Futures Indicate A Strong Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
-102 — The post unemployment report reaction had to be very disappointing to
the bull camp last Friday. In fact, considering the overnight equity market
action this morning the bull camp has to feel that nothing is going their way.
It is very clear that the bond market is looking way ahead to potentially better
economic times following the war.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
+2140, DOW
+60, NIKKEI
+175, FTSE
+137 — The big overnight extension begins the factoring of the end of the war.
The end of the war comes just at the right time, as the monthly unemployment
report from Friday could have been very discouraging for the market if that
report would have had the headlines all to itself. As it stands, euphoria looks
to dominate the marketplace and that means that investors rush in to capture
some quick gains.
FOREIGN EXCHANGE
DOLLAR:
Apparently the Dollar is going to catch the end of the war lift like the
international equity markets. Supposedly, coalition forces might have found a
storage facility for banned weapons in
and that provides yet another
buying wave for the Dollar. As we said last week, the Dollar remains in a
downtrend until it manages to close above 102.45. We suspect that the Dollar
will continue to rise until the UN maneuvering serves to undermine the Dollar. A
special meeting among key parties to the reconstruction of
is to be held in the private
conference room of the UN Secretary General today. We expect that meeting to be
a contentious meeting among countries all trying to get a piece of the
rebuilding projects in
. We have to think that
in particular will be very
aggressive in seeking renewed connections to Iraqi oil, as they were very
closely tied into the supply before the war started. If the Germans and French
come out publicly charging the
with
imperialism, that will signal a very strong line by the
and that could begin to temper
the rise in the Dollar. In the short term, little looks to stop the gains in the
Dollar besides an extreme overbought condition.
EURO:
Near term downside targeting in the June contract comes in at 105.00 but we
suspect that the Euro will at least temporarily forge a new low for the move.
The question for the Euro now is how the market will view the currency
considering that the flight to quality focus is being totally removed. We
suggested back in February, that the Euro had as much as 700-800 points of war
premium in prices and that could mean that the Euro will eventually fall back to
102.00. In the near term, for the Euro to avoid a further slide, the EU will
have to win at the UN and manage to put the
in a bad light again.
YEN:
It would seem that every
currency that benefited from the downgrade in the US Dollar,
is now seeing some deflation in currency rates. The Yen did see significant
flight to quality buying up to and into the war and now that premium is being
extracted. Near term downside targeting in the June Yen is seen at 82.68.
SWISS:
A new low for the move in the Swiss suggests that a broad liquidation is already
underway but we have to think that the June Swiss will eventually slide to the
70.00 level.
POUND:
Surprisingly, the Pound is making a downside breakout, which means that it will
not bask in the same bullish light as the Dollar into the end of the war. The
Pound fell overnight despite the fact that UK Industrial production was a little
better than expected. Therefore, the Pound has evidently transitioned into a
down trend pattern. The targeting in the Pound is now 153.94.
CANADIAN:
We warned last week that the Canadian was vulnerable to flight to quality
liquidation and that has apparently begun. We see no reason why the Canadian
should fall below 66.47 but more selling is seen until that level is tested and
manages to hold for two straight closes.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD
-5.50, SLV
-3.0, PLAT
-6.00; London Gold Fix
$319.75, -$3.45; LME
Copper Warehouse
stks
805,400 ton,
-1,875 tns;
Comex
Gold stocks
2.380 ml, -804 oz; COMEX
Silver stks
108.6 ml oz, +199,931 oz; OVERNIGHT: More selling as the battle for Baghdad is
moving forward quickly
GOLD:
The gold market looks to start the week out on a down note, as the anxiety off
the battle for
isn’t nearly what many feared
it would be. Considering the strong overnight gains in the equity market and the
technical condition of the gold market, prices look very vulnerable. According
to the COT report the gold market continued to hold a significantly large small
spec and fund long position.
SILVER:
We continue to think that silver is holding up fairly impressively considering
the strong liquidation in gold. The weekly COT report showed silver to have a
net short fund position, but also to have a 23,000 contract small spec long (as
of last Tuesday). Therefore, the silver market is vulnerable to liquidation but
because deflation prospects are reduced by favorable equity market action, we
suspect that July silver might be able to respect recent consolidation support
of $4.38.
PLATINUM:
Considering the charts, the platinum market appears to be poised to fall
further, with a break below $600 likely. Furthermore, recent performance in the
platinum market suggests that favorable equity market action isn’t that
supportive of prices, which seem to have had more flight to quality focus than
many suspected. Near term support in the July platinum contract is $593
especially if $600 fails early today.
COPPER:
It clear from the overnight action that copper is going to play catch up to the
equity market gains it missed out on last week. With international equity prices
soaring overnight and the SARS issues somewhat more under control, we suspect
that copper prices are on their way to the 80-cent level. Overnight Chinese
copper prices were up sharply and that should set the tone for bigger gains in
the
market.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE
-113, HEAT
-230, UNGA
-273 — The energy complex should continue to see periodic weakness because the
situation in
is becoming less uncertain. In
fact, we would not be surprised to see the estimated Iraqi down time reduced
considerably now that the war appears to be coming to an end.
NATURAL GAS
We assume
that the snow in the
will create the illusion that
heating demand is lingering at high levels and that could provide support to
natural gas prices early this week. With the weekly COT report showing a
moderately large small spec long position (as of last Tuesday) we have to think
that more stop loss selling by small traders is possible.