Futures Indicate Stronger Open
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS +4
After the mid August bounce the Treasury market shouldn’t be as technically
oversold and with the economic report slate this morning expected to show some
favorable readings on the US economy, one has to expect a downward bias in
prices. In fact, it should be an easy task to put the December bonds down to
103-14 and the December notes down to 108-20. However, in order to send
Treasuries crashing down within the last two months trading range, the leading
indicator report needs to show an expansion of at least +0.2% or more or the US
stock market needs to soar.
STOCK
INDICES
OVERNIGHT
CHANGE to  4:15 AM:S&P+340
DOW +33Â NIKKEI +70 FTSE +26Â The
market continues to favor the bull camp, as the market mostly discounted the
disappointing HP/Compaq news Wednesday and remained near its recent highs.
Furthermore, it would seem that the international Press headlines this morning
are trumpeting a growing US economy and are doing so in the face of obviously
weak economic readings from the UK and Germany. In Germany, the GDP readings
prompted the German Stats Office to declare their economy officially back in a
recession.
FOREIGN
EXCHANGE
EURO:
We have to think that the ECB is at least considering a rate cut but it is also
possible that the ECB wants to see a lower exchange rate given the evidence that
the exchange rate is hurting their recovery efforts. However, overnight the
Press is suggesting that the Euro slide is making an ECB rate cut less likely.
Therefore, it would seem that the Euro slide will be allowed to continue and
might even be prodded on by official statements or actions.Â
Next downside support in the September Euro comes in at 108.88,
especially if the market manages to remain below a critical pivot point of
110.00 for most of the session today.
YEN:
The BOJ is confronted with evidence this morning that net investment flows into
Japanese funds are rising and that could make it difficult to keep the Yen down.
Furthermore, with the Euro so soft the Yen is getting an indirect lift. However,
because the Dollar is so strong, we have to discount the potential that the Yen
is going to rise sharply above the resistance levels it is encountering this
morning. Resistance is thought to be solid at 85.00.Â
SWISS:
There just aren’t many reasons why the Swiss slide should stop as the economic
outlook isn’t significant and the indirect pressure from the declining Euro is
too much for the Swiss to overcome. In fact, the Swiss might have to slide all
the way down to 70.00 before support is found.
Â
POUND:
With retail sales in the UK falling a surprising 0.4%, one might assume
disappointment in the Pound but we must add that the trade was looking for a
0.5% decline. In any regard, the UK numbers make it difficult for the Pound to
find support on the charts. More downside ahead! CANADIAN DOLLAR: The outside
influence of the US Dollar is keeping the pressure on the Canadian and until the
$ rise slows, or reverses we have to fear a slide to 70.70 in the Sep Canadian.
The technical chart pattern is such that the bears have near term control.
METALS
GOLD:
A series of economic numbers from the UK and Germany would seem to hint at
renewed deflationary concerns. Perhaps an even bigger negative for the gold
market is the fact that the numbers released overnight foster more strength in
the Dollar! A 4-month high in the Dollar against the Euro overnight confirms the
recovery pace in the US is stronger than the growth being seen in Europe.
Therefore, with open interest rising sharply off the August low and gold already
carrying a significant net spec long position, the gold market might become
vulnerable under the Dollar action.
SILVER:
One has to like the chart setup as silver prices have clawed their way right
back to the August highs but it would seem that the late July consolidation
pattern up at 506 is heavy resistance. Like gold, December silver is carrying a
significant open interest tally and that also combines with an ongoing large
spec long position to make it difficult add to recent gains without some fresh
headline assistance. The bigger picture trend would appear to be up in silver
but one can’t rule out a temporary return to $4.93.
PLATINUM:
One must give credit to platinum for consistently forging new contract highs but
with open interest soaring to 8,649 contracts, it is clear that platinum is
burning a lot of fuel in making the contract highs. The trend is up but bull
fundamentals are lacking. Â
COPPER:
Slightly lower Chinese copper prices would seem to conflict with the overnight
global view that the US economy is recovering. In fact, the trade is thinking
that US numbers this morning will provide even more favorable readings on the US
economy. In a negative note, a US copper facility in Montana is being restarted
after being closed in 2000 because of power costs.
CRUDE
COMPLEX
OVERNIGHT
CHG to    4:15 AM Â
:CRUDE +8Â Â ,HEAT+64Â
,UNGA+84Â The energy complex took it’s time in responding to the
bullish inventory readings released Wednesday morning but later in the session
the Press reported that Venezuelan exports to the US for June declined and that
declining exports might become a trend. It should also be noted that the basket
price of crude dipped below the upper band Tuesday and that in a sense stops the
20-day count for what could have been a 500,000 barrel per day production
increase from OPEC by the end of the month.
NATURAL
GAS
Considering
the temperature forecast for the Midwest, we suspect that October natural gas
will maintain an upward bias. While the weekly injection reading is probably
something to fear this morning, this market could easily rise to the August high
on almost no notice.