Futures Suggest A Positive Open

OVERNIGHT CHANGE to 4:15 AM: BONDS +0 — The consumer confidence readings were
certainly weak enough Tuesday to rekindle the idea that the US economy could be
falling back into a full-blown recession. Therefore, we suspect that a number of
shorts scrambled out of position Tuesday morning. However, we also think that
some fresh buyers moved into bonds, given the apparent severity of the decline
in confidence.

STOCK INDICES

OVERNIGHT CHANGE to 4:15 AM: S&P -240,
NIKKEI +47, FTSE +26
— The stock market remains
vulnerable from the macroeconomic blow leveled by the confidence readings on
Tuesday. While the stock market garnered its bullish October momentum off
favorable earnings reports, there is still a strong need to have credible hope
for sustained recovery to keep the bull trend alive. Therefore, with the
quarterly earnings reports winding down and regularly scheduled reports coming
in soft, the bulls might have to have some ultra-strong earnings readings just
to wade through the monthly payroll report Friday without significant damage to
stock prices.

FOREIGN EXCHANGE

DOLLAR: It would appear that the dollar avoided an attack yesterday, despite
some of the worst numbers released anywhere in the world for at least the last
five
months. Furthermore, the dollar is higher again today, despite the UK putting it
in the face of the US with a decent consumer confidence reading in October.
Maybe the market is singly focused on a rate cut by the US Fed and is unwilling
to doubt the recovery view interjected into the markets over the last three
weeks. With the dollar now standing at the bottom of the last four months’
consolidation pattern, a major crossroads is ahead. We have to think that the
dollar is in danger of breaking out of the consolidation, given the upcoming
slate of information and the proximity to levels on the charts that might spark
stop loss selling. However, bulls might consider buying a November dollar Index
107 call for 59 ticks instead of being long futures for the coming three
sessions. Shorts have to reduce risk given how low in the range the dollar is
trading. Sell 1 December dollar at the market and buy 1 November 108 call as a
safety valve for the coming three sessions.

EURO: With a number of European forecasting services moving to drop US payroll
forecasts, the euro should generally remain supported. However, the euro is
pretty close to overhead resistance and will need to see the dollar fail to
mount a drive into the upper 50% of the last four months’ consolidation zone. Once
again, the euro only rallies when the dollar paves the way.

YEN: The yen isn’t getting that much support from the announcement of a bad loan
program, and it would appear that the trend in the yen is still down regardless
of the October bounce. An 11% decline in monthly crude oil imports compared to
last year highlights the ongoing slack pace of the domestic economy and with
the US numbers creating a new wave of deflation concerns in Japan, we suspect
that the yen is vulnerable to a large decline in the coming three sessions. We
wouldn’t be surprised to see the yen fall to 80.56 in the coming three sessions.

SWISS: The September KOF survey declined from the prior month’s reading and that
could leave the Swiss vulnerable unless the dollar manages to fail at near-term
support. Trend line resistance comes in today at 67.54, and it would appear that
the Swiss doesn’t have the power to overcome resistance.

POUND: As mentioned before, the UK posted some positive confidence readings and
that stands in stark contrast to the US figures. The pound is rather expensive
in the near-term trading range but has a better fundamental outlook than either
the US or the euro zone. We would prefer to buy the pound on a correction to
154.50, rather than sell it up around 155.80.

CANADIAN: The Canadian is possibly poised to
take some profits. A decline below 63.70 could result in a decline to 63.59
under normal conditions, but considering the slate of information due out Friday
morning, fresh longs might be advised to lower entry orders to at least 63.30.

METALS

OVERNIGHT CHANGE to 4:15 AM: GLD -0.70, SLV
-1.0, PLAT +5.80;
London Gold Fix $316.80,
+$.45; LME Copper Warehouse stks 863,800 tns, -275 tns;
Comex Gold stocks 1.99,
+199,443 oz; COMEX Silver stocks 107.9 ml oz, -1,839,962 oz; OVERNIGHT: Another
minor loss in Asian gold, but Asia isn’t tracking US action.

GOLD: The fact that gold managed to rise in the face of a steady
dollar is
impressive, but it is clear that the longs are being drawn to gold because of
economic anxiety. Looking forward to the economic information for the rest of
the week, and there could be more gains in store. Given that consumer sentiment
drop Tuesday, one would have to think that the monthly payroll report Friday will
support gold prices further.

SILVER: At least the recent pattern of COMEX silver stocks increases reversed,
with a rather moderate overnight decline of 1.8 million ounces. We suspect that
gold will continue to support silver, especially with silver breaking out above
a long-term down trend channel resistance line on Tuesday. With May silver
almost 18 cents above the recent low, the implementation of the short futures
long multiple call “investment” play is highly recommended.

PLATINUM: With platinum showing a new high for the move Tuesday, it could take
better equity market action to justify a continuation into new contract highs. A
failure below $585 in the January contract might disappoint longs and spark stop
loss selling.

COPPER: As expected, copper prices sagged due to an overbought condition and
because macroeconomic concerns returned with the ultra-soft sentiment readings
Tuesday. The London market overnight showed some recovery action attributed to
short covering. Therefore, the copper probably doesn’t need to fully correct to
69.20 support as it might have appeared Tuesday.

CRUDE COMPLEX

OVERNIGHT CHG to 4:15 AM: CRUDE +17, HEAT
+79, UNGA +80 — For a change, unleaded led
the downside break Tuesday and that really shows the bulls’ case is weakened.
Supposedly, unleaded gas was simply taking some premium back out of play that
was previously interjected off a Texas refinery shutdown.

NATURAL GAS

The 6 to 10 day forecast called for temperatures east of the Mississippi to be
below normal and that should help to firm up support in the December natural gas
around the $4.20 level. A longer-term down trend channel support line comes in
today at $4.13, while a trade back above $4.37 might spark stop loss buying.