Futures Point To A Flat Open
INTEREST RATES
OVERNIGHT
CHANGE to 04:13 AM:BONDS+4Â While the Treasury markets have certainly impressed
the trade with the ability to shake off the strong US payroll reports for
October, in retrospect the chart pattern in December bonds hints at a weak
posture. In other words, the action in the bond market has felt impressive over
the last 8 sessions but in reality the pattern has produced a series of lower
highs and a coiling pattern that is pointing downward. Dec bonds would need a
close back over 108.12 to move above the down trend angle from the September
high.
STOCK INDICES
OVERNIGHT
CHANGE to 04:13 AM:$-46, YEN+39, SF+35, CA+27, EU+58Â
Dollar:
Secretary Snow continued to call for a floating yuan on Wednesday and that seems
to leave the track in the Dollar down. A CIA report that said Iraqi citizens
were “increasingly siding with the insurgents” also served to undermine the
dollar. We continue to have a target in the Dollar of 91.60.
FOREIGN EXCHANGE
EURO: The
Euro is seeing investment from safe haven buying as the violence in the Middle
East becomes more pronounced. The feeling is that since the major European
countries did not support the US war with Iraq they will be shielded from
terrorist acts (which may eventually prove to be a false hope). The Euro
garnered strength over night from news that Germany’s 3rd Qtr GDP rose +.2% on
the quarter due to a rise in net exports. The Dec Euro’s improved technical
situation suggests a run to the 1.1740 level looks possible.
YEN: The
Yen is being held back by the market’s skittishness over central bank
intervention. Since the move in the currencies is due to a general wave of
negative dollar sentiment rather than any currency specific bullish factor, the
rally seems to be more fragile. At some point the market will no longer be able
to ignore the improvement in the US economy and both the Yen & the Euro could be
hit hard. However, in the mean time don’t try and fight the uptrend.
SWISS:
This market is also garnering support from the terrorist assaults and the
strength in the gold market. However, Dec Swiss has solid over head resistance
between 74.45 and 74.85 and may need to see a Dec dollar drop below 91.75 to get
through this area.
POUND:
The Bank of England’s inflation report indicated that rate hikes are likely, but
may not happen again until early next year. While sterling is supported by the
interest rate advantage, one also has to wonder if the trend towards higher
rates will choke off growth. Dec pound has key resistance at 168.20.
CANADIAN
DOLLAR: Recent strong readings in the job and housing sector suggest a rate cut
is not likely in the cards which gives the interest rate advantage to the
Canadian over the US. While the market may have gotten ahead of it self, the
outlook remains bullish and pullbacks are likely to be shallow. Near-term
support for Dec should be found around 76.60 then 76.45. Strong US & Canadian
economic numbers this week could push Dec toward 77.50
METALS
GOLD:
Seeing the US Dollar slide aggressively at the same time that the US Treasury
Secretary again called on China to float the yuan, sent the gold sharply higher.
With the market tracking above chart resistance Wednesday morning the funds were
certainly enticed to buy aggressively. Since the silver market rose with the
gold move and the Dollar looks set to fall persistently, it is possible that
gold does go on the $42 run that we mentioned in these comments on Wednesday.
SILVER:
The silver market simply came flying out of a box Wednesday as the trade since
the October 24th high has been extremely lackluster and non eventful. We still
think that a sharply higher gold market or a sharply lower Dollar market is
necessary for silver to perpetually extend the upside, but in the near term one
can’t argue against an extension. It should be noted that silver stocks at the
COMEX continue to rise and now stand at the highest level since mid 1998 and
that could discourage some buyers.
PLATINUM:
The platinum market hasn’t had to contend with soaring gold and silver prices
and it will be interesting to see if the renewed long interest in other precious
metals provides support to prices or actually results in spreading against the
bull camp. Â
COPPER:
The bull market remains in place in copper but the easy gains on the long side
might be a thing of the past. We still think that traders can buy the March
copper at 94.10 and risk the position to a close below 92.40. However, we would
suggest that traders continue to migrate futures longs into long call plays.
CRUDE COMPLEX
OVERNIGHT
CHG to 04:13 AM:CRUDE+25, HEAT+62, UNGAS+3Â Energy markets were able to make a
late session rebound to close mostly firmer with strong gains in Jan unleaded
leading the complex higher. After some early profit taking, the trade apparently
did not want to go home short this market ahead of the stock report today.
NATURAL GAS
We are
fearful that natural gas might have to fail again before it bottoms. Certainly a
number of small specs were forced out Wednesday, but with the inventory report
this morning, the odds seem to favor the bear camp.