Futures Point To A Flat Open
INTEREST RATES
OVERNIGHT
CHANGE to 04:12 AM:BONDS+7 We suspect that tight ranges could continue to unfold
in Treasuries, as the economic report slate is empty and the market is somewhat
hemmed in by the conflict in the fundamental outlook. The idea is that the US
and world economies are recovering but the recovery pace isn’t thought to be
impressive. In fact, during the market closure on Tuesday, the trade got a look
at partially anemic private retail sales readings for the first week of
November.
STOCK INDICES
OVERNIGHT
CHANGE to 04:12 AM:$-49, YEN-47, SF+87, CA+3, EU+94Â
Dollar:
The Dollar is certainly playing catch up to the news and bearish sentiment in
play from the closed session on Tuesday. The disappointment off recent US retail
readings is given more prominence because the thin slate of news and because the
US economy is pretty dependent on the holiday shopping season for retail
profits. In the end, the Dollar is set to slide toward the October lows.
FOREIGN EXCHANGE
EURO: The
Euro is getting a combination of technical short covering from an oversold
condition and is also getting a surprise windfall off the economic differential.
With the overnight action the Euro has simply returned to the bottom of the
September and October trading range, which is bound by 115.28 and 118.42. With
the Germans posting a September trade surplus, there would seem to be little to
discourage more gains in the Euro, with near term resistance seen down at
116.43.
YEN: It
would seem that intervention or the fear of intervention has been at work in the
Yen over the last 24 hours. BOJ officials would not verify their actions but did
suggest that they would not tolerate such volatility in rates. Therefore, the
trade is temporarily limited under this week’s highs. Apparently the trade was
ultimately disappointed with the Japanese machine orders reading and that
combines with the intervention threat to put the Yen down for a couple sessions.
Critical support and a buying zone in the December Yen comes in down at 91.62.
SWISS: A
major upward breakout in the Swiss should generate the potential for stop loss
buying. In fact, we see the Swiss running up to the bottom of the October
consolidation up at 74.79, before much selling is encountered.
POUND:
Since the US economy has basically lost respect, the Pound should see the
impetus to find solid support but a trade below 165.94 could be very damaging to
the bulls in the Pound.
CANADIAN
DOLLAR: The Canadian doesn’t even return to the old up trend channel until it
regains 76.76 and considering that the Dollar is weak, the Pound is choppy and
the Yen is being held back by intervention, the Canadian has a distinct
advantage. Trade with the bull trend and expect new highs soon.
METALS
GOLD: We
suspect that the Dollar is going to play catch up to the information released
Tuesday and that should keep the Greenback under pressure and in turn provide
some support to the gold market. Chinese gold prices were higher overnight and
the London Fix also rose and that should put the US market in position to make a
minor technical breakout above $389.3. A trade above $391.8 would also take the
market above a critical point and that might attract a wave of fund buying.
SILVER:
We are a little disappointed with the technical failure yesterday in the silver,
as that could easily see the March silver slide back toward $4.95. If the gold
market provides leadership we suspect that silver will avoid further selling and
possibly attempt to return to the recent trading range of $5.09 to $5.23 in the
March contract. Trend line support in the March contract comes in at $4.975,
while top of the up trend channel comes in up at $5.316.
PLATINUM:
The platinum market is operating under pretty significant open interest totals,
considering the size of the daily turn over. The market is still being fueled
higher by the idea of inadequate production levels and recently the market has
risen to an even higher level on the idea that a platinum producer is going to
reduce expansion plans. We continue to see an upward bias but also see the scope
for extensive price volatility because prices are so high historically and
because most of the platinum supply news is closely held. Therefore, longs might
be well served to shift futures into calls. Â
The
Chinese copper market was emboldened by the news that troubles at a mining
operation were going to reduce product flow to certain customers. We must also
add that LME stocks continue to contract and even if the macro COPPER: economic
outlook isn’t marginally improving, the trade still accepts the recovery track.
Industry sources continue to upwardly revise price and premium projections for
2004 copper dealings and that fosters long speculation and partially justifies
the bull trend in prices.
CRUDE COMPLEX
OVERNIGHT
CHG to 04:12 AM:CRUDE+6, HEAT-3, UNGAS+2Â The unleaded gas market seemed to lead
the complex higher Tuesday apparently because there were warnings of maritime
terrorism. In other words, the trade is concerned that terrorist might attempt
to strike tankers loaded with finished products, as that would result in a more
disruptive impact on the world economy.
NATURAL GAS
The
natural gas market managed to get a lift from the regular energy complex on
Tuesday partly because of the terrorism threat against seaborne tankers (which
includes natural gas shipments) and partly because of forecasts for slightly
cooler temps for the third week of November. Considering the ultra cold temps in
the Midwest around last weekend, it is possible that the weekly injection report
on Thursday barely manages to add to inventories.