Futures Point To A Stronger Open


BONDS +5 — Bond bulls just can’t be happy
with the performance of the bonds. Even with the concern for the economy rising,
the Bush Administration seems to be capable of keeping most attention directed

instead of the economy and that has hurt bond prospects slightly. Even with GDP
figures barely coming in above unchanged, the trade was unable to rally bonds
prices and that is because, many in the trade were expecting unchanged or
negative readings from the GDP.



4:15 AM
+350, NIKKEI +23,
DOW +2.5, FTSE
-29 — We still get the sense that the stock market is vulnerable to a new low
move, as prices haven’t been able to get away from the recent lows. In fact,
economic headwinds off the threat of war continue to scare away buyers and keep
anxiety a constant element. With the US Administration suggesting that the time


to disarm is "weeks" and not "months" away, would be buyers continue to feel
that they will be able to buy lower.


There are three things providing light support to the Dollar
today. The first is talk that the BOJ might have been intervening over the last
week, in a secretive attempt to restrain the Yen. Secondly, European economic
information this morning suggests that European growth might not be holding in
positive ground. Lastly, we also detect short covering interest in the Dollar,
because of the growing support of US policies toward

Furthermore, we might see US economic numbers hold steady this morning, making


economy seem to be a little better off than the Euro zone. In order for the
Dollar to get out of the downtrend, the


situation has to be solved, as the sellers in the Dollar continue to be
comforted by the anxiety element and by the theme that no decision on


is "sitting" on the


economy. Since markets like bonds and copper are looking beyond the war, the
shorts in the Dollar are becoming a little insecure. However, the trend is down
and the only rational bottom picking play in the Dollar,
is to buy cheap out of the money calls and hope for a reversal, sometime in the
coming three weeks.

EURO: French unemployment rose to 9.1%,
which compares to the last US reading of 6%. Furthermore, the Euro zone posted a
slight decline in economic sentiment readings for the month of January. While
the economic differential hasn’t been driving the Euro up, it could now serve as
a distraction for the bulls.  In fact, the headlines from

overnight, suggest that their recovery has stalled. It should be noted that some
ECB officials suggested that lower rates won’t stimulate the economy and that
means the ECB is unwilling to stimulate in the event of a war, while the US Fed
suggested they would stand ready to help the


economy in the event of war. Maybe we wouldn’t sell the Euro, but traders should
certainly reconsider being buyers. Be short the Euro on a position play only and
only using out of the money cheap put options.

YEN: The Press is rife with suggestions that


began to intervene against the Yen early this week, or last. In fact, some are
dismayed that the BOJ could intervene without going public on the move. The BOJ
responded today with suggestions that they only want to cap the Yen, not weaken
it. In any regard, some of the upside strength is taken out of the Yen but the
direction of the Dollar now becomes the key issue.

SWISS: The momentum in the Swiss has waned
and that is because the US Dollar is no longer a whipping post. While the Swiss
might see another retest of the January highs, we have to think that the next
rally could be the last. Traders might consider buying puts on a rally to 74.00,
but buy June puts in order to have the necessary time to see a trend change

POUND: A big rise in the overnight action
was mostly rejected, creating a sense of a top. However, while


economic stats are softening, it would seem that the same factors lifting the
Dollar are going to support the Pound. In other words, if coalition support for
a war with


continues to expand, the Pound will avoid correcting with the rest of the
currencies against the Dollar. We don’t see the Pound mounting an aggressive
decline anytime soon.

CANADIAN: Open interest is extremely high
and it would appear that the US Dollar is attempting to make a change in
pattern. Anytime a change takes place in the Dollar, one has to see if that
impacts the Canadian. With the Canadian trend up and the market exhibiting
weakness over the last 24 hours, C$ longs might purchase some protective puts.


GLD +1.80, SLV
+1.70, PLAT +6.40,
+10; London Gold Fix $370.35,
+$7.35; LME Copper Warehouse


836,025 ton, +1,000 tons; Comex
Gold stocks
2.139 ml, Unchanged; COMEX
Silver stks
107.6 ml oz, +638,326 oz;
OVERNIGHT: Asian buyers were once again attracted by the talk of war with Iraq.

GOLD: With


gold prices making an 8 year high overnight, it is clear that the war issue is
once again center stage. This morning the Dollar is a little bit softer and that
could alleviate some of the pressure seen in gold earlier this week. However,
the Dollar probably won’t return to the aggressive downside action seen for most
of January, because the


is gaining coalition support for military action, European economic statistics
this morning were soft and there are rumors that the BOJ has been intervening to
support the Dollar against the Yen.

SILVER: The silver market certainly added
some spec longs this week and with silver open interest at 103,438 contracts,
the market will have to hold critical chart support points, or risk a broad
liquidation. However, it would seem that gold will lend support to silver,
keeping the threat of liquidation minimal. Define the trading range as $4.94 to
$4.80 with the market attempting to hold very near the top of that trading

PLATINUM: Platinum prices have certainly got
a big run off the "new technology" dialogue in the State of the Union address,
but that type of bull track is really suspect considering that most scientists
think significant technology changes in fuel cells are years away. In any
regard, the platinum should continue to get spill over support from gold and the
flight to quality theme. Near term targeting in April platinum is seen up at
$672, with near term support seen down at $636.1.



on extended holiday,


copper stocks are unavailable for the week, but the


copper stocks on balance posted a moderate contraction this week. In other
words, the supply issue in copper continues to underpin very impressive price
action. It is our opinion, that copper is looking beyond the war and is also
seeing some light pre-buying for the coming North American construction season.


CHG to 
-47, UNGA -32,
+22 — Despite talk that the Venezuelan
strike was falling apart, the energy complex showed almost no weakness. In fact,
by the close Thursday, the crude oil managed to post a higher high for the move
and a new high close.


weekly draw came in at 247 bcf, which is roughly
what was expected. The draw brings the annual deficit to 681
bcf, which should also be supportive to prices even
though the technical condition is extensively overbought.