Futures Indicate A Strong Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
-15 — A very impressive reversal in the stock market off the lows Wednesday
afternoon and some follow through in the action this morning, has the bonds
under pressure. We continue to think that fresh longs need to wait for a
correction to 114-20 to get long. We would expect the
economic information today to be supportive of bonds but with the equities
slightly higher the bonds might not pay much attention to the numbers.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
+190, DOW +18,
NIKKEI -74, FTSE +114 — The
stock market made a classic reversal yesterday and has followed through on that
recovery in the early action today. The bond market is suggesting that the
chance for a start to the war next week is increasing. Given the Iraqi
rejection of the
compromise and the unwillingness of the French to even consider alternatives it
would appear that diplomacy is no longer viable.
FOREIGN EXCHANGE
DOLLAR: The Dollar is sharply higher today and it is difficult to
determine why. First of all, it would seem that the
numbers due out today will be disappointing and at the same time the
would seem to be prepared to go against the majority of the world with regard to
While the energy and gold markets don’t suggest an imminent war threat, the
Dollar might be factoring such an outcome. Like the stock market (which could be
rallying off the anticipation of war) the Dollar might not be able to move
directly higher. There seems to be a sense that the war will be quick and that
some of the geopolitical uncertainty could be removed from the Dollar. In other
words, a number of Dollar shorts have decided to exit rather than risk being
caught by a surprise attack. We doubt that fresh longs are rushing into the
Dollar. We would not chase the Dollar with buys nor would we attempt to get
short. If you want to get short buy at the money puts instead.
EURO: The Euro zone might be considered to
be between a rock and a hard place, as French opposition to enforcement could be
causing money to flee. It is also possible that the world fears for the euro
zone economy in the event that the
attacks, takes care of the problem and withdraws.
YEN: Because the Yen isn’t up today, we
suspect that the trend of sentiment has changed. For some reason the Yen is no
longer a flight to quality indicator. We doubt that the threat of intervention
is pressing the Yen down, as it feels like a sea change is taking place.
SWISS: Near term downside targeting in the
Swiss is 73.00 but traders should only be short through puts, as a war or a bad
outcome to a war would certainly boost the Swiss temporarily.
POUND: We are not sure if the Pound has a
trend right now, as the
is taking the public leadership role from the
at the UN and that has been negative to the US Dollar in the past. In other
words, the battle between
and the
is causing some selling in both those currencies. Critical support in the Pound
comes in at 159 with an upside breakout seen with a move above 160.10.
CANADIAN: Until the
below 66.97 we are not prepared to call a bottom on the correction. Fresh longs
in the Canadian might have to risk positions to 66.79.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD -3.50, SLV
-1.5, PLAT +0.00; London
Gold Fix $342.90, -$6.10; LME Copper
Warehouse
stks
838,975 ton, -1,950 tns;
Comex Gold stocks 2.31 ml, Unchanged;
COMEX Silver stks
109.9 ml oz, Unchanged; OVERNIGHT: More selling as the trade is convinced that
war is being delayed.
GOLD: The liquidation continued in
as weak handed longs exit rather than hold through a potentially extended UN
debate. With the overnight losses, the June gold is now $10 below the level
where the last COT report reading was taken. Therefore, the net spec and fund
long has probably dropped to around 70,000 long, which isn’t balanced enough to
get in a hurry to rebuild longs.
SILVER: Considering the failure in the June
gold, the May silver might be headed down to $4.55 and possibly to $4.50 if the
economy sours and the war is formally delayed by more than a couple weeks. The
bears have control and the market is vulnerable from a technical and fundamental
perspective. We do think that $4.50 is a solid long-term fundamental value for
silver, especially if the geopolitical cloud were somehow thrown off! PLATINUM:
The market did show a minor downside breakout but until there is a trade below
$685 we doubt that a major failure will unfold.
PLATINUM: The market did show a minor
downside breakout but until there is a trade below $685 we doubt that a major
failure will unfold. Platinum needs clearer direction on the war front just as
the gold market does.
COPPER: A very poor trade overnight in
China
hints that the
session might forge a minor downside breakout. Thin support is seen at 75.20 and
then again down at 74.40. However, the LME market tried to put a positive spin
on prices possibly because of the potential delay in a war but strength in
international equity markets could give copper a positive start.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE +12,
HEAT +33, UNGA +26 — The weekly
inventory readings showed moderately large declines in gasoline stocks and
moderate declines in crude oil stocks. About the only thing that wasn’t bullish
about the API and DOE reports is that the DOE distillate stocks showed an
increase and the refinery rates increased.
NATURAL GAS
Expectations for the weekly inventory draw are for a 125 to 145
bcf, which we think is an easily obtainable figure
in our opinion. While there has been some seasonal tempering of demand, we
suspect that the residual cold last week will bring the draw in above 150
bcf.