Futures Point To A Weaker Open
INTEREST RATES
01/15 OVERNIGHT CHANGE to 04:15 AM:BONDS-6 The
reaction to the Fed Beige book was pretty indifferent Wednesday afternoon but
the general tone toward the jobs sector leaves the bull camp in charge.
According to the Fed, “hiring in some areas has been quite Minimal”. The Beige
Book did show significant improvement in travel and tourism, which would seem to
be a positive lagging indicator for the economy.
STOCK INDICES
01/15 OVRNIGHT CHG to 04:15 AM:S&P-380, DOW-30,
NIKKEI -197, FTSE-4 The stock market certainly appeared to get some buying
interest Wednesday off the hope for a stronger Dollar. However, we doubt that
strong Dollar support will continue unless the outlook for the US economy
improves. It might be possible for the market to garner support from the J.P.
DOW
The Dow continues to coil and maintains a slight upward bias. However, the Dow
is under performing versus the S&P and doesn’t have as impressive of a chart
setup. Critical support comes in today at 10,479 and then again at 10,433. On
the other hand, seeing the March Dow rise above 10,527 could spark
follow-through buying.
S&P
The S&P comes into the session weaker despite a large merger and what appeared
to be favorable Intel earnings. Therefore, it is a little discouraging to the
bull camp that prices are starting out soft. While short-term technicals are in
a sell mode, the overall chart setup seems to favor the bulls, with the biggest
drawback being a lack of momentum. In short, the S&P needs a little help from
the numbers in order to make a new high.
FOREIGN EXCHANGE
US DOLLAR
The Dollar has managed to make another higher-high
overnight and is flirting with a reversal off a number of short-term technical
indicators. While the overall rise in the Dollar, off the recent low, isn’t that
significant there are signs in other markets that the potential to turn the
trend is real. In the gold market it is clear that traders fear a turn and at
times Wednesday the US stock market was seeing the benefit of a turn in the
Dollar. Therefore, the trade is assuming change is possible. However, it is a
difficult play to purchase the Dollar when the fundamental track doesn’t foster
positive attitudes toward the Dollar. Certainly the US economy is net/net
stronger in terms of absolute growth than the Euro zone, but the US Fed seems to
be bent on steady rates and the ECB could change rates at any time. We suspect
that the March Dollar might try and run up to 86.96 but then we think the rally
will fail unless the US numbers strengthen and optimism toward the US economy
returns.
EURO
With the suspicion of change in the Euro, the 4th
quarter 2003 and 1st quarter 2004 GDP forecasts are not that impressive. With
the Euro sitting at such lofty levels and the US economy easily able to surpass
the projected Euro zone growth rate we can understand some longs questioning
their positions in the Euro. Keep in mind, that US growth for the 3rd quarter
was many times greater than the reading released by the Euro zone today for that
same period. We see the Euro falling down to 125.37 before a major trend
decision is made!
YEN
The Yen remains coiled just under the upside
breakout point on the charts. The Nikkei has seen some pretty significant
declines this week and that would seem to undermine the outlook on the economy
and possibly keep the BOJ intent on managing the currency. Critical support
comes in today at 94.23 but a break out up might be signaled with a rise above
94.58. With the Dollar generally remaining in favor, it is surprising that the
Yen has held up so close to the upside pivot point.
SWISS
More chart violations are expected with a near term
targeting of 80.78. The Swiss doesn’t have a strong economic story to discourage
the sellers, so the path of least resistance is down.
BRITISH POUND
Short-term technicals are in a sell mode and the
Pound has violated several critical levels on the charts. Near term targeting is
seen down at 181.35.
CANADIAN DOLLAR
As we suggested early in the week, the Canadian
could be in for some extensive volatility. Near term support at 76.99 will
probably fail, sending the Canadian down to the 76.70 to 76.50 trading range.
METALS
OVERNIGHT
GLD-5.50, SLV-13.50, PLAT-2.40 London
A.M. Gold fix $415.50 -$5.50 LME COPPER STOCKS 405,500 tons -3,200 tons COMEX
Gold stocks 3.17 ml -1,029 oz Comex Silver stocks 125.3 ml oz -1,001 oz
GOLD
The gold market is under pressure in the overnight
trade and because the small spec and fund long has only recently fallen back
from a record long, we have to think that the market remains vulnerable to
severe profit taking. However, unless the Dollar shows signs of forging a
critical bottom, we would not expect a massive capitulation in gold. However,
with the $418 level violated overnight and the Dollar showing hardly any
direction, it would appear that gold is breaking off something besides Dollar
action.
SILVER
Considering the weakness in gold, we suspect that
the record small spec and fund long in silver will come under significant
pressure. In fact, the trade is already noting speculative sales and it would
appear that a significant probe down is in the cards. Near term support comes in
at $6.16 but a slide down to $6.00 would not be surprising, considering the size
of the speculative long entrenched into the silver market over the last 9
months.
PLATINUM
So far, the overt weakness in gold and silver hasn’t
resulted in that much pressure on platinum. However, we would have to think that
a failure below $843.5 could spark an additional wave of stop loss selling.
Since the small spec long in platinum isn’t that large (from an absolute value)
we doubt that panic selling will surface in platinum.
COPPER
The copper market continues to coil just under the
recent highs, as the trade is unsure of the outcome of various labor dealings.
While the economic outlook would seem to be decaying in the US, it should be
noted that LME warehouse stocks continue to contract and that in a way that
reconfirms the bull track in prices. Certainly labor threats have resulted in
300-400 points of upside and a resolution of the disputes could cause a
concentrated setback in prices but we suspect any setback will be temporary
unless the market comes to the conclusion that the global recovery is faltering.
CRUDE COMPLEX
The weekly inventory reports were somewhat
offsetting as distillate stocks climbed moderately but the DOE posted a
moderately large crude stock decline. However, it would seem that the market
wasn’t buying into the bull story even with cold weather being seen in the
Eastern US. With the refinery operating rates declining sharply, the oil
refiners are seeing slackening demand and they certainly don’t want to be caught
with large inventories at such high prices.
NATURAL GAS
The weekly inventory readings are calling for a big
draw of 140 to 190 bcf, which is a figure that gets the bull camp back in
partial control over prices. We have feared that the market expectations were
going to look for a 70 to 90 bcf draw and that simply wasn’t enough demand to
support prices in the vicinity of $7.00. Any draw greater than 136 bcf narrows
the annual surplus and therefore helps the bull camp.