Europe To Help Boost?
Qualcomm’s
(
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PowerRating) boost in forecast is liable to boost
telecom and tech issues Friday morning. Europe staged a reversal on an apparent
short squeeze, so it could help set the stage for similar action in the US
market. Triple witch expiration is the wild card, and should add some volatility
to the market, which could also help fuel a move. There have been some
downgrades and cautious comments out of semis, such as Texas Instruments
(
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PowerRating),
which sets the stage for volatility band and reversal plays in those issues.
INTEREST RATES
OVERNIGHT
CHANGE to
BONDS -20
— Bond
bulls and Americans in general had better hope that the downside action in the
bonds overnight is a knee-jerk reaction to the slight bounce in equities, the
Fed Philly reading yesterday or a technical reaction. If the bonds are down
because of the failure to sell out a Japanese Government Note auction, that
could have far-reaching repercussions. In other words, if the investing public
has reached a point where a well-established government doesn’t have access to
additional
debt (even with soaring yields), there could be trouble for other
borrowers.
STOCK INDICES
OVERNIGHT
CHANGE to
S&P
+450;
NIKKEI -188; FTSE +97 — Even in extremely bearish times the market doesn’t go
straight down. We doubt that the slight improvement in the Philly Fed numbers
Thursday is the basis behind the bounce this morning. More than likely, the
slight improvement in expectations for chip shipments out of
is providing a short-covering lift.
FOREIGN EXCHANGE
EURO:
A
higher euro zone trade surplus reading this morning diffuses some of the profit-taking interest present into the opening. With a higher than expected trade
surplus, the euro is seen in a slightly better light than the US economy, but as
long as the trade thinks the ECB is on hold, other currencies will get the
majority of the benefit of a weak dollar.
YEN:
The
fact that the Japanese government couldn’t sell out a Note auction overnight is
a very significant development that would seem to
suggest that the world is close to being full up on
debt from the Japanese government. In other words, the Japanese
economy had better recover because they might not be able to cut interest rates
or even raise funds for stimulus programs. The overnight action says it all; the
yen could be in for a significant slide. We suspect that continued weak
equity market action next week puts the yen down to the June lows of 80.25.
SWISS:
banks downgraded, potential war with one of the world’s largest oil producers,
and
running out of anti-deflationary tools would seem to
be a very supportive situation for the Swiss. Buy the correction today in the
Swiss. Traders might also consider selling 1 Swiss at 67.15 and buying three
Swiss 70 calls for 53 each (for an explanation of this strategy, call
312-786-4450).
POUND:
A
correction to 152.50 today should be bought, as the action today is against the
trend and the
economy is simply in a better position than the
Soaring home prices in the
highlight the residual strength in the economy, even if the current pace can’t be
maintained. Look for a return to the recent highs next week!
CANADIAN:
The 63.63 high probably won’t be obtained given the setback off the Thursday
high. The rise in the dollar today takes away the upside momentum in the
Canadian with a correction to 63.06 today or Monday.
METALS
OVERNIGHT CHANGE to
4:15 AM
GLD -0.90;
SLV -0.5; PLAT +6.30;
London Gold Fix $321.55, +$1.40; LME Copper Warehouse
stks 884,950 tns -500
tns; Comex Gold stocks
1.906 +17,956 oz; COMEX Silver stocks 107.9 ml oz +433,053 oz; OVERNIGHT: Sideways
action off equity market weakness and renewed M.E. tensions
GOLD:
The dollar is up sharply overnight and that could prompt some profit-taking in the
gold after the run this week and because of the overbought condition of the
market in general. We have to think that extremely weak equity market action is
supporting gold, but the real driving force of gold is the war threat.
Supposedly the Asian and European gold markets were supported by the recent
bombings in
SILVER:
As opposed to the gold, the silver market is not sitting with that burdensome of
a long position. However, silver was up almost 17 cents off the low of the week,
and therefore, some setback is to be expected. We are very impressed with the
silver action this week, as it rallied right in the face of deflation and
recessionary conditions.
PLATINUM:
The platinum market has managed to open up around the impressive highs posted
Thursday and that hints at platinum being a flight to quality favorite. The
silver market has better fundamentals than gold, and platinum has better pure
fundamentals than does the silver market.
COPPER:
While the stock market is higher this morning, the outlook remains negative for
copper as the macroeconomic case deteriorated significantly this week.
Furthermore, the pattern of
copper stocks declines was upset with a weekly gain of 6,013 tons to a 178,825
ton level. We have to think that the fund short increased from the recent 14,000
contract short and that alone could deter the copper from breaking out to the
downside.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM:
CRUDE +3; HEAT
+4; UNGA +16 — The energy complex
might be just a little overbought and exhausted given the fundamental and
technical action of the last two weeks. OPEC seemed to be prepared to tone down
bullish sentiment by suggesting that OPEC countries have an additional 5 million
barrels per day of reserve production if it is needed by the market and that
combined with the overbought condition and the steep declines in the stock
market to throttle back price action.
NATURAL GAS
An
injection of 69 bcf was reported Thursday and that is evidently pretty much an
as-expected figure. The fact that two tropical storms are at issue in the Gulf
keeps the market underpinned.