Futures Indicate Stronger Open


INTEREST RATES

OVERNIGHT
CHANGE to 4:15 AM: BONDS +2 — We have to
think that the bonds will enter the week with a slight negative tilt, as the war
continues to be pushed back and what little US economic numbers have been seen
recently have been better than expected. In fact, taking the


US

numbers in a vacuum, one could conclude that the economy is recovering. Taken
against the backdrop of persistent geopolitical headwinds we have to suggest
that the


US

economy is performing solidly.


STOCK INDICES

OVERNIGHT
CHANGE to


4:15 AM
:
S
&P
+290, DOW +19,
NIKKEI
-78, FTSE -8.4 — We would
classify the action off the lows last week as a "relief rally". In other words,
the negative ilk hasn’t been thrown off completely, but it has been temporarily
mitigated. With 15 EU countries offering up another "final chance" for Saddam to
disarm, we can understand a desire by some shorts to take profits.


FOREIGN EXCHANGE



DOLLAR:
The Dollar is under slight pressure this morning because of
statements from the BOJ that they would not seek coordinated intervention to
keep the Yen from rising. However, because the war track is in the process of
being delayed again, the US Dollar is out from under the pressure of war
selling. We suspect that US economic numbers will continue to make selling the
Dollar a little difficult. More weak economic numbers from the Euro zone this
morning serve to take the pressure off the Dollar and could leave the greenback
in a trading range bound by 99.86 to 100.93. In a sense, with the UN possibly
seeking yet another resolution, the delay of war could temporarily save the US
Dollar. We have to think that the Bush Administration will not easily allow the
Iraqi situation to drift to the background and therefore we assume that the path
of least resistance remains down. Keep in

mind, that

the


US

economic numbers are indicative of recovery but because of the war, the trade
won’t recognize the good numbers.


EURO: Euro-zone December Industrial
production declined by 1.5%, which is not as big of a decline as was expected,
but is nonetheless a contractionary number. It would
appear that the euro is aware of its overbought status and of its dramatically
expensive pricing off the war theme. In other words, the longs in the Euro are
aware that the March Euro is 10 full points off the December lows and since
December, the European economy has really deteriorated, while the


US

economy might have improved! Therefore, a trade below 106.50 in the March
contract could easily spark a long-term technical stop loss-selling binge.
Countervailing the negative Euro zone industrial production readings, were
forecasts from ZEW (a German institute) that called for weak growth but a
bottoming out of the economy. The broadening consolidation pattern since mid
January appears to be part of a major topping pattern.


YEN: The BOJ suggested that they would not
seek coordinated intervention to keep the Yen down and that unleashed the Yen
for a solid rally overnight. The market could have taken the comments to mean
that the BOJ thinks it can control the Yen by itself but instead the market took
the comments to mean that the BOJ was giving up on keeping the Yen down.
Therefore, the Yen is seen charging toward the January consolidation pattern
bound by 84.00 and 85.20.


SWISS: The delay in the war timing is all
the Swiss sees in the early action. In fact, with a number of technical levels
violated on the charts we suspect that the Swiss is in for the biggest
correction since the break off the December highs. Near term downside targeting
in the Yen is seen at 72.00.


POUND: The combination of a delay in war
talk and soft


UK

numbers yank the rug out from under the Pound. With January price readings in
the


UK

negative, and the November output readings showing
contraction the sellers are out in force in the Pound. Near term downside
targeting in the Pound is seen at 159.16 and possibly 158.88.


CANADIAN: Thus far, the Canadian is not
negatively impacted by the big moves in the Euro, Yen and Pound. It should also
be noted that the Canadian isn’t being negatively influenced by the delay in the
war timing. In other words, the Canadian continues to be positively biased. Near
term support is seen at 65.49.


METALS


OVERNIGHT CHANGE to 4:15 AM:
GLD -4.30, SLV
-1.7, PLAT -.40, CP
+15; London Gold Fix $347.00, -$9.25;
LME Copper Warehouse


sts

826,775 ton, -2,625 tns;
Comex Gold stocks
2.164 ml, Unchanged;
COMEX Silver stks
107.6 ml oz, -10,063 oz; OVERNIGHT: Minor weakness seen in Tokyo, but focus is
on more UN diplomacy.


GOLD: With the gold market starting the week
about $16 below the recent COT report benchmark of $363, we have to think that
the net spec long is closer to 96,000 contracts long, instead of the 106,000
registered in the report. The fact that the UN speech last Friday left the world
unsure that war would be likely in the near term was augmented slightly by a
compromise EU agreement yesterday that in effect gives Saddam another "last
chance". According to the EU deal, the weapons inspectors would be given at
least another couple weeks to uncover information, making it possible that "no
war" will be seen until after March 1st.


SILVER: With gold weakness this morning we
have to fear that May silver is poised to fall below critical support of $4.50.
Fortunately open interest has declined and the recent COT report showed a
16,000-contract decline in the net spec long positioning and that reduces the
technical vulnerability in silver. However we suspect that silver still
maintains a net spec long position of at least 56,000 contracts.


PLATINUM: A gap down move overnight suggests
that platinum is negatively influenced by a delay in war timing. It should also
be noted that platinum was extensively overbought and has recently lost
momentum. Near term chart support in the April platinum contract is seen at
$663.8. The net spec long in platinum was only 4,500 contracts, which is only a
moderately long position in a small market.  


COPPER: The copper market took almost no
time to respond to the UN dialogue Friday, as it is clear that a delay in war
timing is supportive to copper. In the recent COT report the net spec long in
copper showed a 40,000-contract position. However, since copper declined nearly
200 points since the COT report was measured, we suspect that the net spec long
is now only 33,000 contracts.


CRUDE COMPLEX

OVERNIGHT
CHG to 4:15 AM: CRUDE -36,
HEAT -152, UNGA
-241 — Apparently the EU agreement to offer Saddam yet another chance is
creating the idea that war will be delayed and that has prices weak overnight.
Just delaying the potential war into March could have significant ramifications,
as that would move

North America
beyond some of the heavy winter heating demand period.


NATURAL GAS


The storm
on the East Coast probably makes heating demand seem to be a lot higher than it
really is. We suspect that weather could turn a little more bearish in the weeks
ahead, but if the war track continues to drive the regular energy complex a
little bearish weather might be discounted.