Looking Toward A Lower Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
+15 — One might think that the rise in the stock market has improved sentiment
toward the economy, but the numbers this morning might not show that, as the
stock market didn’t bottom until Oct. 10. In other words, poor stock market
action in the first 10 days of October could have cancelled out most of the
favorable euphoria generated by the stock market action in the second half of
October. Therefore, the numbers this morning should be a classic example of how
the economy can remain weak, but the performance of the stock market is able to
mask part of the softness.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
-320, NIKKEI -48, FTSE
-64 — The stock market is in need of a fresh stimulus, as the corporate
earnings reports seem to have lost their ability to propel stock prices
consistently higher. However, the stock market might be in a poor position, from
a timing perspective, to forge a move higher without a correction in the near
term. The consumer confidence report this morning is
a conundrum, as the first seven trading days of October had stock prices sliding
aggressively, while the second half of the month began to show optimism.
FOREIGN EXCHANGE
DOLLAR: Just as the consumer confidence numbers look to have a
significant influence on the bonds and
stock market, they could also have a significant impact on the direction of the
dollar. While the stock market thinks it could rally off a weak set of numbers,
we would have to think that a weak confidence reading would initially undermine
the dollar. The magnitude of the dollar slide off its recent highs suggests that
the market is negatively biased toward the dollar and that without a distinct
change in attitude off the numbers, the dollar should weaken. However, as we
mentioned in other comments this morning, there is a chance that the confidence
numbers could be better than expected given the recovery in stock prices toward
the end of the month. We certainly see no reason for the dollar to fall below
consolidation support of 107.07 unless the numbers are strong and the trade
suddenly thinks that the US Fed will not be cutting rates. However, if the
numbers are so strong that no rate cut is expected, then the optimism toward the
economy should step in and support the dollar. In short, be a buyer of the
December dollar today on a decline to 107.10.
EURO: Supposedly, European markets were
lower because they seemed to sense a slight increase in the chance for war and
because they suspect another negative reading from US economic reports this
morning. Therefore, it is clear that the euro is seeing the benefits of
negatives outside its borders and is not seeing direct buying because the euro
zone offers attractive opportunities. There would seem to be a small portion of
the trade, thinking that an ECB rate cut is possible, and that would be a cause
for money to flow toward the euro. Without some surprise rate cut hints from the
ECB or something dramatically negative from the
we don’t see the euro climbing above 98.76 resistance.
YEN: News overnight that Japanese industrial
production rose for the third straight month fuels the yen higher, especially
since the
equity market and the US dollar are soft. Furthermore, the BOJ supposedly
dropped a hint that some easing might be in the cards to insure that the
recovery moves forward. As we have suggested a number of times, money will flow
to any area that appears to be poised to stimulate. Near-term upside targeting
in the yen comes in at 81.39.
SWISS: The downtrend channel in the Swiss
remains in place, but more short covering is to be expected with resistance now
seen at 67.70. Recent economic numbers hardly justify an upside breakout in the
Swiss.
POUND: Favorable lending figures in
September bolster the leadership role in the pound for the near term. We just
don’t see the pound managing to rise above thick overhead resistance at 155.88.
CANADIAN: There would appear to be no
stopping the Canadian, especially since the recent weakness in the
equity market hasn’t seemed to negatively impact the Canadian. In the past, the
Canadian was easily undermined and it appears to have changed its past patterns.
Until the December trades above 64.32, more upside is expected. Late in the
week, the risk to longs will rise off upcoming
payroll reports.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +1.20, SLV
+3.8, PLAT +2.70;
London Gold Fix $316.35, +$3.05; LME Copper
Warehouse
stks
864,075 tns, -1,275 tns; Comex
Gold stocks 1.797, +3,504 oz; COMEX Silver
stocks 109.8 ml oz, +923,756 oz; OVERNIGHT: It would appear that
European gold was stronger than Asian gol
GOLD: A big break in the dollar seemed to
boost gold yesterday, but some traders might attach some of the gold gains to
the weak action in the stock market. One might also suggest that slightly higher
chances of war lifted gold. In any case, none of the bullish attributes seems to
be that strong or dominating.
SILVER: A critical pivot point is seen at
4.45 today and with favorable leadership seen from gold, it is possible that
December silver forges a rally to $4.50. We have to think that silver prices
down around $4.30 are deflated prices factoring a double-dip recession.
Furthermore, if recovery becomes a generally accepted view, silver prices might
settle into a $4.50 to $4.70 trading range.
PLATINUM: It remains clear that the platinum
market is tightly fixed on the daily direction of the stock market. Therefore,
the consumer confidence readings today could be critical. The platinum market
could benefit from the hope for a rate cut, but only if stocks adopt a rate cut
posture.
COPPER: Grupo
showed third quarter copper production to have declined versus last year, while
their first nine months of 2002 also showed markedly less copper production and
that is supportive to copper prices. The market was already aware of the
potential that major producers were paring production to support prices and the
Grupo news simply confirms what the market already
knows. The recent high in copper will restrain prices in the coming four
sessions as US economic numbers look to undermine recent optimism.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +5,
HEAT +29, UNGA
+80 — The energy complex saw only muted support from the increased tensions
connected with the difficulties unfolding in the UN resolution process.
Tempering positive price action was additional supply news, showing increased
flow from key OPEC members.
NATURAL GAS
The
upcoming cold weather pattern sparked short covering in natural gas, as the cold
winter players are streaming into the long side of
the market. While prices are sharply above the levels seen just two months ago,
it would seem that the buyers will not be shy in boosting prices further.