Futures Indicate A Strong Open
METALS
OVERNIGHT
CHANGE to 4:15 AM :GLD-0.50 ,SLV+4.0Â ,PLAT-3.00,
CP+50Â London Gold Fix $367.35 +$3.75 LME Copper Warehouse stks
719,500 tns -6,450 tns Comex
Gold stoc 2.468 -2,572 oz COMEX Silver stocks 105.1
ml oz -381,741 oz OVERNIGHT: Slightly lower price action despite strong Thursday
US gold gain
GOLD:
The action Thursday was a good step toward restoring some of the luster lost in
gold after the May break and the consolidation that followed. We continue to
think that the stock market action is dampening gold interest but it is very
clear from the action yesterday that the direction of the Dollar is a major
driving force for gold. However, in order to placate the gold bulls the June
Dollar Index might have to slide below 92.35, while a recovery rally in the
Dollar back above 94.11 could be very negative for the bull trend in gold.
SILVER:
A nice bottom might have been formed in silver with the reversal and rejection
of prices below $4.50. Traders that were short silver
against long gold positions should have exited those positions as silver appears
to be getting a slight lift from the consistent gains in the equity market and
we are detecting a pattern of declines in COMEX stocks. COMEX stocks are now
down to 105.1 million ounces but in order to really spark interest in the long
side of silver, COMEX stocks really need to fall below 100 million ounces.
PLATINUM:
The path of least resistance is up in platinum but risk and reward seem to be
unfavorable. We are impressed that the platinum market was able to rally into
the news that world automakers are seeing incentive programs fail, as that could
hint at reduced platinum demand and less long interest in the platinum market.
COPPER:
The copper market continues to act sluggish, as if the lack of upside momentum
in the stock market is undermining fresh copper buying interest.
Shanghai
copper stocks increased by 1,100 tons and that is
a slight negative but that was offset by moderately impressive price gains in
Shanghai
copper
prices. The soft factory orders report from the
US
seemed
to undermine the market yesterday but it should be noted that copper appears to
get support from weak Dollar action.
CRUDE
COMPLEX
OVERNIGHT
CHG to  4:15 AM Â
:CRUDE +14Â ,HEAT+17Â
,UNGA+25 Â Early weakness was rejected Thursday, as the energies
began to trade off ideas that Iraqi exports will not resume as quick as expected
because of ongoing looting in the Southern Oil fields. Therefore the market must
have completely discounted the tender stories from
Iraq
Thursday that essentially
offered up 10 million barrels (in 1 million barrel increments).
NATURAL
GAS
The
weekly injection report showed a 114 bcf reading,
which is certainly at the upper end of the expected range and above the 5 year
average injection. As we have said all week long, the natural gas market is
poised to rally, until the technicals becomes
excessive and we suspect that is a long way off.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS
+18 The market is once again focused on a rate cut in the next Fed meeting. Not
only did the ECB move embolden the bull camp in Treasuries, but also the decline
in factory orders gave the bull camp a major lift. According to the bull camp,
the monthly non-farm payroll report this morning is going to put the icing on
the cake.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+300 DOW +30 NIKKEI +128 FTSE +42Â The stock market
continues exhibit the hallmark of a bull market, as the negatives are discounted
and the positives are embraced. Even with an ultra weak Dollar and rising energy
prices yesterday the stock market managed to shake off weakness and forge a
positive close. Therefore, longer-term investors that have no concern about weak
regularly scheduled economic reports are probably feeding the current bull
swing.
FOREIGN
EXCHANGE
DOLLAR:
The Dollar should have gotten pounded yesterday but to its credit it has managed
to stay above the really critical downside breakout point on the charts of
92.35. With the ECB cutting rates and the
US
factory
orders weaker than expected, it could have been open season on the Dollar.
However, with the BOJ promising to sell the Yen, the Dollar might not dive
through the recent low without a significantly weak
US
payroll
report. Certainly the Dollar action is clustered around the lows, as if a
breakout is coming, but we think that the trade is a little worried about
intervention from a number of sources. The trend in the Dollar is down we just
don’t think that a freefall will be tolerated. Those that took our suggestion to
buy a June Dollar 93 put should have banked a profit on the close yesterday.
Those that want to pick a low in the Dollar should only use cheap call options,
as the Dollar either turns right now, or it is headed to a much lower level.
EURO:
The September Euro seems to be poised this morning to run to a new contract
high. The ECB acted with force (50 basis points) and that sent a message that
the ECB is willing to take the necessary steps to avoid deflation. The only
reason the Euro fell off the recent highs, is that the trade was concerned that
the stuffy ECB would sit on their hands, instead of acting. Therefore, the Euro
should continue to rise, with the rate of rise determined by the weakness of the
US
economy. At this point, seeing a decline back below 116.58 in the Euro would be
a very bad development.
YEN:
The BOJ promises to sell Yen and buy Dollars in an effort to stem the Yen rise
and that has temporarily diffused an upside breakout on the charts. Declines in
household spending continue to mount and that simply fosters the fear of runaway
deflation. Deflation fears should be enough to keep money away from the Yen and
reduce the need for intervention. Aggressive traders might sell the Yen at the
market this morning.
SWISS:
While we don’t have a flight to quality situation, the Swiss looks to rise
nonetheless. However, the Swiss might have trouble getting beyond the recent
highs. Position traders should let the Swiss rally to 77.37 and then sell the
September contract.
POUND:
Right now, the Pound is the prime benefactor of Dollar weakness. The euro might
be overbought, the Yen is seeing intervention and the Canadian had a little
disappointment with payrolls. Therefore, the Pound is the best bet against the
Dollar. More gains ahead with a targeting of 167.98.
CANADIAN:
The payroll readings from
Canada
don’t
mesh with the recent gains in the currency and that resulted in a profit-taking
setback. However, some jobs impact was to be expected off the SARS flare and the
BSE debacle. The trend is up and traders should use the correction today to
enter fresh long plays.