Mixed Opening
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS
-4 — The downside probe in the early action this morning evidently manifests
the view that the economic numbers this week will either show an improving
economy. The downside action could also be indicative of an economy that isn’t
faltering as much as the bull camp would like. One thing is for certain, the
flow of economic information this week, looks to be enough for the market to get
a better grip on where the economy is headed.
STOCK INDICES
OVERNIGHT
CHANGE toÂ
AM
S&P
+200, NIKKEI +171,
FTSE -26 –Â The stock market continues to show signs that favor the
bull camp. However, some of the recent gains have come because economic numbers
weren’t as bad as expected and not because investors think conditions are
conducive to expanding corporate profits. Therefore, with the stock market
reaching some of the highest levels since the August highs, the time is near for
the economy to actually show signs of tangible recovery.
FOREIGN EXCHANGE
DOLLAR: The Dollar rose above a critical pivot point in the overnight
action. In fact, the Dollar has apparently moved back into the old four-month
consolidation pattern with the gains overnight. Economic information out of the
Euro zone continues to be uninteresting and that has allowed the Dollar to
continue to mount step-wise gains. We also have to think that early economic
information from the
this week will help foster additional Dollar gains. It is also possible that
pre-holiday euphoria gives the Dollar An added lift.
It almost seems like the Dollar needs all quiet on the international front in
order to sustain upside price action. Next upside targeting in the December
Dollar Index comes in at 106.96. However, we see no reason for the Dollar to
halt the current run until the 107.50 level is regained.
EURO: While inflation readings from
overnight, make it easier for the ECB to cut interest
rates, the Euro might be adversely impacted by the fear of deflation. Given that
Bavarian CPI declined by .4%, one can hardly discount the chance of deflation in
Therefore, until the Euro zone posts a countervailing economic reading, or the
ECB gives some hint of a rate cut, the Euro looks to slide. In fact, given the
chart breakdown in the Euro, the next downside objective in the Euro is seen
down at 98.72.
YEN: The BOJ is suggesting that a lower Yen
actually helps the economy but that the BOJ should be careful in its policy
toward a weaker Yen. The Japanese trade surplus readings overnight were
countervailed by the 7th straight decline in October department store sales. We
think the Yen finds support above 81.30 but could see temporary probes below
80.99.Â
SWISS: Until the Swiss washes out to 67.00
we suspect that more selling will be seen. Unless the
were to come through the upcoming reports, with a
clear tilt toward recovery, we see no need for the Swiss to fall all the way
down to the October lows around 66.00.
POUND: It is clear that the Dollar is making
a comeback and while the
economy is strong enough to support its currency, the fact that the Pound was
the most overbought against the Dollar, means it should suffer the most in an
initial liquidation. Therefore, the Pound could easily slide back down to the
155.00 level.
CANADIAN: From the early overnight action,
it is clear that the Canadian is poised for a return to the November highs,
especially since the correlation to the Dollar is positive. Seeing a trade back
above 63.49 early today could spark long-term short covering.
METALS
OVERNIGHT CHANGE to
4:15 AM
GLD
-1.20,
SLV -2.8, PLAT +6.10;
London Gold Fix $319.50, +$.70;
LME Copper Warehouse stks
869,425 tons, +5,950 tons;Â Comex
Gold stocks 1.99 ml, Unchanged; COMEX Silver
stocks 107.5 ml oz, unchanged; OVERNIGHT: Dollar gains seemed to
undermine gold slightly in the Asian trade
GOLD: The gold market probably comes into
the week with a spec long position of 82,000 to 85,000 contracts. We suspect
that since gold gained roughly $1 above the levels posted when the COT report
was measured last Tuesday, that means the sizable
spec long position held steady or expanded. However, we are not sure where gold
is going to derive its direction from this week, as the weapons inspections
probably won’t start until late in the week and it would appear that the Dollar
is starting the week out firm.
SILVER: While weakness in silver prices last
week might be disconcerting to some longs, we think the reversal should give the
bulls confidence that the long camp still controls the market. The COT report
showed only a moderately long spec position at 35,000 contracts, with the funds
and small specs holding about the same size long position. There is a flurry of
economic reports this week and that could send a message on the direction of the
economy.
PLATINUM: The platinum market was a little
weaker in the
market and the direction of the world equities markets isn’t lending much to the
overall direction of platinum prices. Like silver, platinum will probably
continue to see the threat of liquidation and a re-test of chart support down at
$586.6 but we also suspect that platinum is tight enough to ward off sustained
selling pressure. The COT report showed a moderately long spec position for a
market with low participation and that could leave prices vulnerable this week.Â
Â
COPPER: Since copper was already showing a
net spec long of 30,000 contracts and then rallied nearly 200 points we suspect
the long position is burdensome to prices. Copper is also somewhat vulnerable if
the impact off the world equity markets doesn’t remain positive. Some traders
are suggesting that the small specs are either out of fresh buying fuel, or they
think copper prices above 73.00 cents are a little expensive.
CRUDE COMPLEX
OVERNIGHT
CHG toÂ
AM
CRUDE
+28, HEAT +91,
UNGA +63 –Â At least two OPEC members have suggested in the last 5
days, that overproduction isn’t major problem and that tempers the support off
the compliance issue. With the OPEC basket price sitting comfortably inside the
$22 to $28 banding range ($24.81 late last week) those discounting the need for
quota enforcement, have a good argument.
NATURAL GAS
For
Natural gas to have made a 1 bcf change in the weekly inventory report, out to
be a bullish development, it is clear that the market has a bullish bias.
Furthermore, with the weekly COT report showing a net spec long of 25,000
contracts, the natural gas market is a little long, but not overly long.