Futures Point To A Weak Open
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15 AM:
BONDS
+7 — A big range up and a weak close Friday, puts the bull camp in a bad
position to start the coming week. While the reasoning for the slide off
the high Friday is suspect, the failure to mount and sustain a drive
higher off clearly supportive monthly payroll data, highlights a bearish
shift in market mentality. It would seem that the market is expecting
the Bush Administration to launch bid to expand accelerate tax cuts or
simply push for an aggressive stimulus plan.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P -160,
NIKKEI -35,
FTSE -26.20 — In our opinion, the stock market either catches
a wave of bull interest early today off weekend retail results, or it
will continue to slide off last weeks negative payroll report release.
The anticipated United Airlines bankruptcy filing is probably only a
minor negative but a critical negative in a market without a burning
focus. The market is still somewhat concerned about the prospect of war
with
Iraq
,
but isn’t really sure what the impact of the weekend declaration will
be.
FOREIGN
EXCHANGE
DOLLAR:
Every time there is a new Treasury Secretary the trade assumes that the
incoming regime will implement a new policy toward the Dollar. In fact,
we think the
US
stance will usually be that the market determines the value of the
Dollar and not the US Treasury Secretary. Given last weeks
US
payroll release it is possible that the Dollar remains soft and could
easily return to the November lows. It is also possible that a sudden
upgrade of the
US
economy is seen but that would only appear possible if anecdotal
evidence of strong retail sales are documented today from the weekend.
Since traders showed up in huge numbers around the December top in the
Dollar, it would appear that the trend is down in the Dollar and will
stay down unless something significant develops. Near term support seen
at 105.00 but the November low is really the key support target.
EURO:
A weak German Industrial output reading for October, only serves to
temper the upward pattern in the Euro. German Industrial production
declined by 2.1% and that simply holds the Euro back from gains and
doesn’t serve to change the trend. Some economic forecasts are seen
Thursday, from the ECB and unless the
US
manages to find some optimistic development in the near term, we have to
think that the Euro will continue to climb. Near term targeting in the
Euro comes in at the November high of 101.53.
YEN:
Because the Forex trade thinks the next
Treasury Secretary could have a softer Dollar attitude, the Yen managed
to bounce off the lows last Friday, but in retrospect the trade is now
starting to doubt the wisdom of bidding up the Yen. In fact, with
Japan
posting a 4.1% decline in October Machinery output, it is clear that the
Japanese economy is still extremely weak. We would suspect that the Yen
would resume the slide started two weeks ago, once the Dollar proves it
can hold above the November lows.
SWISS:
Failure to make a higher high this morning,
seems to suggest that the Swiss has run out of buying fuel and might be
set for a correction to 68.00. If the
US
actually releases information that proves
Iraq
lied in the UN declaration that could vault the Swiss toward the
November highs of 69.57.
POUND:
Evidently threat of deflation isn’t a major concern to the longs in the
Pound, as PPI contracted by 0.2% overnight and the trade continued to
bid up the Pound. The Pound might rise to the November highs but we
would strongly suggest that longs take profits on a run to that level,
as the Pound appears to lack up side breakout potential.
CANADIAN:
Even with a stellar monthly payroll report, the Canadian came under the
negative influence of conditions in the
US
.
We think that the Canadian needs to hold above 63.85 in order to
maintain a positive bias. On the other hand, if the C$ can’t rise above
64.20 today, that could begin to disappoint some longs and cause a
wholesale profit-taking binge.
METALS
OVERNIGHT
CHANGE to 4:15 AM: GLD -0.50,
SLV -0.5, PLAT +6.70;
London Gold Fix $325.30, Unch;
LME Copper Warehouse stks 867,650 tons, -750 tns;
Comex Gold stocks 2.03 ml, -198 oz;
COMEX
Silver stocks 106.3 ml oz, -549,000 oz; OVERNIGHT: Weaker action overnight
probably comes from light profit-taking.
GOLD:
Gold comes into the week with high expectations created by last week’s
breakout up. However, it is possible the war tilt is relegated to a back
burner, while UN officials and members of the Security Council shift
through the Iraqi declaration. It is however, possible that gold gets a
slight lift off the growing interest in tax cuts and other stimulus
programs.
SILVER:
The silver market posted a net spec long of nearly 30,000 contracts and
actually saw its net long position contract slightly from the prior
week. While volume increased slightly on the recent rise, open interest
continued to slide, meaning that some traders see silver prices above
450 as a little expensive. Given that silver seemed to spike up directly
off the copper production cutback stories, seems to suggest that it is
getting support off its supply outlook.
PLATINUM:
A gap up move overnight suggests that platinum is primed to rally toward
the 2000 highs of $639. Some traders are citing strong jewelry demand as
the catalyst behind the strength in platinum and that has already been
documented in
China
.
Platinum has built a moderately large long spec position considering
that it doesn’t have a large open interest and is running on relatively
low volume.
COPPER:
The copper market saw choppy to weaker action overnight in international
markets. The equity market looks to open weak and that could keep copper
in a bear posture. The weekly COT report showed the copper to have added
about 5,000 spec longs in the most recent report, with the total spec
long coming in at 40,000 contracts.
CRUDE
COMPLEX
OVERNIGHT
CHG to 4:15 AM:
CRUDE +41, HEAT +137,
UNGA +126 — This could be a very important week for the energy
complex as the Venezuelan government is expected to show force to
control certain key elements of their economy and the Iraqi declaration
is already being dissected. The fact Saddam saw a number of countries
drop restrictions against the use of their land in an attack of Iraq,
has to send a pretty loud message to the embattled leadership of Iraq.
NATURAL
GAS
Unlike
heating oil, the natural gas market is holding a moderately large spec
long position with 36,000 longs, as of last Tuesday. Since the COT
report was marked off, February natural gas rallied from 417.5, to close
at 435.1 Friday and that means the spec long could now be in excess of
40,000 contracts long.