Futures Find A Bid Off Supports
INTEREST RATES
OVERNIGHT CHANGE to
04:21 AM
On one hand, bonds seem to be limited by the consolidation highs around
111-12, but on the other hand, prices seem to want to hold near the top of the
recent trading range of 111-12 and 109-26. While some might be cheered by the
stronger than expected US leading indicators Thursday, we think the weak
Philly Fed readings trump the leaders and leave the bull camp with an edge in
the Treasury market. It is pretty clear that the Fed is seeing the prospect of
further recovery and might even be calling for a quickening of the recovery
pace but for some reason, the Treasury market is discounting bearish
(favorable economic views) from the Fed.
STOCK INDICES
OVERNIGHT CHANGE to
04:21 AM
YEN-3, SF-7, CA-9, EU-30Â
The
market simply can’t unseat a prevailing bear tilt. Even though the market saw
decent earnings reports from Hewlett-Packard and Disney yesterday, it would
seem that the market simply refuses to embrace a bullish outlook for the
future. Certainly, the trade is justified in flinching, in the face of
increased suicide bombings and the fear of more attacks in the near future,
but when one considers the much softer than expected Philly Fed “new orders”
and “employment” readings, there is a justification for continued long
liquidation. While there are a number of Fed speeches today and the Fed has
been very supportive of the recovery theme, the market simply doesn’t have the
interest to forge a conclusive bottom. While it is possible that stock prices
respect the recent consolidation lows, historically the stock market has not
been an effect bottom of this type of formation. In fact, we see a triple or
quadruple bottom formation, as a formation that the market “guns for” with
program sell orders. We really don’t see the fundamental scope for an
aggressive downside pulse in prices but the technicals
might offer enough impetus on their own for a big spike down swing, especially
if support fails and stop loss selling becomes concentrated. As we suggested
yesterday, we would like to see a big range down probe,
that is rejected by the close as that might be enough of a technical
attraction, to produce a sustainable bottom leading into the holiday period
next week.
DOW:
Critical support in the December Dow comes in down at 9,600, but a spike down
probe to 9,525 today, with a close back above 9,573, could be considered a key
bottoming signal. December Dow call options have 27 days until expiration and
therefore they might be a effective way to attempt to pick a bottom,
especially with the market sitting right on a technically critical pivot
point! Wait for a slide to 9,540, before buying a December Dow 9,700 call for
880 points.
S&P
500: It goes without saying, that critical support comes in this morning at
1031 in the December S&P but we think that a critical low formation could be
forged toward today with a spike down to 1019.95, but the market will have to
recoil from that low and close back above 1027.65. The secret to buying the
S&P is to get it bought at moderately oversold levels!
FOREIGN
EXCHANGE
Dollar: The news wires are
seeing some comments from European officials that seem to suggest a little
discomfort is being seen off the rising Euro. In fact, an official this
morning doesn’t think that the US is purposely pressing the Dollar down but it
is clear that the talk of the Dollar decline is beginning to take on a more
significant importance. Recently US economic numbers really haven’t served to
discourage the downside pressure on the Dollar and without the persistent
supportive dialogue from the US
Fed,
the Dollar might be significantly lower. We also have to think that the BOJ is
perpetually influencing the Dollar with intervention. Therefore the US Dollar
is certainly in the crosshairs of many market players. We just don’t see what
factor would be capable of altering what appears to be a solid down trend
pattern in the Dollar. Traders should continue to sell 20-30 tick rallies in
the Dollar, until some headline change in fundamentals is seen! Â
EURO:
As mentioned already it would seem that EU officials are growing concerned
about the pace of the Euro rise and that could be the main reason why the Euro
is backing off the recent highs so aggressively this morning. Near
term support in the December Euro and a potential
long entry point is 118.45. In fact, with another EU member showing a widening
trade surplus it would seem that the Euro zone doesn’t have anything to fear
near term with the rise in the Euro. Buy 30-40 point corrections.
YEN:
The BOJ is in a tough position, as they recently used the word “recovery” in
their official forecasts and that would seem to foster even more long interest
in the Yen. In fact, Japanese Industrial activity came in better than all
estimates, with a rise of 2.2%. Therefore, the overnight low in the yen at
91.46 should be a solid low and prices should at least work toward the top of
the consolidation up at 92.72. Â
SWISS:
The Swiss seems to be coiling for a possible upside thrust but a trade back
below 76.49 would be pretty negative from a technical perspective.
POUND:
Despite the bombing of the
consulate in
the Pound seems to be capable of returning to the recent highs and possibly
forging an upside breakout in the face of any sustained US Dollar weakness.
However, it would be a negative trade for the Pound to fall back below 169.70
today.
CANADIAN DOLLAR: Trend line support is being encountered right on the opening
levels today in the Canadian but it would seem like the December Canadian
could slide down to 76.08 and not really damage the bull trend.
METALS
OVERNIGHT CHANGE to
04:21 AM
SLV-0.20, PLAT+6.80Â London A.M. Gold fix $393.85 -$1.90 LME COPPER STKS
482,950 tons -2,850 tons COMEX Gold stocks 2.963 ml Unchanged
Comex Silver stocks 121.6 ml oz +1.14 ml oz
OVERNIGHT: Asian traders fail to move gold out of an extremely tight rang
GOLD:
While the direction today in gold might not present much in the way of an
upward bias, the trend remains up. However, the Dollar is slightly higher in
the early going and some EU officials are suggesting that a sharply falling
Dollar might hurt global recovery prospects and that could arrest the slide in
the Dollar. According to Dow Jones News, an Australian Bank is forecasting a
rise to 13-year highs in gold but that bank is also suggesting renewed hedging
efforts will take place once gold prices rise back to $419.
SILVER:
Coming into the session today, the silver market is in a slightly negative
position from both fundamental and technical considerations. With COMEX silver
stocks rising to 121.6 million ounces, supply at the COMEX exchange has
reached the highest level since the 1997-1998 time frame
and that has to be a little discouraging to the bull camp. Furthermore, with
the weekly Commitment of Traders report to be released after the close today
and silver prices holding 22 cents above where the prior report was measured,
we have to think that the net spec has climbed above 62,000 contracts.
PLATINUM: The correction early in the week leaves platinum poised to return to
new contract highs. We suspect that the global economic outlook remains strong
enough to continue to foster the up trend pattern in platinum. The feeling
that supply is fixed and unable to meet rising demand remains the prescription
for an extension of the 9 month old up trend pattern in January platinum
prices.  Â
Shanghai
copper stocks declined by 16,290 tons and that stems
a recent pattern of minor gains and should provide some minor support to
copper prices. However, with Chinese copper prices mixed overnight, it would
not seem like COPPER: there will be a major impediment to the recent dominance
of the bear camp. While copper prices aren’t paying too much attention to
world equity market action and macro economic numbers, those outside factors
certainly haven’t stood in the way of widespread long liquidation.
CRUDE COMPLEX
OVERNIGHT CHG to 04:21 AM:CRUDE+29, HEAT+94, UNGAS+76Â The market might have
gotten a little expensive around the highs this week, especially when one
considers that US crude oil stocks increased and the seasonal demand lull
continues. One might also suggest that slack macro economic considerations are
cause for profit taking in energy prices.
NATURAL GAS
The
fact that natural gas inventories saw a draw of 32
bcf, is certainly
a supportive development, as that could suggest an end to the injection
season. However, since the injection season didn’t end premature and the
market did manage to repair most of the annual deficit the upside reaction in
prices following the recent key low, might be limited.