Futures Point To A Flat Open
INTEREST RATES
The Treasury market continues to show a penchant
for the upper end of the anticipate trading range. With the economic report
slate thin and cash demand propping up the market, there is no reason to suspect
a near term downside probe. Some are even suggesting that the Fed might take a
pass on the June 30th rate hike window and that certainly gives the bulls a
little assistance.
STOCK INDICES
While the market continues to take a pass on
potentially bullish developments, one can hardly suggest that the market is set
to fail significantly. With favorable earnings and lower energy prices
yesterday, the market failed to rise as many expected but the fact that economic
conditions continue to improve should simply lay the ground work for gains down
the road. In the near term, the market should be able to respect close-in
support on the charts, but without much direction in the way of scheduled
reports, the trade will have to turn its focus to Wall Street and Corporate
news.
DOW
While the market lacks definition, we would be willing to implement fresh long
plays on a slide to chart support of 10,327. On the other hand, a breakout takes
place with a rise above 10,415.
S&P
A quasi double top at 1139.30 leaves the market with significant resistance.
While we would suggest that aggressive traders buy a correction to chart support
at 1126.50, the market has a vulnerable feel to it. In fact, with a failure
below 1126.50 the September S&P might see a slide to 1121.80.
FOREIGN EXCHANGE
US DOLLAR
The Dollar has a light upward bias this morning
despite a lack of clear cut fundamental information from the US economy. The
Dollar seems to have respected solid support around 89.38 but still appears to
be stuck in a range of trade bound by 90.40 and 89.40. Talk that the US Federal
Reserve might not hike interest rates by 25 basis points in the coming FOMC
meeting, isn’t a widely held opinion, but is a slightly undermining condition
for the Dollar. Therefore, we suspect that the Dollar will generally lack
significant bullish interest. Without the hope for strong growth and a
downgraded view on how much US rates will rise, we can understand a lackluster
attitude for the Dollar.
EURO
It would seem like the September Euro will be held
under critical resistance up at 121.29 and might be headed to the bottom of the
consolidation pattern at 119.55. Like the Dollar, the Euro can’t seem to get a
strong view on its economy and certainly can’t get the market in a position to
expect rising rates in the Euro zone. A significant decline in volume and open
interest on the June slide seems to suggest that few players want to participate
in the Euro slide, but it could also mean that fewer players have a strong
opinion on the direction of the currency. The market showed almost no response
to slightly better German ZEW readings this morning and that clearly shows a
lack of conviction toward the fundamentals. Therefore, expect the Euro to
continue waffling within a wide range, until there is more definition of the
technical and fundamental condition.
YEN
In the Yen, declines in volume and open interest on
the June rally seem to suggest that some traders are balking at the idea of an
uptrend in the Yen. We also have to wonder if a Yen price above 93.00 is
unlikely, due to the wishes of the BOJ! Therefore, it is possible that the
Monday high of 92.72 becomes solid resistance. Getting short the Yen at 90.42,
looking for a downside target of 91.00 would seem to carry significant risk but
those looking for a short term trade probably need to be short.
^next^
SWISS
A critical chart failure looks to have unfolded in
the Swiss with a near term downside targeting of 79.40 and possibly a slide to
79.00.
BRITISH POUND
A major chart failure in the Pound undermines its
bullish chart setup and that could result in stop loss liquidation down to
179.64. In fact, some might suggest that the inability to take out the June
consolidation highs is a major technical failure in the Pound.
CANADIAN DOLLAR
A sharp rise in Canadian CPI this morning might give
the currency a bit of a lift, as the market wasn’t really respecting the growth
pattern in the Canadian economy. In fact, after the June slide it seemed like
the trade was primed to attack the Canadian. We think the firm CPI reading gives
the Canadian underpin. Traders that were long the Canadian and recently took
profits on short side option plays, should now see the Canadian rise back toward
74.00. If the Canadian doesn’t firm up right away, then the upside tilt lacks
capacity.
METALS
OVERNIGHT
London A.M. Gold Fix $394.65 +$0.75 LME
COPPER STOCKS 110,900 mt tons -1,275 tns COMEX Gold stocks 4.401 ml -1,086 oz
Comex Silver stocks 117.7 ml Unchanged
GOLD
While gold continues to hold near the highs of the
last month’s action, a higher Dollar seems to give the bears a slight edge.
However, as long as the August gold manages to respect close-in support of
$393.2 there is no reason to think that a major washout will unfold. In fact,
unless the September Dollar manages to climb above near term resistance of 90.45
we wouldn’t expect to see a wholesale liquidation.
SILVER
The silver market basically rejected the recent
attempt to rally and has now fallen back below critical moving average levels.
With the Dollar slightly higher and gold showing some early weakness, we can’t
argue against a slide to consolidation support of $5.73 and maybe even lower
consolidation support of $5.63. Like gold, the silver market has seen a
significant decline in volume and open interest but recently open interest has
hooked up and that might hint at a critical bottoming above the $5.63 level.
PLATINUM
Critical support is noted around $800 but the market
is flirting with a failure of moving averages and seems to be limited by a
general downtrend pattern on the charts. The outlook for Chinese demand seemed
to improve last week but that same positive buzz seems to be lacking this week.
Therefore, the path of least resistance is down with platinum possible set to
fall $18 to critical support.
COPPER
While LME copper stocks continue to decline, the
market is seemingly without much optimism. In fact, with a private report noting
declining Chinese copper imports for May also suggested that many Chinese copper
holders are de-stocking copper supplies, it would seem like the market is poised
for a moderate slide. In fact, with the copper market mostly ignoring the ultra
favorable macro economic conditions in the US last week, it is clear that the
China focus still dominates.
CRUDE COMPLEX
The fact that energy prices slid Monday confirms
that the trade is looking for bear items and is discounting bull items.
Certainly seeing the Iraqi export flow resume is a major negative but with the
threat of expanded labor tensions in Norway, one would have expected the bears
to have slightly less control over prices. We suspect that the COT report
fostered some of the liquidation as the crude long remained fairly significant
at 65,285 contracts.
NATURAL GAS
With the weather forecast showing continued much
below normal temps for a wide portion of the US (potential record low temps seen
in some areas means that cooling demand is running very weak) it is possible
that natural gas continues to see downside action. Critical long term channel
support comes in at $6.128 basis the August contract and with the regular energy
complex mired in a corrective posture, we have to think that support will be
tested soon. However, the natural gas market is still in an uptrend pattern and
it doesn’t make sense to get short against the bigger picture trend.