Green Means Go
INTEREST RATES
OVERNIGHT
CHANGE to 4:15 AM: BONDS -10 — By the bond market regaining half of the massive
loss sustained in October, it is clear that the recovery is very much in doubt.
However, we would have to think that a move by the Fed would rekindle recovery
views and at least send bonds back down to 108-00 and possibly even 107-02. The
Fed has long said that they don’t target stock prices, but in the coming FOMC
meeting, one would have to think that the stock market strength could sway some
Fed members against a cut.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P +1040,
NIKKEI CLOSED, FTSE +104
— A gap higher trade sets a
high bar for the bull camp, especially since the opening will probably put
prices at the highest level since Sept. 17. Evidently, the market is
cheered by the Microsoft developments overnight and that joins in with the
euphoria ahead of the FOMC meeting on Wednesday to propel prices sharply
higher. A major network is even suggesting that the stock market is seeing
positive potential off the election, regardless of which party wins the
election.
FOREIGN EXCHANGE
DOLLAR: As we suggested last
week, the Forex markets were assuming the worst of two worlds. In other words,
they didn’t think the
US economy was recovering and
they didn’t think that the US Fed would cut rates in the coming meeting. In the
near term, the US stock market is going to act like everything is going to come
out good, even if that sentiment is proven wrong late in the week. We have to
think that the dollar doesn’t deserve to breakout down, but will if the stock
market is disappointed by the election and the Fed holds steady. Aggressive
traders might be lightly long the dollar, using a stop below 105.90. We have to
think that the dollar attempts to mount a recovery to 106.86 and then has a real
important pivot point!
EURO: The ECB meets after the Fed and it would seem that few analysts think that the ECB
will cut rates. However, the Forex markets are in the process of assuming the
worst for the US economy and that has directly benefited the euro. We have to
say that the economic numbers released last week showed the euro zone economy to
have a little better footing than the US, but not such that the euro deserves to
break out to the upside against the dollar. Therefore, the parity line would seem
to be resistance unless the December S&P manages to slide back below 878 in the
week ahead. Traders that are long the euro with profits should begin to
implement profit stops.
YEN: We
have to think that the yen is primed to fall unless the US stock market manages
to weave its way through the coming three sessions without a debacle. With the
Japanese markets closed due to holiday today, ranges might be muted but the bias
is for a slight decline.
SWISS: At
least for the first couple sessions this week the Swiss looks primed to fall
back into the last three months
consolidation zone. At least into Tuesday afternoon, the pressure
should be on the Swiss with a downside target of 67.52.
POUND: We
are not sure that the pound needs to fall all the way down to the bottom of the
consolidation at 154, but it should certainly head to the middle
of the channel at 154.86. The trade is largely expecting the BOE to hold steady
on rates at the end of the week and that could drag the pound down toward the
bottom of the consolidation.
CANADIAN: Evidently, developments in the US
are not going to stand in the way of an upside breakout in the Canadian.
However, traders should let the bull run until Tuesday afternoon and then either
take profits or seek protection for the mid week political and financial pivot
off the FOMC meeting. We could still see the December Canadian managing to go
off the board close to the 66.00 level.
METALS
OVERNIGHT CHANGE to
4:15 AM:
GLD -1.40, SLV -1.5,
PLAT +0.40; London Gold Fix $317.20, -1.55;
LME Copper Warehouse stks 861,325 tons,
-1,675 tons; Comex Gold stocks 1.99, -2,162 oz;
COMEX Silver stocks 107.4 ml oz,
-442,632 oz; OVERNIGHT: Gold action overnight muted by a Japanese holiday and
firmer stocks.
GOLD: The
upcoming week could bring about a major decision for gold, as gold appears to
get most of its upside off down days in the stock market. With the mid-term
elections Tuesday and the FOMC meeting Wednesday, there is certainly the
potential for a major decision for the stock market and therefore for gold. With
the weakness displayed in gold after the high Friday and the subsequent decline
in the gold today, we have to suspect that a minor technical liquidation is
unfolding.
SILVER:
Short-term technicals are in a sell mode, and that is why we strongly suggested
that long-term players get the investment play on in silver. From the recent
high of 458.5, it could be easy for May silver to correct to $4.375. Silver will
certainly track with gold, and a break in gold off less economic stress will
initially be felt by silver, but we would have to think that silver would find
support as soon as short-term technicals are balanced.
PLATINUM:
Improved economic attitudes could lend some support to platinum following its
recent weakness. However, if the economic sentiment turns out to be negative
following the Tuesday and Wednesday time frame, the platinum market could come
under significant pressure, as it is already showing signs of vulnerability. In
fact, the lower low posted last week gives the impression that platinum made a
topping formation in October.
COPPER:
The pattern in the copper market is such that few things look to get in the way
of the bull market. With both LME and Shanghai copper stocks declining and the
prospect of improving demand copper, prices appear to be rushing to re-inflate
prices. Because the copper market has the added benefit of restricted
production, it is finding it easier than most commodities to send prices soaring
in advance of actual confirmation of the economic recovery.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE -17, HEAT
-21, UNGA -35 — The last week brought a
consolidation in the energy complex despite what could have been called
generally bullish developments. This morning the energy complex is also acting
unimpressively following a shutdown of the Alaskan pipeline.
NATURAL GAS
The cold
weather lingered but we have to think that a slight warm-up ahead, combined with
ongoing sluggishness from the regular energy complex could allow the January
contract to slide toward $4.04 before finding a solid bottom. Unless the economy
caves in and all out Peace breaks out in the Middle East we would not expect to
see the January contract fall significantly below the early September lows of
$3.90