Futures Point To A Flat Open
INTEREST RATES
12/31 OVERNIGHT CHANGE to 04:31 AM:BONDS+6 After
a surprising washout in the Treasury market early this week, it would seem that
prices have managed to pull together somewhat overnight. In fact, the overnight
action shows the March bonds to be 1/2 point above the low posted Tuesday
afternoon. Certainly the Treasuries found some supportive evidence in the
economic information Tuesday, as the US reports were moderately weaker than
expectations and the Dow actually closed lower.
STOCK INDICES
12/31 OVRNIGHT CHG to 04:31 AM:S&P+150, DOW10,
NIKKEI na, FTSE+29 It is not surprising that the stock market is losing its
momentum into the end of the year, as recent gains have come on thin volume and
mixed US economic information. In fact, the numbers released yesterday were
extremely disappointing and therefore it is not surprising that the bulls lost
part of their resolve. It should also be noted that the pendulum of thought on
the holiday retail sales activity has now swung back into the bear camp, with
some analysts labeling the sales as simply “okâ€, as opposed to the stellar
expectations at the beginning of the week.
DOW
If one were to use the same pattern that unfolded around the Christmas holiday,
one might expect minor losses today, an extremely narrow but lower trade Friday
and then a key low in the action Monday! The Christmas correction was a mere 52
points in the Dow but we think that a decline of 80 to 100 points in the Dow is
likely in the coming sessions. In a good bull market, consolidation action can
sometimes take the place of a price decline, in correcting the market’s
technical standing! We would turn up our negative view of near term action in
the Dow, with a close below 10,328 in the March Dow futures contract.
S&P
The S&P might have a critical pivot point at 1107.70 but firmer support might
not be found until 1105 basis the March. While we think that the Dow will have a
minimal correction ahead, the S&P has typically shown more of a corrective
tendency than the Dow and therefore a three day correction in the S&P might
allow a slide down to 1097. Trend line support in the March S&P comes in down at
1099.70 today and at 1103.15 on Friday. In the end, we don’t see the S&P
mounting a sustained correction. In fact, we don’t even expect the coming
correction to come any where near the magnitude of the correction seen in the
beginning of December. The early December correction was 5 days in duration and
saw the S&P slide from 1072.20 to 1051.80.
FOREIGN EXCHANGE
US DOLLAR
The pattern continues with the Dollar forging more
new all time lows against most currencies. Adding to the downside tilt today is
the fact that the US economic numbers released Tuesday were soft, while numbers
from the Euro zone this morning were strong. Also adding to the downward thrust
in the Dollar, is a slightly weaker equity price setup. As we have suggested a
number of times the downtrend in the Dollar appears to be a long term structural
situation and little is expected to change in that setup in the near term. In
fact, until a portion of the G7 gets fed up with the slide in the Dollar and
promises to do something about it, we suspect that the Dollar bears have a
protected position. While it is possible that year-end profit taking could
rescue the Dollar today, that is unlikely because the trend is so entrenched,
that traders probably don’t want to risk missing out on short profits, because
of some year end accounting maneuver. With the Dollar falling below 87.00
overnight the bottom of the channel shifts down to 86.60 and now it would take a
rise back above 87.72 to even hint at a trend change.
EURO
Economic readings from the Euro zone foster optimism
that the rising Euro hasn’t resulted in tripping up the recovery. With French
employment conditions improving it would not seem like the ECB will be forced to
make statements against the ongoing Euro rise. Top of the channel in the March
Euro now comes in up at 126.06, with that number rising to 126.30 on Friday! The
trend continues!
YEN
Thus far, the BOJ has managed to keep the Yen from
an upside breakout but with the Dollar sliding consistently into new low ground,
it is likely that the intervention rate is quite significant. Trend line support
comes in today at 93.55 and the top of the channel comes in at 93.84. We remain
bullish but will become concerned if the Yen hasn’t managed a breakout by the
close Friday! If the yen can’t rally in the face of significant Dollar declines,
then something other than intervention is providing support.
SWISS
Top of the channel in the Swiss comes in at 81.78
today and the market would appear to be in the midst of a strong upward
extension. There is nothing to suggest that the pace of gains is going to abate.
BRITISH POUND
With UK home prices posting another increase in
December, the idea of higher interest rates is providing additional support to
the Pound. With the Pound already posting a new high move, on a big range, it is
clear that trading volume is willing to jump on the bullish bandwagon. Next
upside targeting comes in at 178.10.
CANADIAN DOLLAR
A startling recovery burst yesterday in the
Canadian, clearly gives the bull camp control over prices. With the US Dollar in
a downward spiral, the only thing capable of restraining the rise in the
Canadian would be some negative mad cow link. However, with the gains in the
Canadian this week, the mad cow issue is relegated to a background standing or
is simply insignificant.
METALS
OVERNIGHT
GLD+0.90, SLV+5.70, PLAT+1.90 London A.M.
Gold fix $417.25 +$1.65 LME COPPER STKS 432,975 tons -2,450 tons COMEX Gold
stocks 3.05 ml -60,135 oz Comex Silver stocks 122.6 ml oz -1.05 ml oz
GOLD
The Dollar would seem to be poised to climb above
another psychological milestone today ($420) as the Dollar has made another
record low and Asian gold price action was firm. Chinese gold hit a new high
overnight, keeping the bullish hype flowing for the US session. While Peru
posted a 10% increase in 2003 gold production, the total increase on that 170
ton output is not something that will derail the bullish sentiment in gold.
SILVER
The silver market is almost in a straight up trend
with the channel completely blown away by the action this week. While the recent
COT report didn’t show an expansion in the spec long position, we have to think
that the action this week is in fact pushing the market toward an extreme
overbought condition. However, one might note that COMEX silver stocks have
begun fluctuating more aggressively and with an overnight decline in excess of 1
million ounces, one might expect prices to be given an added lift.
PLATINUM
Considering the gains in the gold and silver markets
this week, it is clear that platinum has lost part of its luster. While the
market would still seem to have an upward bias momentum is lacking. Furthermore,
while gold and silver haven’t added significantly to their spec long on recent
gains, the platinum market appears to be burning excess fuel just to maintain a
consolidation pattern in the month of December.
COPPER
The fact that a labor issue was solved yesterday had
only limited impact on copper, as it continues to show amazing strength. In
fact, overnight there were Press reports suggesting that rising Chinese stock
levels are not going to diffuse the pattern of rising prices. In other words,
the market thinks that China needs to increase its buffer stocks of copper to
satisfy demand and that is just another sign of the entrenched nature of the
bullish mentality in copper.
CRUDE COMPLEX
12/31 OVERNIGHT CHG to 04:31 AM:CRUDE+6, HEAT+40,
UNGAS+0 The energy complex showed strength Tuesday despite negative macro
economic information and conflicting weather forecasts. While the regular energy
complex managed to get support from the idea that a Canadian cold front might
slip down into the US, the main support for prices came from OPEC comments. The
market found support off OPEC Secretary General comments that indicated OPEC
would not be providing added production, despite seeing the upper pricing band
triggered.
NATURAL GAS
The natural gas market certainly got support from
the threat of surprise cold front falling into the US from Canada. The weekly
inventory report will be released today at 11:00 cst due to the holiday
Thursday. We are not sure that the magnitude of the draw is that important, as a
rather surprisingly large draw last week, was greeted with an initial slide in
prices.