Futures Indicate Stronger Open
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS +4 — The potential to see the end of
the Iraqi conflict was partially factored yesterday and that makes the Iraqi
filing to the UN today even more critical. We suspect that the economic reports
due out today will continue to demonstrate significant weakness. In fact, with
Ford Motor announcing overnight that they would cut auto production by 17%, that
means both airline and auto sectors are in dire condition.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P +360, DOW +37,
NIKKEI +134, FTSE
+73 — The stakes are high as the stock market is rushing to factor a solution
to the Iraqi conundrum. Through war or full compliance, the stock market is
suspecting that the geopolitical cloud will be removed soon. Considering the
deteriorating
economic condition, the end to the Iraqi situation is now becoming a necessity.
FOREIGN EXCHANGE
DOLLAR: The Dollar continues to trade higher because there is a
chance that war could be avoided, that war might be quick and successful and
because long-term short players are taking profits from months of selling. While
not every perspective can be satisfied, it would appear that overwhelming
negativeness toward the Dollar is nowhere to be found. In our opinion, the only
way that the Dollar falls back into the disdain of the world is to see the Iraqi
filing satisfy the world and not be sufficient enough for the President. If the
White House sees no way to withdraw from the attack mode without losing face,
then the Dollar could come under renewed selling. However, it would appear that
a critical bottom has been forged. If
is mostly disarmed that could be the headline the Bush Administration touts.
Until the June Dollar climbs above 101.24, nothing other than a recovery in a
bear market has taken place. We suspect that the Dollar rise will be slowed
because of the Iraqi filing, as the trade sorts out the documents. Early
numbers probably pull the Dollar back off its highs but it probably recovers
from that slide.
EURO: With the Germans highlighting their
weak economy in their State of the Union address, some of the attractiveness of
the Euro is peeled away. We also continue to see more of the war premium pulled
out of the Euro, which might have had 10 points interjected since the December
time frame. Aggressive traders that think the Euro up trend will resume should
wait for a decline to 107.03 to get long.
YEN: While the yen is showing weakness
early, the economic news from Japan overnight was pretty supportive given the
low economic bar being set by most countries. Japanese factory order shipments
increased by 3.4% and bankruptcies were down by 7.4%. In other words, left to
the numbers alone, buyers would favor the Yen.
SWISS: Until proven otherwise it would seem
that the trade is expecting the Iraqi situation to be solved and possibly solved
peacefully. Therefore, until the Iraqi filing is shown to be a farce, the Swiss
looks to slide to 73.09.
POUND: The latest developments have
apparently undermined the Pound as the sell off overnight projects a slide to at
least 158.00. However, a slide to the 157 consolidation is possible, if the
is forced to fall back and accept more UN diplomacy.
CANADIAN: Until there is reason to return to
the flight to quality mode the Canadian could be undermined. However, it would
seem that support around 66.86 might be capable of holding up. If the Iraqi
filing is acceptable to the UN, the Canadian could slide to 66.47 and then form
a solid low.
METALS
OVERNIGHT CHANGE to
4:15 AM
GLD -0.70, SLV +1.5,
PLAT +2.80;
Gold Fix $335.50, -$7.40; LME Copper
Warehouse stks 835,300 ton, -1,725 tns;
Comex Gold stocks 2.31 ml, +2,283 oz; COMEX
Silver stks 109.3 ml oz, -540,156 oz; OVERNIGHT: Minor Asian losses
mask the idea that the war rally in gold is ending
GOLD: We suspect that the net spec and fund
long is now 60,000 contracts and that means a large portion of the weak handed
longs have been flushed out of position. The gold market will only be saved from
another $10 break, if it becomes clear that the Iraqi papers on anthrax and VX
are a farce and that an attack is still very possible in the near term. While it
is possible that the PPI registers a hot enough number to provide some support
to gold, we doubt that gold will begin to rise off an inflation tilt, unless it
becomes clear that the economy has a chance of regaining strong momentum.
SILVER: As we suggested yesterday, May
silver should have very solid support around $4.50, as that level in our opinion
is a deflated price. Like gold, the silver might have to weather a final selling
wave, in the event that
adequately complies, or that an attack unfolds and ends the situation quickly.
We have to think that silver will begin to lead gold, if some of the
geopolitical headwinds can be removed.
PLATINUM: The platinum market held together
pretty well and that is because platinum has such tight supply fundamentals. In
fact, platinum should have the easiest road off all the metals of transitioning
from a war driven market to a classic tight supply strong demand focus. If there
is a final capitulation washout off the war it is possible that Apr platinum
could slide to $660. Trend line support in the Apr platinum is violated with a
trade below 672.
COPPER: Shanghai copper stocks were down 23
tons an insignificant amount and certainly not a sign that recent declines in
prices attracted interest for copper in China. Ford motor has announced this
morning that they will cut production 17% and that is certainly a negative for
copper prices. A very heavy slate of economic reports is due out today and most
of those reports suggest that copper will be under pressure again today, unless
the stock market manages to replicate the action seen Thursday.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE +10, HEAT
+54, UNGA +12 — The energy complex might
have faded yesterday off the idea that the war might be on and it might have
faded off the idea that the war might be delayed by at least another week. In
other words, some longs were concerned that the
might be ready to attack in the coming week.
NATURAL GAS
It is our
opinion that the weekly inventory draw was disappointing to the bull camp and
with the combination of warmer weather and sloppier regular energy complex price
action, the path of least resistance is down. In our opinion, the natural gas is
entrenched in a correction unless the threat of war rises up quickly and saves
the bulls.