Futures Point To A Flat Open
12/6/2004
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INTEREST RATES
As we suggested Friday it usually takes two
sessions to fully factor in a surprising Monthly US payroll report. While the
market could have discounted the disappointing payroll reading, we have to think
that discouraging holiday sales dialogue and higher energy prices have combined
to give the bulls an added buying incentive. While the US payroll readings were
still in positive territory, they failed to live up to lofty expectations and
therefore the near term bias in the Treasury market shifts back to the bull
camp.
STOCK INDICES
The stock market has really seen a change of
fortune in the last 5 sessions, as holiday sales expectations are deteriorating,
oil prices might be on the rise again and the outlook for the US economy
suffered under the disappointing November payroll report. However, with the
exception of violence in Saudi Arabia and Nigeria the stock market doesn’t look
to be confronted with overly aggressive downside pressure but the market is
overbought and is now without a conclusively optimistic fundamental track.
Therefore, the bias in prices might be pointing down, unless fund managers see
slight weakness this morning as a major buying opportunity.
DOW
The December Dow seems to have forged a blow off top with the high Friday
morning. Now it would seem like the December Dow is poised to fall back to
10,515 and possibly to 10,500 in the event that macro economics progressively
deteriorate as the week unfolds.
S&P
While the December S&P appears to have consolidation support at 1187.10, we
can’t rule out a slide down to even number 1180. Typically the stock market
doesn’t do well from a consolidation pattern and for that matter we have to give
the bears control.
FOREIGN EXCHANGE
US DOLLAR
Since the Dollar players were having trouble buying
into the argument that the US economy was strong; the letdown from last Friday
simply facilitates more aggressive selling in the Dollar. While the Central
Banks seem to be poised to react, we suspect that a series of new lows in the
Dollar will not prompt action unless the declines are aggressive and done on
significant volatility. In addition to the disappointing US payroll readings
from last Friday, the US is also burdened by sagging holiday sales activity and
firmer oil prices. Therefore, there is less of a chance of a bottom in the
Dollar now, than there was last week! Next downside targeting in the December
Dollar comes in at 80.00.
EURO
Just when the Dollar falters on its numbers, the
Euro zone actually gets a surprise benefit from German economic numbers.
Overnight German October Manufacturing orders were reported to have climbed by
1.1% and with the “US” consulate being attacked in Saudi Arabia it is possible
that some traders seek the flight to quality benefit of the Euro over the
Dollar. The Euro should have solid even money support at 134.00 but should now
be expected to forge even higher highs.
YEN
After the significant consolidation in the month of
November, the Yen would seem to be poised to move to even higher levels. While
the BOJ might decide to stand in against the Yen rise, we doubt that they can
effectively stop the Yen from another new contract high. In fact, given the
disappointing US numbers from last week, the BOJ just saw their job made
significantly more difficult. Next upside targeting comes in at 98.70.
SWISS
The Swiss comes into the session this morning, just
below another upside breakout point on the charts. The December Swiss appears to
have significant pivot point support down at 87.67.
BRITISH POUND
The Pound sits poised to make new highs in the
action today, with solid support pegged at 193.15. While the trend is up in the
Pound it would seem like risk and reward to fresh longs is growing unattractive.
CANADIAN DOLLAR
For the Canadian not to have bounced in the last 24
hour period highlights a chance in sentiment and possibly confirms a change in
trend. While Canadian payroll readings were disappointing, they were still
positive. However, it would seem like the Canadian is being lumped into the
Dollar category and that could facilitate fresh selling interest.
METALS
OVERNIGHT
London Gold Fix $445.75 -$3.40 LME COPPER
STOCKS 57,000 metric tons -1,700 tons COMEX Gold stocks 5.374 ml Unchanged COMEX
SILVER stocks 102.8 ml Unchanged
GOLD
The gold market sprinted higher late Friday in
response to a sharp break in Dollar and we would have to think that events in
Jeddah overnight will provide some support to gold. With the US Consulate
attacked in Jeddah and some hostages reportedly being held (the story as of this
hour) we would have to think that some flight to quality buying of gold would
surface this morning. However, the gold market has recently tracked with the
stock market in hopes that better growth will lift demand and increase the
chance for inflation.
SILVER
An early trade above the pivot point at $8.08 could
spark a follow through rally in silver, with the next significant resistance
point not seen until $8.50. The Silver market added to its record net spec and
fund long position but those readings are understated given that silver has
managed to rise another $29 cents following the COT report mark-off. The top of
the uptrend channel comes in at $8.28 today and close-in support comes in at
$7.96.
PLATINUM
Since the platinum market begrudgingly followed gold
and silver higher last week, we doubt that it will be able to avoid some light
corrective action early this week. Given that the platinum market is somewhat
overbought in the weekly COT report and the fact that the market is thinly
traded, we have to think that the market is vulnerable to profit taking.
COPPER
The copper market appears to be consolidating the
big losses last week. The weekly COT report showed the net spec and fund
position to be 35,000 contracts long, which is a marginal long and is most
certainly overstated given that copper managed a break of nearly 800 points to
the low last week. Chinese copper futures were mostly lower overnight and that
extends the generally lackluster action from China.
CRUDE COMPLEX
The energy complex appeared to be set to continue
the downside follow through from late last week but overnight events have
altered that course. In fact, with the Jeddah attack overnight and talk of
tensions in Nigeria, we see the bull camp taking control over prices again. If
the Jeddah attacks are part of a new wave of terrorism in Saudi Arabia, that
could ignite the market for a run instead of providing a temporary short
covering tilt.
NATURAL GAS
Because the regular energy complex appears to be
poised to bounce temporarily that could deflect the selling interest in natural
gas. However, given the mostly mild weather and the recent undermine of the
regular energy complex we can’t rule out a slide back to the bottom of the
summer consolidation down at $6.50 basis the March contract. In fact, with the
recently weekly inventory report raising the annual surplus significantly and
the small spec contingent stubbornly holding a moderately large long position,
it would be premature to expect a major bottom.