Futures Point To A Stronger Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
-9 — With the sudden abatement of the war track, the bond market looks to be
undermined. In fact, considering the Fed commentary yesterday and the dialogue
expected today from the Fed Chairman, we suspect that bonds will continue to
weaken. Near term support in the March bonds is targeted down at 111-17 but with
Greenspan expected to suggest that the
economy is "poised" to recover, it is possible that bonds slide to even lower
support of 111-01.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P +480,
DOW +5, NIKKEI
+36, FTSE +69 — The fact that the
worst-case scenario "unilateral war", has been temporarily avoided, means that
even more sellers decide to take profits. Yesterday we thought that the only
bullish influence in the market would be in the form of a relief rally, but with
the Fed Chairman expected to suggest that the
economy is poised to recover, it is possible that some investors will do some
light (fresh) buying. In fact, if European plans to put a Peacekeeping force
inside
are given credibility, that could make it nearly
impossible to attack
in the coming weeks.
FOREIGN EXCHANGE
DOLLAR: Old-line traders call the current
action in the Dollar a "dead cat" bounce and we
suggest that the rally is simply a relief rally. In other words, the factors
that hammered the Dollar are still basically in place but are tempered
dramatically. However, there is a basis for overall change in the attitude
toward the Dollar, as the macro economic direction of the
economy might be turning, even in the face of the impending war. We also note
that the delay in the war removes a major element of the bear case but it’s
unclear how long the "delay" in war timing will exist. Considering the massive
slide in the Dollar (for two or three months the Dollar was pounded by war
selling) it’s understandable that it recovers. A normal correction off the
December high to February low move would allow the Dollar to bounce to 102.30
basis the March, which is a much bigger rally than
many would have expected two weeks ago.
EURO: Failing below the 106.74 support zone
sets up a full correction to 104.98. Maybe the EU is getting a little too
aggressive in its political power exertion and the world’s investors are
concerned about holding Euros. With
and
combining to reject defensive forces in
it’s clear that are willing to do anything to lay down barriers to the
attacking
In short by hook or crook, the war has been effectively delayed. As we said a
number of times last week, the Euros primary fuel was flight to quality war
buying and now that impetus is lost. Expect a return to the mid January
consolidation.
YEN: As the Dollar gains short covering
momentum the Yen sags. In fact we suspect that the Yen is destined to slide to
81.62 in the near term delay, of the war track. The residual fears of BOJ
intervention are also adding to the downside thrust.
SWISS: With flight to quality temporarily
removed from the market, the Swiss is set for more losses. The near term
downside target is seen at 71.86 basis the March Swiss.
POUND: It goes without saying that a
technical failure has unfolded in the Pound but because the Pound wasn’t the
primary flight to quality instrument on the way up, it probably avoids the
aggressive selling expected in the Euro. Near term downside targeting comes in
at 160.00.
CANADIAN: Apparently some of the Canadian
buying of the last two months came off flight to quality buying and the war
tilt, as traders are taking profits in the Canadian. Near term downside
targeting in the March contract is now lowered to 64.94.
OVERNIGHT CHANGE to
4:15 AM
GLD
-1.80,
SLV +0.0, PLAT -0.90;
London Gold Fix $362.15, -$9.60;
LME Copper Warehouse sts
838,375 ton, -6,000 tns;
Comex Gold stocks 2.156 ml, +9,805 oz;
COMEX Silver stks
107.5 ml oz, -34,471 oz; OVERNIGHT: Minor buying seen after a massive downside
adjustment late Monday.
GOLD: As we suspected the pause in the
buildup to war, caused another wave of long liquidation. While we doubt that the
gold market is finished with the war track, we have to think that the near term
track could continue to be negative. It goes without saying that the record
historical net spec long was vulnerable, considering the 140,000 spec long
reading posted as of last Tuesday.
SILVER: As we suggested yesterday, the
silver market was very vulnerable partly because of the toned down war threat
and partly because of the extensively overbought condition of silver. Near term
support is seen at $4.56 and then again at $4.50 basis the May contract. If the
economy manages to recover the silver market should be able to find long-term
support relatively soon but the liquidation of the war long could temporarily
push prices below, what might eventually be determined fair value.
PLATINUM: It would appear that the platinum
market is going to check up after a minimal slide and that once again
demonstrates that platinum has the best fundamentals in the metals markets. We
still think that fresh longs would be well advised to wait for the April
contract to fill the gap down at $660. Platinum did see some war buying and
therefore buyers should be patient.
COPPER: Chinese copper futures rose sharply
hitting a new high for the year and that seems to suggest that
needs supply and copper will remain a banner bull market. We thought copper was
looking through the war two weeks ago and now we think that copper thinks a war
will be averted. With Chinese buying providing a backdrop for would be
speculative players, the trade isn’t as concerned about paying up for copper
prices 800 points above the December lows.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE +2,
HEAT +7, UNGA +5 — The estimates
for the API and DOE stocks don’t appear to offer too much of a surprise, unless
the slight rise in the refinery operating rate is an issue. With the war timing
delayed slightly by masterful open field political run by
and
(they moved to deny defense to
in what appears to be a direct rebuff of the NATO commitment) it is clear that
all the stops are being pulled to avert a war.
NATURAL GAS
As we
suspected, the natural gas was overbought and undermined by temporary weakness
in the regular energy complex. We thought that the passing of the colder than
normal temps Monday night would weaken prices today but with inventories holding
at tight levels there is a hesitance to attack this market from the short side.