Pre-open Green For First Of Fourth Quarter
INTEREST RATES
OVERNIGHT
CHANGE to 4:15 AM:
BONDS -4
— Unless
expectations for the economic reports today are much too weak for reality, the
bonds should be poised for more gains. With bonds coming into the
session a full point below the high-posted Monday, one can’t say that near-term
technicals are too overbought to get long into the
reports this morning. An added incentive for the bull camp today is the
Challenger layoff report, which promises to call attention to the jobs sector.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM:
S&P
+40,
NIKKEI -221, FTSE +3.8 — December S&P: About the best thing the bull camp has going
for itself today is that expectations for the sweep of reports are perhaps
overly negative. Initial expectations for the ISM were for a minor increase, but
as of the last 48 hours, those expectations have deteriorated into a
contractionary expectation. While the Challenger
Layoff report isn’t usually given that much consideration, it could be given
special attention this week, as concerns are surfacing that employment is about
to soften.
FOREIGN EXCHANGE
DOLLAR: Unless the
can pull a rabbit out of its hat today, the economic report slate should provide
more downside in the dollar. Certainly soft consumer sentiment numbers from
France
temper the interest in selling the dollar against the euro, but in the end, the
dollar continues to fight an uphill battle. If by chance the economic pundits
manage to glean from the numbers, the opinion that the
employment condition is starting to weaken, the dollar should make quick work of
declining to
consolidation support of 106.25. Even if the negative views toward
the
economy are overstated, it doesn’t change the view that money is better off
outside of the
If the numbers surprise, that could allow the December dollar to rise to 107.90
and that would be an excellent sell in our book.
EURO:
French consumer sentiment readings reached a five-month low this morning, and that
starts the euro out on uneven footing, but still with a positive tilt. In
reality, the euro has been coiling for almost four months and the coiling looks to
be narrowing in for a major decision. It would seem that the ECB talked down the
idea of a near-term rate cut (Papademos of the ECB
suggested this morning that monetary policy is appropriate for now) and that
more than anything takes away the upside potential in the euro. Buy a break in
the December euro to 98.20 if the
numbers are as expected or weaker than expected.
YEN: The
interpretation of the Tankan survey overnight
highlights the prevailing negative economic sentiment of the press, as they
suggested that the report was less negative than prior reports, instead of
playing up the idea that the economy is showing signs of recovering. While the
manufacturing index remained negative at -14, it did improve from the prior
month’s reading of -18. Recent gains in the yen seem to beg for a sale in the
currency, especially if US economic concerns rise sharply in the coming four
sessions. There is certainly enough
news in the next four sessions to become very concerned for the future of the
Japanese export business. We also have to think that the West Coast shipping
crisis is something that could weigh on the yen. Sell a rally to 82.38, looking
for 81.10
SWISS:
Unless the
numbers surprise with a much better than expected sweep, we have to think that
the Swiss is prepared to rise toward the September highs in the coming four
sessions.
POUND:
Softer UK PMI readings from the manufacturing sector were much lower than
expected and that serves to temper the upside momentum in the pound. However, we
think that the trade will forget about the
readings once the first set of US numbers are seen. Before the close Friday we
expect to see new contract highs in the pound!
CANADIAN:
One would have thought that the numbers released Monday would have given the
Canadian a huge lift, but instead a 1.5% increase in industrial production and a
+0.4% gain in GDP is simply discounted. It has to be that the
condition is so concerning that the Canadian economy isn’t getting credit for
its standing. We would like to buy the Canadian, but the fear of a dollar debacle
makes risk and reward unfavorable.
METALS
OVERNIGHT CHANGE to 4:15 AM: GLD
-1.00, SLV +0.7, PLAT
+8.40; London Gold Fix $322.60, +$.20; LME Copper
Warehouse
stks
870,375 tns, -1,700 tns;
Comex
Gold stocks 1.892, Unchanged; COMEX Silver stocks 107.5 ml oz, +95,261; OVERNIGHT:
Profit-taking seen in Asia despite ongoing stock market
concerns.
GOLD: The
gold market managed to pass through the end-of-quarter liquidation potential
without a profit-taking binge and that is probably a function of the continued
fear spinning out of the equity market. With bond yields at 44-year lows and the
prospect of global rate cuts increasing, there is certainly cause for holding
flight-to-quality investments. A number of traders remain
bullishly biased, but the anticipation of war with Iraq is probably not
enough to fuel prices higher on top of the existing overly long position.
SILVER:
Trendline support in the December silver is 449.7, but we have to think that
silver could be sloppy today, as gold isn’t providing as much support as it did
last week. Reports that Mexican silver production fell by 22% in July is a
supportive issue because that has been a consistent development, and the overall
output from
is significant at 204,450 kg. Simply returning to the bottom of the August and
September uptrend channel would mean that December silver rises to 460.4.
PLATINUM:
Just when it appeared that platinum would fail at support it has managed an
impressive reversal and partial gap higher trade. It has to be that the muted
supply flow from
is combining with that impressive ongoing demand from the auto sector to
overcome the slack jewelry demand function. Increased volume and open interest
patterns in the last five sessions suggests revived long interest in platinum.
Resistance is now $568.
COPPER:
The bull can claim that the copper managed to rebound sharply away from a fresh
contract low, while the bears suggest that fundamentals continue to sink wounding
future demand. A private brokerage concern called for more producers to cut
production and that could be why the market partially rejected the contract low.
We also have to note that during the demand rupturing report flow of the last
three weeks LME copper stocks have continued to decline.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +4,
HEAT +33, UNGA
+76 — The energy complex once again weathered a number of bearish developments to
finish firmer. For instance, reports that OPEC is currently overproducing by
2.39 million barrels per day were basically ignored.
NATURAL GAS
The storm
track continues to head directly for areas of the Gulf that will impact natural
gas prices the most. Most recent forecasts call for
the storm to come on shore early Thursday morning, leaving the market in
position to respond bullishly for at least another
two full sessions.