Futures Indicate A Lower Open

OVERNIGHT CHANGE to 4:15 AM: BONDS -4 — Bond longs have to
wonder if anything
can lift prices, as scheduled economic reports continue to come in soft, but
bond prices are showing no response. Certainly the performance in the US stock
market has put a cap on rallies. More importantly, earnings reports are completely dominating the action in bonds.

STOCK INDICES

OVERNIGHT CHANGE to 4:15 AM: S&P -720, NIKKEI -289,
FTSE +8.6 — The shorts think that
the bulls pulled a rabbit out of their hat Monday, as the early earnings reports
and the regularly scheduled economic reports were certainly capable of sparking
a profit-taking selloff. However, it would seem that the hedge funds and the
aggressive shorts were caught attempting to force the market down and ended up
becoming a major source of buying fuel later in the session. In today’s action,
negative earnings have started the session out on what would appear to be a
negative tilt, but there would not seem to be as much economic information to
drive stocks as was seen on Monday.

FOREIGN EXCHANGE

DOLLAR: We think the dollar has more ground to give, as the economic information
today is thin and the stock market might not be able to manage another positive
spin toward current conditions. Middle of the consolidation zone in the dollar
comes in at 108.12 and that is a target for the dollar. If by chance the
corporate earnings readings manage to spark an equity market rally, that could
discourage the dollar decline. We have to think that sagging war threats are
causing some flight-to-quality longs to liquidate long dollar plays. Under
current conditions, and the economic report slate for the coming three sessions,
we seriously doubt that the dollar will manage much in the way of upside action.

EURO: The whole expansion issue is probably undermining the euro, as is the news
that the European trade surplus shrunk in the latest reporting period. A survey
of institutions suggested that the ECB would not move interest rates until the
fourth quarter 2003 and that move will be a rate hike. The survey naturally
suggested little need for a rate cut, and that is why the euro is locked in a
sideways consolidation like the dollar. Middle of the channel in the euro comes
in at 97.76 and that level could be regained in a directionless market.

YEN: The yen has recently corrected and is now capable of returning to the
downtrend pattern. A sharp decline in the Nikkei overnight probably comes as a
result of the delay in the NPL plan release. If the US stock market were to turn
negative during the session today, that could give additional pressure to the
yen. Near-term downside targeting for the yen is now 80.05, even though August
business activity showed a slight increase in the overnight news.

SWISS: We are disappointed that the Swiss didn’t see a bigger bounce off the low
Monday. Middle of the range in the Swiss is now a targeted up at 66.95.

POUND: The pound might be poised for a downside breakout, especially with a weak
CBI survey to be released Wednesday morning. If support at 153.62 is violated,
that could result in a quick slide to 153.00.

CANADIAN: We can’t rule out a return to the 64.32 level, but only if optimism toward
the macroeconomic recovery remains in place and the stock market stays
positive. In the last couple of sessions, a number of long-term negative
technical readings signaled a reversal of the downtrend.

METALS

OVERNIGHT CHANGE to 4:15 AM: GLD +0.70, SLV
+1.8, PLAT +1.80; London Gold Fix $311.65,
-$1.75; LME Copper Warehouse stks 855,450 tns, -1,175 tns;
Comex Gold stocks 1.886,
-198 oz; COMEX Silver stocks 107.4 ml oz; UNCHANGED OVERNIGHT: Supportive action
in the Pacific Rim with light Australian buying.

GOLD: While the overnight trade might have found some support for gold, we are
not sure the market can foster enough newfound long interest to overcome the
disappointment of those liquidating in the face of lower war threats and a
higher US stock market. After appearing to have a minor rally window Monday, the
gold market posted a pretty negative chart performance with a higher high and a
poor close. The dollar is being only partially supportive to gold, but is
largely unimportant to the daily action.

SILVER: The silver continues to coil, but appears to lack the momentum necessary
to overcome $4.40 resistance. Fresh longs in silver might be advised to reserve
entry to a dip below $4.31 using a risk below the double bottom low of $4.28. A
continuation of the copper price gains might be seen as a negative for silver,
as that could preclude any further declines in silver byproduct supply flow
from copper mines.

PLATINUM: An extremely poor trade in Japan was initially labeled profit-taking,
but with such extreme declines it would appear that January platinum is
incapable of maintaining prices above $571 in the near term.

COPPER: As of the high Monday, copper was effectively 500 points off the October
low which leaves the market overbought. However, as long as the stock market
provides surprisingly positive action, copper will be supported. Reports of
Chinese selling overnight suggest to us that the near-term rally might have run
its course and that the Chinese are unwilling to pay such higher prices at this
stage in the global recovery.

CRUDE COMPLEX

OVERNIGHT CHG to 4:15 AM: CRUDE +3, HEAT
+31, UNGA +47 — Evidently the President is
suggesting the US will have zero tolerance for Saddam Hussein if he violates the
new resolution and that could serve to provide support to a market that caved in
Monday during the session. While the statements from the White House were
released later in the afternoon Monday, they represent a little more hawkish
stance than the US has been giving off.

NATURAL GAS

As we expected, the natural gas market is feeling the negative pressure from the
petroleum market. Given the acceptance of the decline in war threats, it is
possible that the overbought technical condition of the natural gas results in a
slide back down to $4.20 and possibly even $4.00 basis the December contract.