Futures Indicate Stronger Open
METALS
GOLD:
A positive bias continued to exist in Asian gold trading action with the
Japanese players showing the most visible interest in the long side. We did note
some weakness in gold on the news that 2 of the top three Iraqi regime leaders
had been killed and that shows some longs were in off the hope of political
uncertainty. It should also be noted that gold also saw some light long
liquidation off the strong gains in the equity market.
SILVER:
The silver market continues to get good mileage from the gains in gold and when
the news that Saddam’s sons were killed surfaced that simply added to the
upside. In other words, the silver market is capable of rallying in flight to
quality situations and with favorable leadership from the stock market. With the
gains overnight, the September silver would seem to be headed to the next
resistance level on the charts up at $4.89.
PLATINUM:
There has been talk that Asian jewelry demand is prompting the persistent gains
in platinum but it is also likely that some investment interest is driving
platinum, particularly since both gold and silver are showing strong favor.
Therefore, more step-wise gains are possible in platinum even if the risk and
reward of being long is suspect. Â
COPPER:
Chinese copper action was non descript overnight but it was clear from the
action yesterday that copper isn’t exactly poised to respond positively to
rallies in the equity market. News that a South African copper producer
increased output fosters the concern that several large producers are preparing
to increase output. It should also be noted that a Chinese copper facility is
expected to start production in 2004.
CRUDE
COMPLEX
OVERNIGHT
CHG to  4:15 AM Â
:CRUDE +15Â ,HEAT+78Â
,UNGA+2 Â While the trade seemed to be pricing a big influx of API
crude stocks in the report due out this morning, that doesn’t exactly mix with
the range of forecasts published by the Press ahead of the report. In fact, some
analysts think that crude stocks will decline by up to 2 million barrels.
NATURAL
GAS
A new low
for the move Tuesday, leaves the natural gas market undermined and in a
liquidation posture. With support failing during the session Tuesday, the next
downside targeting is seen at $4.69 in the September contract.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS +15 Despite fear of
upcoming supply and a strong stock market rally, the Treasuries have managed a
short covering bounce. Some traders are suggesting that the “back-up”
of rates has made the bonds competitive with equities on a yield basis. While
the stock to bond yield gap might have sparked some light interest, we think it
is becoming clear that better economic numbers will have to be seen in order for
bonds and notes to go below this weeks lows.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
:S&P+210
DOW +15 NIKKEI +129 FTSE +11Â At this early hour the stock market is
attempting to put a favorable spin on the series of earnings reports released
ahead of the opening. With the stock market seeing short covering and light
fresh interest off the
Iraq
news
Tuesday, it could be a little more difficult for the market to rally
aggressively off slightly favorable earnings news. In other words, the recoil
off the recent lows, takes away some of the potential technical momentum that
could have been expected after the overly aggressive selling activity seen last
week.
FOREIGN
EXCHANGE
Dollar:
The Dollar continues its slide despite seeing the progress in
Iraq
. It
would seem that the
US
corporate earnings reports are mixed and that seems to be allowing for a
slightly negative view on the Dollar to continue. With the
US
economic report slate thin and stock market gains Tuesday not helping the
Dollar, it would seem that the Dollar has more downside before a low is
established. Near term downside targeting is seen at 95.65 in the September
Dollar Index, whereas a short-term trend change would take place with a rise
back above 96.89. Many traders think that the rise off the June low was simply a
technical short covering bounce and that the downtrend has in fact already
resumed. Considering the lack of clear-cut scheduled economic report optimism
one has to wonder if the
US
economy
is in fact stronger or better positioned to recover than is the Euro economy.
Since the Dollar didn’t rally off the Iraqi news Tuesday and the economic report
slate is empty we have to favor the recent downside tilt in the Dollar until
something changes in the headlines.
EURO:
Getting above a critical pivot point at 113.72 could mean that the Euro is set
to climb to the 115.00 level. Without discouraging news in German inflation
numbers and strong interest in Euro Government bonds we have to think that the
Euro is poised to mount more gains. It should be noted that some Bavarian CPI
readings were a little above expectations and that could effectively argue
against deflation concerns in the
Germany
economy. Traders might consider selling September Euro 110.50 puts for a
short-term play.
YEN:
We suspect that the weakness in the US Dollar is providing enough support to the
Yen to hold it above the consolidation low zone of 84.00. However, we would not
rule out a temporary slide below 83.80 before the end of the week. Economic
readings released recently on the Japanese economy showed a setback in the
recovery view and that could serve to channel a little buying into the Yen.
However, on a rally to 84.71 we would become sellers of the Yen.
SWISS:
An upside breakout takes place with a rise above 74.03 and that action is
probably going to take place soon. In fact, unless the Swiss avoids an intraday
rise above 74.00 today, we have to think that an upside extension is ahead.
POUND:
Considering the recent economic readings from the
UK
, we
have to suggest that traders look to any rally in the coming two sessions as a
place to get short. However, traders might have to risk positions to at least
160.98 in order to discount interday noise.
CANADIAN:
For the Canadian to make lower lows in the face of weak US Dollar action,
highlights the downtrend pattern in the Canadian. In other words, the Canadian
is falling without the benefit of Dollar strength.