Futures Indicate Stronger Open
METALS
OVERNIGHT
CHANGE to 4:15 AM:GLD-0.20 ,SLV-0.2Â ,PLAT+2.60
 London Gold Fix $341.40 Unchged
LME Copper Warehouse stks 790,375 tns
-2025 tons Comex Gold stocks 2.46 Unchanged COMEX
Silver stocks 108.7 ml oz Unchanged OVERNIGHT: Slightly lower on minor profit
taking or book squaring by funds.
GOLD:
The $350 level could become a critical pivot point around which the gold market
trades for a while, as it re-balances its overly long positioning. We continue
to think that gold might be in for a long-term grind higher toward the upper
$300’s and that the $350 level should soon become solid support instead of near
term resistance. At the risk of sounding like a broken record the Dollar is down
again and making another new contract low and that could shock the gold out of
any profit taking posture that carries over from the Asian action.
SILVER:
For some reason the silver is lagging and that could be because a major metals
producer predicted yesterday that the silver deficit was due to shrink from 96.6
million ounces in 2001, to 67 million ounces in 2002. There is still a deficit
and that should support prices but maybe not as much as would have been seen if
the deficit had actually escalated. Critical support is still expected to hold
at $4.74 in the July but now silver needs stronger leadership from the gold
market or from the economy.
PLATINUM:
It would not be a good trade for July platinum to fall back below $620 on a
close basis, especially since the equity market is sending off negative
influences. However, with the platinum market not bending under the weight of
the stock market slide Thursday, it seems that platinum is its own market and
that could help to justify a rise above close-in chart resistance of $634.5.
Right now the bull camp seems to need justification.Â
COPPER:
We would guess that seeing the
Shanghai
exchange
close for SARS would be almost as negative of a copper demand indication, as
having a large
Shanghai
copper
stocks increase. In other words, we didn’t see the
Shanghai
copper
stocks reading but we assume that the SARS tilt is negative to copper prices
until there is some clear-cut containment story. In any regard, we see stories
overnight that China Oil might delay the import of some jet fuel because sagging
travel demand in the country and that is another hit against Chinese copper
demand.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE +16Â
,HEAT+27Â ,UNGA+40 Â The
energy complex managed a strong rise Thursday and that might have come because
the trade saw the headline of a ship explosion in the
Persian Gulf
. While the explosion took
place Wednesday night just the rekindling of the anxiety toward
Middle East
oil shipment issues, might
have given the trade a reason to cover some shorts.
NATURAL
GAS
The
weekly inventory report showed a 80 bcf
injection into stocks and that could have been considered a little supportive
because some expectations were for a number higher than 90. We have to think
that natural gas saw some support from the regular energy complex action
Thursday, but that natural gas is still rather overbought and expensive, within
the recent trading range.
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS +1
The prior month’s FOMC meeting notes suggested that the Fed saw the potential
for a slow economy staying in place for an extended period of time and that
certainly gives the recent bond rise credence. The concerning view from the Fed
last month would seem to call into question why the Fed hasn’t moved to cut
interest rates. Once again the Fed shows that it never
really has a balanced view toward the risks in the economy, what it really has
in place is a “built-in bias” to err to the side of slowing, as
opposed to inflation.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+70Â DOW +4
NIKKEI +120 FTSE +12Â We stand by the view that the market is profit taking
but we now can’t rule out some selling off the idea that the recovery is going
to be painstakingly slow. Considering the dialogue released from the prior Fed
meeting, it is clear that many Fed members were fearful that slow conditions
could be persistent. While this begs the question, why didn’t the Fed act
considering their view on the economy, that is a moot
point now that they even passed on the chance to cut rates in the May meeting.
FOREIGN
EXCHANGE
DOLLAR:
While the Dollar tried to reject the new contract low posted overnight, it would
not seem like anything has changed. In fact, the only reason why a trader
wouldn’t want to sell the Dollar is the oversold technical condition. With the
US Fed confirming that the
US
recovery could be tortuously slow, it is clear that the unfavorable interest
rate and economic differential perception is going to remain in place.
Furthermore, with
Russia
and
France
wanting
only a temporary suspension in Iraqi sanctions, it is clear that international
political battles at the UN continue and that hurts the
US
and the
US Dollar. The biggest risk to fresh shorts in the Dollar is that the G7,
or the
US
begins
to talk above intervention. We hardly see the
US
talking
about intervention, as they recently stood by their strong Dollar policy. In
other words, the country that seems to be benefiting from exchange rate hardly
ever is the one to initiate a change or threatens change. Therefore, the Dollar
can bounce technically but it should be sold on technical bounces.Â
EURO:
More negative economic readings from
Germany
were
floated overnight and that impact is thrown directly in the trash, as the market
will hear of nothing that argues against the bull case for the Euro. Like the
Dollar, the Euro is extensively overdone technically and it is the end of the
week. Sometime traders have a desire to bank big profits ahead of a weekend.
Because the outlook for the Euro zone, isn’t as bad
as is being seen in the
UK
today,
that could serve to mitigate any desire to take profits in the Euro. Critical
support and a possible long entry point in the June Euro comes
in at 114.04.
YEN:
Somebody forgot to tell the Nikkei that the world economic outlook is being
downgraded, because it managed another rise overnight. We still think that the
Nikkei and the Yen were unduly impacted early in May off the initial SARS
escalation and now the markets are simply getting back on a normal track.
However, considering the lofty levels seen in the Yen, we have to think that
prices are still too high in the range to be long. In fact, we see the Yen
sliding back to 84.78.Â
SWISS:
An end of week slide does not suggest an “end of the move” in the
Swiss. In fact, we would become a buyer of the Swiss, on a slide to 75.77.
POUND:
According to a
UK
manufacturing reading the
UK
is, or
has already fallen back into recession and that is probably the first of several
G7 countries to report such a development. Since the Press is suggesting that
the such big declines in manufacturing is expected to smash into the UK GDP we
could see the Pound undermined and headed down toward the lower end of the
expected trading range around 158.00.
CANADIAN:
Some of the petals have fallen off the Canadian rose, as the payroll readings
this morning are a disappointment. With the Unemployment rate rising and total
employment falling by 19,000, some traders might be
prompted to take profits in the Canadian. The overbought action and the slowing
of the global economy are the exact reasons why we suggested several days ago
that longs stay long, but take some protection against a corrective move. Those
that sold calls and bought puts in the June options against long futures,
should take profits on a drop below 70.80.