Futures Point To A Flat Open
INTEREST RATES
It seems like technical and fundamental
conditions are countervailing each other in Treasuries. With decently strong
global equity price action over the last month, generally weaker energy prices,
and periodically strong scheduled numbers and the Fed generally assumed to be in
a tightening posture, one has to see a bearish fundamental case. On the other
hand, the technical action on the charts, the recent record short fund and small
spec position and the persistent ability to hold close to the top of the last
two months highs seems to suggest that the technicals are sending off bullish
signals.
STOCK INDICES
The stock market continues to prefer the upward
track. Even after a poor opening yesterday and some minor technical damage on
the charts, the market managed to gather itself and rally. We are actually
surprised and impressed that the stock market didn’t weaken considerably into
the overnight news of a bomb explosion in Turkey, at the Hotel where the US
President was expected to stay this coming Saturday.
DOW
The September Dow managed the highest trade since early April overnight and that
would seem to leave favor with the bull camp. Certainly the market is slightly
overbought from a short term technical perspective, but fundamentals conditions
seem to give the market more upside ability. Near term critical upside targeting
comes in at 10,490, while the trade would be disappointed with a slide back
below 10,442.
S&P
The S&P managed to hold almost all of the impressive gains from Wednesday in the
overnight trade and did so in the face of a series of terrorist activities. The
next upside targeting in the September S&P comes in at 1148.10 but the market
must hold above 1142.20 to keep the technical case squarely in the bull camp.
FOREIGN EXCHANGE
US DOLLAR
While the Dollar is down overnight, we are surprised
that the Dollar isn’t sharply lower. With the Russians deciding to hold even
more foreign reserves in the Euro and less in the Dollar, we could have seen a
broader based speculative liquidation. Furthermore, the trade saw a bomb
explosion in Turkey at the Hotel where the US President was expected to stay
this Saturday and that could have pressed the Dollar significantly. About the
only thing that is discouraging the sellers in the Dollar, is the potential for
strong scheduled US economic numbers. In other words, the Dollar might be
sitting on a critical junction with the next 5 sessions becoming ultra critical
period with respect to long term trend decisions. In short, the bias in the
Dollar is down unless the US economic numbers are “hotâ€. Near term downside
targeting comes in at 89.14 and then again down at 88.78.
EURO
Just as the Dollar should be pressured by the
Russian foreign reserve allocation decision, the Euro should be supported by the
idea that more Euros will be held by Russia. However, the Euro is being held
back by a slack economy and significant overhead resistance. In fact, the Euro
and the Dollar almost seem to be locked within a consolidation zone that could
be extremely difficult to pierce. While one has to give favor to the bull camp,
we don’t think that the risk and reward of being long the Euro is attractive. In
fact, considering the Euro zone economic readings overnight, the long side is
down graded even further.
YEN
The Yen is impressively higher again overnight and
with the Nikkei soaring and less fear of Chinese slowing, it would seem like the
Yen is strongly in vogue. In fact, we suspect that the Yen might become so
strong that the BOJ might have to step in against the upside track. However,
until the Yen rises above 94.00 we doubt that intervention will be that big of a
consideration.
^next^
SWISS
Trend line support in the Swiss comes in at 79.54
and an upside breakout takes place with a rise above 80.65. A light upward bias
is seen but like the Euro, we don’t like the risk and reward.
BRITISH POUND
The trade is discouraged with the Pound and
considering the failure off the June consolidation, a wholesale liquidation
might be in order. The BOE is also undermining sentiment toward the Pound by
suggesting that a great uncertainty is seen toward Asset prices in the UK.
Downside targeting is now seen at 179.01 and maybe even lower.
CANADIAN DOLLAR
The Canadian is back into the bull stance and should
run quickly above the early June high of 74.50. With the recent liquidation in
volume and open interest, it would seem like the Canadian has plenty of fuel
from the sidelines to push prices significantly back up into the early 2004
trading range of 74.00 to 76.40.
METALS
OVERNIGHT
London A.M. Gold Fix $396.75 +$1.50 LME
COPPER STOCKS 108,275 mt tons -1,100 tns COMEX Gold stocks 4.212 ml -182,818 oz
Comex Silver stocks 117.7 ml -9,984 oz
GOLD
While the Asian trade posted a two sided trade, the
early US action is showing positive progression with an upside breakout probe.
With the overnight rise above $397.9 the market reaches the highest level since
June 1st. Therefore, it would seem like the bull camp is making a bid to take
prices to an even higher range.
SILVER
So far, the silver market isn’t getting the same
lift as gold and that would seem to discount some of the bullish potentials for
gold. One positive for silver is that it has managed an extended consolidation
that has managed to produce a series of higher lows. We see the current silver
trade being in the middle of the anticipated range, but with a minor up tick in
volume maybe more buyers are coming off the sidelines.
PLATINUM
In general the platinum market is producing a
vulnerable trade with the October contract tracking below $800 overnight.
Despite the threat of a strike at the Impala mine, the platinum market isn’t
showing much in the way of a bullish reaction but that situation needs to be
watched closely as production outside of Russia has assumed a more critical role
over the last three years. Like silver, platinum could fall to chart support
down at 775, without any notice, so traders should remain defensive.
COPPER
Despite the hard break seen on Tuesday the copper
market remains poised just below critical resistance on the charts. With the
position action in world equity markets it would seem like the bulls are
stepping in to counter recent bearish sentiment in copper. However, the trade is
seeing various stories about sagging physical demand for other base metals and
that would seem to undermine copper.
CRUDE COMPLEX
While the weekly inventory figures were bearish
yesterday, the market seemed to show only a fleeting reaction to the figures.
Maybe the trade saw the gasoline stock estimate variation between the API and
EIA, as a questionable development, but when the rest of the information from
the day is considered we are really surprised that prices didn’t break
aggressively. As of the most recent weekly inventory report, EIA gasoline stocks
were 10.7 million barrels below year ago levels, while API gasoline stocks were
2.9 million barrels below year ago levels.
NATURAL GAS
The natural gas market recoiled away from critical
pivot point support yesterday and that suggests a renewed interest in the long
side. With a number of weather forecasters calling for extremely hot weather in
the 10th day, of the 6 to 10 day forecast, it would seem like the natural gas
will get out from under the weight of the negative US weather pattern of the
last two weeks. From talk in the trade, it would seem like the market is now
poised to focus off every word of the coming two week’s forecasts.