Futures Find A Bid From Oversold Condition


INTEREST RATES

OVERNIGHT
CHANGE to 
4:15
AM
:
BONDS

-10 — The bonds simply got ahead of themselves last week and the probe higher
Monday exhausted the trade. We do think that the action in the Dollar is
beginning to give pause to the bull camp but that the economy remains so sour
that the bull camp could be finding an offset to the potential currency
pressures. The June bonds would appear to have critical pivot point support down
around 118-12, while the June Notes might not see critical support until 117-10.


STOCK INDICES

OVERNIGHT
CHANGE to 
4:15
AM
:
S&P +80, DOW
+1, NIKKEI +20,
FTSE
+29 — The stock market remains in a weak posture. While the
higher opening might give the bull camp some hope, it should also be noted that
some are expecting the


US

to raise the terrorist threat rating and that the US Treasury Secretary is
scheduled to speak this morning. Thus far, it would seem that a lower Dollar
undermines investor sentiment and applies some pressure to stock prices.


FOREIGN EXCHANGE



DOLLAR:
The trade will be listening closely to another Treasury
Secretary speech today. In fact, unless the Treasury Secretary clearly refutes
the slide in the Dollar, the trade will take that as a green light to sell the
greenback. Overnight it seemed that the BOJ was close to stopping the rise in
the Yen but we have to wonder if intervention is capable of stopping the slide
in the Dollar. We have to think that coordinated intervention has a chance of
temporarily halting the slide in the Dollar but it would seem that the trade is
bent on the idea of knocking the Dollar down sharply over the long term. In
fact, a number of professional forecasting agencies are suggesting that the
Dollar could fall another 10% or more. In other words, the Dollar might be
headed back to the 1998 low, which is all the way down to 90.74. 


EURO: The Euro zone will have to cut rates,
or the


US

will have to soundly refute the soft Dollar trend in order to avert the rise in
the Euro. As mentioned yesterday, it would seem that the Euro is headed to the
October 1998 high of 123.04 on the monthly charts. Talk that a


UK

poll is against the Pound being replaced by the Euro is an issue that merely
tempers the rise in the Euro, as the trend is simply too strong to be
discouraged by such a long-term potential snub. Weekly pivot point support in
the Euro comes in at 115.65.


YEN: With the BOJ policy meeting ending, the
trade has come away with the idea that there will be intervention. Usually when
the trade expects intervention, the market responds by running in the direction
that would force the intervention. However, the initial response in the market
was to fear the intervention, which has simply created a correction that can be
bought. In fact, if the Yen is going to run to contract highs, it should
probably manage to hold above 85.13.


SWISS: Following a gap up move, the Swiss
seems a little overdone technically but still in an up trend mode. Critical
pivot point support is seen at 77.10.


POUND: For the


UK

to show rising prices hints at an economy that is shaking off the deflationary
influences seen in other areas. In fact, if the world economy weren’t showing
recent signs of weakness we would see the inflation readings from the


UK
,
laying the groundwork for higher rates. As it stands the Pound is poised to
continue reaping the windfalls of a soft Dollar and its relatively good economic
standing within the G7.


CANADIAN: If the US Treasury Secretary gives
the green light toward more Dollar declines that could vault the Canadian
sharply higher. Eventually the US Dollar declines could be seen as a negative
for the Canadian economy but in the near term that will not discourage the
buyers in the Canadian. Next upside target is seen at 74.40.


METALS


OVERNIGHT CHANGE to 4:15 AM:
GLD +3.10, SLV
+1.5, PLAT +9.00,
CP
-.25; London Gold Fix $368.00,
+$8.25; LME Copper Warehouse


stks

772,350 tns, -2,275 tons;
Comex Gold stocks
2.469, +8,214 oz;
COMEX Silver stocks 107.7 ml oz, -57,411 oz;
OVERNIGHT: The breakout up continued with Japanese
gold touching limit up pricing.


GOLD: The market appears to be catching even
more long interest, as the Dollar is certainly paving the way for more
investment interest in gold. It would appear that August gold is headed to at
least $390 and could rise to $415 again if the current conditions remain in
place in the months ahead. Some forecasters suggested that the Dollar could fall
as much as 10% more and that would put the Dollar down to levels not seen since
1996.


SILVER: Without gold, silver would be
nowhere. In fact, the silver market isn’t necessarily showing much follow
through and has yet to forge a new high for the move. It has been six sessions
since the silver made a new high for the move and without one today, we think
silver will be sending a message that slack macro economic concerns are
undermining its structure.


PLATINUM: The platinum market appears to be
catching some of the benefit of the gold run, as it is poised this morning to
run to new highs for the move. It would seem that July platinum would be making
a bid to return to the Mar consolidation highs up around $675 to $690. The only
thing holding back platinum from even more upside gains is the drag being
created by the economic outlook. 


COPPER: Coming into the action this morning
Chinese copper futures were lower and that could clear the way for the


US

market to worry about slackening demand. Apparently recent longs in

Asia
decided to take profits and we have been wondering why that kind of action
hasn’t been seen in the


US
.
Seeing the July copper fall below 75.75 could create a technical stop loss
selling wave and throw prices down toward lower support of 75.10 and possibly
even 74.55.


CRUDE COMPLEX

OVERNIGHT
CHG to 
4:16
AM
:
CRUDE
+0,
HEAT
+33, UNGA -2 — The energy
complex exhibited some volatility leading up to the last trading day of the June
crude oil contract. Apparently, the deterioration of the macro economic view
prompted some recent longs to exit, especially with weekly gasoline price
readings showing consistent weakness.


NATURAL GAS


With NOAA
calling for 6-9 hurricanes in the coming season, the natural gas market is
anticipating periodic weather support for prices. NOAA suggested there is a 70%
chance of La Nina developing again this summer and that could produce an above
normal amount of tropical storms and tropical storms threaten shipping.