Futures Indicate Stronger Open

INTEREST
RATES

OVERNIGHT
CHANGE to

4:15 AM:
BONDS

-1 — As we feared the long-term top players grabbed the bond market, as the
trade looks through the war. In other words, the Treasury market is making the
bet that the


US


assault will be quick and
decisive. However, we suspect that the initial stages of the war will proceed
quickly, as the


US


military gains control of
southern


Iraq


but that the actual taking of
Saddam could be weeks, or months in the future, as that looks to require urban
warfare.

STOCK
INDICES

OVERNIGHT
CHANGE to

4:15 AM

:
S
&P
+630, DOW +71, NIKKEI
+82, FTSE +42 — The stock
market is buying the rumor that the war will be quick and that some of the
geopolitical headwinds will be gone by the beginning of next week. The stock
market isn’t the only market looking beyond the war, as the energy complex is
also factoring a swift and decisive end to the conflict. With US economic
numbers this morning possibly exposing a deteriorating housing sector, the
onslaught and hopefully the end to the war threat, couldn’t have come at a more
opportune time.

FOREIGN
EXCHANGE


DOLLAR:
The Dollar continues to get the benefit of the doubt for its war stance and that
looks to remain the case until the scenario moves to the next stage sometime
later this week. In other words, euphoria on the


US



situation looks to continue until the really sticky situation of the attack
actually takes place. The fact that US economic stats are falling apart in the
back ground, is not being given too much consideration and that is because of
the optimism being generated by the war track. If by chance, the timing of the
war were delayed by a sudden "total
compliance" effort by


Iraq


that
could halt the optimism and cause the Dollar to take profits. Right now, we see
quick and total compliance as the best chance for Saddam to survive. Saddam
could maintain his palaces and his dictator status if he produced chemical and
biological weapons, but since the UN inspectors have left, even that alternative
is unlikely. Therefore, the war track is on and the Dollar appears set to rise
to 104.00. In the end, there are so many things wrong with the


US



economy, that the war euphoria is simply masking reality. In other words,
long-term short covering is ruling and not a strong interest in the yield
potential in the


US


.

EURO:
Since the euro has already failed to hold the bottom of the January and February
consolidation zone, it would seem to be headed to the 104.00 level and possibly
to 103.00. However, like the Dollar we expect the slide in the Euro to come to a
temporary end by Wednesday night, or Thursday morning, when the attack
ultimately begins. Seeing a rise back above 106.00 on a close in the June Euro,
would certainly signal a major change in the current equation.

YEN:
For the time being, there is no Asian flight to quality flow and for the time
being the Yen is expected to see some technical liquidation. Near term downside
targeting in the June Yen comes in at 83.73 but 83.50 shouldn’t be ruled out.

SWISS:
With gold and energy markets breaking into the start of war, it is very clear
that the Swiss will not be seeing flight to quality buying in the coming
48-hours. However, toward the end of the week, after the Swiss has corrected to
71.27 we might begin to consider the idea of picking a bottom. In the mean time
expect more downside. 

POUND:
With the Political turmoil in the


UK


off the
war, the threat of participation in an unpopular war, it’s understandable that
the Pound comes under attack. Some have to wonder why the Pound is falling and
the Dollar is rising, considering that both countries seem to have an equal role
in the coming attack. We maintain that the Dollar was so historically oversold,
that it is getting a technical bounce that the Pound wasn’t in position to
receive. In other words, the Pound is breaking because of its role in the war
and because of the negative impact being seen on its economy. The Dollar will
have to factor its poor economy after the fog of war has lifted. Near term
downside targeting is seen at 154.00.

CANADIAN:
Thus far, the Canadian hasn’t broken out to the downside but that is possible if
the war really comes off quickly. However, we see enough uncertainty and disdain
for the


US



position to give the Canadian a good chance of holding above critical support at
66.86 in the June contract. Considering the historical nature of current events
unfolding, we suggest that longs should acquire some put protection. 


METALS

OVERNIGHT
CHANGE to

4:15 AM

:
GLD
-2.00,
SLV +2.5, PLAT
+3.20;


London



Gold Fix
$344.90, +$4.90; LME Copper
Warehouse stks
829,675 ton, -4,575 tns;
Comex Gold stocks
2.33 ml, Unchanged; COMEX Silver stks
108.7 ml oz, -Unchanged; OVERNIGHT: Slack action failed to give gold much
support in the

Asia

session.

GOLD:
Either the gold is looking through the war, or the buyers are waiting until the
48-hour deadline to pass before getting long. However, unfortunately for the
bull camp it would seem that the trade is looking through the war and that has
many longs considering an exit. While inflation readings are certainly
indicative of inflation (the UK RPIX reading for February was the highest since
May 1998) the trade just doesn’t seem to be ready to grasp the inflation theme.

SILVER:
Already the silver market has disappointed the bull camp with support on the
charts failing and the leadership in gold almost nonexistent. While the equities
and copper prices have shown the ability to look through the war, to better
economic times ahead, the silver market has not shown any such action.
Therefore, we assume that the market will temporarily fall below deflated
pricing of $4.50 in the coming sessions.

PLATINUM:
The failed attempt to rally Monday could combine with a technical failure on the
charts with a move below $679 today. Platinum looks to be slipping back into a
physical commodity stance, instead of a flight to quality investment vehicle.
Critical trend line support in the April contract is seen at $676. However, like
gold, platinum might make a fleeting rally Wednesday morning and then run out of
momentum.   

COPPER:
A massive rally in copper Monday, highlights the bull
market status of copper that is mostly derived off the contrived production
reduction scheme put in place by producers over the last two years. Certainly
the copper is looking through the war like the stock market and certainly the
Asian trade is a major component of the buying contingent. In fact, Chinese
copper prices action was very strong overnight suggesting the potential for
follow through in the


US


session.

CRUDE
COMPLEX


OVERNIGHT
CHG to
Minute=”15″>
4:15 AM

: CRUDE
-252, HEAT -602, UNGA
-661 — While the energy complex started the week out significantly weak it
did manage to level out some of the losses. Since it would appear that the UN is
pulling out inspectors and humanitarian workers and that means that oil for food
shipments will be stopped.

NATURAL
GAS


Traders
rolling from the April to the May contract have a critical decision to make, as
the market would appear to be slightly undermined and moderately overbought
coming into the end of the heating season. A normal retracement
off the February high, to March low, should allow for a recovery to 5.89, but a
failure below 5.26 might signal a critical chart failure.