Futures Point To A Flat Opening
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
+4 — Bonds continue to hold high in the 112 to 113 range with the residual from
the 10-year Auction combining with the terrorism threat to lift bond prices. We
suspect that US economic numbers will continue to be a drag on the market, with
the claims coming in slightly bearish and the retail sales neutral to slightly
positive. We have to think that the retail sales report has the most potential
to sink bond prices but given the pattern of other retail type readings, we
suspect that the retail sales reading won’t show the surprising strength
documented in the last monthly payroll report.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
-110, DOW -10,
NIKKEI -64, FTSE -15
— Considering the oversold status we have to begin to wonder if a near term
bounce isn’t in the offing. However, reports of a new Bin Laden tape promise to
keep anxieties high and investors cautious. Energy prices continue to climb
higher with almost any development prompting buyers to push prices upward.
FOREIGN EXCHANGE
DOLLAR: A downside gap this morning in the Dollar would seem to end
the recent favor toward the Dollar. It would certainly seem like sagging
economic readings outside of the
fueled the rally in the Dollar this week, but now that sentiment seems to have
shifted. While we doubt that US numbers to be released today will show enough
strength to support the Dollar it is possible. Near term downside targeting in
the Dollar now becomes 99.70. In fact, a number of traders are suspecting that
the BOJ will have to come to the aid of the Dollar before the end of the week.
In our opinion, just seeing the threat of intervention usually means that the
market presses until it sees the intervention. Unless the
retail sales flash a much stronger than expected reading, sell any rally to
100.30 in the March Dollar.
EURO: Apparently the corrective tilt is off
for the near term, as the trade is once again shifting back toward a muted
bullish war tilt. Apparently more
military call ups, orders for diplomats to leave the
and seeing the
use laser guided bombs against installations in
southern
are make the reality of war more likely. However, with a number of economists
downgrading the Euro zone outlook and one forecast calling for a recession in
in the event of an attack of
we suspect that the flight to quality pattern in the Euro, on the coming rally
will be less impressive than the rally seen in January. Extremely weak European
auto sales readings overnight give credence to the recession fears in
In fact, the coming rally in the Euro might be the last before a major top.
YEN: It would seem that the Yen is prepared
to breakout down. Furthermore Japanese GDP readings and reduced corporate
capital spending patterns leave the Yen undermined. However, because the trade
suspects that the BOJ to intervene, the Dollar weakness overnight is partially
countervailed. Given that the Dollar is weak, at the same time that the Yen is
also down, might mean that the BOJ is already selling
Yen! Since we don’t see the Dollar falling as sharply as in past declines, we
suspect that the BOJ will be able to restrain the Yen for now.
SWISS: The flight to quality tilt is back on
but the Swiss didn’t really perform as well as one would expect given the
terrorism threat toward the
Therefore, we are even more interested than ever, to use a 50-point rally to buy
some June Swiss puts.
POUND: Short-term
technicals are oversold and the recent consolidation around 161.04 seems
to suggest a low was forged. Support should be found off the top of the early
January consolidation around 161.00. However, the bigger pattern in the Pound
seems to be down!
CANADIAN: Rejection of 65.17 suggests that
the early February correction has run its course and that a retest of the Feb
highs around 65.98 is expected.
METALS
OVERNIGHT CHANGE to
4:15 AM
GLD
+1.70,
SLV +3.3, PLAT -0.40;
London Gold Fix $354.25, -$8.90;
LME Copper Warehouse sts
832,875 ton, -2,100 tns;
Comex Gold stocks 2.156 ml, Unchanged;
COMEX Silver stks
107.9 ml oz, +403,097 oz; OVERNIGHT: More minor declines in Asian gold leaves
the market undermined.
GOLD: Some funds have evidently decided to
liquidate, as several key technical areas were violated in the action Wednesday.
Many traders are concerned that war with
would be put off for a short period of time and in the event of a significant
terrorist incident in the
some gold players fear a deflationary impact on gold prices. In other words, we
have to think that another terrorist incidence that results in a shut down of
the
economy could easily create a deflationary pressure toward gold.
SILVER: While silver wasn’t nearly as long
as the gold market, it was over extended and due the correction this week. We
would wait for a correction to $4.44 in the May contract before considering a
bottoming play. Silver will continue to be tied to the gold market and might not
shift back into an upward track unless there is a renewed and imminent threat of
war.
PLATINUM: Once again the platinum market
showed that it wasn’t your typical precious metal, or for that matter a metal
that is only driven by war threats. In fact, the platinum market rejected the
decline below $663 rather conclusively and that continues to demonstrate that
platinum has just the right mix of flight to quality and physical demand buying
interest.
COPPER: The copper market is having second
thoughts about its gains posted early in the week, especially with a number of
economists suggesting that
could easily fall back into recession in the event of a war. In fact, some
credible forecasts are suggesting that crude prices could rise to $45 for 3
months in the even of an attack of
Certainly copper is affected by recession, deflation and war threats and with
prices holding significantly above the last three months lows, prices would seem
vulnerable.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE +36,
HEAT +60, UNGA +37 — We are not
sure if the weekly inventory readings altered the landscape in the energy
complex yesterday, as many of the readings countervailed each other. For
instance, gasoline stocks in both the API and DOE reports showed an increase,
but the DOE showed a significant decline in distillate stocks of 4.5 million
barrels, while the API showed crude stocks falling by only 939,000 barrels.
NATURAL GAS
We see
warmer forecasts ahead out to February 22nd and that is weighing on the
overbought status of the natural gas market. The trade seems to have
consistently reduced its draw expectations for the weekly inventory report and
that could suggest less bullish consumption patterns, or a lower bar for the
bulls to clear, in the minutes after the report.