Futures Find A Bid From Oversold Condition

INTEREST
RATES

OVERNIGHT
CHANGE to   4:15 AM :BONDS +9
The initial leg of the Auction didn’t come off very well and that combined
with the patently bearish economic readings to keep Treasuries within striking
distance of the recent lows. However, some traders expect the subsequent
auctions to show a little more demand. The sharp rise in the ISM non
manufacturing Orders Index was quite a shock to the fresh longs in Treasuries,
especially since those traders were attempting to pick a near term bottom.

STOCK
INDICES

OVERNIGHT
CHANGE to 4:15 AM:S&P+280 DOW +26  NIKKEI
-58 FTSE -70 The stock market can’t seem to overcome the overvaluation
view and the view by many on Wall Street that the pace of the recovery isn’t
quick enough to justify rising stock prices. With the US, Euro zone and
Germany all posting job losses in the last four sessions and the IMF
suggesting that the US has room to cut interest rates again, the bears are
finding interest in their case. With CISCO earnings coming in flat, the market
simply didn’t get a life ring when it needed it.

FOREIGN
EXCHANGE

Dollar:
The outlook for the US economy is evidently bad enough that the Dollar gapped
down overnight. While the Euro zone is also showing excessive weakness in
payroll readings, the trade easily turned against the Dollar and pushed it to
the lowest level in four sessions. The US economic report slate today is empty
and therefore the Dollar might take its direction from the equity market. It
should also be noted that the US is currently seeing an extremely volatile
situation in gasoline prices and that could actually serve to injure the
recovery pace, if the gasoline price gains are allowed to continue. Near term
downside targeting in the Dollar comes in at 95.00 and that break might be a
good place to sell some put options.

EURO:
After the Euro zone posted disconcerting payroll readings, Germany came out
with some similar numbers overnight. However, Germany also posted a moderate
rise in June Manufacturing orders and that partially mitigates the negative
influence of the payroll readings. Considering the weakness in the Dollar, we
see no reason why the Euro wouldn’t mount a rally to resistance up around
115.00. Initial resistance is seen at 114.17.

YEN:
The Yen remains caught in a range, bound by 83.64 and 83.00, but if there were
a breakout it would seem to come to the upside. With the Dollar so weak the
BOJ will probably have to repeatedly intervene to keep the Yen from breaking
out to the upside. Favorable leading indicators from Japan probably serve to
keep the Yen from forging an upside breakout early in the session today.

SWISS:
The gains in the Swiss are going to come all at the expense of US Dollar
weakness. Initial targeting is seen at 74.86.

 

POUND:
Top of the coming range in the Pound is 162.60 and the bias has to be to the
upside. However, we might see the Euro and the Swiss garner about as much
advantage off the weakness in the US Dollar as the Pound. CANADIAN DOLLAR: If
the Canadian can’t climb under the current setup, then we are really convinced
that the up trend has been defeated. In fact, the Canadian needs to close
above 71.70 today to really turn off the recent tide of selling.

METALS

OVERNIGHT
CHANGE to 4:15 AM:GLD+2.70 ,SLV+1.5  ,PLAT+4.50
 London Gold Fix $352.65 +$3.15 LME Copper Warehouse stks 609,500 tns
-925 tns Comex Gold stks 2.74 ml oz Unchanged Comex Silver stks 105.6 ml
-14,906 OZ OVERNIGHT: Minor gains posted in Asia as the Dollar dropped sharply
overnight.

GOLD:
In addition to the Dollar being lower, it should be noted that the Greenback
gapped down and is now trading at the lowest level in 4 days. It would seem
like the gold is perking up a little and that could come from the idea that
another US rate cut could be possible. The IMF overnight indicated that world
growth is slowly coming around but that the US has the room to cut interest
rates again.

SILVER:
Comex stocks managed a slight decline but as of yet they haven’t declined to a
level that would spark increased spec or investment interest. Unlike gold, the
silver market simply hasn’t liquidated enough longs to achieve a solid
balance. However, the silver market did manage to respect the first
retracement support (off the June low to July high move) of $4.92.

PLATINUM:
The platinum market held together fairly well despite the surprise washout in
the US equity market on Tuesday. A pattern of lower highs is expected to
continue with a near term downside targeting seen at $669 basis the October
contract. 

The
Chinese session saw light buying and a slightly higher close, and that at
least provides the US market with an early thin foundation of support.
However, it would appear that the outlook for the stock market is
deteriorating and that both housing and auto COPPER: sectors are trying to be
concerned with the rising interest rate environment. Since copper has showed
amazing resiliency we doubt that it will buckle under the weight of outside
negative macro economic issues but those negative fundamentals make the risk
and reward of being long copper unattractive.

CRUDE
COMPLEX

OVERNIGHT
CHG to   4:15 AM  
:CRUDE +41  ,HEAT+114
,UNGA+111  The energy complex managed to claw its way higher in the face
of two more refinery problems in California and that also joined a story
Tuesday morning suggesting that Shell actually had a shut down of a crude oil
flow station last Friday due to ethnic violence in Nigeria. In other words,
the energy complex is mostly being fueled by sporadic refinery problems, but
given the scope of the gains and the probability that the unleaded market has
reached an all-time record fund long, something else must be fueling the
gains.

NATURAL
GAS

With
the regular energy complex providing support to natural gas, the market
avoided a setback into new low ground. While the annual deficit continues to
be significant, there has been a narrowing of that deficit over the last two
months.