Futures Point To A Stronger Open
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS -6 — The bond market faded partly
because the existing home sales readings were a little shocking and possibly
because the US Dollar managed a recovery bounce around mid session. However, it
would seem that the stock market is generally headed lower and that the trade is
fearful of a double dip recession and that should underpin the bond market. It
is possible that some traders fear the President’s State of the Union address,
as he has had the ability in the past to stimulate optimism, but we have a
feeling that the President might not come out of the presentation with much of
an impact on current affairs.
STOCK INDICES
OVERNIGHT
CHANGE to
AM
S&P +620, NIKKEI
-84, FTSE -1.8 — The market is showing
signs of a short covering bounce but the outlook is anything but positive. In
fact, we see the President coming out of the State of the Union Address with
either a significantly lower rating, or with the support of the international
community. Seeing the support of the International community only comes if the
releases intelligence that supports the direct attack of
FOREIGN EXCHANGE
DOLLAR: Supposedly, the US State of the Union Address is expected to
focus on domestic issues and that would really confuse the
consumer and investor. We hardly think that the
will be able to skirt its stance on
considering that the topic has dominated the administration dialogue for the
last two months. With international Press outlets advocating a double dip
recession for the
economy we would expect that the Dollar would remain weak. However, the durable
goods report this morning might provide a temporary lift in the Dollar before
the status quo steps back in and applies pressure to the Dollar. With the
existing home sales reading strong Monday there is some barrier to all out
selling of the Dollar, especially considering the recent oversold nature of the
Dollar. However, it is really hard for us to see the
throwing off the negative ilk because it is coming from so many different
elements. Therefore, traders should look to buy March Dollar puts on a rally to
100.15.
EURO: Some German Ifo numbers this morning
showed a slight increase and the trade took that as a sign that the German
economy is bottoming out and could be prepared to recover. However, along with
the decent Ifo readings overnight, the German survey also suggested that
needs lower interest rates in order to continue the recovery process. The Ifo
report also said that the soaring currency rate environment is hurting trade and
that could serve to slow the rise in the Euro. In the near term, the Euro looks
to continue to get unabashed flight to quality interest but never fail to
remember just how much flight to quality premium is factored into the Euro. If
the war were to be delayed for months, some longs might bank profits.
YEN: Apparently the BOJ isn’t exactly bent
on intervention, as they passed up a chance to talk the Yen down overnight and
instead sounded passive. Strong auto production readings yesterday probably keep
the Yen strong, as does the idea that
economy is being insulated from the
slump, by its dealings with
Therefore, the Yen might weaken but only temporarily. Near term support pegged
at 83.78.
SWISS: Evidently the flight to quality theme
is a little overdone and a correction is needed in the Swiss. Trend line support
is seen at 73.24.
POUND: While the Euro and the Swiss are
correcting technically against the Dollar rise this morning, the Pound is not
and that suggests that the Pound is playing some catch up on the cross spreads.
Near term resistance is seen up at 165.78.
CANADIAN: Finally the bleakness of the
situation is causing some weakness in the Canadian. It is possible to see the
Canadian slide back down to 65.00 and maybe even to 64.80 if the US stock market
falls hard in the coming two sessions. +
METALS
OVERNIGHT CHANGE to
4:15 AM
GLD -3.00, SLV
-2.0, PLAT +1.20;
Gold Fix $366.45, -$4.35; LME Copper
Warehouse stks 843,000 ton, -2,425 tons;
Comex Gold stocks 2.10 ml, +60,188 oz; COMEX
Silver stks 107.3 ml oz, +240,317 oz; OVERNIGHT: Slightly weaker
price action seen with minor profit taking reported
GOLD: The gold market continues to add net
spec longs to it’s position, but with open interest still holding below 230,000
contracts, we are a far cry from the record set back in the early 80’s, when
open interest reached 280,000 contracts. In other words, this market is not
"totally" bullish and vulnerable to a top without additional upside gains but it
is approaching that distinction. The President’s speech tonight will probably
lend some support to gold if the
leaves the impression that there is a strong possibility of war.
SILVER: It seems that silver is being held
up artificially by the gold rally and now that gold is showing some signs of
weakness, silver becomes vulnerable. Trend line support is seen coming in at
$4.77, but with recession talk surfacing, we have to think that silver, platinum
and copper all find a little more selling interest than gold in the coming two
sessions. In other words, either the war track dominates and the bulls win, or
the bears win under almost all other scenarios.
Platinum
and copper all find a little more selling interest than gold in the coming two
sessions. In other words, either the war track dominates and the bulls win, or
the bears win under almost all other scenarios. Considering the recent build up
of spec longs in silver, a trade back below $4.76 could be very damaging. Silver
is just not in favor enough to overcome the negative impact of double dip
recession fears.
PLATINUM: The talk of double dip recession hits
platinum right in the auto sector demand outlook. We also have to think that
platinum looks exceedingly expensive in the current setup with prices $100 above
the summer 2002 levels. It would appear that most of the big volume longs came
into April platinum around $590 to $600 and therefore the market might be able
to withstand significant fluctuations. Near term critical support comes in
around $630.5.
COPPER: With Chinese copper futures lower we
suspect that the weakness seen Monday will extend in the
copper session today. With some equity prices are showing firmer action this
morning, we have think that is technical short covering or profit taking and not
a sign of a critical bottom being made in stock prices and therefore the
windfall to copper bulls might be short lived. Furthermore, we wonder if the
President can markedly change current events with his speech tonight.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE +27, HEAT
+19, UNGA +105 — The energy complex sagged
because the trade feared a significant increase in Venezuelan production. In
fact during the session Monday the trade was factoring the chance that up to 90%
of the national oil company’s workers might return to work.
NATURAL GAS
The trade
was fully factoring ongoing cold even though temperatures were expected to
mitigate. However, we have to think that recent temps were colder than expected
and maybe cold for a little longer than expected.