Market To Open Flat To Lower
INTEREST RATES
OVERNIGHT
CHANGE toÂ
AM
BONDS
-6 — The short-term technical indicators have shifted into a buy mode on the
charts, with the recent COT report showing a net short spec position as of the
beginning of last week! Therefore, from a short-term perspective, one can
conclude that the bonds are oversold and capable of bouncing before getting
punished at some junction in the near future. Since the COT report was measured,
the bonds saw an additional decline of 2 1/2 points, so the net spec short might
be close to 25,000 contracts. The Note chart managed a lower low on the last
probe down, while the bond market managed to forge a low well above the October
low.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P -160,
NIKKEI +30, FTSE
-39Â — The stock market might have gotten ahead of itself with the rise Monday,
as the economic numbers released yesterday highlight ongoing softness in
manufacturing sector. According to Wall Street, the trade is a little concerned
that growth in the
economy is isolated within the retail sector. A couple of weeks ago the only
sectors thought to be strong were housing and autos, with many market players
concerned that the consumer was tapped out.
FOREIGN EXCHANGE
DOLLAR: Short-term
technicals
are in a sell mode in the dollar, with the market continuing to decline off the
recent high in a uniform manner. With the MOF in
clarifying its comments toward the yen and the ECB thought to be ready to cut
interest rates, the dollar is expected to come under pressure. Near-term support
comes in at 105.72, if even numbered support at 106.00 fails to hold. We suspect
that the early retail sales readings this morning will attempt to lift the
dollar, but then the dollar will slide into the layoff report. In fact, we
suspect that the dollar will be mostly soft all the way through the end of the
week. If by chance the
bonds were to fall below 106-13, that could signal a renewed recovery potential
in the dollar and reverse the downside track.
EURO: With the ECB meeting this coming
Thursday, the majority of analysts surveyed think that the odds for a rate cut
are good. In fact, we have to think that the hope for a rate cut is supporting
the Euro. In the overnight action the ECB dialogue suggested that economic risks
haven’t vanished and that the argument for lower rates have increased since the
last ECB meeting. Therefore, the trade is anticipating a move Thursday. Some
analysts even think that the ECB will be forced to cut rats again next year.
Having the ECB suggest that no Euro zone region is registering deflationary
conditions, is not exactly a development that attracts capital and that is why
we doubt the Euro has much upside potential on the current bounce. It should
also be noted that the Euro showed a slight increase in it’s
latest unemployment reading and the detracts from the bull case. When the
cut 50 basis points the trade dumped the Dollar! However, in the near term the
hope of a cut seems to benefit the Euro. Near term resistance in the December
Euro is seen at parity with a rally to 100.32 a sale, looking for a post meeting
slide to 98.66.
YEN: Despite some clarification from the MOF
on how much the Yen might decline, the Yen hasn’t shown much recovery action.
The Nikkei closed higher and the monetary base grew from a 19.8% pace to a new
growth pace of 21.8% and that helps the Yen slightly. In other words, the BOJ is
attempting to inflate the money supply and battle deflation.
SWISS: Even with the Dollar soft, we don’t
get the sense that conditions are ripe for a big Swiss rally. Massive overhead
resistance off the early November consolidation provides limitation to the
current trade. It would take two closes above 68.00 to alter the sideways
pattern.
POUND:
home prices continued to soar and that in a way supports the Pound but at some
point might create the threat of a bubble. In fact, the November home price rise
was the biggest jump in 13 years. Optimism off continued strength in
home values was offset this morning by a weaker outlook on the manufacturing
sector. The Pound looks set to rise until the bottom of the mid November
consolidation zone is encountered at 157.00.
CANADIAN: The Canadian has very little
competition right now and that should foster additional gains. However, we would
fear a correction off the upcoming
payroll report, especially if the December Canadian manages to rise to the
November highs into the Friday morning report release.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +0.20, SLV
+0.8, PLAT +1.90;
London Gold Fix $317.70, +$.40; LME Copper
Warehouse
stks
862,500 tons, -50 tns;Â Comex
Gold stocks 2.04 ml, Unchanged; COMEX Silver
stocks 107.0 ml oz, -9,837 oz; OVERNIGHT: Despite Japanese economic
problems a weaker Yen caused gold selling
GOLD: The gold market continues to
consolidation with a slight negative bias on the charts. However, the COT report
showed the spec long to be holding at 73,000 contracts, as of last week.
However, that spec long did decline by 8,500 contracts in the latest week, which
could mean that the market is slightly less vulnerable to stop loss selling.
SILVER: Unlike gold, silver short-term
technicals are not into a buy mode with a bigger
slide into the October consolidation (445.5 to 435) possible. The weekly COT
report in silver showed a spec long position of 29,000 contracts, which is a net
decline of 6,200 from the prior weeks reading. Therefore, silver is less
vulnerable to liquidation.
PLATINUM: Short-term
technicals are middle of the road suggesting more consolidation. However,
platinum should generally maintain a positive tilt given the artificially tight
supply and consistent growth in jewelry demand. The COT report showed only a
moderate long spec position the size of which isn’t all that significant.
COPPER: Short-term techs remain in a sell
mode and the market is certainly overbought from the torrid rise off the
November lows. The COT report confirms only part of the overbought status with
the spec long position coming in at 34,000 contracts. Since the COT report was
measured the copper rallied nearly 400 points to the high meaning that the long
might have reached 40,000 contracts yesterday.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +29,
HEAT +81, UNGA
+91 –Â The energy complex seemed to take support from a number of sources Monday
most specifically comments from Iraq that they indeed tried to buy aluminum
tubes that the US said were primarily used in refining weapons grade uranium.
did claim that the tubes were not intended for that purpose but we are
not sure what the final impact of the debate means to
the attack threat.
NATURAL GAS
The
weekly COT report showed the net spec position in the natural gas to be 27,000
contracts long and that is a little burdensome to prices. There were some
concerns that could weather was boosting near term demand and that some imports
were being threatened by political events.