Futures Point To a Positive Open

OVERNIGHT CHANGE to 5:11 AM: BONDS +5 — The bond market has managed to gather
itself since the low last week, partly because of the durable goods release and
partly because investors are still risk averse enough to see bonds as
attractive around their recent lows. The fact that newspapers like the
Washington Post are carrying stories calling for a rate cut before the end of
the year are also providing support to bonds, as that clearly suggests that the
US economy isn’t out of the woods yet. With last week’s productivity statements
from the Chairman of the Federal Reserve, it would not be surprising for the Fed
to cut, if the numbers continue to be soft.

STOCK INDICES

OVERNIGHT CHANGE to 5:11 AM: S&P +570, NIKKEI +31,
FTSE +80 — The stock market is
higher again this morning and is into a new upside breakout. However, the market
is waiting for a couple of critical earnings reports due out later today and that
could dramatically impact the favorable early trend. The Washington Post is
reporting the opinion that the US Federal Reserve will more than likely cut
interest rates before the end of the year and that is evidently the same spark
that supported stock prices Friday, following the sharp decline in the durable
goods report.

FOREIGN EXCHANGE

DOLLAR: As has been the case in the recent past, any country with the prospect
of seeing lower interest rates is the country whose currency sees buying
interest. While there are a number of Fed members speaking today, we are not
sure that the market will be easily discouraged from the interest rate
speculation. With the US Fed Chairman last week talking very favorably about US
productivity readings, and the US durable goods readings were extremely soft last
week, it is possible that the Washington Post article predicting a rate cut is
possible. In the meantime, the euro was undermined by another set of soft IFO
readings this morning and with the US economic report schedule empty today,
little looks to upset the early trend. Therefore, the long dollar interest
probably continues to dominate the Forex markets. Near-term resistance is seen
up at 108.95, with support seen at 107.90.

EURO: Given the soft German Ifo readings for October, we suspect that the
euro
is primed to slide to support of 96.66. The Ifo showed specific softness in the
manufacturing sector. Unless US Fed members speaking today clearly feed the US
rate cut story, we would not expect the euro to fall below near-term support of
96.66.

YEN: The optimism for the Japanese recovery certainly took a blow from the
massive decline in the US durable goods report Friday, and that seems to have
undermined the currency. Overnight favorable auto production readings were
offset by ongoing weakness in domestic retail sales in September. Once again it
is clear that Japan is totally reliant on external activity to recover. While
interest rate cuts in the US will eventually help the Japanese economy, that
does send a message that the US is still a long way from recovery and
therefore some might assume that the Japanese export market will remain weak.
However, we see no reason for the yen to fall below near-term support of 79.85.

SWISS: With sentiment focused on above normal rates of return in world equity
markets the Swiss should continue to lose ground. Near-term support in the Swiss
comes in at 66.00 and that level must be tested before data at the end of the
week turns the Swiss back up.

POUND: Near-term support in the pound comes in down at 153.66, but with
conflicting economic data seen recently from the UK, there is not a clear-cut
trend. All things held equal, we have to think that the pound sees a slight
amount of weakness in the coming sessions.

CANADIAN: The Canadian continues to consolidate recent gains, but appears to be
held back by the late August highs. Traders should probably move re-entry buy
points to 63.59, using a risk below 63.30. We have to think that the trend is up
in the Canadian, but later in the week the currency could be extremely vulnerable
to negative information flowing from US economic reports. +

METALS

OVERNIGHT CHANGE to 5:11 AM: GLD -0.40, SLV
+1.3, PLAT +2.70;
London Gold Fix $313.30,
+$1.10; LME Copper Warehouse stks 865,350 tns, +250 tns;
Comex Gold stocks 1.794,
-151,136 oz; COMEX Silver stocks 108.8 ml oz, +876,614 oz; OVERNIGHT: More stock
market gains overnight keeps gold off balance and weak.

GOLD: The slight benefit to gold off weak US economic numbers Friday loses its
impact if the US stock market is going to continue signaling recovery. Gold did
manage to bounce nearly $6 off the low last week, but most of that rise came
directly off the durable goods decline. The COT report showed the net spec
position to be 47,000 contracts long, which is a decline of 7,000 contracts over
the prior week’s reading.

SILVER: Short-term technicals have remained in a buy mode since Oct. 15,
but silver can’t seem to make $4.40 solid support. We think the economic numbers
released Friday hurt silver, which needs a much stronger demand outlook in
order to lift up away from the $4.30 to $4.40 trading range. A recent rise in COMEX warehouse stocks hinders silver, which could at any time slide to $4.30
support.

PLATINUM: It took a while, but platinum finally responded to the stock market
recovery. It would appear that platinum is capable of rising to the recent
contract high of $589 and higher if the stock market continues to help improve
economic sentiment.

COPPER: The copper market shook off the potentially damaging durable goods
report Friday and has forged yet another new high in the overnight action.
Evidently, hope for the housing sector and for overall economic recovery has
copper looking further forward than most commodity markets. As we have said a
dozen times in the last two months, the copper market has its fundamentals
cleaned up and is capable of responding to the prospect of recovery.

CRUDE COMPLEX

OVERNIGHT CHG to 5:11 AM: CRUDE -10, HEAT
+11, UNGA -42 — As we suspected last week
it would seem that the United Nations won’t even use tough language if Iraq
violates a new resolution. After 10 years of violating the old resolutions, the
UN has decided to implement a new set of resolutions without any teeth.

NATURAL GAS

The regular energy complex pulled down natural gas but with the apparent
reversal of diplomatic fortunes we doubt that natural gas will stay down. Colder
US weather is also being seen in a moderate portion of the US, with some sources
suggesting that heating degree days might start off the season stronger than at
any time in the last three winters.