Futures Indicate a Powerful Opening

OVERNIGHT CHANGE to 4:15 AM: BONDS -29 — The fact that the bond market was closed
yesterday means that the bonds have an additional long liquidation threat pent
up into prices. The fact that the stock market appears to be well into a fourth
straight day higher is really causing bond longs to flee positions. The fact
that a number of firms are reporting earnings that are simply coming in better
than lowered expectations is apparently lost on the trade.

STOCK INDICES

OVERNIGHT CHANGE to 4:15 AM: S&P +970, NIKKEI +307,
FTSE +129 — Almost everything that
was bearish a week ago now appears to be bullish. In fact, rose-colored glasses
seem to be standard equipment for the marketplace. Even though a number of
companies have repeatedly dropped earnings projections, the market is cheered by
the fact that these companies were able to meet these lowered earnings.

FOREIGN EXCHANGE

DOLLAR: While the dollar didn’t gain that much against the
euro overnight, if
the trend of things holds, the dollar should gain significantly against the euro
and the pound. Not only are US corporate earnings coming in good, but also it is
clear that investor sentiment has shifted and is now expecting the US economy to
lead the world toward recovery. Also expected in the action today is a sign
from US business inventories that US production may be able to restart sooner
than expected. Therefore, the market is poised to give the dollar a lift and
that lift is given an added boost by the fact that the BOE might be restricted
from cutting rates because of increased inflation pressures. With the yen
breakout down and the pound showing some technical violations overnight, the
dollar would seem to have the makings of a big session up. Top of the
consolidation and resistance today comes in at 108.54.

EURO: Standing against a potential liquidation wave in the euro are reports
that September car registrations made a slight increase. However, given that the
German Finance Minister recently talked down recovery hopes and that hopes for
better times are soaring in the US, we would expect to see the Euro slide toward
consolidation support of 97.51.

YEN: The technical breakdown in the yen projects a bigger slide ahead. Instead
of seeing an influx of repatriation capital, the yen is actually seeing money
leave the currency in hopes of better returns abroad. Economic numbers are
positive from Japan with September corporate bankruptcy rates declining. Even
the BOJ suggested that the economy has bottomed and that no additional stimulus
programs are needed at the current time. As we have been saying for weeks, the
yen is probably headed to 80.00 and maybe lower if the optimism toward the US
recovery catches hold.

SWISS: Bankruptcy rates climbed by 7%, which should add to the negative
sentiment toward the Swiss today. It goes without saying that there is less
financial market anxiety and less flight-to-quality interest in the Swiss in the
near term. Expect a slide to 66.69 in the December Swiss.

POUND: The fact that UK inflation levels rose sharper than expected could
hinder the capacity to recover if the economy doesn’t manage to recover on the
stimulus already implemented. Also hindering the pound today are readings that
September auto sales declines are the end of a long trend of good sales into
Europe. In other words, the bloom is coming off the UK economic leadership rose.
Near-term downside targets in the pound are now 154.06.

CANADIAN: The real test of the Canadian is here. There is true optimism in the
marketplace toward North America and that in turn could save Asia and that in
turn benefits the Canadian export market. If the break in the Canadian, seen
since the June high, came off the failure to recover, then we see a rally window
opening in the near term. In the least, we would expect the December Canadian to
attempt a climb to at least 64.32. Pre buy C$ Mar calls to sell 1 future later.

METALS

OVERNIGHT CHANGE to 4:15 AM: GLD -0.10, SLV
+1.0, PLAT +2.60; London Gold Fix $317.50,
-$.50; LME Copper Warehouse stks 860,125 tns, -1,450 tns;
Comex Gold stocks 1.882,
Unchanged; COMEX Silver stocks 107.4 ml oz, Unchanged. OVERNIGHT: Very light Asian
buying continued despite generally higher equities.

GOLD: Australian and Japanese buying supported gold prices overnight, as the
residual fear of terrorism and its potential economic impact on the Pacific rim
is still being pondered after the Bali bombing. However, we have to note
producer and hedge selling on the recent rally, some of which might have come
from Australian sources. However, while the Aussie currency has more than
bounced back, the yen has broken out to the downside and that might result in
some recent gold longs from the TOCOM exchange dumping gold tonight.

SILVER: While gold weakness might initially pressure silver, we have to think
that stock market gains are becoming significant enough to foster improved
physical demand hopes in silver. In other words, day-to-day price correlations
suggest that real recovery hopes bolsters silver prices, not anxiety. Traders
might pre-buy 10 May 550 silver calls for 4.5 cents each looking to sell a
December futures on a minor rally to $4.36.

PLATINUM: If platinum managed to rally off the macroeconomic news of the last
three sessions then it should come into even more favor. However, the overnight
action has platinum slightly lower this morning possibly because of profit-taking or spreading against other metals. Maybe the auto sector downgrade
yesterday is a having a delayed reaction in platinum. Near-term corrective
support is $574.5.

COPPER: Traders might view the overnight low as strong support as the world
equity markets are sparking macroeconomic optimism. As we have said a number of
times, the copper market is like a mini S&P, and therefore, today copper should get
back to the recent highs. In fact, a near-term high might be seen up around
68.50 and possibly even to 70.00.

CRUDE COMPLEX

OVERNIGHT CHG to 4:15 AM: CRUDE -5, HEAT
-9, UNGA -26 — War expectations picked up a
notch or two Monday, with the weekend dialogue and the apparent increase in
terrorism incidents. Dirty tanker rates, Middle East dialogue and general
anxiety suggest that the war issue is never going to be far from the markets
mind, at least until something significant is decided.

NATURAL GAS

Cash buyers showed up Monday and boosted natural gas prices. The gains came
because of a new storm in the Gulf and partly because of cold US temps.