Wednesday Strength
Bullish sentiment is in the air Wednesday after
Cisco’s
(
CSCO |
Quote |
Chart |
News |
PowerRating) earnings boost is buoying the tech area.
The biotechs are mixed pre-market, with the only
negative comments coming out this morning in the financial issues.
Wednesday’s pre-opening outlook:
INTEREST RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS +5 The
bond market came under heavy fire Tuesday, because of the stock market rally and
primarily because of the threat of
lower interest rates. In this case, a rate cut causes the opposite
reaction in bonds, than many would expect, because the trade expects a higher
chance of recovery or a quicker recovery if rates are lowered than would be
expected under the status quo. Unless the Fed discourages the market with
dialogue that discounts the chance of a 25 basis point cut in the August
meeting, we see the financial markets accepting the rumored action until proven
otherwise.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
+720 NIKKEI +333 FTSE -26Â The Cisco earnings news adds to the positive momentum
seen yesterday off speculation of a
interest rate cut. Some analysts were concerned that sales projections by
Cisco still show rather slack forward conditions but we maintain that any
forward forecast is unreliable. While a massive amount of interest rate cuts
last year, failed to produce significant results, seeing a 25 basis point cut
being talked about is something that countervails the potential undertow of the
scheduled reports.
FOREIGN EXCHANGE
Dollar: As of yet the emperor
still appears to have clothes on as the world is still seeing the
economy in a positive light. The addition of the rate cut talk lifted,
prospects right along with softening numbers from outside the
Overnight
posted weaker numbers, as did the
and that fosters more Dollar gains. With the
report slate today, floating only second tier numbers the Dollar could easily
continue an upward track. However, toward the end of the week and early next
week the
numbers will begin to flow and that could serve to top the Dollar. In fact, we
would suggest that longs take profits on recent long Dollar plays, before the
close today as the Fed’s
consumer credit reading (released after the close) might show the
consumer burning out. Near term support is 108.00 but that level looks to be
tested before the close Friday.
EURO:
Since the Euro zone is in the midst of a slack economic report slate, it would
seem that it would react to technicals and will
react to US developments. The low Tuesday might be a temporary low for the Euro
with an upward adjustment possible over the next two sessions. Near term upside
objectives in the Euro are 96.70 and then again at 96.86.
YEN: If
the positive attitudes don’t remain toward the
recovery, then the Yen probably bottoms. The Yen appears to be in a position
where money flows toward it, if prospects in the
fail to attract capital. In other words, the Yen only falls further if the
Dollar becomes ultra strong. Support at 72.74 must hold for a bottom to form
today.
SWISS:
More than likely the 66.00 level will not be penetrated unless the S&P manages
to climb above 875.
POUND:
The Pound fell to a long-term support point on the charts and didn’t seem to
show much recovery potential even though the Dollar is softer this morning. A
flurry of BOE forecasts, were floated this morning and the net result was to
leave the Pound weak. Therefore, we assume more downside ahead in the Pound.
CANADIAN:
As we expected, the Canadian bottomed within 7 ticks of our objective posted two
weeks ago. Traders should have been able to finance almost half the option
premium on a long term December call play. The Canadian payroll report Friday
could temper the recovery effort but we suspect that the C$ will respect 62.72
support and continue a long term recovery swing.
METALS
OVERNIGHT CHANGE to 4:15
AM:GLD+2.00 ,SLV+3.2Â ,PLAT+1.70 Â London Gold Fix $307.80 +$1.05 LME Copper
Warehouse
stks
890,825 tns -1075 tns Comex
Gold stocks 1.832 Unchanged COMEX Silver stocks 106.4 ml oz +398,079 oz
OVERNIGHT:Stronger gold action in Tokyo seems to
correlate with firmer equitie
GOLD: We
have to think that the recent revelation provided by the COT report gave gold
the ability to bottom but that the prospect of lower
interest rates and possibly better growth is the real catalyst behind the recent
bounce. However, it is possible gold is only seeing less reasoning to be sold
short and not enough reasons to be a fresh buy. The gold buyout/merger between
Aurion and Placer Dome is coming down to the final
stages and is only providing minimal headline support for gold prices.
SILVER:
The deflated price in silver comes in at 4.55 and that level should be respected
as long as the
equity market avoids re-ignition of the excessive negative sentiment seen last
week. In the near term support comes in about 5 cents below the current market.
The Cisco earnings reports were not negative to silver but they weren’t that
positive.
PLATINUM:
The action in platinum is better but not good enough for us to fear getting
short on this rally. In the past month platinum hasn’t even shown strength on
sharply higher equity market days but yesterday it did show a little
correlation. The October platinum reached up to our sell zone Tuesday and can
probably be sold at that level and higher today given the overnight action and
the hope for more stock market gains. A trade above 531 would put the October
contract back above the 40-day moving average but that still wouldn’t discourage
our short sale intentions.
COPPER:
The
market suggested that some bank buying by Asian interests was seen overnight
hinting that Chinese or Asian interests were bargain hunting. The chart pattern
in copper remains very precarious and any return selling in the stock market or
a discounting of
rate cut projections and copper could quickly fall back to contract lows. Unless
the September contract manages to break out of the 68.20 to 66.75 range, we
expect action to be directionless.
CRUDE COMPLEX
OVERNIGHT
CHG to  4:15 AM  :CRUDE -16 ,HEAT-33 ,UNGA-27  We think the energy complex
saw a direct lift to prices off the stock market gain Tuesday as the last couple
weeks of selling in stocks has certainly caused some energy longs to exit.
Reports that
asked the OPEC Ministerial board for a production increase Tuesday makes, it
clear they felt it was worth the effort to ask and
almost that also makes it seem like OPEC is dividing up a September increase.
NATURAL GAS
Weather
has been bearish enough this week to cause some liquidation of longs but
evidently natural gas isn’t as weak as some traders
would expect. However, the charts look pretty vulnerable and a return to 2.60 in
the September is possible.
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