Futures Point To A Flat Open
INTEREST RATES
04/01 OVERNIGHT CHANGE to 04:01 AM:BONDS-3 The
Treasury market would ordinarily have bounced more aggressively yesterday in the
face of the US economic report flow, but with the Dollar under attack we suspect
that foreign liquidation is weighing on Treasury prices. In other words, the
Treasury market is looking over its shoulder at what the BOJ may, or may not be
doing and given the massive intervention effort over the prior months, even a
minimal unwinding of the Treasury position held by the BOJ, could be quite
influential. In other words, the least of the worries for bond bulls, might be
the direction of the economy, as wholesale liquidation of foreign holdings is no
trifling matter.
STOCK INDICES
04/01 OVRNIGHT CHG to 04:01 AM:S&P+120, DOW-3,
NIKKEI -31, FTSE+11 In general we think the stock market is in position to add
to recent gains, as there is the chance that the global recovery is gaining
momentum. It would have facilitated optimism if the ECB had decided to insure
the European recovery with a rate cut this morning (however, in the end they
failed to act), but the real focus of the US market is the condition of the US
economy. Today the stock market will get plenty of potentially important
economic news, most of which isn’t expected to be supportive.
DOW
In five sessions, the June Dow has managed to rally from a low of 10,000 to a
recent high of 10,386 and that is a significant gain for the actual developments
seen in the period. It should be noted that a critical moving average could
signal a return to bull market status, with a rise above 10,417. In the end, the
10,500 level could be considered a bull/bear line and it is no secret that
prices have factored in a decent number for Friday morning. Swap long Dow
futures plays, for a long April 10400 call!
S&P
Big risk and potentially big rewards is how we would explain long plays over the
coming 36 hours. The S&P might already have done its job of factoring in the
payroll rumor but the June S&P might fall back to 1117.60 even on a decent
number Friday morning. What should be determined is that the world economy is
growing and stock prices will continue to favor the upside, but we see prices
above 1132 ahead of the report as expensive.
FOREIGN EXCHANGE
US DOLLAR
The Dollar continues to slide and while the economic
numbers yesterday were soft, they certainly didn’t justify the type of selling
seen in the Dollar. Therefore, we have to think that an unusual development is
serving to drive the Dollar down. We think that development is a change in the
BOJ intervention/investment mix. In other words, if the Japanese economy is
thought to growing and less vulnerable to currency impacts and the US jobs
market might be set to improve, it makes all the sense in the world for the BOJ
to liquidate US Treasuries and exit US Dollar holdings. In short, the Dollar is
in a mechanical downdraft, that might not stop until the 86.00 level is
encountered but we do think that the Dollar is in relative time proximity of a
major bottoming. In the end, the bottoming process in the Dollar is naturally
expected to exhibit massive volatility.
EURO
More gains are ahead in the Euro, as the ECB decided
to hold rates steady and that should foster more short covering in the currency.
However, we would think that the failure to act, will take away some confidence
toward the Euro zone and that should limit the near term upside gains. We think
overt Dollar weakness is providing the Euro with strength, as opposed to direct
long interest in the Euro. In other words, the Euro isn’t in an uptrend it is
merely benefiting from outside influences and we wouldn’t want to be long for
those reasons.
YEN
The Tankan survey certainly showed that Japanese
sentiment is improving but the sharp rise in the Yen is actually resulting in
weaker Japanese stock price action. Therefore, the Yen rise is slowed but not
halted. In fact, we see no reason why the Yen would fall back much on the charts
and it isn’t even clear if the US numbers will change the trend in the Yen. More
gains ahead.
^next^
SWISS
Like the Euro, the Swiss is rising as an indirect
result of the overt Dollar weakness. We suspect that Swiss gains will run into
significant resistance up around 80.00.
BRITISH POUND
The Pound has managed to climb above critical moving
average pivot point and that could project a rise all the way up to 185.50.
However, if the June Pound is unable to get above 184.33 in the coming 24 hours,
that would be pretty discouraging.
CANADIAN DOLLAR
An overdone status in the Canadian would seem to
limit the currency in the near term. It would also seem that the aggressive
decline in the US Dollar is undermining the Canadian and that could mean a slide
in the C$ to 75.65.
METALS
OVERNIGHT
GLD-1.80, SLV+0.00, PLAT+3.80 London A.M.
Gold Fix $425.30 +$2.30 LME COPPER STOCKS 187,400 -1,725 tons COMEX Gold stocks
3.67 ml -300 oz Comex Silver stocks 122.0 ml -42,362 oz
GOLD
The gold market indeed pushed up into a new trading
range and broad based investment interest was the primary force behind the rise
Wednesday. Certainly the sharply lower Dollar added to the bullish mix yesterday
but the Dollar isn’t the primary driving force and that is brought home in the
early action today, with the Dollar lower and gold initially lower. Chinese gold
prices almost managed a three month high in the action overnight, which shows
the long interest in that market.
SILVER
With another rise overnight, silver returns to price
levels not seen since 1988. While there still hasn’t been evidence of improving
physical consumption, the silver market doesn’t seem to need the talk of
shortages to fuel price gains. In fact, the lack of physical stock changes
within this bull market, confirms that broad based investment is driving silver.
PLATINUM
The platinum is showing slightly stronger action but
still hasn’t shown much upside momentum since the low early this week. It does
seem like the platinum is being spread against gold, as the markets are posting
an inverse relationship on days in which the market lacks a dominating theme.
Given the recent correction and the generally bullish bias toward all precious
metals, we have to think that April platinum has little resistance until the
$921 level.
COPPER
The charts look poised for an upside probe. In
addition to higher Chinese price action, the market sees reports that Zambian
2003 production fell to 188,000 metric tons, compared to 222,000 metric tons
last year. Countervailing the Zambian information were reports that Mitsubishi
Materials 1st half fiscal 2004 copper output increased by 7.2% on a total of
28,817 tons per month.
CRUDE COMPLEX
A wild session was seen in the energy complex
Wednesday, with the market soaring early in the session off reports of a
refinery fire in Texas, additional but fleeting gains posted off the official
OPEC production cut and then a massive bloodletting off the revelation that US
crude stocks jumped significantly in the weekly report. In the end, the energy
complex managed to temper the bearish impact of the US stocks build, but we are
not sure that the market is capable of completely discounting additional selling
potentials. Certainly US crude stocks remain historically tight and OPEC for its
part, does expect to see even more significant gains in US crude stocks, in the
coming weeks, as the seasonal rebuilding window is supposedly just getting
started.
NATURAL GAS
The natural gas market exploded Wednesday and did so
in the face of significant weakness in crude oil. Therefore, one has to conclude
that fundamentals have diverged and that natural gas is factoring an extended
draw season, or is simply expecting industrial demand to rise. AG use of natural
gas is expected to expand, as North America plants record corn, soybean and
cotton crops and crop applications look to pull heavily on natural gas supplies.