Futures Suggest A Weaker Open On The Indices

OVERNIGHT CHANGE to 4:15 AM: BONDS +5 — As we suggested in
yesterday’s commentary, a
big break to 109-29 was to be expected as the euphoria from the equity market
forced an all-out technical washout. The fact that the economic reports were
interpreted as bearish when they were bullish highlights the panic liquidation
effort. However, we would have to think that bond prices will attempt to
consolidate around the 110-00, unless the heavy slate of corporate earnings
comes in so positive today that stocks resume the climb in earnest.

STOCK INDICES

OVERNIGHT CHANGE to 4:15 AM: S&P -540, NIKKEI +48,
FTSE -21 — The optimism spinning
out of the equity market for the last four sessions is thrown into question
today by Intel earnings and by the dismal forward guidance being offered by
Intel. Supposedly, the CEO from Intel suggested that recovery in IT spending is
still not taking place and may not take place until well into the coming year.
However, one has to be careful assuming that Intel is leading indicator for an
overall economic recovery.

FOREIGN EXCHANGE

DOLLAR: We suspect that the dollar is going to have a little more trouble
forging gains unless the US equity market and earnings surprise with a much
better performance than is expected today. There is a flurry of earnings reports
due out today and after the close today and that probably sets more of a tone
than does the single economic report scheduled today. Since the dollar hardly
rose back above the middle of the consolidation pattern, the dollar probably
won’t slide if the US stock market softens. Thus far, the Forex markets are not
buying into the idea from the US stock market, that the US economy, is poised to
recover. However, because there is no clear cut indication on the direction of
economies outside the US, the sideways currency action continues. The path of
least resistance in the dollar is down with a trade down to the 107.07 pivot
point possible in the December dollar.

EURO: With the euro close to technical support of 97.65, there is a good chance
of a weak profit-taking bounce. However, with euro zone inflation readings
declining in the core component, there might be a slight amount of support seen
in the euro. If the US stock market falls back by more than 700 to 800 points in
the S&P, that could end up giving the euro a late lift.

YEN: Favorable factory orders and industrial output figures from Japan and the
strong reversal overnight in the yen, suggest that the selling binge in the yen
might have ended. Certainly, the Japanese economy is given a lift by the
expectation that things in the US are improving. The BOJ suggested that the
recent decline in the yen was sparked by the sharp rise in stock prices and not
by some new financial issue. Therefore, we expect a follow through gain in
addition to bounce overnight. Near-term targeting in the December yen is 81.20.

SWISS: Still no return to economic anxiety, even if the stock market is weaker
this morning and that means the Swiss will remain near chart support. A trade
below 66.82 today could signal a resumption of the downward probe. However, we
suspect a minor bounce in the Swiss to run out of gas around 67.16.

POUND: The trade takes the UK payroll readings overnight as a slight positive.
However, the magnitude of the improvement isn’t great enough to expect the
pound
to climb much against a chart with multiple resistance zones just above the
current trade.

CANADIAN: As the optimism toward world equities levels out, it would appear that
the Canadian will also lose its recent upside momentum. Near-term downside
targeting in the Canadian is 62.72.

METALS

OVERNIGHT CHANGE to 4:15 AM: GLD +1.00, SLV
-0.3, PLAT -5.40; London Gold Fix $314.50,
-$3.50; LME Copper Warehouse stks 860,000 tns, -125 tns;
Comex Gold stocks 1.882,
Unchanged; COMEX Silver stocks 107.4 ml oz, Unchanged; OVERNIGHT: Helped by short
covering, gold rose in Asia off earnings concerns.

GOLD: Given the overnight dialogue and the action yesterday, it would seem that
gold is still tied to the ebb and flow of equity market developments.
Supposedly, Asian traders were light buyers overnight because of poor earnings
from Intel, but buying off that issue should be limited, as Motorola managed to
post the first profit in about two years. Fortunately for gold, the yen recovered
overnight or the Asian trade could have joined the US gold sellers and punished
gold further.

SILVER: As mentioned in the gold commentary, it would appear that silver is seeing
a little lift from the hope that better economic times are ahead which in turn
might spark a return of high tech and communication demand for silver. However,
with the equity market softer today and Intel reporting weaker than expected
earnings and cutting forward guidance, silver might fade toward near-term
support of $4.28 on the charts. Countervailing the Intel news for silver were
reports that Motorola made a net profit after an extended period of red ink.

PLATINUM: Maybe platinum anticipated the big run in stocks over the last
four days and is now without fresh support. Therefore, platinum is probably set
for a minor correction to $570 basis the January. However, at any time platinum
could resume the climb.

COPPER: In retrospect, copper didn’t respond as favorably as one might have
expected given the ultra-strong recovery in equity prices. The head of a mining
concern in Peru suggested that new labor laws and rising taxes discourage
companies from entering new copper projects and that could result in an eventual
downtrend in total output from that country. With today’s equity market action
weaker and London and Asian markets impacted negatively by that action, we
suspect that the US session will be weak today.

CRUDE COMPLEX

OVERNIGHT CHG to 4:15 AM: CRUDE -4, HEAT
+37, UNGA +51 — The energy complex is
losing its zing because the war threat is being temporarily diffused. With the
UN picking up the Iraqi resolution debate, we are sure the doves in Congress,
France and Germany are going to mount an effort to prevent the US from acting
before all diplomatic efforts are exhausted.

NATURAL GAS

As mentioned in the regular energy commentary, the next tropical storm was basically
headed toward the middle of the Gulf of Mexico which means that US landfall is
highly unpredictable, but the odds of strengthening would seem to be high. The
natural gas trade is certainly taking note of improved macroeconomic conditions
and to the recent slate of cold temps as that could conspire to send prices into
an early winter rally.