Futures Point To A Higher Open
11/26/2004
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INTEREST RATES
Apparently the Treasury market is under pressure
this morning because of comments made by an academic advisor to the People’s
Bank of China, who suggested that the rate of growth of purchases of US
Treasuries has slowed. According to the Chinese Business News, China currently
holds 180 billion of US Treasuries but the official who made the comments said
he arrived at that opinion through data provided by the US Fed and that he
personally doesn’t have any idea what the Bank of China’s will or won’t do with
respect to US Treasuries. Currently US bonds are 33% of the Chinese total
foreign reserve holding and that would seem to be a rather large percentage,
especially when one considers that 80% of China’s foreign reserve assets are in
Dollar denominated investments.
STOCK INDICES
While European stocks were a little lower
overnight, it would not seem like the market is in an overly pessimistic mode.
However, spot gold prices are on the rise and the Euro is also on the rise, off
comments that the ECB is set to allow the Euro to climb even higher against the
Dollar before any intervention is seen. The trade might also be partially
undermined by overnight rumors that China might be slowing the growth of
investment in US Treasuries.
DOW
Critical pivot point support in the December Dow comes in at 10,501 and an
upside breakout takes place today with a rise above resistance at 10,562. While
the fear of an international disinvestment debacle could undermine the Dow, that
issue is not dominating sentiment this morning and without the outside
distraction of higher gold and oil futures action today, it is possible that the
bull camp will maintain the upper hand. Top of the uptrend channel in the
December Dow comes in at 10,620.
S&P
For the S&P we see an extremely critical pivot point at 1178.10 and upside
resistance up at 1186.10. In order to avoid a broadening top pattern, the
December S&P might have to manage a trade up to 1188.20 today. If optimism from
the retail sector puts the S&P above 1186.10 in the morning trade, we suspect
that the market will manage a probe above 1190 before the end of the session.
FOREIGN EXCHANGE
US DOLLAR
While the Dollar didn’t instantly fall apart this
morning off talk that the Euro zone was prepared to allow an even further slide
in the Dollar, the Dollar has mounted yet another new low. It seems that
contract with Euro zone officials, or mere speculation of what officials are
thinking has left the market with the opinion that intervention is simply not in
the offing. With other overnight rumors suggesting that China might be slowing
it’s purchases of US Treasuries, it would seem like the Dollar has another leg
down ahead. In the wake of the rumors swirling out of Europe overnight, a number
of banks have lowered their targeting on the Dollar, with some suggesting an
80.00 Dollar might be in the cards. While the US doesn’t have anything in the
way of scheduled reports due out today, it is possible that an ultra strong
performance in the US stock market might discourage a full scale attack on the
Dollar. Since the last G20 meeting it would seem like the focus has shifted
toward the lack of stimulus in the Euro zone, and away from the deficit problem
in the US. Many analysts are suggesting that significantly lower Dollar action
is going to increase the chance of global inflation and could already be kicking
up US export activity. However, in the near term, expect the down trend in the
Dollar to continue.
EURO
The trade was surprised that the ECB wasn’t in a
position to slow the climb in the Euro. In fact, sentiment seems to have
accepted a move to yet another significantly higher level in the Euro. We are
already seeing signs of slowing in the Euro zone, with money supply growth
slowing, exports slowing and some economists moving to target negative growth
sometime early in 2005. However, right now the market is simply not ready to
stop buying the Euro off some macro economic indication like slowing money
supply. With a little extension of the range this morning, today’s range in the
Euro might become one of the widest daily ranges of the year and that could
suggest some type of decision point ahead. In the near term, we suspect that the
Euro will be able to manage a rise to 135 before the ECB even gets in position
to make a decision on intervention. We suspect that the political residual from
the Iraq debate is a factor that has slowed down the decision to intervene.
YEN
Overnight the Yen exploded up near 98.00 and so far
that hasn’t brought on the BOJ and some now wonder if the line in the sand is
100.00. Weaker Japanese stock prices show that the currency is undermining
sentiment, but as of yet we don’t get the sense that the situation is at an
inflection point. Critical support comes in at 97.13 and resistance is seen at
97.49.
SWISS
The only resistance one can locate on the charts
comes in off the monthly charts up at the 1994-1995 highs of 89.90. Even without
flight to quality concerns, the Swiss is managing impressive gains and that
alone suggests even more gains are ahead.
BRITISH POUND
The UK 3rd Quarter GDP was unchanged at +0.4% but it
was noted that the industrial sector was softening possibly because of the
rising Pound. The next resistance point on the charts comes off the monthly
chart at 191.02. With the overnight high all the way up at 190.19, the market
would seem to be capable of making more gains.
CANADIAN DOLLAR
The trend is up and the Canadian has avoided
extremely overdone technical status, with periodic corrections and mostly
balanced gains. Therefore, the path of least resistance is pointing up, with a
near term objective of 85.65 and near term support seen at 84.87.
METALS
OVERNIGHT
London Gold Fix $448.65 +$1.65 LME COPPER
STOCKS 62,050 metric tons -300 tons COMEX Gold stocks 5.373 ml +15,602 oz COMEX
SILVER stocks 102.8 ml Unchanged
GOLD
Markets Closed for Holiday!
SILVER
Markets Closed for Holiday!
PLATINUM
Markets Closed for Holiday!
COPPER
Markets Closed for Holiday!
CRUDE COMPLEX
Markets closed due to Holiday. API/DOE Crude Oil
Stks Est +1 to +2 ml bls Act change API -1.2 ML DOE +100K API/DOE Distillate
Stks Est +500k to +1 bls Act change API +1.8 ML DOE +1.0 ML API/DOE Gasoline
Stks Est +1.5 ml to +2.5 ml bls Act API +2.9 ML DOE +1.8 ML API/DOE Refinery
Oper Rate Est +0.2 to +.3 API 93.2 Prev 93.9 DOE 92.9 Prev 93.5
NATURAL GAS
Markets closed due to Holiday.