Futures Point To A Flat Open
INTEREST RATES
02/26 OVERNIGHT CHANGE to 04:26 AM:BONDS+2 The
Treasury market seems to be paying more attention to the ebb and flow of the
Dollar, than to the ebb and flow of the US economic numbers. From our
perspective the economy seems to be throwing off enough weak numbers to
facilitate upside action in Treasury prices but the Fed doesn’t seem to be on
the same page as Wall Street. It is noted that Poole of the Fed is really
enforcing his “Hawk” label, as he continues to talk about the FOMC paying
attention to inflation and being diligent.
STOCK INDICES
02/26 OVRNIGHT CHG to 04:26 AM:S&P+50, DOW7,
NIKKEI +156, FTSE+9 The stock market showed some impressive action Wednesday and
did so in the face of potentially discouraging US economic reports, soaring
energy prices and periodically disconcerting Fed dialogue. In other words, the
lows posted Wednesday, seemed to hold some value or at least managed to attract
some buyers! It certainly seems like the stock market is comforted by a
strengthening Dollar, even if that type of action is damaging to export
companies. So far, the market isn’t overly concerned about the slack nature of
US economic numbers and gasoline prices that quickly rising toward historical
levels.
DOW
Maybe the March Dow is headed back to fill the gap left up at 10,612 to 10,628.
In the big picture, the trend is up but investors are skittish and unwilling to
throw themselves at the long side without cause. In order to continue the rally,
the economic reports today have to foster optimism instead of doubt!
S&P
While the market didn’t forge a classical bottom around the recent low, it would
seem that prices below 1136.10 were too cheap. The March S&P now has a critical
pivot point up at 1147.50. Pushed into the market we would buy a dip to 1140.10
but a better trade is a buy down around 1137. We would also feel better about
the long side, if the macro economic news flow were more conclusive.
FOREIGN EXCHANGE
US DOLLAR
As of this hour it would seem like the Dollar is
primed to make an upside breakout. Apparently the source of the Dollar strength
was comments from an ECB official and talk of a possible Euro zone rate cut.
Before the recent Dollar rise, the Greenback was on the ropes because the trade
saw the chance of a US rate hike as nil. However, if the interest rate
differential is changed by the Euro zone cutting rates that almost provides the
same impact as a US rate hike. However, we have to think that the euro zone
cutting rates simply stops the Euro from rising and doesn’t make the Dollar a
good long term buy! In the near term, the benefit of technical short covering
makes the Dollar look a little stronger than it would be if the recovery were
picking up speed in the US. Therefore, expect some more gains but we still don’t
think that the current condition, puts the Dollar in the early throes of an up
trend pattern.
EURO
Just as we suggested in the Dollar over the last
several sessions, the Euro looks to slide but we are not sure that conditions
justify a downside breakout. In fact, until the Euro falls below the January
lows, it would not be surprising to see persistent declines and ongoing talk of
a major top. However, if the market begins to think that the Euro zone economy
is even slower than the US, that could effectively switch the trend down and
punish the Euro in the process. If you took our suggestion to buy the June Euro
at 128.30 and bought 3 June 125.50 puts, your puts are beginning to expand
rapidly and will certainly outperform the futures loss with a decline to near
term support on the charts of 123.10.
YEN
Japanese officials are calling on the BOJ to
continue the effort against the yen exchange rate and that is certainly
providing perpetual pressure on the currency. In fact, given the downside
failure overnight, the next downside target might be 90.98 and then again at
90.10.
^next^
SWISS
The Swiss comes into the session this morning right
on a critical pivot point. Given the decline in the Euro and the comments from
the ECB, we have to think that the odds are good that support will fail.
However, talking about cutting rates is not the same as actually cutting
interest rates. In order to get the Swiss down and into a downtrend, the Euro
zone numbers will have to facilitate a rate cut.
BRITISH POUND
The Pound is off so much this morning that critical
channel support might be violated at 185.25. So far, there is no reason to
suspect that the big picture trend is changing. However, in the near term, we
can’t argue against more downside action.
CANADIAN DOLLAR
The Dollar strength is simply too much for the
Canadian. Near term critical pivot point support comes in at 74.31. The path of
least resistance is down.
METALS
OVERNIGHT
GLD-0.10, SLV-3.50, PLAT+8.70 London A.M.
Gold Fix $395.05 -$8.35 LME COPPER STOCKS 288,800 -3,000 tons COMEX Gold stocks
3.47 ml -310 oz Comex Silver stocks 123.9 ml -1,015 oz
GOLD
The Dollar rebound has now become something that one
can’t discount, as the Dollar has added another 50 points to the stellar gains
posted yesterday. Just as the declining Dollar didn’t look to aggressively push
up gold, we doubt that a rising Dollar will completely undermine gold. However,
one can expect a weakening and with the net spec and fund long still holding at
a moderately long positioning, the violation of technical support might result
in stop loss selling.
SILVER
The silver market is already into a failure mode and
we think that a large number of fresh fund longs are on the ropes. Given the big
pulse up (supposedly heavily fostered by Asian fund buying Tuesday night) we are
thinking that silver is primed to fall to $6.25. However, the silver market
really hasn’t been as tightly tied to the ebb and flow of the Dollar but with
the silver market already falling to chart support levels, it is clear that the
recent optimism has been replaced by near term bearishness.
PLATINUM
The platinum market was supposedly in heavy favor in
the Asian overnight trade and that follows some rather aggressive long US
interest over the last three sessions. It would seem that players are long
platinum and short either gold or silver! In fact, it almost seems like platinum
is going to make a bid at the old highs right in the face of overt weakness in
both gold and silver markets.
COPPER
Minor profit taking in China overnight adds to the
corrective tone seen in the US session Wednesday. In fact, the copper market
made a massive reversal off the highs yesterday and that comes on the heels of
one of the longest consolidation patterns since the early January consolidation.
However, the trade did note some Asian buying interest around the lows overnight
and that would suggest that buyers are still present and that the trend is still
generally higher.
CRUDE COMPLEX
The energy complex flashed higher and did so
because of fears of future gasoline supply shortages. Some might suggest that
the sharp decline in the refinery operating rate is simply a move to lock in
profitable refinery margins and facilitate high pump prices. Even the government
expressed concern Wednesday that gasoline prices were going to explode and
therefore it seems that the bull case has plenty of believers.
NATURAL GAS
After a major rejection of the lows Tuesday, the
natural gas market certainly looks like it has forged a bottom. The fact that
the regular energy complex exploded, gave the natural gas market new life, as
that means some large commercial accounts will probably switch variable use to
natural gas and away from crude. For others the mere threat of switching, means
that natural gas prices are pulled up by crude prices.