Futures Indicate A Strong Open
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS
-11 — Losses in the bond market are being tempered slightly by the potential
for an extremely soft payroll report Friday morning and because the battle for
could create some anxiety. However, it would seem that the trade is fully
convinced that the war will be coming to and end, possibly by the end of the
coming weekend and that certainly emboldens the bears. In fact, if the trade is
fully convinced that the war will come to an end, then the monthly payroll
report can be discounted.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P +640,
DOW +64, NIKKEI
-52, FTSE +42 — It would appear that the
coalition will prevail soon and stock prices are certainly on their way to
factoring that outcome. Therefore, the big risk is that the victory might be
delayed a little longer than expected. We have to think that the market is
expecting a culmination by the end of the week, or certainly over the weekend.
FOREIGN EXCHANGE
DOLLAR: Until the Dollar rises back above 101.00 many will assume
that the Dollar simply remains in a consolidation pattern. Extremely weak German
employment figures overnight would seem to lower the bar for the
numbers Friday morning. We continue to think that few traders have a strong
opinion on the Dollar, as the presence of long-term short covering is making the
Dollar look better than it probably would otherwise. In our opinion, we think
that politics and not economics might determine where the ultimate trend in the
Dollar heads. For instance, it will be important for the Dollar bulls to see
strong support from Iraqi citizens in the wake of the advance on
It could also be necessary for the
to find evidence of weapons of mass destruction, in order to get the
international community off the back of the
and US. Some on the Arab street will never accept the evidence, even if it is
found but the Europeans might be easier to convert. In other words, for the
Dollar to overcome the entrenched downtrend pattern and the depreciation in
prestige, the
will need to justify the war! Therefore, on a rally above 102.00 in the June
Dollar, we would begin to suggest that longs take
futures profits or swap long futures for long calls.
EURO: The Euro zone left interest rates
unchanged this morning, despite a much weaker than expected German employment
reading. March jobless figures increased by 55,000, which was above
expectations. Apparently some European foreign Ministers are willing to get
beyond the war decision and focus on the rebuilding of
and that reduces the need for a flight to quality premium in the Euro. We
suspect that the June Euro will begin to find support once prices fall to
105.93.
YEN: Near term downside targeting in the
June Yen comes in at 83.26 and unless the Yen manages to climb back above 84.41
we would assume that the trend is down.
SWISS: Near term targeting in the June Swiss
is 71.89 and we would expect to see more flight to quality war premium to be
extracted today. Unless the Swiss manages to climb back above 72.84 we assume
that the path of least resistance is down.
POUND: The Pound should be close to solid
support of 155.08. However, considering that the March UK Services PMI came in
the weakest in 1 1/2 years it would seem like the
economy is not getting a pass like the
economy is. Therefore, we assume that the Pound is vulnerable to a downside
breakout.
CANADIAN: Trend line support in the June
Canadian comes in at 67.11 today but seeing the Canadian avoid a quick return to
the 67.00 level indicates that the currency isn’t as weak as it could have been.
There is still significant risk to the longs but that can be easily managed by
selling a June 69 call and buying a June 67 put against futures longs.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD -5.00, SLV
-2.7, PLAT -4.40; London
Gold Fix $324.70, -$5.55; LME Copper
Warehouse
stks
809,025 ton, -3,100 tns;
Comex Gold stocks 2.383 ml, Unchanged;
COMEX Silver stks
108.5 ml oz, Unchanged; OVERNIGHT: More selling off potential war end and
because of technical signal
GOLD: Considering the magnitude of the
overnight slide, we have to revise downward our ultimate downside target from
$323 to $309. When one considers the magnitude of the net spec long coming into
this week (60,000) then it is not shocking to see prices slide so aggressively.
In fact, using the 10,000 contract per $10 price move rule, we would think that
June gold might have to fall to $309 before a bottom is forged.
SILVER: With the gold market breaking out to
the downside, the negative pull on silver should not be ignored. However, as we
suggested yesterday, the silver market probably entered the week net spec long
about 20,000 contracts. Therefore we have to think that the speculative position
in silver is getting pretty close to a leveled position.
PLATINUM: We thought that it was a little
too early to transition into a physical demand driven market and with the July
contract close to a downside breakout on the charts, we have to think that more
downside is ahead. The net spec position in the platinum is probably getting
very close to flat but a slide to $600 should not be ruled out. The problem with
picking a bottom in platinum is that prices are extremely expensive on a
historical basis. Until economic recovery is probable and fully accepted,
platinum prices will remain weak and choppy.
COPPER: The final stages of the war with
are ahead and therefore some industrial demand driven markets might suffer some
light liquidation. We don’t see any fresh significantly negative SARS news this
morning but that issue remains a negative for copper prices.
Fearing a contraction in Asian business activity hits right at the strongest
demand zone in copper.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE -16,
HEAT +24, UNGA +17 — The energy
complex continued to cave in under the weight of the potential end to the war.
With the market already under liquidation pressure Wednesday, the sharp increase
in API and DOE crude stocks might have rung the death knell for the bull camp.
NATURAL GAS
We
continue to be very surprised that the natural gas market hasn’t caved in and
violated critical chart support. Critical chart support in the June natural gas
comes in at $5.04 and we continue to be interested in buying June natural gas
puts, if the futures can mount a rally $5.25.