Futures Point To Weaker Open
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS +5 — It goes without saying that the
bond chart is severely damaged and it would also appear as if some major long
term change in sentiment has effectively taken place. Supposedly, a large
rotation by the funds, resulted in the wash in bonds, with money leaving bonds
and moving into stocks. The bond pit is also suggesting that the increased
probability of war, sparked liquidation interest, as the trade feared excess
deficit spending by the
STOCK INDICES
OVERNIGHT
CHANGE toÂ
AM
S&P +90, NIKKEI
-27, FTSE +39 –Â This market could have
broken down aggressively early this week but didn’t. Furthermore, this market
could be considered short term overbought, (2-4 days) but according to the last
COT report, the speculative position easily has the capacity to launch a strong
rally if the fundamentals will cooperate. While some Wall Street types might
want to downplay the importance action in the S&P futures pit, action in the S&P
pit certainly spawned the rally yesterday.
FOREIGN EXCHANGE
DOLLAR: While short term technical indicators will mean nothing if
the
economic information is weak, traders should note that the Dollar is seeing buy
signals from the technicals. However, with a very strong German factory orders
number already coming out and setting a high bar, the
will have to really impress to turn off the selling. In other words, the
will have to surprise the international view, with a much stronger Payroll
reading, in order to turn off the entrenched down trend in the Dollar. With the
chance of war with
sitting on the Dollar it will take a clear-cut recovery view to cause shorts
with profits to exit the Dollar. Thin support is seen in the Dollar at 101.95.
EURO: That German factory order report
showed a +1.7% gain and that was slightly tempered by the French 3rd quarter GDP
reading, which showed an anemic rise of +0.2%. In other words, the French
economy came into the year-end much slower than the
economy. The trend is up in the Euro but short-term technicals are overbought
and the Euro might need to hold above 104.33 to avoid more intense profit
taking.
YEN: The net flow of economic information on
the Japanese economy this week has been negative, with household spending
declining by 2% yesterday and the trade now looking forward to a leading
indicator reading next week. Even Japanese officials are suggesting that they
don’t now if the economy is recovering or slowing. In other words, the Yen might
find it difficult extend gains through resistance, unless the
numbers provide pressure to the Dollar. In the event that US numbers are strong,
the Yen could fall further than many might expect. We have to think that the Yen
will fall to 83.36 and possibly to 83.12.
SWISS: Like the Euro, the Swiss is seeing a
very overbought technical status. We also doubt that the market is in a posture
to grasp the flight to quality story in the action today. In other words, we
favor a slight correction in the Swiss today, but only if the Swiss remains
below 72.37 this morning.
POUND: The
continues to see softening economic numbers and that has the rate cut crowd
complaining about the lack of movement from the BOE. With the trade thinking a
rate cut was needed and one wasn’t forth coming, we have to think that the Pound
will find it hard to forge an upside breakout. However, we have little interest
in selling the Pound because risk and reward ratios are not conducive to a short
play.
CANADIAN: If the Canadian can get by the
employment readings without a surprise, the up trend should continue with a
retest of the December highs. The Canadian employment surged 58,000 jobs and
that is very impressive. The Canadian might have the strongest economy of the G7
and is only getting partial credit for that status. Some might suggest that a
steady unemployment rate keeps the economic outlook from being very impressive.
METALS
OVERNIGHT CHANGE to
4:15 AM
GLD -0.40, SLV
-0.5, PLAT +2.70;
London Gold Fix $353.15, -$1.45;
LME Copper Warehouse stks 853,750 ton, +25
tons; Comex Gold stocks 2.04 ml, Unchanged;
COMEX Silver stks 107.9 ml oz, +2,995 oz;
OVERNIGHT: Despite initial short sales,
gold managed to hold slightly lower
GOLD: The gold market could once again show
some weakness, as the overbought technical condition haunts the market a little,
especially when war news becomes stale. With the
promising to divulge more specific intelligence to UN weapons inspectors on the
Iraqi weapons hunt, we would suspect that the war track will not be a back page
story for long. Today the focus of the gold market might shift a little, with
the monthly
unemployment report to be released this morning.
SILVER: The silver market is also lacking in
positive momentum and without “war” leadership from gold, silver could sag under
the weight of the macro economic outlook if the outlook turns negative. In other
words, silver might need to see a non-farm payroll increase of at least +30,000
just to keep the deflationary sellers away from the silver market. Near term
support in silver should come in at $4.78.
PLATINUM: Short term technicals are not
quite in a classic sell signal but it did fall back and fill an initial gap
higher trade yesterday. We also have to think that the payrolls report will be
critical to platinum as it has a tendency to track the macro economic case. Â
COPPER: While we didn’t expect copper to
rise as sharp as it did early this week, under the right conditions today,
copper could soar. With a German Factory orders release coming in this morning
much stronger than expected, US stocks mounting an impressive rally yesterday
and the prospect for a decent US payroll report, copper might be able to catch
yet another wave of buying. However, we just aren’t interested in buying an
industrial commodity nearly 600 points off the December low, without seeing a
much better attitude toward recovery.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE -26,
HEAT -100, UNGA
-125 –Â The stock market took the headline from the UN weapons inspectors and
the White House, “that no smoking gun was found in Iraq” as a sign that war
might be averted, but the energy complex took the opposite view. With the White
House suggesting that they have proof that Iraq has hidden weapons, the pressure
for the US to turn over that evidence will increase dramatically.
NATURAL GAS
The NWS 6
to 10 day forecasts called for a mix of warm and cold with the magnitude of the
cold downgraded from the beginning of the week. However, temps are still
expected to be low enough to provide some support to natural gas prices.