Futures Indicate Stronger Open
METALS
OVERNIGHT
CHANGE to 4:15 AM:GLD-0.90 ,SLV+1.0Â ,PLAT+3.30,
CP +10 Â London Gold Fix $344.50 +$.30 LME Copper Warehouse stks
649,775 tns -2,375 tns Comex
Gold stoc 2.673 -965 oz COMEX Silver stocks 107.3 ml
oz -325,434 oz OVERNIGHT: Gold was weaker in Asia but strong equities weighed on
sentiment
GOLD:
The gold market remains on the ropes with the Dollar higher and the COT report
confirming that 74,000 spec and fund longs were still in position as of last
Tuesday. Furthermore, with expectations of favorable corporate earnings reports
this week, it would seem that gold will have plenty of investment competition
from the equity market. Recently gold hasn’t been getting a lift from the
favorable equity market action, even though silver, platinum and copper have
been! In other words, the gold market can’t seem to get a consistent trading
theme and especially can’t get a consistently bullish trading theme.
SILVER:
The silver chart looks a little vulnerable and with the COT report showing the
net spec and fund long to be 45,000 contracts, as of last Tuesday the market is
overbought. Given recent patterns, we would suspect that favorable equity market
action this week could lift silver, but with silver prices nearly 30 cents above
the late June consolidation lows, the market should be considered a little
vulnerable. We suspect that even under a corrective attempt, September silver
will be able to respect chart support of $4.74.
PLATINUM:
The platinum market is wasting no time in rising toward the March highs. We have
to think that strong positioning of Asian economies and the stellar run in the
Nikkei over the last month, are contributing to the platinum rally. As long as
Wall Street manages to progress through the heavy slate of earnings reports with
a positive attitude to stock prices, platinum could make a contract high bid. Â
Â
COPPER:
Both Shanghai and
London
copper
price action was firmer and considering the favorable earnings from Citigroup,
we assume that copper will be supported by equity market action. Furthermore,
reports of Chinese buying overnight gives the market a much improved positioning
versus last week, when the market basically consolidated. However, the Chinese
are suggesting that copper prices in
Asia
continue
to carry high premiums and that might limit the amount of up side in the near
term.
CRUDE
COMPLEX
OVERNIGHT
CHG to  4:15 AM Â
:CRUDE -3Â Â ,HEAT+47Â
,UNGA-30 Â The energy complex decided to rally aggressively off the
news Friday that some oil companies were removing personnel from platforms in
the Gulf of Mexico because of tropical storm Claudette. We also think that the
IEA forecast released before the opening last Friday, that suggested OPEC
managed to reduce June production by almost 800,000 barrels per day, is suspect
but that forecast could easily have spurned the trade to bid up prices.
NATURAL
GAS
The
reason we doubt that the regular energy complex was up off the weather Friday is
that natural gas failed to hold ground during the action Friday. With the
hurricane a threat and the market expecting hot temps for this week natural gas
should have shown more signs of strength.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS
+2 The Treasury market comes into the week in a slight upside breakout, with
prices managing to climb above the last five days consolidation. It is
surprising that bonds and notes are showing such firmness considering that Wall
Street is attempting to “hype” the early earnings reports. However, if
one looks back at the data of the last two weeks, there would seem to be plenty
of fundamental basis to bid up Treasuries.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
:S&P+350
DOW +35Â NIKKEI +120 FTSE +15Â The
initial reaction to the very heavy slate of corporate earnings is positive, as
Citigroup comes out of the box with a favorable set of figures. Since the stock
market stumbled last week and then recovered, some might suggest that the
technical condition of the market is suspect, but if the trade sees an early
pattern of favorable earnings reports, that should produce a wave of buying
interest. We do detect a certain measure of skepticism that stock price gains
have already factored fairly decent earnings and therefore to a certain degree,
favorable earnings are necessary to sustain current price levels.
FOREIGN
EXCHANGE
DOLLAR:
The Dollar is quietly forging consistent new highs for the move and is doing so
without the aid of beneficial
US
numbers. The Dollar is also climbing without the
US
stock
market seriously outperforming the
Pacific
Rim
stock
markets. In other words, the Dollar is making most of its gains against the Euro
and is doing so without clear reasoning. Some are suggesting that long term
short covering is still taking place and that may be the case. We just don’t get
the sense from the
US
numbers
that the
US
is
positioned significantly better than the Euro zone, especially considering some
numbers late last week from the Euro zone. In any regard, it would seem that the
coming sweep of US corporate earnings reports are going to drive US stock prices
higher and that in turn should fuel more light buying of the Dollar. We still
suspect that the Dollar is going to periodically fall back below 96.00 but that
consistently higher prices will be seen in the mean time.
EURO:
The Euro is simply out of favor and we are not sure why. However, the European
trade made it clear that favorable
US
numbers
this morning are behind the slide in the Euro. With those Citigroup earnings
hitting the wire early, the Euro starts the week out on a selling note. With a
move to new low ground for the move and a slight rejection of that downside
breakout, the euro shows some capacity to hold up against a whole new wave down.
In fact, with a gap filled this morning we suspect that the Euro might respect
the overnight low of 112.21, unless the NYSE really forges some strong gains
today.
YEN:
The Japanese economy continues to spew favorable numbers with the bankruptcy
rate in June falling by 1.2% and the Nikkei posting another moderately large
gain. We are actually surprised that money is flowing aggressively toward
undervalued Japanese assets, considering the improvement in the numbers.
Therefore, we have to assume that the path of least resistance is up in the Yen.
Resistance is seen at 85.49, as it would appear that the BOJ might have scared
off the overnight buyers.
SWISS:
Another new low for the move and with that action the Swiss appears poised to
slide toward those March and April lows. With the Euro fostering the weakness in
the Swiss, we see more significant losses before a solid low is found.
POUND:
Non descript PPI readings from the
UK
overnight, do little to discourage the pattern of selling seen in the Pound for
the past month. In fact, seeing the Pound slide below 161.52 could mean that the
Pound is headed down to 161.34 and eventually down to another gap at 160.28.
CANADIAN:
The Canadian is holding together rather well, considering the performance in the
US Dollar. We still have to fear a slide to the May low of 71.30 but we attach a
low probability to that type of washout. In fact, there is a good chance that
the Canadian might be able to respect last weeks
lows.