Futures Point To Soft Open
INTEREST RATES
OVERNIGHT
CHANGE toÂ
AM
BONDS
+8 — We are a little surprised that the stock market is holding together and we
are equally surprised that the bonds haven’t mounted a recovery bounce in the
last 24 hours. Maybe the severe decline in the Dollar is undermining
international bond sentiment and the sharp rise in the gold market is siphoning
off some flight to quality buying of bonds. In any regard, we see the opening
this morning as extremely critical, as the macro economic information seems to
be precarious enough to provide bonds with some support.
STOCK INDICES
OVERNIGHT
CHANGE to Â
4:15 AM
S&P
-320, NIKKEI +59,
FTSE -36 –Â Given the sharp rise in gold and the sharp decline in the
Dollar, we have to think Wall Street will be looking over its shoulder with
fears of an anxiety event. However, in the overnight action, the S&P is not
showing too much concern. Nonetheless after the surprise rally Monday, soaring
energy prices and slackening views toward the holiday sales period, we have to
think the stock market is a sell.
FOREIGN EXCHANGE
DOLLAR: We would have to suggest that the Dollar is the sole
financial market responding as one would expect, given the breadth of news
overnight. With energy prices rising sharply and gold prices soaring, we would
have expected the
stock market to be showing massively lower opening indications. However, the
stock market is initially hanging together, but the Dollar is falling apart.
While some intervention threats from
are expected to temporarily defray the selling the Dollar, the trend in the
Dollar is clearly lower. In fact, one has to look to the monthly charts to see a
near term support level in the Dollar with many traders expecting the Dollar to
eventually fall to the 1999 consolidation around 102. Early
numbers today might defray the selling in the Dollar, but if they prompt a rally
in the Dollar, it should be sold quickly.Â
EURO: We are not sure why the Euro is
getting so much credit in the current environment, as they also have to pay
inflated energy prices, on top of a sluggish economy. With the international
trade fixated on the
attacking
it’s entirely possibly that money is flowing to the Euro zone as a way to get
out of the way of the war. Since the progression of US holiday retail sales
patterns less than stellar, there is very little reason to hold out in long
Dollar positions until the real war timing is seen in January. In other words,
money sees no reason to stay in the Dollar and is moving to the safety of the
EU. Traders are now projecting an ultimate target in the Euro up at 104.30.
YEN: With negative economic numbers from
overnight one would expect the Yen to lag behind other currencies in the rise
against the Dollar. The Yen is also going to see continued concerns of
intervention from the BOJ and that should restrict gains. We seriously doubt
that the 83.43 level will be violated without the BOJ responding.
SWISS: Flight to quality abounds today and
the Swiss is in position to fully react to conditions. With gold soaring, crude
oil rising and the Dollar falling apart, the only thing missing for the Swiss to
launch a massive rally is for the
stock market to slide. Near term targeting in the Swiss comes in at 72.50.
POUND: We suspect that the Pound is primed
to forge a new high for the move on the monthly charts, with the currency more
than likely headed to a level where 160 becomes support instead of resistance.
Rising inflation readings in the
probably don’t have much of an effect on the Pound, as the trend is up and
little looks to change that condition.
CANADIAN: So far, the Canadian is holding
together against the negative barrage lodged against US assets. We continue to
fear a slide in the Canadian down to 63.78. In order to turn the trend back up,
the March Canadian will have to climb back above the 64.05 level. +
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +3.10, SLV
+3.3, PLAT +4.90;
London Gold Fix $341.00, +$8.10; LME Copper
Warehouse
stks
858,400 tons, -1,125 tns;
Comex Gold stocks 2.03 ml, Unchanged;
COMEX Silver stocks 106.8 ml oz, -27,236 oz;
OVERNIGHT: Sharply higher action partly off Monday’s
action but some fresh buying.
GOLD: The headlines of 5 1/2 year highs in
gold overnight should continue to foster speculative buying in a market that is
closing in on a historically long spec position. We suspect that the net fund
and small spec long in gold will reach 110,000 to 115,000 contracts today, but
as we suggested yesterday, it might be possible that the cumulative spec long
reaches up to 130,000 to 150,000 longs. Traders not long, should consider
selling 1 February gold and buying
2 February 340
calls.
SILVER: We suspect that the silver will
catch the gold wave today, with a return to levels above $4.80. Given the
magnitude of the gold run and the potential hype behind the gold run, we suspect
that many longs will be forced to buy silver instead of gold, as options in gold
have become pretty expensive and some specs are hesitant to pay up or chase gold
at recent levels. We suspect that the August and September highs are about to
become support instead of resistance.
PLATINUM: Surprisingly, the platinum market
is catching precious metals interest buying and with the strong gains in gold,
platinum could probably make a run above $600. The trade saw very little
response to the fuel cell stories floated Monday possibly because officials at
big auto producers continue to project extremely poor global auto sales next
year. Near term trend line support comes in at $592.Â
COPPER: We are surprised that the equity
market isn’t under aggressive attack this morning, as crude oil is sharply
higher, the Dollar is falling apart and gold is soaring. Without extremely
favorable
economic numbers today, we see copper falling to 72.00 and possibly 71.40.
Critical support of 72.90 should be tested early, as Chinese and
copper prices were lower overnight.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE -18,
HEAT -64, UNGA
-55 –Â The energy market flared toward $30 a barrel yesterday with the
trade realizing that the US was seeing 15% of its imports disrupted by Venezuela
and could easily see another major disruption of imports in the event that Iraq
is attacked. In short, the trade has to factor in some extreme price premium,
just in case the unthinkable happens with up to 25% of
imports shut down.
NATURAL GAS
Extremely
violent trade was documented in the action Monday, as the natural gas market
wants to participate in the same type of bullish action seen in the regular
energy complex. However, the natural gas market might lack the same
fundamental punch, as the regular energy complex.