Futures Point To A Weak Open

INTEREST
RATES

OVERNIGHT
CHANGE to

Minute=”15″>
4:15 AM
:
BONDS

+7 — Considering the early action in world equity markets, we would have
to think that bonds will continue to climb. The fear of war is filling
the headlines with comparisons to the 1990 Gulf war, making it seem like
another recession is possibly. In fact, given the added impact of the
aftershock of the 9/11 attacks, we are surprised that the economy hasn’t
already fell back into the negative growth distinction.

STOCK
INDICES

OVERNIGHT
CHANGE to

4:15
AM
:
S
&P -740,
NIKKEI -122,
FTSE
-128 — The economic and investing outlook starts the
week out on an extremely negative note. It seems that the White House
will continue its direct pressure on


Iraq



despite protests and little support from the international coalition.
Littering the headlines over the weekend, were a number of comparisons
to the initial gulf war and that in of itself paints a very negative
picture.

FOREIGN
EXCHANGE



DOLLAR:
The trade is making a big deal out of the fact that the Dollar is down
for the tenth straight session in a row, as that is a record. However,
when one sees no reason to suspect a bottom is due, it is understandable
that the Dollar continues to slide. Even with some economic numbers this
morning showing positive growth in existing home sales, the trade wants
nothing on the long side of the Dollar. The most damaging aspect for the
Dollar, is that the US is seen going it along against Iraq even if the
UN weapons inspections fail to show proof of weapons of mass
destruction. In other words, the war premium being factored into gold is
also being extracted from the Dollar. We can hardly even project where
the Dollar might fall because
its
unclear just how long the current situation will be the main and total
focal point of the markets. We suspect that the trade will continue to
pound the Dollar at a 30-50 point daily pace and that the war might not
start for a full month! About the only way to get short is to sell
Futures and buy a call, just in case a short-term corrective bounce
catches you in the first couple days of the short play.



EURO:
Even with European equity markets falling sharply, the trade is
convinced that being long the Euro is almost as good as being long gold.
In other words, money prefers the pacifist stance in the near term. In
fact, economic and interest rate differentials probably have very little
to do with the current rise in the Euro as the gains are all about
flight to quality.


YEN:
The BOJ is discussing intervention and the ways that it might be under
taken. Evidently Japanese exports to


China



have hit a new record with


China



and that dampens part of the potential negatives off the slumping



US



economic outlook. In other words, the Japanese situation would seem to
project another new high in the Yen very soon. We doubt that any central
bank will intervene until something is decided on



Iraq



and that should allow the Yen to continue higher.


SWISS:
One would think that the Swiss is going to remain in favor, with
investors and speculators seeing the Swiss in much the same light as the
gold market. With the chart almost straight up, there is significant
risk to fresh longs but that would seem to the entrenched direction of
prices. Near term targeting is seen at 75.20.


POUND:
Even with economists voicing concern over the



UK



economy, the weakness in the Dollar countervails any potential weakness
in the Pound. Near term targeting in the Pound is seen at 165.78. In
fact, the UK Press is forecasting that the


US



economy is headed back into a double dip recession and that simply
pushes traders into the long side of the Pound.


CANADIAN:
The path of least resistance is up, but with the Press beginning to beat
the drum on a double dip


US



recession and the


US



being singled out as the whipping post for any military action, the
Canadian could be held back from the type of gains seen for most of
early 2003. More upside but longs have to realize that risk is
increasing along with reward. +

METALS

OVERNIGHT
CHANGE to 4:15 AM: GLD +2.50,
SLV +3.0, PLAT +4.90;
London Gold Fix $370.80, +$6.70;
LME Copper
Warehouse
stks
845,425 ton, -3,025 tons; Comex Gold stocks
2.048 ml, -96 oz; COMEX Silver stks 107.1 ml
oz, -1,186,834 oz; OVERNIGHT: More resistance levels violated overnight
mostly off war speculation


GOLD:
The weekly COT report showed the small spec and fund combined net
position to be 117,000 contacts long and since that report, gold has
managed to gain an additional $14 an ounce. Therefore, we suspect that
the net spec long has reached 127,000 contracts net long. We still
assume that the gold market has additional buying fuel, especially since
we haven’t seen the physical markets respond as aggressively as the
futures have.


SILVER:
With gold so strong, silver will probably be pulled higher. Next
resistance level in the March silver comes in at the 2002 highs of $514.
The weekly COT reports showed the small spec and fund long to be 69,000
contracts, but silver is now 10 cents above that mark off point and now
probably long 74,000 contracts.


PLATINUM:
While platinum should be pulled higher by gold, we sense that it is
giving some thought to the potential for an economic contraction and a
softening of future platinum demand. In fact, considering the
consolidation for the last three sessions, it is clear that platinum
isn’t tightly linked tightly to gold & silver. Because platinum is
already at historical prices longs have to be less interested in paying
up!


COPPER:
The copper market really has a big job in rationalizing its current
price level. Not only were COT figures indicative of a market slightly
overextended, but also the macro economic case is also pretty
disconcerting. Chinese copper futures were weaker and a



UK



analyst suggested that he couldn’t tell whether the



UK



economy was softening or collapsing! In other words, world equity
markets look to be headed into a significant dive and that should make
copper prices, 700 points above their January levels, seem extremely
expensive and vulnerable.

CRUDE
COMPLEX


OVERNIGHT
CHG to 4:15 AM:
CRUDE
+8,
HEAT +73, UNGA +0
— The market appears to be poised for more gains in the week ahead,
even if the recent US inventory readings failed to exaggerate the
“tightness” theme. With the “war” theme still
dominating the headlines, it would seem difficult to alter the bull tilt
without significant diplomatic progress with the Iraqi situation.

NATURAL
GAS


The
weather isn’t exactly supportive to natural gas as a warm-up will be
seen for the better part of the coming week. The weekly COT report
showed the natural gas to be net long 43,000 contracts, which is
moderately overbought but not excessively so.