Futures Indicate A Strong Open
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15 AM:
BONDS
-11 — While we would give the bond market another session to prove it can still
respond to the recent weak
US
payroll numbers, it would
seem that the market is into a failure mode. Despite a thin slate of economic
news today, the economic report slate for the week is very full and that could
help resolve the recovery debate. With bonds showing significant weakness in the
face of supportive numbers, the Tuesday retail sales reading could become a
massive volatility event.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM:
S&P +410,
NIKKEI CLOSED, FTSE +19
— The longs have been very lucky, as the equity market
could have come under aggressive panic type liquidation last Friday but didn’t.
In fact, it would appear that Equity and Treasury markets are looking beyond the
threat of war and are even discounting the threat of economic slowing.
Certainly, it is the job of the stock market to predict future conditions, but
it is a critical development that the investing public is no longer
“scared” by weak
US
numbers
or by the military buildup toward war with
Iraq
.
FOREIGN
EXCHANGE
DOLLAR:
So far the Dollar hasn’t seen the same light that the US Treasury and US
stock markets have. Apparently, investors are confident enough in the
US
situation to rotate out of US bonds and into stocks and one would think that
would eventually benefit the Dollar. In some regard, the Dollar is getting a
lift, as it is higher this morning following what could have been a very
negative set of payroll readings from Friday. Furthermore, the fact that the
Dollar is higher today, in the face of much stronger than expected German
Industrial production readings, suggests that sentiment might have shifted
toward the Dollar. It is also possible that the Dollar is simply getting an
oversold bounce and that nothing has changed with respect to the trend. However,
if the
US
stock
market continues to forge a series of gains, we would not be surprised to see
the Dollar attempt to bottom this week. In order to form a bottom the Dollar
will have to hold above the recent low for an extended period of time, as the
downtrend in the Dollar was very entrenched.
EURO:
For the Euro not to continue a straight up rise following the weak
US
numbers
Friday and the massive jump in German Industrial production reading indicates an
overdone technical status, or a critical change in opinion. With German
Industrial production rising by a surprising 2.7% in the month of November, one
would think money would be pouring into the Euro. Furthermore, if the trend in
the Euro remains up, then a correction to 104.73 should be bought aggressively.
YEN:
A holiday in
Japan
leaves
the markets without near term direction. The Yen appears to have lost momentum
but still maintains an upward posture. However, seeing a March Yen trade back
below 83.78 could undermine recent bull sentiment and send prices moderately
lower.
SWISS:
We would have thought that the
US
payroll
decline would have left enough anxiety in the market to light the Swiss up for a
big gain, especially with the
US
deploying a large amount of troops to the
Middle
East
.
However, the Swiss has failed around the recent highs and could be poised to
correct toward support of 71.78. Anxiety
isn’t gone but is being discounted.
POUND:
The charts look a little toppy in the Pound but with
inflation readings coming in pretty tame this morning, the Pound probably won’t
forge a major top. However, a decline on the charts back below 159.20 might
signal a near term failure of significant consequence.
CANADIAN:
Finally an upside breakout that is sanctioned by the fundamentals and the techncials.
With the Canadian economy creating jobs at the fastest pace of any economy in
the G7 and the currency so undervalued, from a long term perspective, it might
be possible to see the Canadian rise all the way to the June highs of 65.75.
METALS
OVERNIGHT
CHANGE to
4:15 AM
GLD -2.20,
SLV -2.8, PLAT +1.20;
London
Gold Fix $352.35, -$.80; LME Copper Warehouse stks
853,975 ton, +225 tons; Comex Gold stocks 2.04 ml, -96
oz; COMEX Silver stks 107.2 ml oz, -671,073 oz;
OVERNIGHT: Slack trading interest resulted in minor profit-taking in
Asia.
GOLD:
The Asian trade supposedly weakened because of concerns that the gold market was
overbought and that more than likely comes from the COT report reading released
after the close Friday. The net small spec and fund long in gold came in at
110,000 contracts and since that reading, gold has managed to gain another $8 an
ounce. We think that every $10 gain in gold results in 6,000 to 10,000
additional spec longs in the net spec position.
SILVER:
The net spec long in silver came in at almost 69,000 net long, an increase of
8,800 contracts. Therefore, silver is overbought but not as over extended as
gold and really hasn’t gained that much since the COT report was measured. Trend
line support comes in at $4.744 basis the March contract, but silver will have
to have persistent support from gold in order to move higher.
PLATINUM:
The platinum chart really looks overbought, with an extremely steep upward angle
and little in the way of fresh fundamental news. More than likely, platinum is
getting the majority of long interest from spill over buying from the gold
market. Tight trend line support comes in at $608 in the Apr contract, with
resistance coming in up around $639.
COPPER:
Chinese and LME copper prices were sharply lower overnight, which leaves
the
US
market
overbought and vulnerable from the recent rally. There is a flurry of economic
reports due out this week, but that information might take on a different tone
this week, considering the buildup toward war. Copper is certainly going to be
supported by what appears to be higher overnight equity markets but we just
don’t think that March copper offers a favorable risk and reward function at
prices above 72.80, especially since the US macro economic case was unsettled by
the recent payroll report.
CRUDE
COMPLEX
OVERNIGHT
CHG to 4:15 AM:
CRUDE -35, HEAT -33,
UNGA -21 — Evidently
OPEC agreed to increase production by 1.5 million barrels per day as of February
1st and will meet again on March 11th to evaluate the situation. OPEC also
reportedly would meet again if Iraqi production is shut down.
NATURAL
GAS
The COT
report showed the natural gas to have 50,000 net spec long contracts, as of last
Tuesday and the market has made gains since then. Even with the net spec long at
55,000, this market is not without additional buying capacity.