Futures Point To A Stronger Open
INTEREST
RATES
OVERNIGHT
CHANGE to
4:24 AM
BONDS
NA — While some might discount the action in Bonds on the 24th as an
overreaction to thin conditions, we would suggest that the fundamental
case easily supports a strengthening price structure. In fact, we are
concerned that the stock market is primed to return to the October lows,
with renewed talk of a double dip recession and that could fuel the
bonds back to September and October highs.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:25
AM
-150, NIKKEI CLOSED,
FTSE CLOSED — In order to see the stock market
forge a rally, the bulls would have to pull a rabbit out of their hat.
With the headlines expected to be full of rationalization for deep
discount sales from retailers, one could find it difficult not to turn
extremely negative toward the recovery and toward stock prices. In fact,
some headlines this morning were trumpeting the worst sales in 30 years,
which would seem to suggest that the tail end of the holiday sales
window remained soft into the final hours.
FOREIGN
EXCHANGE
DOLLAR:
With many international markets still closed for holiday, the pressure
on the US Dollar might be mitigated. It is also possible that
US
initial claims provide a little long incentive in the Dollar, but any
rally in the Dollar should be sold looking for an eventual new low for
the move. With the Forex markets seeing weak
US
numbers before the holiday and many
US
retailers suggesting that the holiday sales tally might have been the
lowest in many years, we see no reason not to have the Dollar under
attack. About the only thing capable of bailing out the Dollar; are
ultra weak Japanese numbers and the prospect for Japanese intervention
to stop the rise in the Yen. Some traders are even willing to look ahead
to housing figures from the
US
Friday morning, with suggestions that those numbers will be weak and
that they could cause the bottom to fall out of the Dollar. Some traders
suggest that the Dollar should never have mounted the 2000 to 2002 rally
and that a return to 102.82 on the weekly Dollar chart, is simply
a justified return to the top of the old range.
EURO:
For the time being, the Euro wins by default and as long as the number
flow for the ECB is thin, nothing looks to change the trend in the Euro.
With the Pound coming under some scrutiny early this week, the Dollar
ultra soft and the BOJ ready to halt the rise in the Yen, the Euro wins
on all accounts. Near term targeting in the March Euro comes in at
103.50.
YEN:
We doubt that the BOJ will act right out of the box this morning, but
they might be primed to act tonight if the Yen rises above the recent
high of 83.72. With soft construction spending readings overnight and
Japanese investors finding favor in gold, it is clear that extreme
volatility will be seen in the coming sessions. As has been the case in
the past, the currency markets like to tempt central banks to intervene
by forcing the hand of officials. We suspect that the BOJ intervention
is more of a function of time, as opposed to price but we seriously
doubt the BOJ will act unless the Yen manages to post a new monthly
high.
SWISS:
The biggest barrier to a sharply higher Swiss today, might be thin
conditions and a lack of negative hype toward the global economy.
However, as the trade returns to normal, we suspect that flight to
quality interest in the Swiss will rise significantly. There would not
seem too much resistance in the Swiss until 72.58.
POUND:
There has been some doubt cast on the UK economy, with stories early in
the week suggesting the housing bubble was about to burst in the UK.
Significant resistance is seen in the Pound today at 158.84, with
critical support seen at 158.12. A poor trade in the Pound now, would go
a long way toward confirming the recent negative economic rumors and
could play a major role in forming a top in the Pound. However, the
UK
economy has been strong enough to caution traders looking to sell the
currency.
CANADIAN:
We have to say that the Canadian has been in a vulnerable position but
has avoided weakening. In fact, a new high for the move would certainly
put would-be shorts off balance. As long as the outlook toward the
US
economy doesn’t border on panic, we suspect that the C$ might find favor
and return to the upside breakout zone above the double top at 64.48.
METALS
OVERNIGHT
CHANGE to 4:25 AM: GLD -0.30,
SLV -0.7, PLAT +5.00;
London Gold Fix $345.00, Closed;
LME Copper
Warehouse stks
855,775 ton, Closed; Comex Gold stocks 2.04 ml,
Unchanged; COMEX Silver stks 107.1 ml oz,
Unchanged; OVERNIGHT: No significant price action but buyers appear
poised to buy breaks
GOLD:
The gold market remains in strong position to rally, despite its
overbought condition. There continues to be a number of supportive
anxiety issues but the most supportive issue might become the economy.
With another round of extremely soft numbers from
Japan
and disappointing
US
holiday sales, the odds of more monetary stimulus are growing.
SILVER:
The gold market seems to be capable of discouraging macro economic
selling in silver, but the slower the outlook for the economy becomes,
the more silver will need gold support. We would not be surprised to see
silver slip down to chart support of $4.61 but we would not rule out a
bigger break to $4.56, if the
US
equity market were to come under aggressive attack. Unless gold makes a
new high early, we suspect that silver might open weak and trade down.
PLATINUM:
A new low for the move is anticipated in platinum in the action today,
but that could require continued weakness in the
US
equity market. In fact, given thin conditions and the poor macro
economic outlook, we would not be surprised to see a $465 price in Apr
platinum contract.
COPPER:
We were somewhat surprised that copper fell apart so quickly, but not
surprised that copper fell. In fact, the prospect for sagging demand is
so great that one should not be surprised to see March copper slide to
70.00 and possible even 69 cents if the US stock market begins to fail
at critical chart points. Slack durable goods readings from the
U.S.
CRUDE
COMPLEX
OVERNIGHT
CHG to
4:25 AM:
CRUDE -38,
HEAT -99, UNGA -81
— After expectations of a moderate decline in API crude oil stocks,
the 2.7 million barrel build, has to temper the bull case temporarily.
However, seeing a minor build on top of a moderately overbought
condition is probably not enough to overcome a series of more
significantly entrenched bull fundamentals.
NATURAL
GAS
The
chart pattern in natural gas still looks a little vulnerable, with near
term support coming in at $5.10 and then again at $5.06. The blizzard in
the Northeast might initially be supportive, but if there is going to be
a negative El Nino impact on natural gas, we would have to think the
coming 6 to 10 day forecast would show some sign of that.