Futures Look To Lower Open
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS +2 — The bonds still need directly supportive numbers to fight
against the bearishness of the 8 point October slide. However, the combination
of Consumer Confidence and the Chicago Purchasing Managers readings early in the
week has swung sentiment around enough that recovery is being questioned again.
In fact, the dollar is being punished because the international trade is
concerned about the ability of the
economy to recover.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P -650, NIKKEI +45, FTSE
-67 — The response from the unemployment report today could easily be the most
important development for the economy in the last year. With the stock market
managing to temper extreme negative economic
psychology, with gains off the October low and the consumer thought to be
fading, it would not be a positive development to smash sentiment with the
numbers today. While some might suggest that an ultra-weak set of numbers will
ratchet up the rate cut mentality, we are concerned that too much negativity
directly ahead of the holiday shopping season will make the job of recovery an
even harder task.
FOREIGN EXCHANGE
DOLLAR: While we are concerned about a
stock market break today, we would have to say that the Forex markets are
extremely bearish on the dollar and might have factored an extremely negative
situation off the payrolls. While the
stock market is seeing the negative economic news flow and tempering its gains,
the
stock market is also hopeful that the US Fed will bail out the
economy. The dollar on the other hand seems to be getting no benefit from the
prospect that the Fed could counteract the recent slowing. Maybe the
international trade thinks the Fed will look at the strong GDP reading and
refuse to cut rates. After all, the Fed is still battling inflation and they
have shown a tendency to avoid acting unless forced to act. We also think that
the Fed goes out of its way to be "non-political" and with the election early
next week, they won’t even mumble anything in their speeches, that might hint at
their stance. Therefore, the dollar might continue to slide toward the September
lows, but in the next three or four sessions, a large number of dollar bears
might end up having egg on their faces. Traders should consider buying a
December 107 dollar call for 80 today, holding the position at least to the end
of next week.
EURO: Giving the euro an added boost this
morning, at the expense of the dollar, were strong October PMI manufacturing
readings from the euro zone. Right now, posting positive growth is a major
supporting issue, especially if the
economic numbers go the other way. Expect a return to the September high, and
possibly an upside breakout, if the
payrolls are worse than expectations.
YEN: The yen would seem to be set up for
failure after the bad loan fiasco early in the week and soft domestic numbers.
However, the Japanese economy gets a very timely boost from October auto sales
readings that showed an increase for the second straight month. In other words,
even the yen looks to have an advantage over the dollar this morning. A big
rally in the yen to 82.41 is still a sale.
SWISS: The Swiss is already rushing to
factor in an anxiety event. In other words, flight-to-quality buying has already
boosted the Swiss above the late September highs and may be capable of putting
the Swiss up to the early September highs. We still think that a big flare above
68.39 today could be sold for next week.
POUND:
October PMI readings improved by a very slight amount, leaving the pound
supported against the dollar but not in an ultra-strong position. We just don’t
see the pound forging an upside breakout on the charts, but would expect some
minor gains today.
CANADIAN: There could certainly be a big
payoff for those that decide to stay long the Canadian today, but there could
also be a big penalty. Those that are long should sell a December 65 call for 22
and use that money to buy a Dec 64 call for 40.
METALS
GOLD: Gold bulls should get some support
today in the early trade, as the international market bought gold off the
anticipation that the
might get a sweep of disconcerting employment news today. The dollar is also
weaker again this morning and the
equity market is also showing a weaker opening. Therefore, gold is getting help
from all the necessary bull sources.
SILVER:
reported a decline in August silver production of 8.9% and that is on a sizeable
output base of 229,653 kilos. Both gold and copper production in
rose, which makes the silver decline even more surprising. We have to think that
the Mexican silver output flow is in trouble, as they have had significant
volatility in their production totals, for the past two years.
PLATINUM: The divergence between platinum
and gold should be painfully evident today as the sagging stock market and
fleeting hopes of economic recovery weigh on platinum prices. Unlike silver
prices, which haven’t factored in good physical
demand we have to think that platinum prices above $570 have factored strong
demand. If the payrolls disappoint, Jan platinum falls to $550.
COPPER: Copper prices are showing a higher
overnight trade, possibly because Shanghai copper stocks declined by 16,296 tons
to 119,924 tons. If Shanghai copper stocks are falling sharply, the Chinese
evidently weren’t covered enough and are certainly not that concerned about
upcoming US numbers. Reports of China buying are therefore dominating this
market and therefore the long term up trend pattern looks to adjust to a new,
higher range with only moderate concerns off the US payrolls.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +24,
HEAT +60, UNGA +79 — Thursday
the energy complex saw a little short covering, a little war mongering and a
little awareness of OPEC attempting to control supply. First of all, the White
House suggested that they would not be handcuffed by any UN resolution and that
sounds like the Administration is leaving the door open to attack Iraq.
NATURAL GAS
Critical
support in the January natural gas market comes in at $4.23 today. With the
regular energy complex firming, we have to think that natural gas will attempt
to discount the warm up coming toward the end of next week in the
and in turn slow the slide in prices.