Futures Point To Weaker Open
INTEREST RATES
OVERNIGHT
CHANGE toÂ
AM
BONDS +5 — We see enough disconcerting
information to put the bond market up to the November high of 112-14. However,
there is still reason to fear some negative influence on bond prices, from the
stock market if it manages to rally in thin holiday conditions. It would seem
that the economy has more than enough problems entering this week, with oil
prices soaring, the Dollar falling sharply and holiday sales coming in slower
than expected.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P -350, NIKKEI
+19, FTSE +4.2 — The stock market could be
in for a sharp dive, unless the holiday spirit can shift the direction of
sentiment quickly. The fact that energy prices are soaring and the Dollar is
falling sharply simply turns up the existing selling pressure in stocks. We have
to wonder how many fund managers will move to dump positions aggressively, if
the March S&P slides below 884.40, as many managers might attempt to cut losses
quickly, rather than see yearly results damaged by a late failure in prices.
FOREIGN EXCHANGE
DOLLAR: The charts in the Dollar look really ugly. Without the
overnight Press reports that European investors are beginning to upgrade their
opinion of prospects in the
we would see nothing but negatives for the Dollar. In fact, if the
can’t muster some countervailing view off the remaining holiday sales patterns,
we suspect that the Dollar could fall massively. While the Dollar has regained
some of the significant losses posted on it’s opening today it still, remains in
an extremely vulnerable posture and most importantly can’t even seem to generate
positive domestic sentiment. We would leave the holiday euphoria window
potential open for at least part of the session today, but rallies in the Dollar
in the next two sessions are certainly selling opportunities. Downside targeting
in the Dollar is 100.00.
EURO: European economists and European Press
outlets are suggesting that rates of return might be higher in the
over the coming three months, but that hardly looks to alter the pattern of
gains in the Euro.
stocks were lower this morning but that should only serve to mitigate the upward
track in the Euro. Near term upside targeting in the Euro comes in at 103.50.Â
YEN: A holiday in
probably reduced the threat of intervention from the BOJ and that probably
allowed the Yen to forge an upside breakout overnight. Near term targeting in
the Yen is the November highs, but we would have to expect the potential for
extreme volatility into that pricing. The BOJ has to be preparing for some type
of move against the rising Yen.
SWISS: Economic and political anxiety levels
are high and look to remain high and that should foster a run in the Swiss up to
the mid 1996 and 1997 highs around 72.40. Flight to quality interest in the
Swiss should rise consistently into the January war window. The 70.00 level
should become a long entry point on corrections.
POUND: The
continues to post the best macro economic numbers of the G7 and investors are
rewarding the currency with aggressive bidding. Overnight the 3rd quarter GDP
readings showed an increase of +.9% because of an upgrade in construction
figures. Therefore, the Pound is almost as solid of a flight to quality currency
as is the Swiss. However, some traders are concerned that the Pound has begun to
lose momentum around the recent top and that the threat of military involvement
might now begin to chase some longs out of position. Therefore, it would not be
a good thing for the March Pound to fall back below 158.84 in the coming weeks
action.
CANADIAN: Like the Pound, the Canadian has
begun to lose momentum around its recent high. We have to wonder how negative
the trade can get toward the Dollar, before the Canadian Dollar begins to
suffer. We also have to wonder how slow the
economy has to become, before that also begins to influence the C$. Longs should
stay long, but should quickly move to obtain some long put protection against
their positions. +
METALS
OVERNIGHT CHANGE to
4:15 AM
GLD +3.80, SLV
+4.3, PLAT +3.00;
Gold Fix $343.90, +$.80; LME Copper
Warehouse stks 857,300 ton, -100 tns; Comex
Gold stocks 2.04 ml, Unchanged; COMEX Silver
stks 107.1 ml oz, -141,120 oz; OVERNIGHT: Higher action off what
appears to be bargain hunting short covering
GOLD: The COT report showed gold to have a
net spec long position of 106,000 contracts as of the close last Tuesday, which
probably made the gold net spec long, close to 120,000 contracts at its recent
highs. Therefore, gold probably did not reach the largest net long position in
modern history last week on its highs. With the firmer overnight action in
overnight, concern over holiday sales, a sagging Dollar and threats of war, it
would seem that gold would remain positively poised.
SILVER: Little change in volume and open
interest, suggests that silver is not as sensitive as gold in the current
equation. The weekly COT report in silver showed a net spec long of 50,000
contracts, which is a little overdone for a market that hasn’t rallied very far.
Bottom of the channel support in silver comes in at $4.61 basis the March
contract with the middle of the channel seen as near term resistance up at
$4.73.
PLATINUM: A major range down today in the
platinum, on a large open interest total might prime the platinum market for a
continued washout. Concern that the auto sector will see significantly slower
production totals combined with very disconcerting views toward the economy has
to be chasing a large number of longs from platinum. Near term targeting in the
April platinum comes in down around the $567.5 level. Â
COPPER: Given the early action in
international equity markets, the Dollar and crude oil, we have to suspect that
copper is on its way to lower pricing. With platinum showing significant
weakness and sentiment toward holiday sales very poor, we would not be surprised
to see March copper touch 70 cents sometime this week. According to the COT
report, copper had a net spec long of 33,000 contracts and that could easily
feed moderate sell orders onto a thin market.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +60,
HEAT +150, UNGA
+143 –Â It would appear that the crude market would open the week roughly
$1.00 above the COT report mark off point, with a net spec long position of
68,000 contracts. Therefore, we have to guess that the net spec long entering
this week is between 75,000 and 78,000 net long.
NATURAL GAS
Despite
weather that could be termed bearish, the natural gas market maintains a firm
underpin from the annual deficit tally and the threat of war with Iraq. Thus
far, the El Nino issue seems to be a net positive from the perspective, that
some Mexican shipments might be hindered by high winds