Futures Point To A Weaker Open
INTEREST RATES
OVERNIGHT
CHANGE to
4:22 AM
BONDS
+13 — The bonds have rejected the trade below 112-00 with many sources
suggesting that the track of war is still present. From the action overnight it
is clear that the bull camp is back in charge and with the housing starts
expected to contract, we can understand the short covering tilt. In fact, seeing
US numbers come in soft, would be against the recent pattern and could suggest
that the economy is being held back by the constant fear of war.
STOCK INDICES
OVERNIGHT
CHANGE to
4:22 AM
S&P
-290, DOW -4, FTSE
+1.5, NIKKEI -14.5 — The market comes into
the session weaker today, with some key US stocks declining in
We still suspect that the market will attempt more short covering, especially
with energy prices weak and OPEC members talking about scraping production
quotas in the event of a war. In other words, OPEC is in preparing to throw all
available production at the market, in the event of a war.
FOREIGN EXCHANGE
DOLLAR: It would appear that the currency markets are back into a
consolidation mode, with the war track confused and most of the diplomatic
efforts being carried out behind the scenes. However, we suspect that a weak set
of US housing numbers this morning, could result in the Dollar giving some
ground early, especially since the Pentagon deployed more troops overnight. A
long term moving average in the March Dollar would be regained on a rally to
101.04 but for the next few sessions, the path of least resistance looks to be
down. In fact, near term support in the March Dollar might be tested down at
100.00 before the end of the week. If the
comes out with suggestions that it will attack, even without a second UN
resolution, that could easily push the Dollar down to
99.86 and possibly down to 99.05. The Dollar made the bounce off the February
lows off the combination of sagging war threats and much stronger than expected
numbers and today it would seem that both of those conditions are shifting back
into the bear camp.
EURO: With a lower trade surplus reading
this morning, the Euro sees some of its luster fade. Also mitigating the upside
in the Euro are comments from the EU that a soaring Euro in the event of a war,
might cause an overreaction in the marketplace. In other words, even the EU is
noticing that the aggressive flight to quality buying of the Euro is misguided.
A number of sources peg the EU war premium to be 400-500 points, but we suggest
that figure could be as high as 700-800 points. Therefore, the Euro remains
supported at current levels but risk to longs appears to be rising. On any
return to the levels above 107.50, traders should consider buying some June puts
as an investment.
YEN: Tempering recent statements, the BOJ is
now suggesting that a strong Yen is undesirable. However, suggesting that a
soaring Yen is undesirable hardly erases the suggestion yesterday that
will not ask for coordinated intervention to stop the Yen. We still think that
the Yen is getting flight to quality buying from money that is fleeing
and
for the
It’s a very bad investing environment when flight to quality is buying
in its current fiscal situation! Even the Japanese government has maintained an
extremely weak economic outlook for its economy. A moderate rise in January
steel output countervails an expected decline in the Japanese business activity
Index. The March Yen probably manages to hold above 83.81
support, but a key moving average would be violated on a move below 83.94
today.
SWISS: A lack of flight to quality concern
keeps the Swiss under pressure. Its possible that the
Swiss will fall all the way down to 72.00 support.
POUND: It would appear that the UK is going
to take the diplomatic lead against Iraq even against the opposition of most of
the UN Security Council and that could in a way, push the Pound into the same
standing as the US Dollar. In other words, the Pound looks to stay under
pressure, especially since the gap down action yesterday wasn’t rejected. In
fact, given overnight lows the Pound appears to be headed to 157.60.
CANADIAN: The Canadian shows an upside
breakout overnight and that shows clearly where the Canadian fits into the
current political and economic situation. With an unencumbered political
position, a decent economy and several key commodity areas doing well.
METALS
OVERNIGHT
CHANGE to 4:22 AM: GLD +3.50,
SLV -1.0, PLAT
+0.20, CP +.40;
London Gold Fix $347.20, +$.20; LME Copper
Warehouse stks 826,225 ton, -550
tns;
Comex Gold stocks 2.164 ml, Unchanged;
COMEX Silver stks 107.6 ml oz, -4,927
oz; OVERNIGHT: Asian market weakness was reversed when the Japanese
mkt reversed
GOLD: The liquidation pressure continues
with the war timing put off into the future without specific dialogue on when a
war might be expected. With the
and US apparently working diplomatic channels for another UN “use of Forceâ€
resolution, the trade rightly assumes that an attack won’t take place with
negotiations ongoing. A number of key countries continue to pull embassy staff
from
namely
which is a bit of a surprise, considering how close the
has been dealing with
and how steadfast
seems to be against a war.
SILVER: Like gold, silver partially rejected
the lows posted over the last four sessions. However, May silver would seem to
have significant resistance around $4.60. If the world economy can maintain a
positive bias, we see the recent lows as pretty cheap and possibly even deflated
pricing.
PLATINUM: Apparently the Russians inked a
new Platinum Group Metals export quota, which is bearish because red tape on
exports has slowed the movement of supplies in the past. However, because the
amount of the quotas was left unchanged, the platinum market should find support
following the recent correction. A key platinum mining concern,
showed nearly a $2 million decline in revenues in 2002 compared to 2001, with
moderately higher prices that should mean that overall production declined
slightly. In conclusion, two main sources of supply suggest that the “tightâ€
condition in platinum should be expected to continue but the trade isn’t sure if
demand is improving enough to justify pushing prices even higher into the
historical range.
COPPER: Asian copper prices were lower again
despite talk that Chinese buying is coming in repetitively. Even
prices were down overnight leaving the
market in a slight downward tilt. We are actually surprised that copper didn’t
rise with silver and the stock market Tuesday, which shows that the bull camp
isn’t in charge in copper. it’s understandable that
the Canadian is viewed as a flight to quality tool and possibly as a good
investment for macro economic reasons. Near term upside targeting in the
Canadian Dollar is now at least 67.10. +
OVERNIGHT
CHG to
AM
CRUDE -16,
HEAT -36, UNGA -10 — With Kuwait
asking OPEC to consider scraping the enforced quotas Tuesday in the event of a
war, it is clear that consideration is still being given to what will happen in
the event of a war. In fact, many take the quota lifting threat as a serious
blow to the bull camp but in our opinion, no amount of supply promises will
mitigate upward price action on the onset of hostilities.
NATURAL GAS
Cold
weather hooked around behind the most recent snow storm and that kept the market
from weakening with the regular energy complex. Since the regular energy complex
eventually managed to finish in new high ground, the natural gas was also
lifted.