Futures Point To A Flat Open
INTEREST RATES
01/23 OVERNIGHT CHANGE to 04:23 AM:BONDS+12 The
overnight action in Treasuries is pointing to more upside action, as the market
is well on its way to another technical breakout. We have to concede that the
economic reports released this week, on balance foster concern for the pace of
US growth. Certainly the US economy is moving forward, but with the US economy
unable to maintain improvement in the jobs sector, at the brisk economic levels
seen in December, we would have to think that the January jobs report will
hardly show readings that would prompt the Fed to change its stance on rates.
STOCK INDICES
01/23 OVRNIGHT CHG to 04:23 AM:S&P-30, DOW2,
NIKKEI +68, FTSE-13 So far the Microsoft earnings haven’t sparked a wave of
buying interest and we think the market needed a fresh catalyst to avoid drifted
toward a profit taking mentality. With the US economic report slate empty today
and the net shake from the information released this week uninspiring, we could
understand a widespread desire to bank some profits. However, investors have
been doing some rotation among stock sectors and that is usually a healthy
indication.
DOW
Near term chart support in the March Dow is pegged at 10,575 and the top of the
up trend channel is pegged at 10,670. It should be noted that the Dow is once
again resisting corrective action better than the S&P, which also means that the
Dow probably carries less risk to fresh longs than positions placed in the S&P.
S&P
Trend line support comes in at 1133.50 and that is probably a level that traders
should consider getting long at. The top of the up trend channel in the March
S&P comes in at 1156.20 and since the fund position in the S&P might have been
net short, as recently as Tuesday, we see the market as anything but overbought.
In other words, this market continues to make upside gains without over
extending itself technically and that in many ways reduces risk to fresh longs!
Buy breaks to chart support of 1137.50 and risk the position to a close below
1133.40.
FOREIGN EXCHANGE
US DOLLAR
While the Dollar probed sharply lower in the
overnight action, it is regaining some of the lost ground into the US opening.
With the US numbers hardly fostering ideas of higher interest rates and UK
numbers promoting ideas of higher interest rates, the path of least resistance
remains down in the Dollar. In fact, unless the upcoming G7 meeting begins to
spawn some type of intervention talk, there would seem to be little to
discourage the Dollar from persistent losses in the coming sessions. In fact,
with the US economic report slate empty today and Microsoft earnings failing to
stimulate a strong bullish tilt toward US stocks, there is little to rescue to
the Dollar from the sellers. The next downside pivot point in the March Dollar
comes in at 85.54 and a key reversal on the upside would take place with a close
back above 86.32.
EURO
Like the Dollar, the Euro made a strong bid
overnight but has tempered the move into the US opening. The trend remains up
and without some statement from the ECB, we suspect that the Euro is going to
track back toward the January highs in the coming sessions. Just to get back
into the up trend channel, the March Euro has to manage a close back above
127.81. A key failure would take place with a decline back below 126.03.
YEN
So far, the BOJ has done a good job in restraining
the Yen but the impetus remains up and a breakout could come at any time. In
fact, a close above 94.64 could be just the ticket to spark a stop loss buying
wave. With the METI reporting a much weaker Activity Index reading in November,
it is clear that the BOJ needs to protect its economy from a decline in exports,
caused by an unfavorable exchange rate. Therefore, the intervention window might
be wide open against a Yen rise.
SWISS
Just for the Swiss to get back into the up trend
pattern that was in effect from the November low to the early January high, it
would have to rise to 82.09 today and to 82.27 on Monday!
BRITISH POUND
The UK GDP data came in slightly above expectations
and is causing the trade to speculate on a February rate hike. A strong economy
and rising interest rates is a prescription for money to flow toward the Pound!
We suspect that the market will move to fresh contract highs in the coming
sessions. Support is pegged at 183.19 and therefore traders should buy a test of
that level.
CANADIAN DOLLAR
Failure, that is all that can describe the Canadian.
In the face of persistent US Dollar losses, the Canadian showed no strength and
now it has simply failed on the charts. Near term downside targeting is seen at
75.60.
METALS
OVERNIGHT
GLD+2.50, SLV+2.00, PLAT-3.20 London A.M.
Gold fix $411.40 -$.60 LME COPPER STOCKS 384,900 tons -4,500 tons COMEX Gold
stocks 3.44 ml +14,988 oz Comex Silver stocks 125.3 ml Unchanged
GOLD
With the Dollar falling persistently off the January
high, the threat of a turn in the Dollar has declined and that gives the bull
camp in gold some confidence. While the gold market has managed to forge a
series of higher lows following the mid month debacle, we are still not seeing
the type of long interest that would point to a direct resumption of the up
trend that was in effect from October to January. Maybe the absence of Chinese
traders and other regional players from Asia have dampened the speculative
interest in gold.
SILVER
While silver showed an impressive recovery bounce
yesterday, it is still not clear what force is behind the long side interest.
The trade thinks that concentrated fund buying settled in on thin trading
conditions yesterday but that wouldn’t explain additional gains in the action
today. A critical upside breakout would take place with a trade above $6.41 and
even though the bull case isn’t apparent from a fundamental perspective, the
market is still technically in a bull trend and capable of adding to the upside
with minimal effort.
PLATINUM
While ranges in platinum have become unusually
narrow, the bullish pattern remains in place. Speculative players continue to
project expanding jewelry demand into China and with much of Asia closed for
holiday, the physical interest is expected to slow until late next week, when
the holidays come to an end. Near term chart support is pegged at $854 and
resistance is seen at up $869 basis the April contract.
COPPER
So far the Asian holiday hasn’t robbed the copper
market of its positive tilt. LME warehouse stocks fell a rather large 4,500
tons, indicating that the pattern of tightening supplies continues and that
demand more than likely is outstripping supply. In other words, the restart of
some production has yet to show up at the consumer level and that means that the
bull market remains very much entrenched.
CRUDE COMPLEX
The energy complex faded and then managed a
recovery partly because the market eventually realized that the weekly inventory
stats were bullish. With crude oil stocks at the API declining sharply and both
DOE and API distillate stocks falling rather briskly, the bull case is
reconfirmed. While there might be some debate as to whether crude prices deserve
to be trading above $35 there isn’t much argument over the fact that conditions
are bullish.
NATURAL GAS
The weekly inventory readings showed a 156 bcf draw,
which was effectively at the bottom of the range of some rather lofty
expectations. We also think that the market failed off the fact that the annual
surplus continued to grow, despite the fact that it’s January and there has been
some pretty cold weather. In other words, the market has seen some pretty
bullish fundamental conditions but the reality is that supply isn’t “tightening”
as one would expect it to in a bull market.