Futures Indicate Stronger Open
METALS
GOLD:
We doubt that August gold will decline further than $364.5 but considering the
magnitude of the recent spec long reading, one can’t rule out a slide to the top
of the late February consolidation down around $362. Strong gains in the equity
market certainly detract from the investment interest in gold, as the rate of
return environment shifts to higher levels leaving gold partially out in the
cold again. If the
US
stock
market continues to soar relative to other international markets that could in
turn dampen or stop the slide in the Dollar and that would be another negative
for gold.
SILVER:
Today will be an important session for silver, as it will have to show its
focus. In other words, will silver fall simply because gold is weak, or will
silver rise because the economy is seen as improving. We have a feeling that
silver will initially sag but then will find support off physical buying
interest and hedge buying.
PLATINUM:
Two large range days around the recent highs and the platinum market appears to
be have topped just like the other metals. Therefore, it is clear that platinum
was deriving its strength from some type of flight to quality interest. In other
words, a higher US stock and Dollar market condition is detrimental to platinum.
Â
COPPER:
Considering the action in the equity market and the weakness in the precious
metals, about the only thing keeping copper from sharply higher action is a
firmer Dollar. However, international copper price action overnight was less
than stellar, with significant gains pared into the close. It should be noted
that LME copper stocks continue to decline at a noteable rate and that is
indicative of a market that should be able to rise to the previous stated target
of 80.60.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE -18Â ,HEAT-40Â
,UNGA-53 Â Not a very good showing for the energy complex Tuesday, as
it opened firm and then failed to hold the gains into the close. However, the
crude oil market did manage to finish higher on the session, which leaves the
path of least resistance pointing up.
NATURAL
GAS
Considering
the normalization of weather and the significantly overbought status of the
natural gas market coming into the week, the technical damage on the charts
could be significant. In other words, gas could see at least a three-day
extension on the downside.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS -23 What goes up fast
tends to come down fast! In fact, considering the pace of gains in bonds in the
month of May, traders should not be too quick to jump in and buy corrections
until there is cause to buy from the numbers, or from some other headline type
event. We had been thinking that
the bond market was assuming much too negative of a scenario for the economy,
but with sentiment readings rising along with the stock market Tuesday, one
might say that the economy is even better than anyone expected. Considering the
volatile condition of the bond and note markets, the durable goods report this
morning becomes quite significant.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+510 DOW +48 NIKKEI +113Â
FTSE +58Â The stock market never really doubted the economy like the
bond market and therefore it probably doesn’t have a massive extension capacity
off the improving macro economic outlook. However, we do get the sense that some
investors are seeing recent gains and are beginning to feel the pull of greed.
Until the March low, the stock market was controlled by fear and until the last
couple sessions we hadn’t really detected much in the way of greed.
FOREIGN
EXCHANGE
DOLLAR:
The
US
stock
market is the main issue providing some support to the Dollar. It will not be as
quick of a transition in the Dollar, as it has been in the
US
stock
market because the world might need to see some proof that the
US
economy
deserves some capital flow. Therefore the
US
durable
goods report due out this morning might be extremely critical in establishing
the coming trend in the Dollar. If the durables report were to surprise with a
positive number that could go a long way toward altering the outlook toward the
Dollar. Most traders will not change their opinion on the Dollar until there are
two closes back above 94.10, while others won’t change their opinion until the
Dollar manages a rise back above 95.00. In the near term, the Dollar looks set
to rise until something tempers the current optimism toward the recovery. It
should be noted that the
US
stock
market rise is a major portion of the “good feeling”. There is an
upcoming G8 meeting and with the Dollar rising, it might be easier for the trade
to fear a coordinated intervention.
EURO:
Trend line support in the Euro comes in down at 115.87 and that is a long way
down. Right now the Euro zone is having trouble garnering the spotlight and with
overnight dialogue still pointing out a risk of German deflation, we suspect
that the Euro is set to slide. Currently the ECB is attempting to fashion the
rising Euro as a necessary evil to control domestic prices but at the same time
the officials are attempting to discount the threat of deflation. As usual, the
policy of the ECB is a negative to the currency. In fact, ECB officials
suggested overnight that the Euro had not reached the pain threshold around the
recent highs.
YEN:
Lower Japanese auto production for 2 straight months is disconcerting to an
economy that is dependent on auto production. Considering the massive slide in
the Yen overnight and the chance to slide below the moving average pivot point,
it is possible that sellers come out in force on the Yen. Near term support is
pegged at 84.00.
SWISS:
A sharp rise in world equity prices and a moderate rise in the Dollar is not a
good combination for the Swiss, especially with the currency recently overbought
technically. Critical pivot point support comes in around 76.77 but that doesn’t
look to stop the current slide.
POUND:
Even the Pound is sitting on critical chart support levels into the opening this
morning and that might make US economic numbers very important. A failure to
162.22 would not be that surprising.
CANADIAN:
The combination of SARS and BSE were apparently enough to stall the Canadian but
with the
US
stock
market providing an incentive to reconsider investment in the
US
, the
Canadian was a prime target for profit taking. However, if the June Canadian
slides below 72.23 there could be a capital break down to the 71.57 level. Longs
should have put protection.