Futures Point To A Flat Opening
INTEREST
RATES
OVERNIGHT
CHANGE to
4:24 AM
BONDS +13 — The bonds remain
poised for an upside breakout and with weak world equity market action today, we
suspect that the bulls will show a little better control than was documented
Thursday. While the economic report slate will return to normal next week, we
really don’t expect the US Fed to act in the FOMC meeting next week, because the
numbers haven’t been excessively weak. However, one can conclude that the
US
economy is still in the
“soft spot” that the Fed pointed to, over a month ago.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:24 AM
S&P -20,
NIKKEI -59, FTSE +32
— About the most important thing to consider
today, is that the stock market rarely bottoms quietly and the early global
indications point to continued weak price action. It is possible that the market
might see a muted rally in the event that the White House begins to succumb to
international pressure on the
Iraq
issue.
With the President’s approval ratings falling sharply, there is probably
internal debate within the Administration to compromise and give the UN
inspectors even more time.
FOREIGN
EXCHANGE
DOLLAR:
The Dollar posts another gap down move and with the
US
report
slate empty, there would appear to be nothing to alter existing sentiment. The
Dollar could possibly get some support from ideas that the Fed might cut
interest rates next week but that type of move is a long shot. Furthermore, the
last couple rate cuts had almost no impact on the down sloping Dollar. In other
words, the Fed action or inaction might have little influence on the Dollar.
Furthermore, we are not even sure, if the US Administration altered its war
stance, if the Dollar would pull out of its dive. The Dollar is certainly
oversold but even that doesn’t appear to provide the bulls with anything other
than temporary corrective bounces. The next downside target in the Dollar is
projected down at 99.10.
EURO:
With some German inflation numbers coming in slightly above expectations it is
once again clear that the Euro zone is less at risk of deflation than the
US
and
that fosters the bull trend in the Euro. The Euro zone continues to be a haven
for those against the war and concerned that the
US
is
going to suffer a backlash in any unsanctioned attack of
Iraq
. In the
mean time, expect the Euro to find solid support around 107.16, with an eventual
target of 108.50.
YEN:
The yen appears to have lost upside momentum. Traders might consider getting
short the March Yen at 84.89, with an objective of 84.50 and risking the
position to a tight stop at 85.19.
SWISS:
The trend in the Swiss is very well defined and that should mitigate the threat
of corrective action. While we see the flight to quality impact slightly subdued
today, the bias in the Swiss should continue to be positive. Next upside
targeting in the March Swiss is seen at 74.20 with support at 73.26.
POUND:
A “pointer” seems to be lodged with the early action today in the
Pound. The market hardly appears to be reacting to the preliminary 4th quarter
GDP, which rose an as, expected +0.4%. In fact the actual rise in the GDP was
less than some expectations and the Pound still forged a strong rally. It would
appear that the Pound is about to play catch up from its previously muted
action.
CANADIAN:
After the gap up action Thursday the Canadian is overbought but apparently
entrenched into an up trend. With a quiet report slate there should be nothing
to discourage the Canadian from forging more gains.
METALS
GOLD:
The gold market was very impressive in the action Thursday but the move could
have been aggressive enough to bring the market to an excessively overbought and
vulnerable short-term condition. Certainly the
US
is
seeing massive pressure to delay the war and a serious threat to delay action
against
Iraq
undermine an extremely overbought gold market. We can’t emphasize enough the
need to construct positions in gold that can withstand massive price
fluctuations.
SILVER:
The silver market continues to disappoint spec longs and as we suggested
yesterday, in the event of a major top in gold, silver could easily fall 25
cents. With world equity markets significantly weak today that could prompt
deflation type selling in silver. We also think that the silver spec and fund
long has expanded this week and could make some longs exit early next week.
PLATINUM:
The platinum market has almost been straight up since the early January
consolidation and that should leave a low volume market significantly
overbought. Critical support in the platinum is found off the monthly chart at
$641 with near term resistance seen up around $660.
COPPER:
Chinese copper futures were basically unchanged overnight as some traders
decided to bank profits from the week’s gains. While we are still an interested
seller of copper at current levels, we still would not suggest selling copper
futures but are willing to have the defined risk of a long put play. World
equity prices are weak and the
US
economic
report slate is empty and that could leave copper without real direction.
CRUDE
COMPLEX
OVERNIGHT
CHG to
4:24 AM:
CRUDE +14, HEAT +27,
UNGA +45 — Neither the API, nor the DOE reports fostered the bull
case Thursday, with the crude stock readings showing increases, instead of
contractions. The energy complex also saw some added selling interest with
rumors circulating that up to 75% of Venezuelan oil workers were returning to
work.
NATURAL
GAS
The
natural gas market showed a 210 bcf draw, which is slightly below the top end
expectations for the weekly draw. The annual deficit tally stands at 522 bcf and
that in of itself lends support to the market, even in the face of recent steep
price gains.