Markets Look To Weaker Open
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS
+15 — The overnight action has the bonds forging another new high for the move
and that would suggest a further run up into the September and October
consolidation. With news from the corporate world, adding to macro economic
concerns already in place, the bonds look to get consistent long interest. We do
have a couple Fed survey reports this morning and one has to expect that they
will add to the upside momentum.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P -20, NIKKEI
-229, FTSE -33Â — This feels like one of
those days where it’s too obvious to be short. However, the negative spin seen
yesterday is being given added life by negative Disney guidance. The Disney news
simply adds to the bearish momentum seen since the Fed move earlier this week.
FOREIGN EXCHANGE
DOLLAR: Since the Dollar fell on a 50 basis point rate cut and US
stocks are looking very weak today one would have to think that little stands in
the way of a trade below the July lows. In fact, the trade is behaving like the
Dollar is about to resume a long-term historical adjustment that might not
culminate until 104.00. Even with weak German and Euro numbers this morning the
trade continues to dump Dollars. Some traders have suggested that Peace with
means that some flight to quality longs in the Dollar are exiting looking for
higher rates of return in the
and that is probably true. Since we can’t say anything positive about the stock
market and the Dollar has violated a critical downside chart point in the early
going today we expect selling to dominate the Dollar.Â
EURO: It would appear that the Euro is going
to breakout to the upside even in the face of soft German output readings and a
softer Euro zone leading indicator reading. Therefore, the trade has confirmed
that interest rate differentials are the driving force of the trade. First
resistance is 101.29 and then again up at 101.90. The German numbers were
significantly below expectations but the trade almost totally ignored the
readings, a sign of more big gains in the Euro.
YEN: A gap up trade in the Yen comes
compliments of concerns toward the
and Japanese economies. Now that economic fear has returned, the Yen could be
benefiting from repatriation but the Japanese economy recently posted favorable
auto sales numbers and that might help the Japanese economy ride through a
slower than expected US recovery process. The Yen appears ready to run to new
highs for the move.
SWISS: There is certainly some anxiety in
the marketplace this morning and that benefits the Swiss. Furthermore, because
Euro zone numbers have been slack that could give the Swiss an added lift. We
are concerned that the Swiss has gone too far to fast this week and therefore
the
stock market will have to be under aggressive pressure to get to the July highs.
POUND: The Pound is the prime currency with
apparently the best economy and the most attractive yield structure. Therefore,
a run to 160 is in the cards and possibly to 161.
CANADIAN: Things might be getting a little
too sloppy south of the border for the Canadian, especially given its overbought
status. A trade below 63.90 could spark stop loss selling and an even bigger
washout. Longs should stay long but should purchase some put coverage.
METALS
OVERNIGHT CHANGE to
4:15 AM
GLD
+2.20,
SLV +4.0, PLAT +1.50;
Gold Fix $322.55, +2.85; LME Copper
Warehouse stks 858,575 tons, -325 tons;Â Comex
Gold stocks 1.994, Unchanged; COMEX Silver
stocks 107.1 ml oz, -2,984 oz; OVERNIGHT: Light spec buying overnight
was seen without a solid market focus.
GOLD: The technical action in gold is
impressive, even if the market doesn’t have a specific driving force. Certainly,
economic concern is part of the strength in gold, but one could also point to
weakness in the Dollar and possibly even war concerns, as part of the bull
picture in gold. In July when the Dollar appeared to be breaking out to the
downside and the stock market was under attack, December gold managed a rise to
$328.5, or another $6 above current levels.
SILVER: A big gap up in the May silver
yesterday, should foster longer term technical stop loss buying today. It is
very impressive that silver is managing equal gains to the gold market but it is
pretty clear that silver prices are rising off financial anxiety and not because
of a growing focus on the tightness in silver fundamentals. Therefore, silver
should continue to rise at the expense of the equity market.
PLATINUM: Despite the slack action in the
stock market, platinum appears to be catching a lift from gold and silver. In
other words, some traders are looking for flight to quality investments so why
not buy the precious metal with the tightest fundamental picture and that is
platinum. Heavy technical resistance in January platinum is seen at $586.8.Â
COPPER: The overdone status in copper prices
was exposed at the same time that doubt on the global recovery surfaced and that
is a bad combination. Shanghai copper stocks declined by 680 tons to 119,244
tons, which is a smaller decline than has been consistently posted over the last
couple of months. China copper futures ended the session largely unchanged with
London closing weaker.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +1,
HEAT +5, UNGA
+56 –Â As expected, the energy complex could hardly pull up away from the recent
lows even with the President going pretty aggressively on Iraq in a Press
conference just prior to the energy market close Thursday. The fact that the
market is seeing evidence of rising OPEC supply, rising Iraqi exports and the
chance for the passage of the UN resolution today, (10:00 eastern time?) means
that few longs are interested in standing in front of the recent liquidation.
NATURAL GAS
The fact
that the natural gas market started the drawdown season with the inventory
decline yesterday, should provide a little support to natural gas prices, which
are generally being pressured by the regular complex. With the US inventories
showing a minor annual deficit of 7 bcf and the
Secretary of Energy calling for a normal (or colder than the last two years)
winter, we suspect that natural gas will try to find support soon.