Futures Point To A Flat Open
INTEREST RATES
The Treasuries continue to lack a defined trend
but until this morning they have mostly respected consolidation support.
However, after falling below critical support this morning at 104-29, September
bonds have recoiled away from the overnight lows and look to be poised to at
least test the upper portion of the consolidation at 105-16. We continue to
think that the coming range of trade will be bound by 104-13 and 106-04 but that
the market could rise temporarily to 107-00 in the event that the Fed does
nothing in the next meeting.
STOCK INDICES
The coiling action in stocks continues and that
might be considered a positive for the near term trend. In the past, the market
seemed to fail quickly once a resistance zone was encountered. Now however the
market has managed to remain within striking distance of an upside breakout and
has done so after a sustained rise off the May lows.
DOW
In short, we are generally bullish but don’t expect the market to drive in
either direction. Pushed into the trade from a short term perspective we could
see the September Dow slide to 10,327 but a rise above 10,415 could create a
mild upward rise to 10,450. It is possible that the Dow is currently building a
base from which a higher trade will unfold in the near future!
S&P
The September S&P might be holding a little higher in the consolidation range
than the September Dow and that could leave the S&P a little more vulnerable to
temporary downside action. Near term critical pivot point support comes in at
1126.60 but fresh buyers probably need to wait for a slide to 1123.50 to get
long, risking the fresh position to a close below 1120. More aggressive traders
might look to get long at 1128.50 and hope that the market manages to breakout
up shortly after the Thursday morning durable goods report.
FOREIGN EXCHANGE
US DOLLAR
A massive range down overnight was mostly rejected,
as if something major was unfolding. It is possible that the failure to punch
through to the downside caused a number of Dollar shorts to take profits and in
thin trade that resulted in a sharp recovery bounce. We still don’t get the
sense that the Dollar is poised to come back into clear cut favor, but we would
not rule out a probe back above the 90.00 level. However, given current
conditions we suspect that Dollar prices above 90.60 are too expensive and that
prices below 89.00 are too cheap. With the US economic report slate empty again
today, the Dollar looks to have little direction. We can’t get fired up about
the long side of the Dollar without much stronger US economic numbers.
EURO
After making a two week high, the Euro seems to have
lost favor. In fact, it is pretty clear from the overnight action, that the Euro
has very little sustained buying interest once prices rise above 121.49. While
the Bundesbank hinted at higher interest rates in the Euro zone, it is clear
that sustained jobs growth must come before the ECB puts itself in a rate hike
posture. Therefore, the Euro is no closer to strong recovery and in turn is no
closer to higher rates. Therefore, the overnight buyers seem to regret their
Euro buying interest. We are not afraid to recommend a temporary sale in the
Sept Euro, looking for a slide to 119.60.
^next^
YEN
The pattern of higher lows in the Yen seems to leave
control with the bull camp. However, the Yen must manage to hold above critical
trend line support of 91.78 to maintain a positive bias. With the trade looking
ahead to the Friday BOJ meeting, it is thought that policy will remain on hold
but we can’t help but think that some of the recent gains in the Yen have come
off hopes that some of the easy money stance will be changed. The Yen is the
prime pick to take on the Dollar in the near term.
SWISS
The Swiss has made a major technical failure
overnight and might be headed to a low around 79.00 in the coming sessions.
However, with the US economic report slate empty, the declines in the Swiss
might be delayed until Thursday morning.
BRITISH POUND
The fact that the BOE could easily be in line for
more rate hikes, comes from the fact that the minutes from the last meeting
showed a 9-0 vote for higher rates. Therefore, we see the Pound remaining under
the influence of buy the fact, sell the rumor. The downside target in the
September Pound is seen at 179.26.
CANADIAN DOLLAR
With the Canadian managing a higher high overnight,
the up trend looks to remain intact. However, the chart pattern is such that the
Canadian needs to make gains in the near term to shore up bullish sentiment and
result in a trade above 74.00. Remain long the Canadian but don’t tolerate a
slide back below 73.42.
METALS
OVERNIGHT
London A.M. Gold Fix $395.25 +$0.55 LME
COPPER STOCKS 109,375 mt tons -1,525 tns COMEX Gold stocks 4.395 ml -6,622 oz
Comex Silver stocks 117.7 ml -14,515 oz
GOLD
With the overnight action and the trade on Tuesday
it would seem like the Dollar/Gold correlation is weakening. It would seem like
the August gold has forged a resistance zone just under $398 but with the market
managing to rise $6-$8 off the June low, without the benefit of a specific
influence, it would seem like buyers are moving into position for varied
reasons. Supposedly overnight gold saw a brief rise off rumors of a bomb threat
in the New York Financial district, so it is clear that gold still retains the
capacity to rally off flight to quality issues.
SILVER
The silver market continues to waffle around
critical moving average lines and about the most positive thing one can say
about silver is that it has built an extended consolidation since the May low
and has also managed to forge a series of higher lows. In other words, the
technical outlook for silver is improving but the fundamental outlook is benign.
In fact, unless the gold forges a significant move, or something major unfolds
in the economy we think that silver should remain mired in a consolidation
pattern.
PLATINUM
Like silver, platinum is lacking a clearly defined
trend. With the outlook for Chinese economic activity uncertain and platinum
holding at a generally lofty historical price level, we have to give the bear
camp a slight edge. A critical pivot point comes in at $798 on the downside and
up at $809 on the upside.
COPPER
We are actually surprised that copper has managed to
shut off the liquidation press seen in the action Tuesday. News that Chinese
players were de-stocking physical copper supplies could have caused a complete
technical capitulation. Chinese copper prices were softer overnight but
apparently were simply following the action seen in the US Tuesday.
CRUDE COMPLEX
A series of higher lows since the June low
suggests that the market is capable of rejecting August crude prices below
$37.40. However, in our opinion, the market continues to get a steady flow of
bearish supply information. In fact, during the session Tuesday, we saw signs
that Libya planned to increase production into August, at the same time that the
trade began to circulate forecasts of a rise in weekly US crude stocks data.
NATURAL GAS
The natural gas market continues to perform
impressively, despite having almost no support from US weather. However, with
the regular energy complex mounting a sharp recovery bounce and the June 30th
Iraqi hand over drawing closer, we suspect that speculative traders are
migrating back into natural gas. Unfortunately the small spec long position in
natural gas will easily become overbought with even a minimal rally in natural
gas.