Futures Indicate Stronger Open
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS
+1 — Since the December low, the bonds have seen a divergence between
volume and open interest, with volume declining and open interest
rising. In other words, the technicals were
not completely behind the recent bond rally. However, in looking at the
COT report one can see that the funds and small specs were moderately
net short and that would seem to favor the bull camp in the coming week.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15
AM
S&P +380,
NIKKEI -65,
FTSE +45 — The pattern of lower lows, is not usually a
good formation for those expecting a major recovery bounce. If it were
not for the prospect of a pre-Christmas rally, there would seem to be
little to deflect the potential for ongoing selling in the equities. We
have to think that many investors are put off by the fact that the
market can’t seem to get the bull focus turned back on after such
impressive performance in November.
FOREIGN
EXCHANGE
DOLLAR:
The Dollar looks to make a stand, at least for the first couple sessions
of the coming week. Indications that the BOJ has seen enough strength in
the Yen to begin threatening intervention gives the Dollar a little
support but in order to see the Dollar turn up consistently, something
else will be needed. In scanning the headlines averting the
New
York
transit strike probably takes away some of the selling pressure seen
recently, but that would not seem capable of turning on the buying
interest in the Dollar. In looking forward to the economic report slate,
it would seem that the Dollar would get favorable numbers early in the
week and negative numbers late in the week. Initial resistance in the
Dollar comes in at 104.91 and then again at 105.07. However, given such
significant escalation of volume and open interest on the recent slide,
the trend looks to stay down in the Dollar unless its economy really
receives an upgrade.
EURO:
With the Dollar in a slightly firmer stance this morning, statements
from the ECB that the bank has more room to maneuver would seem to hint
at a potential rate cut and that might be responsible for more weakness
in the Euro. We also have to wonder if EU expansion is a net negative or
a positive to the Euro, as that could simply exaggerate the fear that
the bank is slow and unresponsive in policy decisions. Support down at
101.45 can probably be bought early this week, expecting a return to the
highs by Wednesday or Thursday.
YEN:
With a BOJ policy meeting sparking talk of easing and of intervention,
the Yen falls back into a profit taking posture. The BOJ specifically
highlighted fears that the soaring Yen would hinder an export led
recovery and that a lower Yen was needed. Therefore, with the Dollar
showing a little profit taking bounce of its own, maybe it is possible
that the Yen slides back to 82.00 in the first three days of the coming weeks
action.
SWISS:
With the Swiss 230 points off the December low and conditions seemingly
calm this week, it would not be surprising to see a correction back down
to 68.45, but we suspect that initial support of 68.97 will hold due to
low volume action.
POUND:
A private manufacturing survey showed a contraction in the fourth
quarter and further contractions into the coming year and that serves to
increase the profit taking weakness in the Pound. With the Pound a full
400 points above the December low, there is certainly room for a
correction. Near term targeting in the Pound comes in down at 156.75 and
then again at 156.24.
CANADIAN:
Soaring open interest in the Canadian seems to call for a near term top.
A series of highs around 64.19 apparently failed to muster enough fresh
long interest to punch the currency through some very critical technical
points. Considering that the Canadian economic information was pretty
good during the recent rally, we doubt that the market will be able to
put the currency down very hard in a corrective swing. Therefore, look
to be a buyer of a break to 63.70. +
METALS
OVERNIGHT
CHANGE to 4:15 AM: GLD -0.50,
SLV -0.2, PLAT +5.30;
London Gold Fix $332.90, -$.60;
LME Copper
Warehouse stks
859,525 tons, -1,600 tns;
Comex
Gold stocks 2.03 ml, -129 ounces; COMEX Silver stks
106.9 ml oz, -103,750 oz; OVERNIGHT: Minor gains seen overnight but the
market lacks a dominating focus
GOLD:
The net spec long in gold rose to 92,000 contracts, or an increase of
23,000 contracts. Furthermore, since the COT report was marked off, gold
rallied an additional $10 and therefore, the gold market might have
added an additional 10,000 spec longs, leaving the gold the longest it
has been since the 1995 flare up. Back in 1995, the gold market
seemingly rallied mostly off of extensive short covering, as gold
loaners, hedgers, central banks and futures specs all appeared to be net
short around the bottom in 1995, In order to unwind those positions, the
market rallied in one of the most compacted explosions ever.
SILVER:
The silver market could also be vulnerable, if the gold market fails to
provide consistent positive direction. The net spec long position in
silver comes in at close to 40,000 contracts, with the market adding
another 12 cents onto prices, since the COT report was measured.
Corrections to 460 should not be ruled out, especially since the market
did see significant volume action in mounting the gains off the November
lows.
PLATINUM:
Shifting focus to the April contract traders should expect to see fresh
contract highs this week. The COT report does have a moderately
overbought condition in a market with rather thin conditions. The net
spec long comes in at 5,400 contracts might not seem that large until
one considers the open interest in platinum at 8,630. A Japanese report
about increasing fuel cell technology has to give platinum a firm
fundamental underpin.
COPPER:
Apparently both LME and
Shanghai
copper fell overnight, leaving the impression that more declines are to
be expected in the
US
market. The funds were holding a massive long of 27,000 contracts and
that could make a slide to 72.00 possible this week. We see a critical
pivot point down around 72.90 but with industrial production due out
later this week, it is unclear if the trade can garner enough positive attitude
toward the economy, to turn copper moderately higher.
CRUDE
COMPLEX
OVERNIGHT
CHG to 4:15 AM:
CRUDE +41, HEAT +137,
UNGA +105 — After adding some 16,000 spec longs last week, the crude
oil market went on to add another $1.10 to prices, and that could
possibly raise the net long to 50,000 longs. While the product market
added moderately to it spec long in the unleaded rally, seeing the spec
long position in unleaded (as of last Tuesday at only 16,000 long)
should leave the market with more upside.
NATURAL
GAS
With
natural gas rising from the November low of 383, to a recent high of
544, it would seem that the market is significantly overbought
and vulnerable, if the predictions of a warmer than normal winter were
to become reality. Some think that the colder than normal temps seen
already preclude an El Nino winter, but if one looks back to each of the
last two years, they also started out cold and wet but became warm and
dry.