Futures Point To Positive Open

OVERNIGHT CHANGE to 4:15 AM :BONDS +17 The bond market played a little catch-up
this morning to the weakness registered in the stock market on Monday. With the
worldview toward the US economy manifesting itself in a falling Dollar, we have
to think that bonds will remain well supported in the coming session. The
economic report slate today contains a number of minor regional Fed surveys and
with two of the three reports registering negative readings last month it would
not be surprising to see all three surveys show a worsening of the economy.

STOCK INDICES

OVERNIGHT CHANGE to 4:15 AM:S&P+550 NIKKEI +4.40 FTSE +41 Certainly, the
initial Iraq response would seem to push the US to the brink of an attack.
However, one must be careful accepting the dialogue of the ruling council as the
final decision, as the Iraqi ruling council has as much real legislative power,
as the Monarchy in England. Because the stock market is higher this morning that
suggests that the market isn’t nearly as anxiety ridden as many would expect.

FOREIGN EXCHANGE

DOLLAR: There have been a number of incidents in history where war or conflict
masked over economic weakness and that would appear to be the best bet for
Dollar bulls in the coming week of trade. Left to the economic outlook, the
Dollar has already shown it will weaken. Even after a 50 basis point rate cut,
the confidence in the US recovery failed to surface. Some sources are suggesting
that the Fed needs to raise money supply aggressively, in order to avoid a
Japanese style deflationary condition. We suspect that the Fed Chairman will
discount some of the ultra slow economic concerns in his dialogue Wednesday and
may be asked if the Fed moved more aggressively to pre-empt slowing off a war
with Iraq. Therefore, the Dollar probably forges a bottom later today and into
Wednesday. In our opinion, the Dollar has been falling because fears that the
economy won’t recover and because of fears of a war with Iraq. On the other
hand, if the US does attack Iraq that could mean a return of flight to quality
buying to the Dollar. If Saddam decides not to end his regime, then a large
portion of the selling pressure in the Dollar reverses. Traders should sell 1
March Dollar Index at the market this morning and buy 4 March 110 calls for 44
each. If the prevailing downtrend maintains, it won’t be long before we recoup
the call cost.

EURO: We would be a seller of the Euro 101.12 or better looking for a return to
100.00, as the Euro zone doesn’t have the economics to drive against the Dollar.
The euro has the ability to drive against the Dollar if the US Dollar is falling
away on its own accord. German confidence readings should undermine Euro
sentiment as well as the concerns floated by the ECB’s Issing overnight. The ECB
suggested that inflation numbers are getting better but that risks off the
economy remain high and that more than anything suggests the bank is laying the
ground work for a rate cut. Rate cuts hurt the Dollar, the question is, will it
hurt the Euro?

YEN: Thus far, the renewed concerns for the Japanese economy floated by the BOJ
haven’t undermined the Yen, but there was talk that the BOJ might not tolerate
any more gains in the Yen. Maybe the comments on the economy where floated to
stem the rise in the Yen! Supporting the Yen, is the view that the Japanese GDP
Wednesday will show a rise. In the near term, the Yen will probably only fall if
the Dollar bottoms.

SWISS: The Swiss has already seen the benefit of anxiety and now the currency is
overbought. We suspect a retracement to 68.63 will be seen in the December
contract, before the end of the week.

POUND: UK inflation numbers continue to climb slowly, which probably serves to
support the Pound. If the economy can remain strong enough, with prices showing
the opposite of deflation, we have to think that the Pound will generally remain
in favor. However, with the Pound rising so sharply over the last month, it will
correct sharply if the Dollar manages to bottom. Near term corrective potential
is seen down at 157.40.

CANADIAN: We take the washout and recovery overnight as a near term sign of a
low. However, heavy overhead resistance might cause gains to be measured. +

METALS

OVERNIGHT CHANGE to 4:15 AM:GLD+0.60 ,SLV+1.3 ,PLAT-6.70 London Gold Fix $321.90
+.80 LME Copper Warehouse stks 867,575 tons +8,100 tons Comex Gold stocks 1.994
Unchanged COMEX Silver stocks 107.1 ml oz Unchanged OVERNIGHT: Minor gains in
Asia possibly ahead of the Iraqi resolution response.

GOLD: With the news overnight that the Iraqi Parliament rejected the UN
resolution, the only thing capable of averting war now is word from Hussein.
With war talk expected to hang in the balance (at least until the Friday UN
deadline) gold should remain supported with a possible attempt to regain the
$325 level in the February and possibly even soar to $330 later in the week.
With the added uncertainty of an economic downgrade in Japan, we suspect that
gold will find a little more favor than it did Monday.

SILVER: The gold market isn’t the only market seeing merger and acquisitions as
Pan American silver bought a Peruvian concern, and that also has the capacity to
increase investment interest in silver. Despite the strong action in silver
Monday there would seem to be little in the way of fresh fundamentals driving
prices. We have to think that some roll over action drove silver but one can
always argue that silver remains historically cheap.

PLATINUM: Given the news overnight we knew that platinum would be under pressure
today. The fear of slackening auto demand and possibly slackening Japanese
jewelry demand undermines a market that is pretty expensive in the metals and
commodities sectors. In other words, with platinum holding roughly $60 an ounce
above the July lows because of recovery hopes, one might expect prices to fall
back to more accurately reflect the uncertainty of recovery. We doubt that
platinum needs to fall to $510 but $550 might be a fair value.

COPPER: We are sure that the copper market will discount the massive single day
increase in LME stocks seen overnight, but a pattern of such increases might
begin to weigh on prices later this week. We also have to think that copper will
remain supported unless the December S&P falls below 873. Both the Chinese
market and the London copper market were higher overnight, confirming the
strength seen in the US market Monday.

CRUDE COMPLEX

OVERNIGHT CHG to 4:15 AM :CRUDE -4 ,HEAT+30 ,UNGA+31 The Iraqi Parliament voted
to reject the UN resolution! After the vote they turn their “no”
recommendation over to the dictator division of the Iraqi government. While the
trade took comments from the Iraqi Parliament as if they were enforceable, we
doubt that the dialogue was anything but an orchestrated ruse.

NATURAL GAS

The natural gas seems to be prepared to break out to the downside, but the
regular energy complex looks to dictate most of the direction in prices. With
the 8 to 14 day forecast calling for either mild or warm in the US, out to
November 21st, the natural gas might easily adopt a bearish tone unless the
regular complex prevents weakness.