Futures Point To A Flat Open
INTEREST RATES
03/19 OVERNIGHT CHANGE to 04:19 AM:BONDS-6 The
Treasury market certainly had a number of critical developments in the action
Thursday. Fortunately for the bull camp the Philly Fed survey numbers were
extremely weak or Treasury prices could have been hammered. Not only did initial
claims unexpectedly decline by 6,000 but the much delayed PPI report came out
with a tinge of inflation.
STOCK INDICES
03/19 OVRNIGHT CHG to 04:19 AM:S&P-210, DOW-10,
NIKKEI -65, FTSE+12 The stock market action Thursday favored the bull camp, as
the market was able to reject aggressive selling and climb above some critical
resistance points on the charts. Certainly the hope that some top Al-Qaeda
officials were about to be captured in Pakistan, gave the bull camp some
incentive but anything that can provide investors with a lift is acceptable.
However, there are a number of negatives operating in the background with
soaring energy prices, weak US economic numbers and maybe even creeping
inflation! The delayed US PPI report Thursday was reported by most Press outlets
as another mundane inflation reading, but in reality, the reading showed an up
tick in inflation.
DOW
The June Dow managed to make a higher high for the move Thursday and has the
look of a market that might be able to add to the gains posted over the last 4
sessions. However, a trade back below 10,235 could defeat the mostly bullish
psychology in place into the opening this morning. Until it is known that the
Al-Qaeda officials escaped or were in fact captured, the market might maintain
an upward tilt.
S&P
As the S&P moves beyond the expiration window we suspect that volatility will
abate but we are not sure that the market is prepared to extend the recent
bounce off the lows. It is positive that the June contract managed to take out
the double top in the action Thursday, but we still think that the market has
the potential to trade 1101 ahead of the coming April 2nd employment report.
Near term resistance in the June S&P comes in at 1124.80, but the market would
certainly seem to be carrying less negative baggage than was present early in
the week. A minor bull bias exists but the trade needs a positive kick from the
geopolitical realm to mount a really strong rise.
FOREIGN EXCHANGE
US DOLLAR
The Dollar suffered a significant blow on Thursday
and the blow seemed to be dealt from the political front. In other words, verbal
attacks blaming the US for the Iraqi situation, seemed to begin an undermine of
the Dollar and that washout became even more significant when the PPI released
caused some waves. Some economists think that the US economy might not be strong
enough to weather a pre-emptive strike against inflation and with a series of
allies in the war on terrorism, turning against the US, we can understand the
washout in the Dollar. However, shorts in the Dollar should be careful, as the
US economy is showing some between the lines improvement and that could catch
the market leaning too hard on the short side. In the mean time, the 88.00 level
would seem to be solid technical support. However, the economic report slate in
the US is pretty thin for the coming three sessions and therefore the existing
trend might be able to extend. With potential changes in BOJ policy, the Dollar
might see the Yen, Euro, Pound, Swiss and Canadian foster additional declines in
the Greenback and that is a big wall of pressure. We think support will hold but
the path of least resistance is down in the Dollar.
EURO
The Euro came alive Thursday after a couple sessions
in which the Euro failed to capitalize on Dollar weakness! However, the Euro was
unable to make significant ground on the charts and would still seem to be
limited by 124 resistance and limited by a down trend resistance lines! Define
the range in the Euro as 124.00 to 122.00 with the potential for a slight slide
in the coming session.
YEN
Even Japanese officials are suggesting that the
intervention policy may be ending and that could serve to extend the upside in
the Yen. However, we are a little surprised that the Yen didn’t continue to add
to gains after the intervention story was floated. In other words, the market
has grown accustomed to constant intervention and is now a little shocked by the
change. End of year action, is still a potential but we have to think that 94.00
will be temporary resistance for the June contract. After all the Japanese stock
market is expressing concern that the recent Yen rise might hurt certain
Japanese stocks and the market is also fearful that Japan might be the next
target of terrorism. Therefore, those with long profits should begin to run
stops and narrow upside objectives.
^next^
SWISS
Like the Euro, the Swiss failed to hold the upside
breakout point on the charts in the action yesterday. Therefore, we are
expecting a minor slide to 79.20 before the market finds support. We are not
ready to buy into an uptrend in the Swiss.
BRITISH POUND
With UK officials suggesting that they will raise
rates again if growth rates remain above trend, it would seem that the sharp
rise in the Pound will be tempered. We are not ready yet to buy into the idea
that the Pound is back into an up trend pattern.
CANADIAN DOLLAR
After a fleeting rally Thursday, the Canadian is
calming down and is giving off signs that massive overhead resistance is a
dramatic limitation for the bull camp. In fact, we still think that the Canadian
is destined to trade in a range bound by 74.46 and 75.73.
METALS
OVERNIGHT
GLD-0.50, SLV-1.00, PLAT+2.30 London A.M.
Gold Fix $411.00 +$3.85 LME COPPER STOCKS 223,800 -5,250 tons COMEX Gold stocks
3.56 ml -5,829 OZ Comex Silver stocks 122.1 ml -13,563 oz
GOLD
Since gold managed to rise above a critical down
trend channel line and managed to get some help from an atypical source, one has
to give the bull camp respect. Considering the massive slide in the Dollar, we
suspect that even more gold longs are preparing to enter the market. The
inflation report Thursday was significant because the report was for January and
given the rise in food and energy since that period, we have to think that
upcoming numbers will be even hotter.
SILVER
The silver market certainly followed gold higher
Thursday and would seem to be poised for a run above $7.50 but given the
magnitude of the rise yesterday, one should not be surprised to see a little
back and fill. The $7.50 level will bring the market to the February 1998 high,
which then leaves the market with an upside target of $8.06, which is the July
1988 high. The trend is up put there is very little technical support under this
market, beware of increasing volatility.
PLATINUM
The pattern of lower lows suggests that investors
have shifted long interest toward gold and silver and away from platinum. It is
possible that platinum is seeing its industrial lineage undermining the bull
case, as the world economy is in a slowing posture and extremely high prices
might be working their magic on the supply front. In other words, some flight to
quality and precious metals bugs are moving positions to gold and silver and
therefore platinum sees a slight void in buying interest.
COPPER
The copper market shows no signs of making a near
term top, as the bias in the market remains up and continues to be impressive.
With Shanghai copper stocks falling by 18,110 tons, it is clear that demand in
China is still pretty strong. We were concerned that Chinese demand was tapering
off but that doesn’t appear to be the case.
CRUDE COMPLEX
Weakness in the stock market might have
undermined energy prices Thursday, but it is likely that the market was simply
overbought and needed to correct. So far, it would not seem like OPEC will
relent from the March 31st production cut and that type of development might be
the only easy way to stall the rally in energy prices. Since the February low,
crude oil has gained $7, while unleaded has gained 15 cents and that is really
significant gains without a specific physical supply problem! However, the trade
is mostly convinced that inventories will not be rebuilding in the second
quarter and therefore is rushing to factor into all kinds of summer uncertainty.
NATURAL GAS
The technical action in natural gas Thursday was
very sloppy and that might indicate a vulnerable status in the marketplace. We
continue to see slightly bearish weather ahead for the market and certainly the
recent run from the January low of $4.99 to the recent high of $5.83 should
leave the market significantly overbought. The 6 to 10 day forecast called for
mostly warm in the US and that has to spook some of the longs out of the market.