Futures Point To A Flat Open

INTEREST RATES

03/08 OVERNIGHT CHANGE to 04:08 AM:BONDS+7 While
the bond market might have overreacted to the economic numbers last Friday, the
bear case in bonds holds little merit in the near term. Not only is the pace of
the recovery in question, but it also appears as if intervention against the Yen
is set to continue, providing bonds with a fundamental underpin. The market is
partially expecting a favorable reading from manufacturing (and has already seen
a surprising improvement in US machine orders) but we are not sure if the types
of reports due out today are capable of erasing the concern generated by the
monthly payroll report last Friday.

STOCK INDICES

03/08 OVRNIGHT CHG to 04:08 AM:S&P+90, DOW11,
NIKKEI -34, FTSE+2 There are healthy rallies and there are unhealthy rallies and
the gains posted Friday would seem to be of the unhealthy variety. While the
prospect of seeing interest rates remaining low into the end of 2004 is a
positive, the fact that job generation is very anemic, increases the risk to
fresh longs. However, the market doesn’t seem to be fostering anxiety off the
macro economic case and would appear to be wholly unconcerned about the threat
of sharply higher energy prices.

DOW

Critical support is targeting at 10,554 but a slide down to 10,431 is possible
if outside market forces spark negative attitudes. It should be noted that the
March Dow has significant consolidation support around the 10,554 level and
therefore the Dow might hold up better than all other sectors in the coming
choppy trading pattern. Seeing the March Dow rise above 10,625 could put off the
shorts enough, to allow for another day of upside follow through but the current
rally is coming off the wrong type of information.

S&P

Trend line resistance comes in at 1163.80 and we would be surprised to see the
market get to that level, unless the early US numbers are much better than
expected. The technical pattern of the S&P is surprisingly favorable even if the
fundamental track is mostly without merit. The COT report also shows a very
balanced positioning and that makes it difficult to actually suggest a short
play. In fact, given the total setup in the market we are inclined to suggest
that longs use profit stops on positions, while fresh shorts should use sell
stops below the current market at 1156.60.

FOREIGN EXCHANGE

US DOLLAR

The US unemployment report certainly undermines the
recent bull track in the Dollar. It is possible that the favorable US machine
orders report this morning provides a temporary underpin for the Dollar but we
have to doubt the Dollar’s ability to continue the gains seen off the February
low. A former Fed member this morning suggested that with such anemic job growth
the actual recovery could come in question in the US. Therefore, the interest
rate differential would seem to be against the Dollar. It also doesn’t seem like
the ECB is poised to threaten a rate cut and that should add a little weakness
to the Dollar. With contracts rolling to the June this week, we suspect that
March could lose to the June but that March support of 87.80 will hold in the
early going today. However, unless the secondary US economic numbers manage to
impress the trade, we doubt that the Dollar will simply pick up where it left
off last week (in an clearly defined up trend).

EURO

In the near term we have to think that the path of
least resistance is up in the Euro. Not only have ECB officials been mum since
the US payroll disappointment, but we also think that they have some point in
mind before they will comment. We suspect that the Euro has the ability to rally
to 125.36 in the March contract and to 125.05 in the June contract before some
limiting commentary is rendered.

YEN

Considering the moves made last week by the Japanese
government, it would seem that the intervention threat is going to continue
regardless of some suggestions that the BOJ is out of powder. However, one might
also want to consider the massive profits the BOJ have managed in long US
Treasury positions and for that matter short Yen positions! The BOJ revised
their diffusion Index to 7 from 11 but Bank lending and real household spending
came in as expected and that shows the economy to be improving. Watch out for
quasi government/Corporate interaction into the end of March, which could push
the Yen even lower. Near term support is targeted at 88.00.

^next^

SWISS

The recent rally back above 78.00 wasn’t wholly
impressive but we suspect that the Swiss will manage to hold above 77.88. A
break to 77.59 might be considered a buying opportunity but we are not sure that
the upside holds that much potential.

BRITISH POUND

The break last week in the Pound should put the
Pound in a good position to return to a bull market status. Near term support
comes in at 184.46 and that should be considered a buying opportunity. A slight
rise in the UK PPI, shows that the UK economy is not too hot or too cold and
that alone should give the bulls reason to push up the currency.

CANADIAN DOLLAR

A down trend resistance line comes in at 75.97 today
and a rally back to 75.60 should be sold, as the Canadian is in a downtrend.

METALS

OVERNIGHT

GLD-1.60, SLV-2.50, PLAT+11.50 London
A.M. Gold Fix 394.40 +$5.90 LME COPPER STOCKS 263,600 -3,975 tons COMEX Gold
stocks 3.49 ml +16,636 oz Comex Silver stocks 123.9 ml +586,485 oz

GOLD

A pattern of lower highs seems to leave the gold
market in a negative posture but considering the leveling of the fund long in
the last COT report the technical vulnerability of gold would seem to be
reduced. Certainly seeing the Dollar rise consistently off the February low has
undermined overall bullish sentiment in gold but with the much weaker than
expected US payroll reading last Friday, the Dollar might have a different
reality. In fact, a decline below 86.00 on a close basis in the March Dollar
could put the gold market in a much-improved position.

SILVER

The silver market continues to act relatively
stronger than gold and has even managed to discount the weak macro economic
readings produced from the US last Friday. Therefore, the silver market is
bucking the Dollar action that is undermining gold and isn’t even undermined by
the fear of a slowdown in the US recovery pace. Therefore, specific investment
interest must be carrying the silver market.

PLATINUM

Like silver, the platinum market is bullishly poised
to continue its up trend pattern. The COT report shows the platinum holding a
moderately large long of 6,200 contracts and with the market nearly $20 above
where the COT report was measured, we have to think that the platinum is close
to making a new high in its spec long. Chinese demand hopes are part of the Bull
Run but we also suspect ongoing spread action against recent gold shorts.

COPPER

The technical washout last week was to be expected
considering the severe overbought status in copper. However, with the weekly COT
report showing the net spec long to be only 38,000 contracts and the market
coming into the session this morning 500 points below the point where the report
was measured, the market is in relatively strong position to respect the
consolidation around 130 basis the May contract. However, Chinese copper price
action was weak overnight and the Chinese will have to show renewed buying
interest to replicate the type of aggressive buying action seen in early
February.

CRUDE COMPLEX

With the political turmoil in Venezuela heating
up and OPEC seemingly set to cut production next month, a move back to $40 crude
oil is within reach. Although we were unable to get long the Jun unleaded
107/113 bull call spread, the situation in the energy market remains highly
volatile and we may get another buying opportunity soon if things can cool in
Venezuela, or if OPEC decides to delay production cuts. However, the turmoil in
Venezuela looks to be getting worse not better, with government resignations and
military clashes with protesters making the markets extremely nervous that there
will be a repeat of the 2002 situation where oil production and exports were
interrupted for 2 months due to a coup attempt.

NATURAL GAS

We are little surprised that natural gas prices
didn’t get more of a lift out of the higher price action in the rest of the
energy complex. But the near-term fundamental situation is bearish and the
market will always be working against the true fundamentals. April natural gas
is finding solid resistance at 5.600 and with the year ago stock surplus
widening to 333 bcf, it is tempting to sell the market up at these levels.