Futures Point To A Flat Open
INTEREST RATES
As we expected the Treasury market extended the
“relief†rally in the wake of a slow and gradual Fed approach. In other words,
the bonds and notes rallied because the market factored into too much of a rise
in interest rates in the March through May time frame. Another thing that makes
the recent gains in the Treasuries possible, is the fact that US economic
numbers continue to come out disjointed.
STOCK INDICES
While the stock market normally doesn’t like to
see higher interest rates, the market is convinced that the Fed will maintain a
go-slow approach and for investors that means status quo. Fortunately for the
bull camp, status quo appears to mean steady growth and low inflation and that
is good for stock prices. While energy prices showed some recovery action
yesterday, it does not appear like they are ready to resume the ultra damaging
upside progression seen for most of the last 6 months.
DOW
The Dow appears to be headed to the June highs and with the correction Monday,
the market should be in good technical position to rally. Significant resistance
is noted at 10,471 and we would think that the market will forge a new high
today, or that it will manage a rise on Friday, once it is determined that the
US economy is still adding jobs at a solid pace.
S&P
The September S&P needs to climb above a critical pivot point at 1144.10 early
today and that would set the stage for a new high for the move later today or
during the action Friday morning. Another critical upside pivot point takes
place with a trade above 1145.25. The bulls don’t want to see a slide back below
critical support at 1139.50 today.
FOREIGN EXCHANGE
US DOLLAR
Early this morning the Dollar probed lower, rejected
that decline but has once again migrated toward a downside breakout point on the
charts. We suspect that ultra favorable Japanese economic stats apply some
pressure to the Dollar, while European (German) economic readings provided the
Dollar with support. The Dollar seems to be poised to slide unless the US stock
market can whip up enough optimism to discourage the sell off in the Greenback.
Because the US economy continues to throw off periodic weak economic readings,
the trade is convinced that US rates are going to rise slowly and that the US
economy isn’t going to leap forward. Therefore, the Dollar bears have control
but that control isn’t dominating. However, we would not want to get short the
Dollar at current levels and ahead of the upcoming US payroll report. Therefore,
on a dip to 88.70 aggressive and short term traders might consider buying the US
Dollar.
EURO
The ECB was largely expected to hold rates steady
this morning and with German retail sales coming in disappointingly weak at
-1.7% it is clear that the ECB is on hold for a while. With the strength in the
Japanese economy, all it would take for the Euro to explode against the Dollar
would be some favorable economic readings but that is simply not going to happen
in the near term. In fact, we see the recent double top of 121.95 as a fairly
strong resistance level, with a chance that the Euro will slide to consolidation
support of 120.50 in the wake of the US payroll report on Friday.
YEN
The Japanese economy continues to throw off very
impressive recovery progress and that has given the Yen a fresh lift. In fact,
off the combination of strong Japanese survey readings and weak German retail
sales readings, the Yen should be able to return to the June high of 93.78. In
fact, the only thing standing in the way of the big Yen rise, is the potential
for the US to post a hot payroll gain!
^next^
SWISS
We would look to sell the Swiss on a rally to 80.30,
looking for a slide to the bottom of the consolidation down at 79.15. However,
it is somewhat impressive that the Swiss has managed to respect and recoil away
from the 40 day moving average on two occasions this week.
BRITISH POUND
The pattern of lower highs continues and with the
downside probe early this week, we can’t shake the opinion that the Pound is set
to gradually move lower over the coming weeks. The Pound falls below a critical
moving average with a move below 179.31. Apparently the market thinks that the
BOE is preparing to meter growth, in order to control prices and that makes the
currency unattractive.
CANADIAN DOLLAR
There is no mistaking the track in the Canadian and
it might rise until the gap is filled up at 75.25 to 75.65. The Canadian economy
is good enough to support the currency rise and the US Dollar doesn’t appear to
have a setup to derail the near term bull trend in the C$.
METALS
OVERNIGHT
London A.M. Gold Fix $394.50 +$.65 LME
COPPER STOCKS 101,475 mt tons -3,100 tns COMEX Gold stocks 4.399 ml Unchanged
Comex Silver stocks 118.3 ml -10,676 oz
GOLD
We are impressed that early US gold market action
managed to avoid weakness in the face of an overnight Dollar rebound. However,
it is possible that the seeing the September Dollar temporarily fall below 89.00
gave the bull camp a lift. Apparently the gold market was satisfied with the Fed
promise to go slow with rate hikes and that apparently reduces the chance that
the recovery could be derailed and that deflation would return.
SILVER
The coiling continues in silver with the bulls
suggesting that the chart formation is managing a series of higher lows.
However, silver enters the session today almost exactly in the middle of the
last two months trade and is depicting very little in the way of a trend. We
continue to think that silver prices down at 550 are too cheap but we are not
sure that silver has the fundamentals to rocket above the top of the
consolidation up at $6.265.
PLATINUM
Certainly it was impressive that platinum recoiled
away from the $764 level yesterday, but the market did make a lower low with the
downside probe and that leaves the market suspect. In fact, until the platinum
can show some consistent gains on the charts, or the Chinese show some renewed
physical buying interest the bears would seem to have an edge. Critical support
in October platinum comes in just under the market today at $775 and the near
term tilt is pointing downward.
COPPER
The copper market continues to produce wide range
action, but it would not have managed to shut off the selling this week, if the
strike in Chile hadn’t surfaced. Overnight Chinese copper prices were higher and
the trade is apparently willing to trade tight supply conditions, even in the
face of talk that a Polish copper producer was planning to expand production. So
far, the upward track of US interest rates isn’t wreaking havoc on the macro
economic condition and that means that copper will continue to trade off its own
fundamentals.
CRUDE COMPLEX
The energy complex forged an impressive reversal
Wednesday and managed the bounce off a resumption of the tightening inventory
pattern. With the EIA suggesting that gasoline stocks might have peaked out for
the summer, the API/DOE figures are given even more credence. We suspect that a
bottoming off tighter physical stocks is a more sustainable bottoming force,
than would be expected off periodic threats against Middle East supply.
NATURAL GAS
The natural gas market didn’t bounce as aggressively
as one would have expected, especially if the market was still in an ultra
powerful bullish position. In order to get back into the up trend channel, that
was in effect from last fall, the September contract will have to climb back
above $6.223. The weekly inventory report today is expected to show another
injection, but with cool weather dominating in most areas into the 4th of July
weekend, the bull camp doesn’t seem to have a good case.