Futures Point To A Flat Open
INTEREST RATES
01/13 OVERNIGHT CHANGE to 04:13 AM:BONDS-4 As we
expected the Treasury market needed another day up on Monday, to fully factor
the disappointing payroll report. However, with Greenspan scheduled to speak in
Germany this morning, the trade is already expecting to see confirmation that US
rates are going to remain on hold for at least a large portion of 2004. With US
numbers starting the week out soft, the Nikkei falling moderately overnight and
French economic readings soft, the bull camp would seem to maintain control over
prices.
STOCK INDICES
01/13 OVRNIGHT CHG to 04:13 AM:S&P-110, DOW1,
NIKKEI -115, FTSE+28 The stock market continues to deflect negative pressure in
a manner consistent with a bull market. However, it would seem that the economic
numbers are going to fail to countervail the negative tilt thrown off by the
monthly payroll report last Friday. Furthermore, it would seem that a number of
Fed members are primed to reconfirm that interest rate will remain on hold for
the foreseeable future and that is partially disappointing to those that would
at least like to see the economy strong enough to impact interest rates.
DOW
We suspect that the Dow will hold above 10,433 but we would not be surprised to
see further erosion in prices. However, getting back above 10,514 would signal
an end to the consolidation/correction tilt and more than likely ignite the
market to a new high. Fresh longs have to have patience and probably have to
risk positions to at least 10,370.
S&P
The S&P is actually showing much more strength than the Dow, which is a change
of pace from the recent action. In fact, given the sharp rise off the lows
Monday, it wouldn’t take much for the S&P to rise to new contract highs in the
early action today. However, we are a little concerned about the divergent
action between the Dow and the S&P, as that usually signals a lack of consensus.
The charts suggest a buy, but the fundamentals are suspect. The March S&P must
hold above 1123.80 to keep the tech tilt bullish.
FOREIGN EXCHANGE
US DOLLAR
The Dollar has a good chance of making some traders
question the down trend pattern, as the charts are hinting at a reversal and
economic information in the Euro zone was a little disappointing overnight. With
OPEC suggesting they might have to cut production (with supplies already
historically tight) one should not ignore the potential outside impact from
OPEC. Some OPEC members are calling for pricing in Euros, which could be a major
development that in a sense accelerates the downside in the Dollar. In our
opinion, seeing crude pricing change, could escalate the cost of fuel to the
world’s biggest consumer, which in turn could really slow its economy. If the US
economy continues to slow and is then threaten with more slowing, the interest
rate differential would really turn against the Dollar. In the near term, we
suspect that the Dollar is bouncing because of technical considerations, but it
could also be the result of speculation that the Dollar has reached a critical
level that is causing complaints. Furthermore, with the G7 meeting looming, some
Dollar shorts might not want to risk seeing a policy change. However, the trend
is down and US numbers would seem to accentuate the downside in the Dollar and
that is why put options were invented.
EURO
With French manufacturing readings declining by 0.4%
for the month of November, some of the petals have come off the rose of the bull
case in the Euro. However, we would have to think that the OPEC dialogue keeps
the Euro generally in favor and poised to recover. Near term corrective
targeting in the Euro is seen at 126.01 but there would seem to be enough big
picture concern, that traders should use the current correction to exit long
futures, wait a couple sessions and then re-enter long call plays.
YEN
The BOJ must be intensely managing the Yen but with
the Dollar peaking out above some near term resistance, it might be possible
that the Yen mounts a minor slide to 93.86, but that kind of break should be
bought. It is possible that a bird flu virus could undermine the Yen and
therefore traders should be alert to that issue over the coming sessions.
SWISS
The Swiss correction might have already found
channel support and therefore the Swiss might be the first currency to buy off
the current correction.
BRITISH POUND
The steep up trend pattern in the Pound could leave
the currency vulnerable to a correction. In fact, we don’t see trend line
support until 182.67 in the March contract. It should also be noted that UK
November Industrial output was below the forecast but the numbers were still
better than those seen in other G7 readings. Therefore, the Pound up trend
remains in place, even if the market is set to correct.
CANADIAN DOLLAR
the Canadian has already tested a critical pivot
point at 78.00 and would seem to be poised to test levels below 78.00.
Considering the trend set up, traders should be prepared to buy the coming
correction but a risk of 77.60 might be necessary.
METALS
OVERNIGHT
GLD-1.90, SLV+3.30, PLAT+14.90 London
A.M. Gold fix $424.50 -$3.70 LME COPPER STOCKS 411,950 tons -2,050 tons COMEX
Gold stocks 3.12 ml Unchanged Comex Silver stocks 125.3 ml oz +1.61 ml oz
GOLD
The gold market continues to see it leadership role
erode slightly, as silver is showing more consistent performance on the upside.
It was clear from the overnight action that gold had become even more dependent
on the Dollar for direction. However, it would not seem like the Dollar is
prepared to forge a major fundamental bottom unless there is going to be some
concerted intervention against the Greenback at the upcoming G7 meeting.
SILVER
The silver market would appear to be leading the
precious metals complex and is doing so compliments of persistent fund buying.
We have to think that fund buying is providing most of the upward price action
and not physical buying. If physical buying were giving silver its recent
strength, we would have expected COMEX stocks decline but instead they mounted a
moderate overnight rise and now stand at 125.3 million ounces.
PLATINUM
The platinum is showing no sign of buckling under
the slightly deteriorating macro economic outlook, nor is it showing signs of
indecision off the lack of direction in the gold market. The prospect that users
of platinum will begin to use alternatives is a long process and probably won’t
be the ultimate factor that causes a top in platinum. In our opinion, the
topping factor in platinum will be increased production from Russia that is
stimulated by the lofty price level.
COPPER
Chinese copper prices were down overnight, while the
early US action was showing minor gains. At least one minor labor shutdown was
solved overnight and the market will see a Canadian vote later today. However,
while the Chinese market was lower, the trade reported periodic buying interest
by the physical trade and that hints at pretty solid support under the market.
CRUDE COMPLEX
The crude oil market once again rejected early
weakness and closed into new high ground on Monday. A re-evaluation of the
supply situation combined with cold temps at the end of the week revitalize the
bull camp. Comments from the Nigerian Oil Minister suggested that OPEC might not
cut production in the February meeting but the cartel might consider imposing
sanctions against over producing members.
NATURAL GAS
Slightly warmer weather in the West prompted the
natural gas market to discount the cold coming in toward the end of the week.
However, as long as crude oil maintains a positive bias, we suspect that natural
gas prices will be persistently supported. However, in order to return to the
recent highs, the market will have to see much colder than normal temps and not
just the normal January cold that is on the way.