Futures Point To A Weaker Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS -4 — The bond market is showing a
moderately impressive reversal off the overnight low and we are not sure if that
is because of increased anxiety brought on by the start of the war, or because
the trade is anticipating the
economic numbers to be weak today. We doubt that regularly scheduled numbers are
that much of a consideration to the trade under current conditions! However, in
looking back to the original Gulf War and the early stages of the Afghan attack,
the bond market was quick to doubt the progress of the US Military and in fact
the bonds were one of the markets that played up the idea that the Afghan attack
was "BOGGED DOWN". In other words, because
and US tanks are not racing toward
the bond market might be attempting to price in a protracted fight.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
-10, DOW -1, NIKKEI
+144, FTSE -6.6 — Initially the progress of
the war is not of the type that the market expected and that could be why the
overnight action is lackluster and without definition. Most major Indexes
managed to probe above the bull/bear line overnight and that suggests the tilt
in the market remains bullish. However, until the course of the war offers more
definition, we doubt that investors will be willing to throw money at the long
side.
FOREIGN EXCHANGE
DOLLAR: After the upside breakout Wednesday, the Dollar appears to
have stalled. Like the stock market and bonds, the trade is not sure what to
make of the slow start to the war and so far
has not used banned weapons. In order for the Dollar to rise sharply, the war
has to go smooth and quick and for the Dollar to begin a long-term up trend
pattern, the Allied forces will have to find banned weapons and prove it to the
world. In other words, the
has to do more than win the war, in order to sway international sentiment back
into its court. The economic report slate today promises to bring some weak US
numbers into play and that could cause the Dollar to slide, if the news from
Iraq is insignificant. Near term critical support in the June Dollar comes in
at 101.31 and resistance is seen at the weeks high of
102.15.
EURO: The Euro forged a major downside
breakout overnight but then recovered from that low, as if the market was
oversold. With a German group (the Ifo)
predicting growth in that country to be a mere +0.9% in 2003 (and only if the
war in
is short) we hardly see any reason to buy the Euro at such lofty levels. If
growth under the best-case scenario is barely going to be positive, money should
go to
instead of
Critical resistance in the June Euro is 106.40 and we would be a seller at that
level.
YEN: The BOJ is promising to act if the war
causes some type of confidence shock but that apparently didn’t spark too much
buying interest in the Yen. We suspect that the Yen might try to rise to 83.60
but should run out of upside momentum once the pace of war in
intensifies. Keep in mind, the Yen was a flight to quality instrument and when
it becomes clear that the war will be short we suspect that more selling will
surface and the BOJ might join in with selling of their own.
SWISS: Like the Yen, the Swiss was a flight
to quality instrument and with the war progress unclear, we can understand the
desire by some to buy the Swiss. We think the rally in the Swiss this morning is
a sale. Sell the June Swiss at 72.38 and risk the position to 72.80.
POUND: Some of the extremely negative
political pressure on the Pound has abated temporarily but once loss of civilian
lives in
rises sharply the Pound might come under attack again because of intense
protests. The problem for shorts is that a quick end to the war might make the
two-month break from 164 to 155 seem significantly overdone.
CANADIAN: The Canadian managed to respect
chart support of 66.78 and might be sending a signal that it won’t liquidate its
flight to quality status, as easily as the Swiss and Yen. In other words, maybe
the Canadian economy is strong enough to justify the 6-month rise in the
currency. It would also be a good thing for the Canadian economy if the
economy were put on better footing with a quick end to the war!
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD -0.90, SLV +1.0,
PLAT +1.30; London
Gold Fix $335.50, -$4.50; LME Copper
Warehouse
stks
828,025 ton, -275 tns;
Comex Gold stocks 2.335 ml, -788 oz;
COMEX Silver stks
108.7 ml oz, -5,839 oz; OVERNIGHT: The start of the war in Iraq did not spur
gold buying in Asia
GOLD: While we are not totally convinced
that gold will breakout down in the face of the war, that
would appear to be the track of sentiment. In fact, overnight the gold probed
lower and almost fell below critical support at $332.6. We have to continue to
remind traders that the gold market is sitting with a significant small spec and
fund long position and that position could become extremely vulnerable once the
buzz of war begins to die down.
SILVER: The silver market forged to the
lowest level since last October. Considering that the silver market continues to
hold a moderately large small spec and fund long position, one would have to
suspect that more stop loss selling is ahead and a possible return to the
October low of $432. In buying May silver at 432 one is making a physical demand
bet and is hoping that the war will be swift, thereby helping high tech and
communications demand for silver.
PLATINUM: The weak price action in platinum
early in the week, hinted at a breakout down and with gold and silver in decline
and the war apparently not a reason to alter the bear trend, we suspect that
platinum is headed toward support of $650. Keep in mind,
that platinum is trading at an extremely expensive historical price
level. .
COPPER: At least in the early trade, copper
hasn’t been able to garner follow through buying interest. After the gains of
the last few sessions, copper is short term overbought and possibly without
fresh buying interest. With the war starting out slower than many expected,
markets like copper appear to be paused as if waiting for confirmation that the
siege will be quick and the economy can get on with recovering.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE -68,
HEAT -61, UNGA
-115, N-GAS -23 — It would seem that the
energy complex managed to rise Wednesday because some spec longs were coming
back into position ahead of the 48-hour deadline. In other words, it probably
made sense for those that are bullish to have positions on before the start of
hostilities but so far that logic hasn’t reaped any rewards.
NATURAL GAS
The
weekly inventory expectations call for a 50 to 96 bcf
draw and that pretty much confirms that the seasonal impact is forcing the draw
level back toward zero. If it were not for the war issue, the weather might be
more important to price action but with the natural gas prices dramatically
impacted by the direction of crude oil, weather really doesn’t matter.