Futures Find A Bid From Oversold Condition

• September 29, 2003
• TradingMarkets Editors

INTEREST
RATES

OVERNIGHT
CHANGE to   4:15 AM :BONDS -10
The pattern of higher highs is pretty clear and regardless of international
Press outlets suggesting that the world recovery remains on track, it would seem
that the trade is not as convinced that the US recovery remains on track. Around
the August lows, US economic numbers were mostly favorable with the exception of
the US payrolls but over the last months, a number of readings have begun to
show signs of weakening and that comes directly ahead of another critical
monthly payroll report. While the numbers due out today might discourage the
longs we have to think that the bullish bias is going to remain in place until
the market has cleared the week ending payroll readings.

STOCK
INDICES

OVERNIGHT
CHANGE to   4:15 AM:S&P-10 
DOW +33 NIKKEI -88.8 FTSE +29 While the downward track in prices
isn’t that aggressive, it would seem to be entrenched. It certainly seems like
the market is going to play up concerns over the coming monthly payroll report,
especially since other measures of economic growth have been softening. With the
end of quarter looming and the tilt in prices pointing down, we just don’t think
that many fund managers will tolerate much in the way of early losses today.

FOREIGN
EXCHANGE

Dollar:
Some economists are suggesting that the US Administration won’t be able to force
the Dollar down consistently enough to effect sweeping trade changes and that
would seem to be giving the Dollar a surprise bounce this morning. All we know
is that US economic numbers appear to be falling behind Europe and certainly
Asia. However, we suspect that BOJ intervention efforts will be witnessed this
week, if the Yen makes a new high for the move. Seeing the BOJ intervene should
mean that the Dollar is bought and the Yen is sold and that could be why the
Dollar is showing artificial support this morning. We suspect that the Dollar
will get an additional lift off the US numbers but then the interest in the
Dollar should wane quickly. Critical resistance is seen at 94.73 and then again
up at 95.13 (as those points define a gap area).

EURO:
It would seem like the Euro is going to start the week out on a corrective tone,
as the December contract has already forged an early chart failure. Comments
about protests at European ports might be a minor cause for weakness in the
Euro, but we think the weakness has to do with BOJ actions and not macro
economic developments. Next support in the December Euro comes in at 113.58 and
then again down at 112.96. We view the Euro in a temporary corrective slide and
not in some type of sustained reversal.

YEN:
The BOJ has its work cut out for it as the currency remains poised on the charts
for what appears to be an upside breakout. Overnight Japanese economic numbers
were soft, with auto production falling and their trade surplus declining by 39%
on the year. In other words, the impact of a strong Yen is being felt. We see
the Yen drawing out the BOJ with a move to new highs early this week.

SWISS:
The Swiss missed its chance to garner sustained flight to quality interest. In
fact, flight to quality seems to be totally absent, even the gold market is
weak! Therefore, the Swiss might be headed down to 73.85 support this week.

POUND:
The economic numbers this morning from the UK disappoint and the recent rise in
the Pound set a high standard for the UK economy. Even with the UK’s Brown
suggesting that the economy is going to get stronger in the months ahead, the
trade is apparently going to deflate some of the value put into the Pound in
September. With confidence numbers unchanged the market might be thinking that
the UK economy has hit a bump like the US economy and may decide to take the
Pound down to support of 162.98.

CANADIAN
DOLLAR: It would seem as if all currencies are set to slide against the Dollar,
as if some coordinated intervention was decided upon over the weekend. With the
technical failure in the Canadian overnight, expect a trade down to 72.40.

METALS

OVERNIGHT
CHANGE to   4:15
AM:GLD-1.10,SLV+1.0,PLAT+14.10, CP +15 London Gold Fix $379.85 -$4.25 LME
Copper Warehouse stks 582,600 tns -2,500 tons Comex Gold stocks 2.775 ml oz -405
oz Comex Silver stks 105.8 ml -49,033 OZ OVERNIGHT: Minor weakness documented in
Hong Kong but Japanese buying countered

GOLD:
We would have expected the extreme volatility in the Forex markets, weaker stock
prices and new highs in the US Treasury markets would have given the gold a lift
late last week, but the trade doesn’t appear to be sensitive to flight to
quality issues. Coming into the action this morning, the December gold is
sitting right on a critical up trend support line and is facing an ongoing
massive spec and fund long position in the COT report. As of last Tuesday, the
small spec and fund long in gold reached 170,000 contracts and that is probably
reduced by 5,000 to 6,000 contracts given the break off last week’s highs.

SILVER:
A slightly negative fundamental shift continues to reverberate in the silver
market following the announcement last week by Kodak that they would be
concentrating on digital cameras, as that certainly threatens silver demand off
the silver used in film processing. Like gold, silver has fallen down to
critical chart support, with a failure below the trend line seen at $5.16. Even
numbered support comes in at $5.10 and then again down at $5.02.

PLATINUM:
January platinum comes into the week fresh off what could have been considered a
major failure on the charts last week. While platinum managed to reject the big
break seen last Friday, the move below $680 has to remain on the minds of the
bulls. We must also add that the net spec and fund long position in platinum
remains overdone considering the relative small size of this market. 

COMMITMENT
OF TRADERS ANALYSIS – FUTURES & OPTIONS 
Sep 16 – Sep 23, 2003

              
LARGE SPEC         
COMMERCIAL          
NON-REPORTABLE

                
NET                 
NET                  
NET

           
POSITION   NET CH   
POSITION    NET CH   
POSITION   NET CH

SILVER         
53986    -1669     
-87122      
716       33135     
952

COPPER         
34769      249     
-45394      -855      
10625      605

GOLD     
     119187    
8430     -169211    
-9743      
50023     1311

PLATINUM        
5196     -165      
-5859      
321        
663     -156

 

Just
as the precious metals appear to be on the verge of a technical failure, the
copper market is close to a chart breakdown. COPPER: However, critical trend
line support won’t be tested until prices fall below 80.80. The COT report in
copper showed a moderately overbought condition at 45,000 contracts, but as long
as Asian demand for copper remains healthy, we suspect that copper will avoid a
sustained profit-taking slide.

CRUDE
COMPLEX

OVERNIGHT
CHG to    4:15 AM  
:CRUDE +30  ,HEAT+76 
,UNGAS+101 While the energy markets might not have closed firm last
Friday, they deserved some profit taking off the $1.50-$2.00 recent rally. The
COT report showed the large fund short in crude to be mirrored by an equally
large small spec short.

NATURAL
GAS

Not
surprisingly so, the natural gas market saw the fund short rise to 46,961
contracts and with the price decline seen since the report was measured, we now
have to think that the funds have posted a massive short position record.
Furthermore, we were afraid that the small specs were still moderately long and
that could certainly fuel more stop loss selling in the week ahead.