Futures Indicate Stronger Open
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS -30
The bonds tried to rally on the encrypted dialogue from the Fed but in the end,
the view that the economy is recovering dominated sentiment. While the bonds and
notes saw fleeting long interest, as a result of the statement that the risk of
slowing was slightly higher than the risk of inflation, there just isn’t the
setup to support fresh buying in Treasuries. We hope that traders took advantage
of the brief pop to sell those near to expiration 109 and 110 September bond
calls, as those options now seem to have a high probability of expiring
worthless.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+10Â
DOW +0 NIKKEI +187 FTSE +29Â The stock market certainly took the Fed
inaction Tuesday surprisingly well. In fact, seeing the market comfortable with
status quo monetary policy, is a sign that the market might not need a
significant improvement in the economic outlook to return to the last two months
consolidation highs. As mentioned yesterday the Dow is already on the cusp of
the top of the consolidation and that is providing the board market with a
measure of confidence.
FOREIGN
EXCHANGE
EURO:
As mentioned in the Dollar comment, the theme driving the currency markets in
the early action today is that the Euro zone growth is not going to keep pace
with US growth. Therefore, the US retail sales reading today is very critical
and with retail sales above +0.5% we expect the Euro to see more selling and a
possible near term low of 112.10.
YEN:
With a surprising decline in Industrial output overnight offset by a surging
Nikkei, the yen probably doesn’t get the repatriation buying interest that it
could have today. We have to think that the Yen has found a temporary top,
especially if the US retail sales shows a strong reading. Near term support in
the Yen comes in at 83.95.
SWISS:
The technical breakdown in the Swiss would seem to project a slide down to
72.50, especially if the Euro manages to post a trade below 112.50.
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POUND:
While the Pound has showed a nice reversal off the overnight lows, it would seem
that the trade is growing concerned about the UK economy. With consumer credit
rising and recent inflation readings coming a little below projections, it would
seem that the UK economy is under a slowing threat. However, we see no reason
for the Pound to trade below the recent consolidation low. In fact, we see the
Pound hemmed in by 159.60 and 160.70. CANADIAN DOLLAR: The Canadian failed to
take the bullish advantage early this week and now appears to be in a
liquidation wave. We don’t see significant downside punishment unless the US
retail sales lights up bullish sentiment toward the US economy. Near term
downside is limited at 71.91 but even lower action could be seen if the US
numbers are much better than expected.
METALS
GOLD:
The gold market appears to be back on its heels a little, especially since the
FOMC really didn’t do gold any favors with their monetary stance. While the gold
market wasn’t expecting a rate cut, seeing a cut would certainly have emboldened
the bull camp. Considering the large fund long in gold the market might be in
for more significant stop loss selling if the December gold slides back below
$355.
SILVER:
It would appear that the funds have already decided to liquidate some positions
and with a security analyst partially downbeat on silver, more selling is
possible in the near term. Near term downside targeting in September silver is
$4.765 and possibly lower when one considers the massive open interest in
silver. Recent open interest readings in silver show a large 111,383-contract
tally and that is coupled with a recent record spec long in the COT report.
PLATINUM:
Consolidating the spike up trade Tuesday is a bullish near term signal for
platinum. With Chinese spot trade in platinum beginning this morning, we
suspected that New York platinum would find some support. Platinum open interest
is 8,426 contracts, which is still below the 9,202 contract 12-month high water
mark. Therefore, platinum is overbought and vulnerable but not without
additional buying capacity. Unless there is a clear change in the tightness
theme, platinum prices will remain firm.Â
Early
yesterday morning the market showed slightly higher price action despite news
that BHP would leave reduced production in place at the Escondida mine. However,
the announcement that BHP would increase production at a smaller COPPER:
facility seemed to become important later on the in the session. We have to
think that the production move psychologically shifted the structure of the
copper market and with copper overbought and at the very top of the last
8-months trading range, it was a natural to see longs bail.
CRUDE
COMPLEX
OVERNIGHT
CHG to   4:15 AM Â
:CRUDE +20Â ,HEAT+49Â
,UNGA+95 Â The energy complex started the Tuesday session out firm in
the unleaded market and weak in the crude oil market and it appeared that the
focus of the session would be solely on the unleaded market. We think that the
trade is anticipating another moderate decline in US gasoline inventories but
that another decline in crude oil stocks is possible, considering that the
market was talking up the potential for decreasing crude imports into the US
early last week.
NATURAL
GAS
Another
new high for the move leaves the natural gas in a slightly overbought condition.
However, unless the weather forecast changes it would seem that natural gas will
continue to benefit from the potential for increased cooling demand.