Futures Point To A Flat Opening



4:15 AM

+4 — While many might take statements from the Fed’s Santomero,
(that the


recovery is being
held back by war uncertainty) as an understatement, that issue remains
the primary drag on the economy and the biggest benefit to the bull
camp. With talk that the war with


might not take place
within the next month the continued drag on the economy might be capable
of throwing off the recovery altogether. In our mind, delaying the
outcome in


, simply means that
capital and consumer spending will remain under a cloud and that could
pull the economy down.



&P -110,
FTSE -46 — A
little weaker bias is seen today, but it would seem that the market has
a different tone. For the past five sessions the stock market has
managed to discount bearish news and claw higher, but we now think that
pattern will cease. Over the past two months we have watched the ebb and
flow of war talk and have detected buying interest when it appears that
the war track is moving forward quickly.


The Dollar is really surprising today with gains in the face of a higher
energy prices, slack


economic numbers and the Euro zone easily winning the economic
differential battle. The big lift to the Dollar would seem to be coming
from the Pound, but the support for the Dollar is pretty much spread
across all currencies. Therefore, it would appear that a technical
balancing move is taking place again and not some major sustainable
change in fundamentals. Maybe there will be sustainable change if the
inflation numbers are a surprise, or the


admits it wants a lower Dollar. In other words, unless a major headline
change is clearly documented, traders should use the correction against
the trend, as a chance to reposition in the short side of the Dollar.
With a possible delay I the launch of the war, it is possible that some
Dollar shorts want to stand aside until some future date. Look to sell
the March Dollar index on a recovery to 102.24.

Trend line support in the euro comes in today at 104.35 but with the war
possibly being pushed back longs are justified in banking some profits
in the Euro. With investors only recently switching into the Euro, this
is not the end of the up trend and considering the recent German and
French numbers, we remain bullish on the Euro. In fact, a German retail
group published some very impressive numbers and that suggests the
recovery is entrenching itself. Buy a two-day dip in the Euro.

There seemed to be a hint of intervention in the Yen action overnight.
Certainly the Yen is overbought and in need of a technical correction
but the trend does not appear to be breaking up. In fact, with the BOJ
threatening to stop the slide in the Yen, we could see a correction to
83.92 before the market finds solid support. As it stands now, the BOJ
is still content to talk the Yen down, instead of taking action.

A delay in the war track and a technical correction in the Dollar is
more than enough to undermine the Swiss. Near term corrective targeting
in the Swiss comes in down at 71.78.



saw mixed employment data in the news this morning, with jobless numbers
falling by 5,800 but it would appear that manufacturing jobs fell to the
lowest level ever. In other words, the


economy might be in the same situation as the


economy and that could set the Pound up for some significant declines.
In fact, the Pound might see an initial decline to 158 and could turn
lower if the war is truly delayed well into the future.

The correction in the Canadian should be considered technical in nature,
especially since the US Dollar was oversold and the Canadian was
overbought. As long as US conditions don’t appear to be falling apart,
we suspect that the Canadian will find support at 64.48 and then resume
the upside track late this week, or early next week.



SLV -1.0, PLAT +4.30;


Gold Fix $352.90, -$1.85;
LME Copper Warehouse stks

859,025 ton, +4,275 tons; Comex Gold stocks
2.04 ml, +3,117 oz; COMEX Silver stks 106.5 ml
oz, -574,869 oz; OVERNIGHT: Stronger Dollar undermined the overnight
action only slightly.

A stronger Dollar could keep the pressure on gold but fortunately for
the bull camp, the energy complex continues to provide some flight to
quality anxiety. However, there are reports that expatriate Iraqis,
willing to fight to overthrow Saddam, have been told they will be flown
to European boot camps, within days and that would seem to suggest that


timing for the war isn’t that far into the future. Reports that anthrax
was found on a letter sent to the Fed, is being investigated and we
would have to think that another anthrax scare would propagate
deflationary conditions and hurt gold.

Surprisingly the silver failed at chart support and with gold pointing
lower again today silver could remain under pressure. A number of
economists continue to express concern that Capital spending will remain
weak, as long as the war hangs over the marketplace and therefore a
delay in war might be negative to silver. There was another moderate
decline in COMEX warehouse stocks this morning, but until the total
falls below 100 million, the trade won’t care and until the total drops
below 96 million ounces the trade might not buy silver off the threat of

We are impressed with the platinum markets ability to hold above 609 in
the face of weakness in gold and silver. Certainly platinum can
distinguish itself from the other metals because of its tight supply
situation. We assume that April $610 price support is solid.

Chinese copper futures rose overnight, apparently discounting news that


can’t find jobs for 15 million workers and may have to lay off another 5
million workers. If China weren’t posting 8% growth, copper prices would
be closer to 68 cents than to 78 cents. Furthermore, with the US
economic outlook remaining slack, China and the Euro zone will have to
carry the ball for the bull camp in copper.


CHG to 4:15 AM:
CRUDE +36, HEAT +84,
UNGA +84 — The energy complex failed to hold the majority of
gains posted during the session Tuesday, partially because so many non
OPEC producers talked about increasing production flow. Both Mexico and
Russia were seen promising increased supply flow right into the opening
Tuesday and we suspect that news deflected the bull stories that the UN
was unhappy with Iraqi disclosures and more importantly, that the UN
might have found proof that Iraq was importing illegal weapons.


natural gas market couldn’t stand prosperity, as the trade decided to
take profits, despite the coming extremely cold forecast. Some brokers
suggested that the market corrected because the coldest weather timing
is soon to pass, but we have to think that the biggest bull reaction
comes when cold weather comes later, or lingers longer than expected.