Futures Indicate A Strong Open
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15
AM: BONDS -2 — While the trend in the bonds
appears to be down, we have to suspect that a bounce is possible today into the
monthly payroll report. While the “hope†for an end to the war is pressuring
bonds, the real impetus behind the sell off is that the end of the war will
increase the odds of economic recovery. However, if the economy comes limping
into the end of the war, that could certainly make it harder for the recovery to
grab hold.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P +300, DOW
+43, NIKKEI
+56, FTSE +51 — Apparently the stock
market wasn’t undermined by the suicide killings in Iraq this morning and it
would also seem that traders are not too concerned that the coalition might take
its time before attacking the heart of Baghdad. However, the market is
significantly overbought on the week and will have to face some potentially
negative economic news from the monthly
US
payroll
report. Since the monthly payroll report is normally played up by the talking
heads on Wall Street, there is the potential to see negative psychology into the
opening this morning.
FOREIGN
EXCHANGE
DOLLAR:
The Dollar continues to be lifted by the trend because the macro
economic condition certainly isn’t cause to drive the Dollar higher against
all other currencies. We continue to think that the majority of the buying in
the Dollar is short covering and not fresh buying. For the Dollar to see fresh
long term buying, would mean that traders are picking a long term bottom. In our
opinion, for the Dollar to form a long term bottom, the war has to end and the
war has to be justified. Certainly seeing the disregard for life by the Iraqi
military is helpful in repairing the image of the Dollar, but it is still
unclear if the
US
action
will be sanctioned by critical allies in
Europe
. In our
opinion, the Dollar needs to see
Europe
accepting of the action and preparing to get along with the
US
. With
the
US
insisting on control of the
Iraq
rebuilding we are a little concerned that tensions could remain high enough to
limit the Dollar. Therefore, we can’t seem to get on board with a long Dollar
play from current levels.
EURO:
Considering that significant war premium has been extracted from the Euro, we
have to think that a near term bottom is possible. However, there is some
question whether the Euro deserves to continue its uptrend and the last four
months consolidation shows that many traders are questioning the bull trend.
Therefore, we suggest that traders buy a June Euro this morning at 107.01 and to
buy 4 June Euro 103.50 puts. In other words, step into a volatility play!
YEN:
The trend is down in the Yen, with the next support level on the charts seen at
83.00. Like the Swiss and the Euro, more flight to quality longs are coming out
of Yen positions. Therefore, the sellers should continue to control. Overnight
the Japanese economic reports showed more weakness with household spending once
again showing a contraction.
SWISS:
The direction of the Swiss is mostly determined by the ebb and flow of the war
and near term support is now targeted at 71.90.
POUND:
Other than a correction to the bottom of the March consolidation of 155.22, we
doubt that the Pound needs to forge a downside breakout. In fact, as long as the
war is expected to come to an end soon, we think it is risky to sell the Pound
at such low levels on the charts.
CANADIAN:
The Canadian still hasn’t shaken off the threat of flight to quality
liquidation but with the Canadian unemployment rate falling and jobs rising that
should be seen as the best situation in the G7. Therefore, the fundamentals
stand against selling the Canadian. We still think that longs should be long but
they should have put protection in place.
METALS
OVERNIGHT
CHANGE to 4:15 AM: GLD -1.00, SLV
+0.2, PLAT
-1.70, CP -.75; London
Gold Fix $323.20, -$1.50; LME Copper
Warehouse stks
807,275 ton, -1,750 tns; Comex
Gold stocks 2.381 ml, -2,700 oz; COMEX
Silver stks 108.4 ml oz, -88,382 oz.
GOLD:
Asia
gold
slides again as sellers factor in more coalition
successes. SILVER: One would have to think that an end to the war will
come within 72 hours and could have come sooner, if the coalition forces
didn’t think that the Iraqi government could collapse without storming the
city. The Dollar also continues to hold strong and that is another element
discouraging buyers from picking a bottom in gold.
SILVER:
As we expected, the silver market managed to respect the recent lows despite the
weakness in gold and that is a telling sign. The $4.36 low seems to be solid
support and if the war limitation can be eliminated over the weekend, the odds
of this weeks lows being a critical low increases dramatically. Lets face it
silver has fallen to levels below $4.40 because fears of slow physical demand
and fears of deflation.
PLATINUM:
Thin support is documented at $601.6 in the July contract but we get the sense
that platinum will do a better job of discounting deflation fears and tracking
with the stock market. Considering the break this week, one might be able to
adjust the COT report tonight for the declines since the Tuesday mark off date
and speculate that the funds and small traders have become net short. In other
words a break below $600 today might be a buy.
COPPER:
The copper market seems to have been cheated out of the favorable stock market
action this week! We are also a little bit shocked at the magnitude of the
declines in LME stocks this week. Furthermore,
Shanghai
copper
stocks declined by -11,219 tons and now stand at only 63,073 tons. In other
words, the copper market has been seeing a tightening of supply, even in the
face of slack economic reports.
CRUDE
COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE
-76, HEAT -167, UNGA
-252 — It would seem that energy prices can’t even find a temporary
bottom, even with the war lingering on and international tensions off the war
still running hot. Apparently, just expecting the end of the war is enough for
sellers to continue to press energy prices.
NATURAL
GAS
We have
to think that the weekly injection of 37 bcf
Thursday was a little larger than expected and the rebuild might hint at a
swifter than expected rebuilding of tight inventories. The trade is correct in
avoiding an aggressive attack of natural gas prices, as inventories remain
tight.