Futures Point To A Weak Open
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS
+14 The bonds are slowly coming around to the fact that the
US
economy is mired in a
slowdown, but we still think that the massive rotation away from bonds on
January 2nd, has robbed the market of aggressive buying power. In other words,
if it weren’t for the rotation away from bonds and the headlines trumpeting the
end of the bull market in bonds, the macro economic information of the last two
weeks, could have easily pushed bonds back up to 112-00. Given the potential
explosion in the
US
deficit and the slide in the
Dollar, it’s understandable that the bonds have trouble posting gains but we
suspect that the path of least resistance will remain up.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
:S&P-760
NIKKEI +81 FTSE -26Â It would not appear that the flurry of critical Dow
earnings reports of the last 24 hours has markedly altered the bearish posture
in the marketplace. So far the market hasn’t totally lost faith in the
“positive” progression of the
US
recovery
but that type of faith is waning quickly. In fact, a negative reading in either
industrial production or capacity utilization could foster a failed recovery
mentality.
FOREIGN
EXCHANGE
DOLLAR:
A new three year low in the Dollar,
is certainly justified considering the economic differential, the fear of
US
deficit
spending and the anticipated military involvement by the
US
in
Iraq
.
However, we would suggest that the Dollar has been fortunate in that confidence
in the
US
eventually recovering remains in place, or the Dollar would really be on an
aggressive slide. Traders should watch upcoming
US
numbers
closely, as a loss of recovery confidence could accelerate the downside in the
Dollar. We also think that a significant delay in the timing for a potential war
with
Iraq
would
accelerate the downside in the Dollar. Therefore, industrial production readings
this morning should be watched closely. The decline in the Dollar continues
without even the slightest comment from the US Administration and that is either
a desire to see a lower Dollar, or a result of change in Management at the head
of the Treasury. In other words, the
US
doesn’t
seem to be too concerned about the Dollar. In fact, the most likely parties to
become concerned are the BOJ and the ECB. More downside and possibly accelerated
downside. It could now take concerted intervention to stop the Dollar slide.
EURO:
We are just not sure how far the Euro could rise, but we would not rule out a
run to 110 on the monthly charts. Right now the fundamentals don’t seem to
suggest any change in sentiment is warranted. The EU posted an Industrial
production increase of +0.1% and that wouldn’t be that impressive, if it weren’t
for the fact that expectations were for a lower number. It is also possible that
comparable
US
figures
come out at or below that level. In the end, the reason for the Euro rally isn’t
that the Euro economy is attractive it is mostly because the
US
situation is disconcerting. As suggested before, the war premium in the euro is
probably approaching 700 to 800 points.
YEN:
It would not appear that the batch of significantly weak Japanese numbers
released overnight, would have any affect on the currency. In fact, the trend is
so entrenched that the BOJ might be afraid to intervene because the market might
simply plow through their efforts to hold back the Yen. Money isn’t flowing to
Japan
for its
rate of return, its simply trying to get away from the
US
. More
gains anticipated with next resistance seen at 40 points above the overnight
highs.
SWISS:
There is enough economic, military and political anxiety to fuel the Swiss to
more new highs. Next upside targeting is seen at 74.10. There is some fear that
the SNB might intervene but at this point it might take concerted intervention
to halt the Dollars slide. We might note that the upcoming G7 meeting was
delayed and that makes concerted intervention less likely in the near term!
POUND:
So far the Pound isn’t being held to the same negative influence as the US
Dollar for its war stance. However, it is clear that the Pound is missing out on
some of the Dollar weakness, as it has hardly managed to post a new high for the
move. The Pound doesn’t want to go higher, but will go higher, at a slower pace
than either the Swiss or Euro, until the point at which the Dollar makes a major
turn.
CANADIAN:
The Canadian continues to shake off the potential negative association with the
US
economy
and the US Dollar. We continue to suggest that the Canadian economy is the
strongest among the G7 and that should result in a bidding
up of the C$.
METALS
OVERNIGHT
CHANGE to 4:15 AM:GLD-0.60 ,SLV+1.0Â ,PLAT+5.20
 London Gold Fix $356.90 +$6.05 LME Copper Warehouse stks
854,875 ton -2,400 tons Comex Gold stocks 2.038 ml
Unchanged COMEX Silver stks 107.9 ml oz +895,577 oz OVERNIGHT:Asian
gold action continued to send off proof of an overbought statu
GOLD:
The Asian action showed a trade just a little concerned about adding to longs
and that is probably because of the extensively overbought condition. In fact,
after the close today, the gold market should get a reading on the magnitude of
the “net” spec and fund long. Since the January 7th COT report, April
gold has managed to add another $11 to prices and that should easily create the
largest net spec long in modern history.
SILVER:
It would appear as if gold will provide leadership to silver today, with the
silver being held back slightly by the slack macro economic condition. Two
straight days of increases in COMEX warehouse stocks ends, what could have
become a pattern of declining stocks. Open interest
in silver hasn’t even reached the levels posted back in June, so it isn’t as
overdone as the gold market.
PLATINUM:
Top of the channel in April platinum comes in today at $622, with platinum not
following gold nearly as closely as silver. The
London
platinum
fix rose by $4 an ounce and that suggests news highs. Â
COPPER:
If one only looked at the supply side of copper, it would be a lot easier to
rationalize the strong rally off the December lows. LME stocks seem to be in a
minor downward pattern and producers are following through on production
restraint. In fact, the
Escondido
mine in
Chile
posted a
4.6% decline in production in 2002 and that is the worlds largest mine.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE -24Â
,HEAT-27Â ,UNGA-91 Â The
energy complex would seem to have caught a surprising number of bullish events
this week and that certainly manifested it self in significant price gains. Just
as a measure of how overdone sentiment is, on Thursday the trade saw significant
interest in $40 crude calls.
NATURAL
GAS
The
weekly inventory readings showed a draw of 136 bcf.Â
That draw is above expectations, but below year ago draws.