Futures Point To A Slightly Weaker Open
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15 AM
: BONDS
+5 — A big range Monday with a failure to hold an upside breakout, is
disappointing to the bull camp. The failure to rally bonds, in the face of a
stronger Dollar Monday, was especially disappointing for the bull camp.
Significant declines in volume and open interest on the recent rally might be
more of a function of the holidays than it is a detraction
from the bull case.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P +190, NIKKEI
+105, FTSE +10 –Â While the Japanese
stock market action overnight would seem to start the US session out on a
positive note, the action from Europe isn’t that significant. In fact, with
the court ruling overnight that Sun’s Java scripting must be included in the
new Windows operating system, there could be a negative tilt against broad
market sentiment, as Microsoft is a bellwether issue. The trade will also get
significant economic information today, from both private weekly retail sales
readings and a durable goods report.
FOREIGN
EXCHANGE
DOLLAR:
It could go from bad to worse today for the Dollar today as early US numbers
look to be soft and that would simply give the trade another reason to sell the
Dollar. However, if there is a day that the Dollar could throw off the selling
pressure and bounce, it would be today. However, we are not sure if the holiday
euphoria can fool enough players to foster a run against an entrenched down
trend. It would seem that the Dollar is attempting to forge a consolidation
around the 104 level. However, a couple of brokerage firms think that the
durable goods report this morning could be negative, when aircraft orders are
extracted and that could highlight the ongoing weakness in the US economy. With
the
US
Secretary of Defense, suggesting the
US
could
fight
North
Korea
and
Iraq
at the
same time, we can understand the desire to flee the US Dollar. Adding into the
negative sentiment toward the Dollar is the court ruling forcing Microsoft to
include competing coding in its product. We suspect that the Dollar might rise
to 104.15 to 104-38 and that could be a good short for the rest of the year!
EURO:
The euro continues to see capital flow, because conditions outside of the Euro
zone are uninteresting and not because the zone offers an outstanding return.
With EU forecasts that Euro zone growth might end 2003 around 2.5% to 3%, one
has to wonder if the Euro would continue to rise if the some of the political
burdens were removed from the
US
outlook. We hardly see the Euro correcting more than 102.22, off the potential
for
US
euphoria. Without
US
euphoria, there is very little to hold the Euro back from returning to the
recent highs by the end of the week.Â
YEN:
With a very strong run up in the Nikkei and the outlook for the Pacific-rim
generally better than the view toward most other areas, it would seem likely
that the Yen will continue to rise until the BOJ has to make a move. Near term
support comes in at 83.23 with resistance seen at 83.55.
SWISS:
There evidently will be little corrective action in the Swiss, as the trade sees
just too many potential anxiety events. In fact, we would expect both the Swiss
and the gold market to rise as some speculators attempt to factor in some
negative event for the near future. The only resistance on the Swiss charts
comes in off the monthly chart up at 72.35, which compares to the current
monthly price of 70.78.
POUND:
After taking a significant blow yesterday, the Pound would seem to be rebuilding
support quickly on the charts. Following a sudden decline in consumer confidence
yesterday and private concerns for the housing bubble to pop, it would seem that
the Pound is bullishly biased but is now carrying
additional baggage. We also detected concern for the war, which the Pound seems
to have been immune from, for the last month. Maybe the proximity of the
potential attack is beginning to weigh on the Pound. We have to think the path
of least resistance is up in the Pound, but risk to the bulls is growing
rapidly.
CANADIAN:
If the Dollar and the Pound are being negatively impacted from the war threat
and the
US
economy
is about to lay an egg, with the holidays, the Canadian might be dragged out of
the recent consolidation to the downside. We would not rule out a last minute
improvement in holiday activity and that means that traders should be careful
selling the Canadian until a trade below 64.03 is seen. In fact, given the
potential in the C$, avoid selling futures, buy puts instead.
METALS
OVERNIGHT
CHANGE to 4:15 AM: GLD +0.70, SLV
+0.5, PLAT +1.60; London
Gold Fix $345.00, +$1.10; LME Copper
Warehouse stks
855,775 ton, -1,525 tns; Comex
Gold stocks 2.04 ml, Unchanged; COMEX Silver
stks 107.1 ml oz, Unchanged; OVERNIGHT:
Minor upside continued with some traders now concerned about Korea.
GOLD:
The gold seems to be getting plenty of supportive information as the trade is
watching a number of political issues and is also a little concerned with the
economy. In addition, to the Middle East tensions, the situation in Venezuela
and soaring energy prices, the trade is also factoring increased tensions with
North Korea. With the President of Venezuela discounting the chance for an early
election, it is likely that more tear gas and rubber bullet action will be seen
in
Venezuela
.
SILVER:
Given the slack focus toward silver this week, it is possible that a slight
improvement in economic attitude provides silver with a slight lift today.
However, for silver to get a lift, the stock market will have to lead the way.
Gold could lead the way later in the session, but early in the day there is the
chance for holiday euphoria.
PLATINUM:
While platinum has bounced away from the lows last week, the market appears to
be vulnerable to further losses. Extremely high open interest last week should
leave the market vulnerable to more liquidation ahead. If the
US
stock
market were to surprise with a bounce today, platinum could also bounce. On a
rally back to $585 the April platinum should be sold and held until Friday.Â
COPPER:
A triple high around 72.35 could provide resistance unless the
US
stock
market tries to mount a Santa Claus rally. In the end any rally in stocks, or
copper might simply be an opportunity to get short for the post holiday
realization that the world economy is weak and is carrying too many geopolitical
burdens. The trade had to absorb an increase in Peru copper production in
November of 12.7% yesterday and that keeps the bears in slight control of this
market.
CRUDE
COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE
+0, HEAT +33, UNGA
-6 short — Â As if the threat of war in Iraq and problems in Venezuela
weren’t enough, the energy complex looks to get support from a significant
contraction in US crude oil stocks after the close today. With the latest OPEC
volley, suggesting that there might be a problem meeting world demand in the
event of a dual production shutdown from Venezuela and Iraq, the bull camp looks
to continue to control prices.
NATURAL
GAS
While the
regular energy complex continues to be very supportive of the natural gas
market, the weather is mixed and natural gas prices are significantly overbought
from a short term perspective. Traders should use a breakout system in the
February contract of 5.30 and 5.06.