Futures Point To A Higher Open
12/1/2004
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INTEREST RATES
The Treasury market continues to hover just above
an extremely critical support point on the charts. With the low Tuesday, the
March Treasury bonds pulled within 5 ticks of the October low and a trade below
that level could really begin to whip up long term top dialogue. Furthermore,
against a back drop of a Dollar crisis, we suspect that many longs are getting
even more restless.
STOCK INDICES
While the stock market finished the month of
November with a down day, the month of November saw the best monthly gain of the
year in the Blue Chip sector. The stock market was confused by the economic
report flow, as the GDP was revised upward and Consumer Confidence declined
again. The market was also confused by the fact that the Chicago Purchasing
Managers report contracted but also showed a very impressive rise in the
employment component of that report.
DOW
The Dow continues to be vulnerable on the charts, but using a 2-3 day down
count, one would think that the market would be poised to turn back up today.
Critical support comes in at 10,447 but a rise above 10,475 this morning could
serve to kick up a wave of buying.
S&P
Critical support in the December S&P comes in today at 1175.20 but the sentiment
doesn’t really shift into positive territory until the market manages a rise
above 1180.00. We are bullish unless the December fails to hold above 1171.50.
FOREIGN EXCHANGE
US DOLLAR
The Dollar is already making a series of new lows
against various currencies in the early going today. Apparently the new
intervention threats from the BOJ are of little concern to the market. It is
also clear that downward revisions in economic expectations for the Euro zone
are not providing the Dollar with any support. As we have suggested a number of
times, the markets job is to pull out intervention and it would seem that the
Dollar is set to fall until a Central Bank or a group of Central banks stand in
the way. We are pretty surprised that the macro economic shift isn’t beginning
to diffuse the downside in the Dollar, as US payrolls Friday might clearly
signal the US economy to be head and shoulders above the rest. We also have to
think that the ultra low exchange rate is beginning to provide the US economy
with an edge and that edge could be exaggerated by the increased activity into
the US holiday. In conclusion, we expect to see new lows in the Dollar but on a
big spike down trade this week, traders might consider looking at some cheap
June Dollar Index calls.
EURO
The Euro zone 3rd quarter GDP was up on 0.3%, with
the 4th quarter expectations barely even calling for any positive growth. In
fact, some 4th quarter GDP predictions have the Euro zone GDP to be up only.1%!
It would also appear that what Euro zone growth there is, is coming from
inventory building which is another negative element for the future. However, at
least in the coming 12 hours the economic and interest rate differential means
almost nothing. Therefore, if the trade sees another big pulse up and rejection
of that high (similar to the action seen last Friday) we have to think that the
Euro bulls will lose their resolve. Those that are long with profits should
consider picking a point above the market and looking to bank those profits on a
pulse up.
YEN
The consolidation just above 97.00 would seem to
give the Yen a base from which to work higher. However, the Minister of Finance
is warning that the BOJ will take action in the event that the US Dollar makes
any unusual moves. Therefore, the market is seeing the gauntlet laid down and
will have to push the Yen into new high ground in order to bring on the
intervention. In conclusion, we suspect that the next new high will fail to hold
as traders encounter intervention.
SWISS
We just don’t get the sense that the Swiss is poised
for new highs. The Swiss has significant overhead resistance on the charts and
is simply not seeing the type of anxiety that is typically present when money is
pouring into the Swiss. In fact, it just feels odd to be buying the Swiss at
such high levels into what might be a fairly impressive US payroll report.
BRITISH POUND
There is no holding the Pound back as it has
launched into a significant upward pulse. To find resistance in the Pound one
has to flip back to September of 1992 when prices soared to 200.88.
CANADIAN DOLLAR
We think the time to pull the trigger on longs in
the Canadian is now. In other words, on any pulse up traders should consider
banking long term profits and reversing. Consider buying 2 June Canadian 79 puts
for 50 ticks and holding for a position play.
METALS
OVERNIGHT
London Gold Fix $451.10 -$.90 LME COPPER
STOCKS 59,775 metric tons -200 tons COMEX Gold stocks 5.374 ml +772 oz COMEX
SILVER stocks 102.8 ml -39,548 oz
GOLD
The gold market remains in a liquidative posture
this morning but with the Euro poised at new highs and the Dollar holding within
striking distance of new lows, we don’t get the sense that the market is set to
replicate the weakness seen on Tuesday. Chinese gold was up only slightly and
with the US economic report slate today bringing on less significant
information, we don’t get the sense that the market is poised for a significant
move. This morning we don’t see the same amount of intervention talk as was seen
yesterday and that could take some of the pressure off gold.
SILVER
The silver market held together against the
liquidation in gold and would still seem to have a general upward bias this
morning. Slow European manufacturing growth overnight is a slight undermine to
silver, platinum and copper but fortunately for the silver bulls, silver is
tracking gold fundamentals and isn’t paying much attention to the actual
physical supply and demand setup. The bottom of the up trend channel in March
silver comes in today at $7.64.
PLATINUM
With the overnight action pointing to the upside, it
would seem like January platinum is headed toward the November high of $881. We
have to think that platinum is benefiting from the fact that both gold and
silver are extensively overbought, as that seems to be pushing fresh longs
toward platinum. Even though the market is limited by the recent private supply
and demand report, which showed the deficit condition in platinum to be
moderating, we have to think that the near term could bring enough spillover
buying to see the higher high formation of the last three months extend itself.
COPPER
After a moderately negative overnight probe, the
copper market has managed to recoil away from the overnight low. Chinese copper
prices were down overnight as some profit taking dominated the action in that
market. A report from a Bank overnight suggests that base metals supply
continues to tighten but the LME exchange stocks daily changes have once again
narrowed significantly.
CRUDE COMPLEX
While the energy complex managed an early new
high for the move rally on Tuesday, the market eventually failed to hold those
gains into the close. With a number of international economic agencies now
predicting slower growth in the months ahead, it makes sense that some energy
demand expectations will now be pulled lower. The OECD cut Euro zone growth by
almost.5%, while similar downward revisions were made for the Japanese and US
economies.
NATURAL GAS
Natural gas prices temporarily fell below recent
consolidation support and that could have seriously undermined the trade if the
natural gas market were still ultra vulnerable. On the other hand, the natural
gas market will not be able to ignore a patently negative weekly distillate
stock reading this morning if one is floated. In other words, natural gas prices
will probably see prices fall below the November consolidation lows in the event
that the coming winter tightness threat is reduced by a moderate build in weekly
distillate stocks.