Futures Point To A Flat Open
INTEREST RATES
As we expected the Treasury market had the
capacity to ratchet the range upward and with recent US economic information
coming in soft and disjointed, we see a number of analysts toning down their
expectations for the next FOMC meeting. Traders should have been able to get
short at 106-04 on our suggestion yesterday but considering the magnitude and
concentration of the upward pulse yesterday, we are once again going to suggest
that traders take a quick short profit and look to reset the position short at
an even higher point in the anticipated range. Because we were operating under
the assumption that prices would track in a tight range and would only claw
their way higher, we have to revise the upper end of the coming range even
higher.
STOCK INDICES
While the stock market showed signs of giving
back some of the recent gains yesterday and appears to have lost some upward
momentum, the overall bias and sentiment is generally supportive. However, we
have to wonder if the equity market will fret over the potential for weekend
violence in Iraq and if the coming FOMC meeting won’t begin to foster some
profit taking. Some in the marketplace took the weaker than expected Durable
goods report Thursday as a sign that the Fed would indeed maintain a go-slow
approach with interest rates and that is evidence of favorable spin! With the
Norwegian oil workers strike ended by decree from the government, oil prices
should seem some of the upside tilt, off the Iraq situation tempered and that
should help the bull camp.
DOW
It’s usually not a good development for the market to make a double top after a
sustained upward pulse and that is what happened in the September Dow this week.
Critical support comes in at 10,438 and to keep bullish sentiment squarely in
place the September must forge a rise above 10,471 in the early going. We would
suggest that longs set profit targets just above the current trade and hope to
exit on a minor bounce this morning.
S&P
Unlike the Dow, the S&P has not forged a double top formation on the charts. The
September S&P however, must manage to hold above its critical pivot point of
1139.30, or a slide to 1134 might be seen. We think that longs should set profit
targets and exit on a minor bounce this morning. Maybe the market will continue
to rise but the market is short term overbought and is confronted with weekend
uncertainty and uncertainty next week from the FOMC meeting. Upside targeting
and a temporary top is seen at 1145.40 today.
FOREIGN EXCHANGE
US DOLLAR
The Dollar appears to have bounced off critical
support at 89.00 but considering the recent economic news from the US, the
Dollar probably doesn’t deserve to bounce significantly. Certainly the Dollar is
a little short term oversold and certainly the Dollar will see a little help
from the scheduled numbers but we are not sure if the Dollar can throw off the
bearish ilk without something significant surfacing. Critical overhead
resistance comes in at 89.43 and that might be as far as the Dollar can rise.
However, one might suggest that the US economy holds enough promise that the
trade can’t bury the Dollar below this week’s lows, without some significant
justification. While the upcoming Iraqi handover might be bloody, we suspect
that situation will become less negative to the Dollar by the end of July. In
the mean time, short term traders might look to sell rallies.
EURO
The IFo is suggesting this morning that the German
economic recovery is “shaky†and that the ECB should not hike rates. In fact,
the Ifo labeled the decline in their June Index as substantial. However, the Ifo
seemed to suggest that rates might be set to rise if the coming month’s numbers
were firmer. In other words, the Euro zone economy is only just beginning to
climb into a positive growth pattern and that limits the Euro on the upside.
Therefore, we would consider getting short the Euro on a bounce to 121.20,
looking for a slide to the bottom of the consolidation around 119.55.
YEN
The Yen has certainly forged an aggressive upside
track off the May low and would seem to have reached a short term overextended
status. With the sharp overnight reversal, we suspect that profit taking selling
will dominate and that the Yen could be set to slide to 92.41. However, the
trend in the Yen is up and we still see the Yen reaching back up above 94.00 and
that could bring about some threats of intervention. Because the Japanese
economy is much stronger than it was during the last threat of intervention, the
threat of intervention is probably going to be much less significant.
^next^
SWISS
While the Swiss seems to have run out of momentum,
it also seems to have moderately significant support just under the market at
79.80. Therefore, we doubt that the September Swiss will fall below the 80.00
level. Fresh longs might buy the Swiss at 80.04 and use a rather tight risk at
79.70.
BRITISH POUND
The Pound pattern appears to have forged a rounded
topping pattern and with a series of lower highs one might expect a continued
minor slide in the prices in the sessions ahead. Near term downside targeting
comes in at 180.00, but a couple of closes below 180.00 could whip up
increasingly negative views toward the Pound.
CANADIAN DOLLAR
Unfortunately the Canadian reached an overbought
status and has forged a lower high pattern. Therefore, a back and fill swing
might be in order. Near term corrective support comes in at 73.84. In order to
make a major upside reversal, the September Canadian would now have to climb
back above a long term down trend channel at 74.74 but that down trend line
falls to 74.70 on Monday!
METALS
OVERNIGHT
London A.M. Gold Fix $401.15 +$4.40 LME
COPPER STOCKS 105,875 mt tons -2,400 tns COMEX Gold stocks 4.403 ml +191,467 oz
Comex Silver stocks 117.4 ml -295,244 oz
GOLD
While the Chinese gold marketed rose in the wake of
extremely strong action in US gold on Thursday, we suspect that the market is a
little short term overbought. However, with Bank and spec buying Thursday it
would seem that the market is firmly entrenched in the upside tilt. We have to
think that the surge of violence in Iraqi is part of the bullish tilt but the
Dollar did make the lowest trade since early June yesterday and that certainly
kicks up long interest for the gold market.
SILVER
The silver certainly responded and has managed to
hold most of the gains posted Thursday. While the action Thursday sparks some
confidence in the bull camp, until the market manages a rise above the top of
the two month consolidation zone, we can’t get that excited about the upside
unless gold provides constant positive leadership. Critical support in September
silver comes in at $6.085 and resistance is targeted at $6.265.
PLATINUM
The fact that platinum failed to rise along side
gold and silver is very discouraging to the bull camp. We are still concerned
that Chinese and Asian platinum demand is tapering off and that prices will
struggle to hold above $800. With slightly negative macro economic news seen
from the US Thursday, it is even a little difficult to be optimistic about US
platinum demand.
COPPER
The copper market managed an impressive pulse up
yesterday but we suspect that labor issues provided the market with a temporary
lift. However, it should be noted that Shanghai copper stocks were down 1,870
tons on the week and that LME stocks continue to decline and that keeps the
tightness issue in the markets mind. We continue to see the near term trend in
copper to be pointing down and with the weaker than expected US durable goods
report Thursday, we won’t change our bearish outlook.
CRUDE COMPLEX
It was impressive that energy prices managed to
rally Thursday in the wake of patently negatively weekly inventory statistics in
the prior session. Even in the face of statements from OPEC that they would go
ahead with an August production expansion, energy prices managed to finish
higher. More than likely the severe outbreak of tensions in Iraq fostered
concerns over Iraqi supply flow and that caused some shorts to cover.
NATURAL GAS
With the regular energy complex some early weakness
we suspect that natural gas will see a little early profit taking pressure.
However, with the forecast for warm weather from July 2nd into the middle of
July the bull camp is cheered and prices will find it hard to break down hard
ahead of the June 30th Iraqi hand over. However, the market is being partially
undermined by the presence of a much below normal temperature pattern of last 24
hours.