Futures Point To A Weak Open

INTEREST
RATES

OVERNIGHT
CHANGE to

Minute=”15″>
4:15 AM
:
BONDS

+2 — The overnight indications from the bond market show an upward tilt in prices.
The fact that the war track continues to move forward, evidently countervails
the optimism generated by the construction spending increase and the equity
market bounce Monday. It would seem that the Press has almost ignored the Bush
Budget and that is probably because of the focus on the shuttle and the return
to war mongering.

STOCK
INDICES

OVERNIGHT
CHANGE to

4:15 AM
:
S
&P -630,
DOW -5.7, FTSE -42,
NIKKEI -15.8 — The market comes into the action today on a
moderate correction from the higher probe forged Monday. We thought that the war
talk would remain in the background until after the Shuttle Memorial today, but
the gold market is quickly rushing to factor in “compelling” evidence
against


Iraq


promised
by the


US



Secretary of State. However, we do have to give credit to US economic numbers
Monday, as they presented enough growth to put stock market bears off balance.

FOREIGN
EXCHANGE



DOLLAR:
With the gold market once again factoring a possible war with



Iraq


, the Dollar slides back into
the role of a whipping post. The fact that the


US


Secretary of State indicated
that he would give compelling evidence of Iraqi violations, the market took no
chances with the Dollar, especially since the Dollar had been on a five-day
recovery. In other words, the Dollar is vulnerable even if US numbers have been
decent and in some cases better than expected. Since the Dollar gapped down
overnight we suspect that sellers will attack the currency and send the Dollar
down to first support around 99.45. Because European stocks are down and
confidence is relatively low in

Europe

, the selling pressure on the
Dollar should be less aggressive than the action seen in late January. The US
Dollar has the millstone of war, tied around its neck again and that could mean
new lows unless there are signs that either


France


or


Germany


are ready to throw support
behind a


US


led attack. Like the gold
market, we think the Dollar is now within 15 sessions of forging a major trend
change, with a long term bottom expected after fresh contract lows are posted.



EURO:
After some slightly higher price readings last week, the Euro zone this morning
is benefited by better than expected inflation readings. Furthermore, it goes
without saying, that the Euro will be directly benefited by the return to war
mongering talk. In conclusion, the Euro appears to be headed into another pulse
up, with a new high for the move expected in the week ahead.


YEN:
Overnight Japanese investors rushed into gold partly because of a lack of
confidence in the new BOJ leader and partly because they see the Yen rising
against the Dollar. In fact, the retail price of gold in



Japan


reached the highest level in
a decade overnight and that highlights a loss of confidence. We also have to
think that a contraction in steel exports is a negative to the Japanese economy.
In other words, the Yen probably bounces slightly but might not be capable of
returning to the type of gains seen in early December. In fact, we would become
a seller of the Yen on a rise to 83.61.



SWISS:
All one has to say is war and the Swiss regains long interest in quick fashion.
In fact, we see no reason why the Swiss wouldn’t run all the way back to the
January highs of 74.36. The coming rally in the Swiss should precede a major
top.


POUND:
The Pound looks poised to rally but appears to be restrained with the January
highs providing significant resistance. So far, the Pound has been immune to the
war effect but as the threat of real action rises, the Pound might see less long
interest.


CANADIAN:
We detect some concern in the bull camp in the Canadian. It should be noted that
the Canadian has mounted some significant gains and extremely wide trading
ranges over the last month and that might mean that a number of longs are
vulnerable to stop loss selling in the event of a failure on the charts.
Critical chart support comes in down around 65.51.

 

METALS

OVERNIGHT
CHANGE to

4:15 AM
:
GLD
+4.60,
SLV +4.0, PLAT +8.10,
CP +20;


London




Gold Fix
$374.85, +$5.85; LME Copper Warehouse stks 830,425 ton, -2,800 tons;
Comex Gold
stocks
2.159 ml, +16,352 oz; COMEX Silver stks 107.6 ml oz, +533,473 oz; OVERNIGHT:
Australian & Japanese traders bid gold to yet another new high.


GOLD:
Apparently the gold market isn’t going to wait for the actual testimony
to the UN on Wednesday, to bid gold up in anticipation of a war. Overnight
Japanese buyers were evidently chasing gold because new leadership at the BOJ
didn’t give off an air of confidence and because many Japanese think the
currency action will prompt even more buying interest in gold. We suspect that
another wave of war longs is in the process of entering the market.


SILVER:
Thus far, the silver market hasn’t responded to the overnight rise in gold but
we have to think that May will at least regain the top of the up trend channel
at $5.08. By not reacting to the reduced silver production story from



Mexico


Monday,
the silver market proved that it is not tracking pure supply and demand
fundamentals closely. If silver doesn’t climb away from critical support of
$4.82 in the wake of the gold gains a number of spec longs might decide to bail
out of positions.


PLATINUM:
The platinum wasted no time in thrusting higher along with gold this morning. It
is clear that platinum is getting some flight to quality buying probably because
investors know how tight supplies are in platinum and therefore platinum appears
to be an excellent alternative to purchasing. However, relatively platinum
prices are significantly more expensive than gold prices at current levels!



COPPER:
Certainly the copper market is overbought but the longs don’t appear to be
balking at paying up for fresh longs. The


US



construction numbers Monday were certainly supportive of copper as was the
action in the


US


stock
market. However, with the war talk playing big in the gold market today we
suspect that copper will see some minor weakness.

CRUDE
COMPLEX


OVERNIGHT
CHG to

Minute=”15″>
4:15 AM
:
CRUDE
-8, HEAT -6,
UNGA +35 —
The energy complex could have faded aggressively Monday with the dialogue
that OPEC was throwing off early in the session. With OPEC referring to a supply
glut in the action Monday, weak handed longs could easily have thrown in the
towel.

NATURAL
GAS


Colder
weather ahead gave the natural gas a lift after early weakness Monday. However,
it would not appear that the coming cold front is a sustained front, capable of
prompting an explosion in prices.