Futures Look To Open Higher
INTEREST RATES
OVERNIGHT
CHANGE toÂ
AM
BONDS -7 — Favorable stock market action
this morning has to give the bonds a little pressure in the early going. With
the bond market discounting slack economic readings last week, we have to wonder
why the bulls are backing away from this market when it appears that the economy
could easily fall back into recession. We do think that the generally positive
trend in the equity market is giving consumers a little lift and that in turn is
causing economists and traders to look forward instead of backward.
STOCK INDICES
OVERNIGHT
CHANGE toÂ
AM
S&P +640, NIKKEI
-157, FTSE +66Â — An impressive opening
indication is seen this morning, despite the presence of a specific bullish
development. Some technical traders are suggesting that a firm close in the
Nasdaq today could turn a number of long-term technical indicators up for the
first time in several years. In other words, the duration of the gains off the
October low are now beginning to have a beneficial impact on investor sentiment.
FOREIGN EXCHANGE
DOLLAR: We still think the big incentive in the dollar is technical
short covering instead of a bona fide interest in the long side of the dollar.
However, one has to think that war threats are still declining and with the
consistently higher equity market action, it is becoming a little easier to
discount some of the concerns that sent the dollar lower from the mid-October
high. It would almost seem like higher inflation readings from the
benefited the dollar, which might have come under pressure off the interest rate
differential argument following the last Fed cut. Therefore, seeing higher
inflation prospects in the
might actually pull in some interest in the dollar. Therefore, we expect the
dollar to remain supported through Tuesday of this week, with a limited upside
target of 106.10.
EURO: Even against negative economic
forecasts from the Bundesbank on the European recovery pace, the trade is
evidently not ready to sell the euro. The short-term technicals in the euro are
overbought and suggesting a near-term sell. Furthermore, the trade is seeing
recent euro zone inflation readings to be handicapping the euro, especially if
additional stimulus is needed to insure economic recovery. However, the euro is
evidently not going to come under aggressive attack despite its lofty
positioning on the charts. We would suspect a correction to 100.00 in the
December Euro, but for the currency to hold above that level on the current news
flow.
YEN: The yen is coming under aggressive
selling pressure today partly because of the bad loan situation and because of
rumors of more scandals. We seriously doubt that the gains of the last month
will hold, especially if the
economy continues to send off mixed signals. Therefore, we would expect the yen
to slide toward chart support of 82.10.Â
SWISS: Short-term technicals are in a sell
mode with anxiety levels low and some flight-to-quality longs deciding to stand
aside. Near-term downside targeting in the Swiss comes in at 68.43.
POUND: Since the pound seemed to pick up
some flight-to-quality buying over the last month, it might have to give ground
in what appears to be a quiet week ahead. However, with the FTSE showing strong
action into the opening this morning the pound should be able to find close in
support around 157.00.
CANADIAN: Short-term technicals remains in a
sell mode in the Canadian, which might have to return to the August and October
consolidation lows. It might be easy for the December Canadian to slide to 62.79
this week.
METALS
GOLD: As anticipated, the COT report
documented a massive small spec and fund gold long of 85,000 contracts. This is
an extreme position, but not entirely unusual for gold considering it has posted
a 100,000 spec long in the last two years and also posted a 120,000 spec long
position back in 1996. The long position is pretty much split between the fund
and small spec categories, which makes the position about as balanced as it can
be for being 85,000 contracts long.
SILVER: As expected, the silver market
wasn’t nearly as overbought as the gold market, with 33,000 spec longs, but the
silver did add over 8,000 fund longs since the last COT report was documented.
Bottom of the up trend channel in silver comes in at 455 in the March contract,
suggesting that silver is losing momentum in the upside pattern. Short-term
technical indicators are in a sell mode, but silver has done a good job
discounting the obviously corrective chart patterns of the past month.
PLATINUM: The platinum market is having no
trouble under the current environment as it held last Friday’s gains and has
mounted a quasi gap higher action this morning. Evidently weekend reports of
record platinum demand off Chinese and Japanese demand is more than enough to
fuel platinum upward on top of restricted Russian supply. Near-term resistance
in Jan platinum comes in up at the $614 level (off the monthly nearby charts).Â
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COPPER: Evidently Chinese buyers were very
interested in copper overnight and that should combine with initially higher
equity markets for an upward thrust. First resistance in March copper comes in
at 74.00, and if the stock market can maintain a positive tone, we might see an
upside breakout on the charts. The COT report showed copper to have 30,000
contract spec long position as of last Tuesday, which is slightly overbought,
but not that limiting if the world is accepting of the economic recovery view.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +19,
HEAT +50, UNGA
+41 — With crude oil and heating oil carrying extremely small speculative long
positions as of last Tuesday, we have to think that the energy complex is not
only capable of avoiding another major washout, but might be able to rally off
events in Iraq and Venezuela. Over the weekend Iraqi defense sites fired on US
warplanes patrolling the no fly zone and the
is suggesting that that is a violation of the new UN resolution.
NATURAL GAS
A
critical pivot point is seen in the January natural gas at 398.2, with an upside
breakout signaled on a rally above 4.15. The weekly COT report showed the
natural gas market to have a muted long position of 13,000 spec longs, which was
in fact pared down by over 10,000 contracts from the prior report.