest retailer (Wal-Mart) downwardly
revising November sales. Wal-Mart suggested that November sales were being
pulled down due to high gasoline prices and that would seem to be the only drag
against the holiday sales kick-off.
DOW
The December Dow looks to be caught in a range bound by 10,500 and 10,600, but
it still maintains a generally positive tilt. Traders should be looking to buy
30-50 point corrections and expecting to see new highs at some time in the
coming week. However, seeing a trade back below 10,478 would be extremely
negative, considering the positive flow of fundamentals early this morning.
S&P
The December S&P should have close-in support at 1186.20 and even more critical
support down at 1180. The bias is up and we would not be surprised to see a 1200
trade before the end of the week. Despite short term technical sell signals this
morning, we suggest that traders ride the up trend by buying 200-300 point
setbacks off the early upward pulse in prices.
FOREIGN EXCHANGE
US DOLLAR
After a major thrust into new low ground Friday, the
Dollar has managed to bounce rather aggressively this morning. Apparently there
is a growing sense of intervention this morning and with the BOJ comments it
would seem that a number of players are less willing to attack the Dollar. The
talk about a floating Yuan adds an extra wrinkle into the equation that may be
difficult to predict. Some think that a floating Yuan, would mean a higher Yuan
and perhaps an even lower US Dollar and that could simply overcome the
intervention efforts. In the near term, we suspect that the Dollar will only be
able to mount a fleeting bounce but that more new lows are ahead, unless there
is a coordinated intervention effort by several countries. In the near term, it
would not seem like the US economy is strong enough to garner a shift in
investment flow and therefore we have to think that the overall direction of the
Dollar is still pointing down. In order to turn the down trend around, the
December Dollar would have to mount a rise back above 82.95.
EURO
Inflation readings from the Euro zone seem to be
having almost no impact on prices this morning. However, the extreme overbought
status of the Euro is having an impact on the early trade, as the Euro is
attempting to find support on the charts. Near term support comes in at 132.33
and then again down at 131.82. It would seem like the lesser currencies are the
ones being lifted the most by the overnight threat of Dollar intervention, and
that is a positive sign for the Euro. We see no sign that the trend is set to
end!
YEN
While the BOJ has indicated they are ready to
intervene, the market isn’t exactly sure where they will act, or if the BOJ can
effectively stop the rise in the Yen, which is given such momentum by an ultra
weak US Dollar. However, a bit of back and fill is possible, with the December
Yen seeing near term pivot point support at 97.00.
SWISS
After a tremendous run last Friday, the Swiss is
significantly overbought and in need of a decent correction. In fact, the action
last Friday almost looked like a blow off top. Near term corrective support in
the Swiss comes in at 87.26.
BRITISH POUND
UK October consumer lending declined, mortgage
lending also declined and the overall consensus is that the UK economy is
showing signs of slowing. With the massive range posted last Friday, it would
seem like the market is overdone and in need of an aggressive correction and
with economic information slightly slack, the bears certainly have an excuse to
pressure the Pound. Near term support on the charts comes in at 189.72.
CANADIAN DOLLAR
A major technical breakdown overnight leaves the
market in a very bad position to start the week. Near term downside targeting
comes in at 84.00 and then again down at 83.50.
METALS
OVERNIGHT
London Gold Fix $450.40 +$1.75 LME COPPER
STOCKS 59,300 metric tons -150 tons COMEX Gold stocks 5.373 ml +15,602 oz COMEX
SILVER stocks 102.8 ml Unchanged
GOLD
Intervention psychology seems to have lifted the
Dollar as the market is closely monitoring those central banks thought to be
primed to react against further Dollar declines. However, the gold market
continues to be bullishly positioned and is seeing periodic support from private
forecasts like the Citigroup Inc. analyst from Sydney who suggested overnight
that he may have to raise his target for gold in 2005.
SILVER
After a quasi gap up move in March silver overnight
the market has given back most of the gains. We suspect that the gold market
action is responsible for the setback in silver, which has been mostly locked in
a consolidation for the last two weeks. A general upward bias continues but
recent declines in momentum leave the bull camp with minimal upside targeting.
PLATINUM
The platinum market also gapped higher overnight but
the magnitude of the gain was limited. Short term technical indicators in
platinum are in sell modes but with the outlook for gold remaining so positive,
we have to think that platinum has the capacity to return to the $875 pivot
point with only minimal outside support from gold.
COPPER
Last week Shanghai copper stocks declined by 1,245
tons to 23,258 tons and Chinese copper prices ended at a new high Friday morning
and that appeared to give early US copper prices a lift this morning. However,
tempering the overnight bullishness is the fact that Chinese copper prices this
morning actually finished a little lower. Apparently a bidding war is heating up
for WMC and that could foster progressively higher flat prices of copper, as the
media hype pushes more longs into the market.
CRUDE COMPLEX
Apparently a battle is brewing inside OPEC as the
Saudi’s are suggesting they might turn up production further in an effort to
head off further tightening into the North American winter. On the other hand,
the Iranian Oil Minister suggests that the oil market is currently oversupply by
up to 2 million barrels per day. However, the energy complex comes into the new
week moderately above the prior week’s lows and looking toward OPEC for
leadership.
NATURAL GAS
The rather shockingly large weekly draw figure
sparked the natural gas into motion, as the trade took the early start to the
withdrawal season as a major positive. We also think that the relatively cheap
prices of natural gas when compared to heating oil and crude oil, brought heavy
arbitrage trade into natural gas on the long side. With the latest weekly draw
of 49 bcf, much bigger than expected and the annual surplus contracting to only
118 bcf, the persistently bearish tilt from the supply front is being
alleviated.