Futures Indicate Stronger Open

INTEREST
RATES

OVERNIGHT
CHANGE to   4:15 AM :BONDS
-31 It would seem that the Treasury market has already formed an opinion on
the reports due out this week, as prices are sharply lower coming into the
early action. Apparently the market took the reports last Friday and put a
favorable macro economic spin on them. Furthermore, international and US
traders are both suggesting that the ISM report this morning will show
progress in manufacturing and employment sectors.

STOCK
INDICES

OVERNIGHT
CHANGE to   4:15 AM
:S&P+420 DOW +34  NIKKEI +19
FTSE -9 The Dow continues to suggest that the US economy is gaining
recovery momentum, as it posted another new high for the move in the overnight
action. In fact, the Treasury market is also showing signs that the economy is
gaining momentum, as it was down hard overnight on the dialogue that the
recovery was in the process of showing itself. While we are not sure if the
markets are correct in the recovery assumption, there will be an ISM report
this morning that could resolve the debate.

FOREIGN
EXCHANGE

Dollar:
The Dollar is reading its own Press clippings and is getting a bit of buying
as a result. It would seem that the stage is set to see a solid ISM report
with the trade almost gushing over the prospect of salient recovery evidence
from the US economy. Until the September Dollar manages to rise above 99.40 it
wouldn’t even seem like anything has taken place of technical significance.
While we saw signs of strength in various US reports last week, we are a
little surprised that the market has managed to put away the concern of a
jobless recovery ahead of the monthly US payroll report Friday morning. In the
mean time, there should be little to prevent a rise into the ISM but if that
report doesn’t yield a 1.2-point gain, the Dollar could see an aggressive
correction off this morning’s highs.

EURO:
Adding to the Euro weakness this morning are slightly softer Euro zone PPI
readings but since there isn’t a true fear of deflation from the numbers, the
US numbers probably hold the real key to action for the rest of the week. In
other words, we see the September Euro sliding toward chart support of 108.07
but for that level to hold unless the recovery view is really given legs by
progressively stronger than expected US numbers, or by new high moves in US
equity markets. 

YEN:
While the BOJ might not have acted against the Yen in August that will
certainly not be the case in September. In fact, we would think that the BOJ
has already acted by selling the currency on its move above 86.00. Late last
week the Japanese posted extremely weak auto sales readings and that is the
first real setback on the economic front in a week. As it stands, the Dollar
is strong enough this morning that the BOJ should be willing to step in and
sell the Yen. Near term downside targeting comes in at 85.05 basis the
September contract.

SWISS:
In our mind a failure below 70.59 signals a bigger failure ahead. However, if
the US numbers this morning don’t confirm better than expected US growth, the
Swiss might find that level to be extremely solid support on the charts.

 

POUND:
The Pound really gets a macro economic boost from numbers released Monday, as
Manufacturing PMI rose to the highest level in 14 months. It should also be
noted that UK housing figures also strengthened and that should give the Pound
a good chance of bottoming. In other words, the 156.00 level is solid support
unless something significant changes. Near term upside targeting in the Pound
comes in at 158.00. CANADIAN DOLLAR: A major upside breakout in the Canadian
at least puts the bear camp off balance. Even if the Canadian couldn’t hold
all the overnight gains, it at least gets some respect. In fact, if the
Canadian can garner some buying interest in the face of Dollar strength that
could push the trend back up.

METALS

OVERNIGHT
CHANGE to   4:15 AM:GLD+0.60
,SLV+3.8  ,PLAT+8.40, CP +55 London
Gold Fix $375.50 +$4.50 LME Copper Warehouse stks 619,300 tns -850 tons Comex
Gold stocks 2.729 ml oz -2419 oz  Comex
Silver stks 104.8 ml +1,044,899 oz OVERNIGHT: Japanese buying helps gold start
the week out on a positive note.

GOLD:
While the gold market starts the week out on a positive note, it could be an
uphill battle with the Dollar sharply higher and the COT report showing a net
spec and fund long reaching 141,000 contracts into the last COT report. Since
the gold market has added another $10 an ounce, since the COT report was
measured, we now have to put the net spec long at 151,000 contracts and that
simply blows by the old record net spec long position. However, while the COT
report certainly shows a massively overbought condition it also shows interest
in inflation sensitive markets and commodities in general.

SILVER:
The silver market will continue to track gold to a degree but will also be
impacted by the ebb and flow of macro economic sentiment. The weekly COT
report in silver showed a net spec long of 73,000 contracts and that is not
quite a record but with silver 13 cents above where the report was measured,
we have to think that the market is close to a record, as we enter this week’s
action. With the trade taking the economic reports Friday as a sign that the
US recovery might be strengthening, we suspect that silver will find some long
interest even though prices are short term overbought.

PLATINUM:
With the platinum market already making a new high, it is clear that last
weeks gains haven’t exhausted the long interest in platinum. The COT report
probably understates the net spec long of 6,400 contracts because the platinum
market has rallied almost $20 since that report was taken. We think that
platinum is catching the wave of economic recovery and that means slightly
higher demand on top of inadequate supply flow. There is really nothing that
suggests platinum should be turned away from even more gains. 

COMMITMENT
OF TRADERS ANALYSIS – FUTURES & OPTIONS 
August 19 – August 26, 2003

              
LARGE SPEC          COMMERCIAL          
NON-REPORTABLE

                
NET                 
NET                  
NET

           
POSITION   NET CH   
POSITION    NET
CH    POSITION  
NET CH

SILVER         
45802     1927     
-73794      2475      
27992    -4402

COPPER         
28945    -1222     
-38197      2726       
9251    -1504

GOLD           
97021     8279    
-141078     -9998      
44058     1720

PLATINUM        
5842      169      
-6642      -371        
800      202

 

A
significant gap up move overnight in December copper could catch the market
leaning on the short side. In fact, if the copper market COPPER: were not
still moderately long, we would expect to see aggressive buying on the current
bounce. It would seem that the macro economic look is vastly improved because
of the spin from the weekend financial programs and that could serve to lift
copper prices back to the July and August highs up around 82.50.

CRUDE
COMPLEX

OVERNIGHT
CHG to    4:15 AM  
:CRUDE -32  ,HEAT-43 
,UNGA-96 The energy complex enters this week with the trade
talking about a loss of momentum. The crude oil market is showing a massively
long fund position and surprisingly a net short small spec.

NATURAL
GAS

The COT
report continued to show a dichotomy in the natural gas market, with the funds
carrying a huge short and the small traders carrying a large long. We suspect
that some of the small specs were forced from position last week and that more
small specs will be forced out on decline below $4.63 as sell stops are
invoked.