Positive Retail Data Position The Markets For A Positive Open
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS
-9 — Because the net effect of the Iraqi acceptance was anything but soaring
economic optimism, the bonds managed to avoid liquidation Wednesday.
Furthermore, as long as the equity market remains subdued and indecisive, we
suspect that the
economic report slate will provide enough bullish fodder to maintain a slight
upward tilt in bonds. However, in order to climb up to the September and October
highs, the bonds will have to see softer than expected retail sales numbers or
another big jump in ongoing claims.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P +200,
NIKKEI -135, FTSE
-11.1Â — While the S&P rejected a bad technical trade below 873 Wednesday, it
really failed to mount an impressive recovery move, considering the favorable
news from Iraq. Either the economic outlook has become so negative that longs
couldn’t be pulled into play, or the trade isn’t totally confident that
will live up to its word. For the action today, talk
of a buyout in the Financial sector seemed to provide
a little lift to prices overnight, but the near term look isn’t that favorable.
FOREIGN EXCHANGE
DOLLAR: The dollar could continue to claw higher, as those that sold
the dollar under the threat of war are probably liquidating positions. However,
we think there are a number of dollar shorts than want to be short because they
think the
economy is on the rocks. Therefore, the retail sales reports this morning are a
critical reading for those traders. We doubt that the December dollar will be
able to climb all the way up to 105.62 resistance
unless the
manages to see retail sales come in better than the expectations this morning.
Since the dollar was down for almost a month, its
understandable that it would see at least a few sessions of technical short
covering. However, unless the Euro zone releases some significantly weak
economic information, the overall down trend in the dollar probably won’t be
defeated. If the
stock market would have exploded on the Iraqi news, we might have expected more
out of the dollar.
EURO: Welteke
from the ECB is doing his part to weaken the euro this morning, with comments
that the Euro zone growth remains weak but he did give the euro bulls some
support by suggesting that the Euro zone growth projections for 2003 will be
met. The ECB official also suggested that he sees Euro zone rates being in a
downward trend and that is another hint at possible easing. We are not sure what
easing does to the euro, as easing hurt the dollar. We have to think that the
euro would benefit from a rate cut! We would expect the euro to find support
around parity.
YEN: The yen continues to have second
thoughts about the recent recovery bounce. With the Nikkei coming under pressure
and the concerns mounting on the bad debt issue again, it would seem that the
yen would continue to slide back toward support of 82.63.
SWISS: Temporarily,
flight-to-quality concerns have declined and that should undermine the
Swiss for another couple sessions. Near-term support in the Swiss comes in at
68.28.
POUND: The pound is resisting a liquidation
wave but without a significant challenge from other currencies, we have to think
that the pound maintains its leadership role. Therefore, traders should be
looking to buy the December pound on a decline to 157.76.
CANADIAN: We think the Canadian has found a
bottom around 63.33 but in order to resume the upside track seen in October,
something significant has to be seen in the headlines, to avoid a sideways
consolidation pattern.Â
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +0.10, SLV
+.5, PLAT +.20, CP
-30;Â London Gold Fix $319.60, -4.60;
LME Copper Warehouse
stks
874,250 tons, +6,325 tons;Â Comex
Gold stocks 2.00 ml, Unchanged; COMEX Silver
stocks 107.0 ml oz, -98,223 oz;Â OVERNIGHT: A minor recovery bounce
seen in Asia but the move wasn’t convincing
GOLD: The gold market proved with the
liquidation Wednesday that the war threat was a major component of the recent
rally theme. We do think that economic uncertainty and weakness in the equity
market was an additional focus of the gold bulls. In the near term,
it’s possible that technicals
play a bigger role than the fundamentals, as the last COT report showed the
combined small spec and fund long in gold to be 62,000 contracts.
SILVER: Trendline support in March silver
comes in at 452.3, but a really critical pivot point is seen down at 450. While
the washout was significant yesterday, we think that a number of longs stayed
put, regardless of the bearish headline news. While silver prices are still 28
cents above the critical October low, we don’t get the sense that they are
vulnerable to a full correction.
PLATINUM: The 580 level looks to be a
critical pivot point, but since the platinum rally in the July to October time
frame appeared to come off hope for decent demand and tight supply we don’t see
the weakness in gold and silver hindering platinum. In fact, platinum could
possibly be lifted by the no war tilt, especially if global equity markets
manage to rally. More consolidation within the 571 to 590 range is expected
until the macroeconomic look improves.Â
COPPER: Surprisingly, copper dipped down
Wednesday and didn’t get a lift off the no war
decision. This morning the LME has documented another large increase in
warehouse stocks and that makes two such increases in less than a week. We doubt
that warehouse stocks will result in a selloff, but if the stock market is weak,
the stocks rise could cause copper to fall sharply if prices fail to hold
critical support of 71.15.
CRUDE COMPLEX
OVERNIGHT
CHG toÂ
AM
CRUDE +29,
HEAT +52, UNGA +41– It’s clear
from the start that the Iraqi government is going to barter and cajole for
better position against the UN resolution and its specific requirements.
initially insisted that all inspections would be escorted inspections but the
came out against any type of alteration of the resolution.
NATURAL GAS
Now that
the shock from the regular energy complex washout has been encountered, we
suspect that natural gas and crude will see some divergence of pricing in the
days ahead. Evidently, the locals were overly short and were forced to cover
into the close Thursday.