Futures Find A Bid From Oversold Condition
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS
-10 The Treasury market got more than enough fundamental justification Tuesday
for its upward pulse in prices. Considering that the scheduled reports showed
significant contraction Tuesday, the bull camp should easily be able to
control prices into the Friday morning monthly payroll report. Historically
sentiment readings have been a very accurate leading indicators for most of
the other economic reports and that would seem to hint at some trouble for the
US economy.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+230 DOW +11 NIKKEI +142 FTSE +18Â The market
managed a partial rejection of the lows Tuesday, but in the end the bounce off
the lows didn’t rise to the level of a classical reversal low. The regularly
scheduled economic reports were extremely damaging to the psychology of the
market place, especially with sentiment readings falling off the map. It is
also the month of “October”, which in of itself should give many
investors pause.
FOREIGN
EXCHANGE
EURO:
Like the Dollar, The Euro is seeing excessive technical readings but with the
fundamentals so convincingly bullish we see no reason why the market would
stop because of the technicals. In fact, we still see the euro charging up to
the May and June highs above 118.00. Standing against a direct rise in the
Euro were disappointing August jobless readings in the Euro zone, with the
highest jobless level since December of 1999 certainly something for the longs
to take into consideration. Right now, the market is capable of discounting
negative news outside of the US, as the US news is the focal point.
YEN:
The BOJ threat is all that keeps the yen from returning directly to the recent
highs. There were some favorable Japanese auto sales figures for September
this morning and a stronger Nikkei overnight and that probably provides the
Yen with a little support. In other words, the BOJ is going to be challenged
again and the Yen is likely to make new highs unless some other central bank
joins the fray with the BOJ.
SWISS:
Short-term technicals are dramatically overbought but there would seem to be
nothing to discourage a return to the recent highs. Near term support is seen
at 75.89, while resistance is pegged at 76.85.
POUND:
A major overbought condition seems to leave the Pound vulnerable to a sharp
setback. However, fundamentals in the UK seem to be capable of deflecting the
technical selling pressure, especially with the September Manufacturing PMI
coming in the highest since May of 2002. In other words, the Pound has
fundamental justification to hold recent gains and could easily return to the
highs on the slightest weakness in the US Dollar.
CANADIAN
DOLLAR: So far, the Canadian has met the challenge of the deteriorating
Dollar. In other words, the Canadian is de-linking itself and could be
prepared to rise to new contract highs. Short-term technicals are overbought
but not into classical technical sell modes. Therefore, the bias is up until a
critical change is noted.
METALS
GOLD:
Interest in gold increased and then abated fairly quickly. We are a little
disappointed in the magnitude of the rally considering the magnitude of the
Dollar slide Tuesday. It is possible that the partial recovery in the Dollar
into the close deflated the incident for the bull camp, especially when it was
learned that the BOJ had intervened against the Yen.
SILVER:
Short-term technicals are in a sell mode in silver and with the outlook for
the US recovery deteriorating we have to think that silver is becoming more
vulnerable to liquidation, especially if the gold market can’t provide
persistent leadership. Trend line support today comes in at $5.086 with at
least another couple sessions down needed to bring the technicals into a
bottoming mode. With Mexico showing a 16% increase in July silver production
of 248,165 kg there is a slight negative tilt from the supply side.
PLATINUM:
The platinum market continues to distinguish itself from the rest of the
precious metals, as it manages to post gains in the face of slack macro
economic developments. However, the recent gains in platinum have come with
increasing volume and declining open interest, which usually isn’t a positive
pattern. Â
COPPER:
Trend line support in copper comes in down at 80.95 today and with the steep
losses in the equity market undermining macro economic sentiment, the
fundamentals are slightly negative for copper. Chinese copper was closed for
holiday, while LME copper action was uneventful. In our opinion, copper
remains in a bull pattern but with outside markets flashing negatives, there
is no reason to get in a hurry to implement fresh long plays.
CRUDE
COMPLEX
OVERNIGHT
CHG to    4:15 AM Â
:CRUDE +5Â Â ,HEAT+25Â
,UNGAS-1Â The energy complex ran sharply higher from on-going
reaction to the surprise output cut by OPEC, possible production cuts by
non-OPEC members, cold weather and short covering ahead of the October product
contract expiration. With crude oil stocks still below year ago levels a
further tightening of supply could easily take December crude back to $29.63,
while a move over $30 per barrel should not to be ruled out.
NATURAL
GAS
Despite
Tuesday’s weak close, we would think that Dec nat gas should be able to see
more upside follow through given that the latest 6 to 10 day forecast is
calling for below normal temperatures in the Northeast. Given the cold
forecast through Oct 10th, we would think there are still a fair amount of
fund traders wanting to exit short positions.