Futures Indicate Stronger Open
METALS
GOLD:
While it initially appeared as if liquidation of long silver short gold plays
was driving the metals Monday, the fact that gold has managed a slight upside
probe in the face of a rising Dollar and a rising stock market is an indication
that something has changed in the gold market. While we don’t see gold firing
up into a strong upward pulse, it is possible that gold forges a rise to the
down trend resistance line of $352.6 basis the August contract. Yesterday a
story suggesting that the Washington Agreement might come to an end, at the end
of 2003, might have influenced gold prices, but we have a hard time
rationalizing that outcome.
SILVER:
It is disappointing for silver to have failed to rally in the face of the
optimism in the equity market Monday. However, silver is somewhat overbought and
technically vulnerable, considering distance the market has climbed in the last
month. However, we would think that consistently higher equity prices could end
up smoothing the way to economic recovery and that in turn should help improve
the fundamentals in silver.
PLATINUM:
A return to the March highs leaves the platinum market poised for more gains,
but without clear leadership from the equity market, we doubt that platinum will
shoot higher. The path of least resistance is up, but prices are very high
historically and the market would seem to lack a clear fundamental reason to
drive sharply higher. Â
COPPER:
With Chinese copper prices hitting a 31 month high and the momentum from the US
stock market still ringing in the mind of the copper market, we have to think
that the path of least resistance is up. However, considering the pace of gains
Monday and the proximity to the February highs, copper could see some
volatility. In fact, copper seems to have made a significant bid off only a
marginal improvement in the fundamental case.
CRUDE
COMPLEX
OVERNIGHT
CHG to  4:15 AM Â
:CRUDE -17Â ,HEAT-21Â
,UNGA-16 Â Even with the tropical storming affecting production in
Texas yesterday the energy market was apparently without the power to add to
last weeks gains. However, overnight tropical storm Claudette appears to have
become Hurricane Claudette with wind speeds picking up as the storm prepares to
come on shore in
Texas
.
NATURAL
GAS
While
recent declines have pared down the small spec long position in natural gas, we
doubt that the small spec long is totally leveled. In other words, continued
average or below average temperature readings in the
US
should keep the pressure on
the small spec longs and therefore natural gas prices.
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15 AM
:BONDS +3 The technical
action on the charts is pretty negative for Treasuries. We had thought that
prices were set to bounce, considering the rise off last weeks lows, but the
reversal action Monday has to be a real bull camp killer. It made sense for the
bond market to buckle under the weight of the equity market action, but with
Greenspan testifying today, one might expect wild volatility and possibly an
attempt to recover.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+360 DOW +40Â NIKKEI
-4.63 FTSE -4.8Â While the stock market might have set a high bar for itself
with the earnings reports reaction Monday, it would seem that the market will
get the fundamental information to continue the upside action. With McDonalds
and Citigroup starting the ball rolling and several other companies fostering
the optimism overnight, we see no reason why the gains can’t continue. In
fact, it would seem that regularly scheduled US economic information will
continue to support bullish sentiment today, which is something that the stock
market hasn’t necessarily seen over the last several weeks.
FOREIGN
EXCHANGE
DOLLAR:
Like the stock market, the Dollar already has a decent amount of favorable macro
economic developments factored into its price. With the trade already expecting
retail sales numbers today to rise by +0.4% and also expecting the Chairman of
the Federal Reserve to give the recovery view a lift, we have to think that the
Dollar will generally remain in favor. However, the Dollar simply won’t be
able to tolerate comments from the Fed that call the recovery into question.
Early indications are that the Fed Chairman will suggest the
US
economy
is capable of growing faster, without sparking inflation and that could be a
very big lift to the Dollar. Therefore, the bull camp really shouldn’t see a
trade back below 95.65 today in the September contract. One might consider the
junction in the market today extremely critical to the trend in the Dollar. Go
with a breakout of the 96.50 to 95.65 range.
EURO:
Apparently a couple countervailing influences hit the Euro overnight. While a
German economic survey showed the largest collection of economists in 9-months
upbeat on the German economy, it would appear that intervention statements from
Austria
clouded
the picture. As it stands, the Euro comes into the session firmer but
confronting potentially damaging US numbers and
US
testimony. With several calls for intervention we would expect the Euro to
aggressively give ground today, if the information from the
US
today
fosters the slightest pressure on the currency. Like the Dollar, this could be a
major decision day in the Euro, go with a breakout of a 112.21 to 113.44 in the
September contract.
YEN:
Weaker stock prices in
Japan
would
seem to hint at a leveling of sentiment toward the Japanese economy. The BOJ
left policy unchanged and seemed to say little about intervention. However, with
the Yen close to an upside breakout and the Dollar possibly seeing a very
critical session ahead, we see the Yen making a critical move. We suspect that
the yen is set to top but that only comes if the
US
stock
market posts another big gain following the developments early this morning.
SWISS:
Traders should sell a Sept Swiss at the market and buy a cheap call as coverage.
The trend is down and the market would appear to be headed to the March and
April lows.
POUND:
The Pound is undermined by a soft PPI reading and by talk of deflation by the
BOE this morning. In fact, the BOE seems to be talking up the chance of more
rate cuts in the future which is an issue that could throw the Pound quickly
toward the May gap area down at 160.28 to 160.02.
CANADIAN:
There would appear to be a critical pivot point for the Canadian today at 72.55.
In other words, we think that the Canadian is presented with an extremely
critical decision today and a move outside 72.00 and 72.66 could be a sign that
the market is setting up the trend for the rest of July. Considering the setup
in the
US
stock
market, we are a little concerned that the recent lows in the Canadian might not
hold.