HP Earnings Push Market To Open Higher
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS +2 — The stock market gains are
evidently causing bond players to discount soft regularly scheduled economic
reports. Comments from the Fed yesterday seem to take the form of a “pep talk”
with the Fed calling the risk of deflation remote and suggesting that 3% to 3.5%
growth in 2003 was possible. The Fed also suggested that they would be watching
holiday sales closely and when that is combined with the claims that the Fed
isn’t out of ammunition, bond longs are discouraged.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P +260, NIKKEI
+208, FTSE +83 — The positive impact of the
HP/Compaq earnings gives the market a lift and in effect brings the markets
right back into some very critical pricing. As mentioned early this week, a
number of long-term technical pivot points are being encountered, and that could
cause the funds to throw some money at the market. With the funds documented to
be short some 34,000 S&P contracts and short 4,500 Dow futures contracts (in the
last COT report), there is certainly short covering fuel for a breakout rally.
FOREIGN EXCHANGE
DOLLAR: The dollar rise off the November low initially appeared to
come off reduced war threats, but subsequently it would seem that the
economy is being given more credit. At the same time that the
stock market was showing an improved performance, the Euro zone economic stats
turned off soft and that more than likely resulted in a short-covering rally. We
still get the sense that the dollar is going to run into significant overhead
resistance around 106 in the December and 107.10 in the March contract. With the
dollar not really responding to the strong rally in stocks and the favorable
comments from the US Fed yesterday, the trade isn’t apparently primed to make
fresh buys in the dollar. In the end, for the dollar to rise through three
months of consolidation resistance, it will have to show investors the money. In
other words, the
economy has to show recovery potential in its numbers! The numbers today might
be a key pivot point, as the numbers are generally expected to be soft!
EURO: We suspect that the euro will be
capable of holding support around psychologically important parity levels. With
leading indicators expected to come in down -0.1% to -0.2% the euro should see
some support early. However, if the
stock market mounts another strong rally, that could siphon some money away from
the euro. However, since it would appear that the market has managed a
consolidation around 100.00, that it will not succumb to a technical washout. If
any of the
numbers were to come in positive today that could be just enough to force a
temporary capitulation down toward 99.13, which is just above the middle of the
summer consolidation zone.
YEN: If the
stock market can continue to rise that might help the yen overcome the Japanese
ratings downgrade or at least distract the sellers in the yen. We expect support
at 81.70 to hold.
SWISS: Critical support is seen at 67.95
today and short-term technicals remain in a sell mode.
POUND: The
posted positive retail sales for October but appears to have some sectors of
Industrial output slackening in November. Order books and export projections for
November show some weakness and that might serve to take some of the pedals off
the pound bloom. A trade below 156.74 today, could mean a slide to 155.70.
CANADIAN: Short-term technicals are now in a
buy mode in the Canadian and the US Dollar at least has a chance to turn the
tide on the sellers. Therefore, the Canadian has a bottoming chance. Buy Dec at
62.90 and risk the trade to 62.60.
METALS
GOLD: Short-term technicals remain in a sell
mode and it would appear that even a minor rise in the dollar was enough to
spark some light selling in gold. While February gold has managed a pattern of
higher lows since the Nov. 6 low, that pattern could be violated on a trade back
below $318. With the Conference Boards leading indicator report today, there
could be a slight increase in financial market anxiety on a weak number or a
vast improvement in sentiment on a strong number.
SILVER: Like gold, the silver technicals are
posting near-term sell signals and the overnight action would seem to suggest a
test of lower levels ahead. Seeing May silver fall below 456 could mean a dip
down into a 455 to 451 range. Since silver was not as overbought as gold, it
should not be threatened with aggressive stop-loss selling like gold could be.
PLATINUM: It might be a critical signal that
the platinum market isn’t getting a direct loft off higher equity market action
as that speaks of an overbought or exhausted long camp. The rise and failure to
hold above $600 means that current fundamentals are unable to justify platinum
prices close to $600. A correction to 571 is possible.
COPPER: One has to be impressed with copper
performance considering that it held most of Wednesday’s gains and has also
managed a rise above the prior day’s close in the early action today. We might
add that copper made most of its gains yesterday prior to rally in the stock
market. The Press is clearly citing a strong rise in Chinese physical demand and
that combines with the contrived production cutbacks to send copper sharply
higher.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +26,
HEAT +59, UNGA
+41 –Â Thanks to a severe warning by President Bush calling for Iraq compliance
to the UN resolution, energy markets maintain their bullish posture and could
stay firm up until the Dec. 8 deadline. Despite the government’s weekly energy
data showing strong builds in crude & distillate stocks (in contrast to the
declines seen in the API report), Bush’s comments put the markets on a
heightened war alert.
NATURAL GAS
With the
latest weather forecast calling for about 10 degrees below normal for the
Midwest & Northeast between Nov. 26 and Dec. 5, the downside in Jan nat gas
should be limited. The inventory report this week is likely to show another draw
with the range of estimates between 20 and 38 bcf.