Futures Point To A Weak Open
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS -1 — While we
think the bonds will maintain a positive stance in the action today, it
would not seem like the economic numbers will directly accentuate the
upside. In the first four days of the week the economic numbers were
patently supportive to bonds, while the numbers this morning might be a
mixed bag. International equity markets are soft, gold is showing more
strength and the Dollar is weak and that should keep concerns over the
US
recovery as the
dominating theme.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P -990,
NIKKEI -192,
FTSE -86 — The bear camp
had almost all the news it could wish for Thursday with war, anthrax,
chemical weapons, rising initial claims, corporate accounting problems
and a new low for the year, in the US Dollar. We are actually quite
surprised that the stock market didn’t get smashed yesterday and will
be equally surprised if the market doesn’t get hammered today. It’s
possible that two of the four economic numbers to be released this
morning, create a little optimism, but we hardly see the reports as
something that entrenches sentiment into the bull camp.
FOREIGN
EXCHANGE
DOLLAR:
Another gap down Dollar trade overnight highlights the international
consensus on the
US
and the US Dollar. The twin issues of war with
Iraq
and a questionable economy might be joined by a slight inflation risk
after the numbers this morning. Some traders might suggest that seeing
some inflation would be a positive to the Dollar, but given the
extremely negative posture toward the Dollar, we doubt a little higher
rate of return potential is going to turn the Dollar back up. In fact,
the inventory numbers and the
University
of
Michigan
readings this morning might temporarily lift the Dollar but that is
probably just a chance to get short at a better level. Maybe the
US
is willing to see its Dollar fall sharply in hopes that its export
markets will be benefited. The overnight action has the weekly Dollar
chart equal to the lowest level of the year. As in the
US
stock market analysis, it might take a significantly positive and
significant headline development to alter the course of the Dollar.
EURO:
Another new high for the move and the Euro would seem to be in position
to gather longer term stop loss buying. Even with an extremely hot Irish
inflation reading, the ECB suggests that inflation in the Euro zone is
under control. With the
US
possibly posting an inflationary number this morning we hardly doubt
that the Euro will in any way, be held back by an inflation view. In
fact, given the entrenchment of sentiment, inflation in the Euro zone
might benefit the Euro! Next upside targeting in the Euro comes in at
103.30.
YEN:
The Nikkei was down hard and the Yen was firm overnight, simply because
of the weakness in the Dollar. However, a continuation of a much weaker
Dollar could spell disaster for the Japanese export sector. In the mean
time, the Yen rises toward resistance of 82.49 and should eventually be
an outstanding short. While
Japan
showed a mix of good and bad numbers yesterday, with industrial
production falling and bankruptcy becoming less prevalent, it would seem
like the actual direction of the Japanese economy is a very minor
component of the factors driving the Yen. Look for a sale up around
82.49.
SWISS:
The Swiss still isn’t getting a large measure of flight to quality
buying, but is getting enough to expect a new high for the move in the
coming sessions. We suspect that next week the Swiss will be high enough
that the July high of 69.85 will become support.
POUND:
It would seem to be a safe bet, that the Pound forges a new high for the
move, but driving the Pound sharply above 159.28 is rather suspect.
Strong sales from John Lewis keeps the UK economy among the most
respected recoveries and probably makes buying the Pound at new highs
easier than buying the Swiss or Yen at such lofty levels.
CANADIAN:
The Canadian stands at a critical junction, as the Dollar is falling
away aggressively and the world is seemingly turning a very negative eye
toward the
US
recovery. In other words, the Canadian needs to manage to disconnect
with the Dollar and come into favor on its own merits. Certainly
economic numbers have been good enough to justify a strong Canadian, but
there is a lot of history and chart resistance causing traders to be
skeptical. Most traders fear a repeat of last summer’s Canadian rally
and failure. This is a classic spot to sell a Mar Canadian and buy 3 Mar
Canadian 65 calls which is initial a flat position but gets longer on a
rally.
METALS
GOLD:
In addition to gold making a number of key technical breakouts, it is
clear that the Dollar is also making some critical technical failures on
its chart. In other words, the gold is in effect getting a double lift.
Asian gold traders suggested concerns of war, specifically drove buyers
into the market, which means that the concern over the economy isn’t
that key of a driving factor in the recent gold surge.
SILVER:
We grow more impressed with silver every day, as the silver followed
gold higher, but surprising hasn’t seen sharply rising volume or open
interest rise in the process. In other words, silver is apparently not
burning through volume and open interest, in making the gains and that
could mean a more orderly and sustained rally. Near term support in
March silver comes in at 474 and then again at 465.
PLATINUM:
Instead of being defeated by the potentially negative macro economic
tilt platinum is falling in step with the precious metals distinction
and is forging gains. The top of the channel in the January platinum
comes in at $612.40. However, off all the metals the platinum shows the
most signs of being overbought as open interest is at the highest levels
of the year.
COPPER:
Shanghai
copper stocks declined by 4,331 tons, to stand at 83,456 tons and that
is slightly supportive to copper, given the ongoing doubt toward demand.
However, Shanghai copper prices were slightly lower hinting that Chinese
buyers interested in copper but are not currently ready to pick a bottom
in this market. We seriously doubt that optimism toward the Asian
economy is going to overcome the negativeness fostered yesterday,
without some major leader saying something that suggests the US, is not
moving toward an attack.
CRUDE
COMPLEX
OVERNIGHT
CHG to 4:15 AM:
CRUDE +54, HEAT +156,
UNGA +136 — If one attempts to follow what OPEC says, then one
becomes very confused. If one keeps an eye on the amount of total OPEC
production, that is free from compliance threats, it is clear that more
oil can be expected to flow to the market.
NATURAL
GAS
While
the weekly inventory buildup in natural gas came in slightly smaller
than aggressive expectations, it was none the less supportive. With a
162 bcf draw in stocks and an annual deficit of 444 bcf the supply issue
is beginning to get the attention of the commercial and small spec
players.