Futures Indicate Stronger Open
July
24, 2003
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS +3 The bond market is
certainly showing signs of building a consolidation support zone on the charts.
Certainly, the bonds have been helped by the weakness in the
US
stock market and it is also
possible that bonds saw a measure of support generated off the anxiety created
by the Dollar slide/gold rally action Wednesday afternoon. While the bonds might
eventually rue getting support from the gold market action, (that is if
inflation really does become an issue) it would seem that the uncertainty
generated by the Dollar and gold markets is contributing to a slightly negative
view on the economy.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+140 DOW +11 NIKKEI +55 FTSE +43Â There is
certainly an improvement in sentiment in the equity markets coming into the
opening today. In fact, the optimism this morning is higher than at any time
this week. The Japanese stock market was higher and then gave up some of those
gains into its close as soft Sony sales figures dampened sentiment.
FOREIGN
EXCHANGE
Dollar:
The attack of the Dollar Wednesday was significant and would seem to have
extension capacity. However, given the fact that US corporate earnings are
creating a positive hype toward the
US
economy
and earnings from other areas of the world are slightly disappointing, there
might be less intense selling of the Dollar ahead. However, in order to stop the
slide in the Dollar and rekindle fresh buying interest, the
US
initial
claims report today, or the Durable goods report Friday morning must show some
strengthening. Near term downside targeting in the September Dollar comes in at
95.00, but the market might be content just to fill a gap at 95.14 and that
could stall the Dollar slide temporarily. A long term moving average in the
September Dollar comes in at 94.86. We think a sustained slide in the Dollar
comes about if the trade truly sees the
US
economy
to be in a weaker position than other economies. We are not sure that the Dollar
bears can say that, at the current point and therefore we expect the Dollar
selling to slow or stop soon.
EURO:
A critical moving average comes in above the euro this morning at 115.19 and
that could be resistance for the Euro today. We see the Euro trading in a 114 to
115.20 range until the macro economic leadership is determined. We are not at
this junction prepared to say that the Euro zone economy is going to recover
faster than the
US
.
YEN:
Poor Sony earnings stand out as a major disappointment for the Japanese economy
and disappointment in the Japanese economy usually results in a slight bidding
up of the Yen. However, with the BOJ expected to continue to weaken the Yen and
the Dollar possibly oversold from the action Wednesday. we don’t see the Yen
climbing above 84.47.
SWISS:
A double top potential is seen at 74.50, which interestingly enough is right on
a longer term down trend channel resistance line. We think the risk and reward
of buying the Swiss at current levels is unacceptable.
POUND:
Another new high for the move would seem to keep short covering interest high.
With June retail sales spiking up 1.9% over the prior month. some of the
negative economic baggage tied to the Pound is removed and that could allow for
some fresh buying instead of simple short covering. Near term resistance is seen
at 162.38 and then again at 163.16.
CANADIAN:
Three days up off the low should effectively threaten would be sellers. If the
Canadian manages to climb in a session in which the US Dollar is higher, we will
be convinced that the up trend is saved. In fact, a trade above 72.00 might be
enough to save the Canadian bull market even if the Dollar is weak.
METALS
GOLD:
The metals markets appeared to peg the Dollar slide, as the main catalyst behind
the sharp rise in gold prices Wednesday, but we have to think that a combination
of events contrived to send prices up. Certainly the interday slide in the US
Dollar kicked off the rise, but the small spec and fund long position had been
building in gold since late last year. In fact, in the first quarter, the gold
market saw a record small spec and fund long position.
SILVER:
Since the silver market gained 40 cents since the last COT report we have to
project the net spec and fund long to be 75,000 long. The record spec long in
silver, in the COT was posted last year with an 82,000 contract net spec long.
Therefore, silver is significantly overbought and close to using up the players
that have been long silver in the past.
PLATINUM:
The platinum continues it grind higher and is expected to under perform gold. We
still don’t like the risk and reward of long platinum positions from current
historically high pricing.Â
COPPER:
The copper market was slightly supported by the precious metals action but might
find it difficult to continue that relationship. Chinese copper prices were up
slightly on weak buying and it would seem that copper is without solid
direction. With the equity market choppy and the macro economic view somewhat
disappointing we think copper is vulnerable and too expensive within its
expected trading range.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE +5Â Â ,HEAT+10Â
,UNGA-3 Â The energy complex engineered a slight recovery bounce
after it became apparent that crude inventories continued to contract. Some
traders suggest that seeing the annual crude stocks deficit narrow to 30 million
barrels from 34 million barrels the prior week was a slight negative but we see
the focus being on the product market.
NATURAL
GAS
There
would not seem to be much bounce in the natural gas market, even though some
short term technical indicators are extensively oversold. The trade is expecting
a weekly injection of 75 to 100 bcf but it is possible that the trade will be
confronted with a record build, considering the slack cooling demand for the
month of July.