Futures Indicate A Strong Open


BONDS -10 — With all the anxiety present in
the stock market and the prospect of another 2 or 3 week delay in the Iraqi end
game, we are a little surprised that bonds didn’t maintain more of the gains
posted Thursday. In the mean time, the headlines continue to see a steady flow
of layoff announcements and what appears to be increased concern over the
economy. The payroll report today would appear to be an indirect influence in
bonds, with a moderately weak number certainly prompting a rally, but maybe not
as big of a rally as the bull might hope for.


CHANGE to 4:15 AM: S&P +140,
-36, FTSE +12 — There would appear to be
slightly less anxiety present in the marketplace this morning, but it would also
seem like this confidence is built on expectations for a slightly positive US
employment report. The bar for the non-farm payroll report is pretty high at
+60,000 jobs and we also fear that a positive payroll reading will be offset by
a rise in the unemployment rate. Most economist expect the unemployment report
to continue to rise even after the economy shows generalized recovery progress
and right now we hardly detect an entrenched recovery pattern.


We have to think that the weaker European numbers seen this
week and the failure to see the ECB cut rates, has contributed to the Dollars
ability to resist additional selling. However, while the delay in the war timing
takes some of the pressure off the Dollar, the lingering realization that a
battle will probably be fought, without UN consent, leaves the Dollar poised to
fail at any given moment. We hardly expect the


payroll readings to come in so strong, that the negative tilt from the Dollar is
lifted, as the report will probably serve to accentuate the negative tilt or in
the best case mitigate the negative tilt. However, a rally back above 100.70
would be a pretty telling development and could result in aggressive stop loss
buying, as the trade is significantly short. With the delay in the kick off to
the war, until late in February, the Dollar could surprise with a bounce, but
that bounce should be sold. We might not suggest a fresh sell until the Dollar
rises above 100.70. 

EURO: It might be a gift to buy the euro on
a near term correction to 106.70, but with the ECB failing to step forward with
a rate cut and numbers from the Euro zone showing slowing, the Euro has to have
a strong threat of a "go it alone war" in order to return to the sharp upside
gain pattern. Look to buy a 50 to 100 point euro correction over the coming two

YEN: The Japanese continue to see
maneuvering by the government in an effort to shore up confidence in the
financial structure and it isn’t meeting with that much fanfare. Household
spending readings remained weak in December and that suggests that the Japanese
economy isn’t recovering at its core. With a slightly stronger Dollar today, the
Yen might retest recent lows of 83.12 but we doubt that the Yen will forge a new
low for the move in the action today.

SWISS: Economic forecasts for the Swiss
economy were weak and with the war timing delayed until at least February 14th,
the longs in the Swiss might continue to take profits. Near term corrective
targeting in the Swiss is seen at 73.05.

POUND: Apparently the trade is concerned
that the BOE needed to cut rates and with the next round of economic numbers
showing a contraction in December manufacturing output, the Pound is vulnerable
to more liquidation. In fact, we would not be surprised
to see the Pound slide all the way down to 160.00.

CANADIAN: The Canadian is down probably
because of the strength in the Dollar and probably because the total Canadian
workforce declined by 19,200, which is a deviation from the prior report.
However, it should be noted that the Canadian unemployment rate declined to
7.4%. Therefore, we still fear a technical dip to 65.41 in the March.


GLD +0.60, SLV
+2.5, PLAT +15.50;
London Gold Fix $370.55, -$1.95;
LME Copper Warehouse


843,900 ton, -4,900 tns;
Comex Gold stocks
2.147 ml, -98 oz;
COMEX Silver stks
106.4 ml oz, -1,005,151 oz; OVERNIGHT: Asian gold tried to recover but a
weakened tone remained in place.

GOLD: We have to think that the gold market
is undermined by the idea that war might be delayed by 10 to 15 days. It would
seem that the


is willing to wait until after a February 14th UN report, from the weapons
inspectors, before going to war, or voting on what is expected to become a
punishment resolution. In other words, the chain of events could be as follows,
chief weapons inspectors report to the Security Council after February 14th and
if a vote passes to use force, then the military planners would take control.

SILVER: A double bottom was forged overnight
at $4.675 and that could be the extent of the near term washout. Considering
that silver performed so poorly in the wake of the late January gold rally, we
are disconcerted with silver prospects. Furthermore, given the weakened trade in
copper and concerns for deflation in the event of a sustained war in

we would not implement fresh longs in silver, unless the May contract declined
to $4.62.

PLATINUM: Apparently the platinum rejected
the $664 level overnight and appears to be capable of returning to a bullish
posture. We continue to think that platinum has a unique mix of bullish
fundamentals, that leave it with a better look than
either gold or silver.   

A massive range down Thursday
undermines the recent bull tilt in copper and exposes that copper does fear
global recession in the event of a war.


copper prices were weaker Friday morning and


remained closed due to holiday and that should leave the


market soft. Under a weak set of US payrolls this morning, copper might fall to
76.00 in the May contract, especially if the


stock market is forging fresh lows for the move.


CHG to 
+169, UNGA +78 — We are not
sure if the Presidents comments Thursday afternoon were a final warning or a
prod for the UN Security Council to move forward. According to the


Secretary of State, the


is prepared to disarm Saddam "within" weeks.


weekly draw lived up to bullish expectations and others suggested that we just
finished the largest ever, "late January draw". The annual deficit reading was
only 811 bcf and that is a slight contraction from
the prior week.