Futures Point To A Flat Open
INTEREST RATES
The Treasury market has at least partially
corrected a severely oversold technical condition and will now have to encounter
another inflation report, as the delayed PPI report will be released today.
Expectations call for a rise of +0.6% but with the recent and direct inflation
downplay by the US Fed Chairman, we doubt that inflation concerns will have as
big of an impact on Treasuries, as the build-up to the CPI. Furthermore, against
the backdrop of the muted core CPI rate, a hot PPI report just doesn’t seem to
have as much importance.
STOCK INDICES
The fact that stocks failed to rise sharply over
the last two session’s simply shows that consumer and investor sentiment levels
are still a little weak. Certainly it is possible that the Triple witching
expiration scared away some buyers, but neither Wall Street nor Main Street
embraced the bull theme when it was presented and that is a little
disappointing. However, just because the market isn’t showing ultra bullish
action, doesn’t mean that the market won’t attempt to push prices higher.
DOW
Critical consolidation support in the September Dow comes in at 10,334 and as
long as the market holds above 10,325, the trend should be considered bullish.
In order to spark ideas of an upside breakout, the September Dow needs to regain
the 10,390 level early in the trade today. Be a buyer of a slide to 10,334
following the PPI report, but pull the order, if the PPI were to rise above the
+0.7 level.
S&P
Critical support in the September contract comes in at 1130.10, with a
significant failure taking place with a decline below 1125.40. In order to
create an upward swing, prices will have to regain 1136.50 in the first hour of
trade. Conservative traders should wait for a correction to 1123 to get long,
while aggressive traders might have a buy point of 1130.10. Even aggressive
traders might want to see the PPI figure before jumping into fresh long plays!
FOREIGN EXCHANGE
US DOLLAR
The Dollar has turned away from the upside tilt in
place on Wednesday, which would seem to suggest that the Dollar is concerned
about the PPI report. In other words, the Dollar appears to come under pressure
from ideas that US rates might be set to rise. In what appears to be a 180
degree shift, the Dollar seems to buckle under the prospect of rising rates and
that might be a sign that the currency markets are in fact focusing on real
growth instead of yield. However, we are really not convinced that the currency
markets have a defined theme and therefore traders should not rule out an
extension of the consolidation action. Given the full slate of US economic
information today one might expect the market to confirm its potential focus on
growth. Unfortunately early action in the Euro argues against the growth theme.
Therefore, we would suggest that traders either wait to buy the Dollar down at
89.62, or wait until a more prevalent theme becomes evident.
EURO
It is a little surprising that the Euro has managed
to rise overnight, with Euro zone Industrial production coming in at +0.2% as
that was significantly below expectations of +0.7%. In other words, the growth
theme doesn’t seem to be governing the action in the euro. The September Euro
looks to have solid support at 119.60 and has already climbed above a critical
pivot point of 119.97. We would look to sell a rally to 120.70, as the Euro zone
economy can’t hold a candle the pace being seen in the US. In fact, if the US
economic numbers are strong today and the PPI doesn’t create a concern for
sharply rising US rates, we suspect that the Euro will soon return to the April
and May consolidation lows.
YEN
The Yen is peaking out above significant resistance
at 92.00 and might be prepared to establish a new higher trading range. Rising
long term yields seem to be pulling in money and that could mean that the Yen
deserves a rise to the 93.00 level. Traders might consider selling some put
premium in the Yen as the 91.00 level looks to be extremely solid support.
^next^
SWISS
With the Swiss rejecting the downside thrust
yesterday and coming back above mid range for the week, it would seem like a key
bottom was put in place. However, in order for the Swiss to soar, the Dollar
will have to be tripped up by its own numbers.
BRITISH POUND
The Pound is showing signs of an upside breakout.
Apparently very strong UK retail sales readings have put the BOE right back on
the hot seat. With May retail sales rising by +0.8% there is the expectation
that rates need to rise again. Therefore, the Pound looks to have the capacity
to rise to the top of the recent consolidation of 183.19.
CANADIAN DOLLAR
The 72.50 level might be a level that holds up the
Canadian. However, the US Dollar action continues to be key to the near term
trend in the Canadian. If the Dollar remains weak after its economic report
sweep today, that could allow the Canadian to reestablish a trading range above
73.00. Following US report action this morning, traders with short call and long
put coverage (against long September futures) should liquidate the option
coverage and hold the long September futures.
METALS
OVERNIGHT
London A.M. Gold Fix $386.00 -$1.75 LME
COPPER STOCKS 116,075 mt tons -1,350 tns COMEX Gold stocks 4.403 ml +104 oz
Comex Silver stocks 117.7 ml -26,948 oz
GOLD
The gold market just can’t seem to get a consistent
theme in position as the threat or concern over interest rates and subsequently
the direction of the Dollar, won’t allow the market to build positive or
negative momentum. The August gold market is holding under the 40 day moving
average and is holding almost $4.00 below the week’s highs. With the delayed PPI
report to be released today, it is possible that the whole interest rate issue
surfaces again.
SILVER
Like gold, the silver market is holding below the 40
day moving average and is also coiling in a tight consolidation pattern. Silver
would appear to have built a more substantial support ledge at $5.655 and $5.63
but we still can’t rule out a quick slide to $5.50. Also like gold, the silver
market doesn’t seem to have solid driving theme from which to inspire the trade.
PLATINUM
The Platinum chart has suffered significant damage
but as long as the market manages to hold above the late April and early May
lows, it would not seem like a secondary and more devastating liquidation is in
order. The difficult thing to forecast for platinum is when or if the outlook
for ongoing Chinese interest will show itself and in the mean time that means
that prices have a weak downside track. Critical support comes in down at $767,
as some might suggest that platinum is attempting forge a pattern of higher
lows.
COPPER
For a change, Chinese copper prices were firmer
overnight and that is probably the result of the soaring US Dollar. Apparently
the Chinese are willing to step up and buy copper, even though Spot copper
concentrate treatment fees have risen by 43% in China (according to Dow Jones).
Talk about more mining Industry consolidation might be prompting speculation on
buyouts and that could mean that speculative interest extends into copper
futures.
CRUDE COMPLEX
The long and short of it is that the bull camp
doesn’t seem to have the power that is had prior to the swoon off the May high.
Not only has the market failed to respond to predictions from the President that
Iraqi violence is set to escalate, but the market also didn’t rise much off news
that two attacks were lodged against Iraqi oil facilities and in fact has
already significantly reduced Iraqi export flow. In other words, the market
isn’t as concerned about supply and that probably comes from the idea that US
gasoline demand growth is slowing.
NATURAL GAS
By now the market distinctly notes a clear cut
distinction between natural gas and the rest of the energy complex. With the
stellar gains posted Wednesday, it would seem that natural gas has found its own
set of bullish fundamentals to work from. In fact, unless the September contract
falls back below the moving average at $6.295, we suspect that the trend is
pointing up.