Futures Point To A Flat Open
9/14/2004
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INTEREST RATES
With Treasury prices once again showing signs of
an upside breakout it would seem that the bull camp remains in full control of
the Treasury market. While some of the scheduled numbers have been soft, we are
not sure that the market has the justification for an actual drive into a
significantly higher price zone, but apparently suggestions from the Fed Monday
that they could now afford to wait on moving rates up and that gives the bulls
enough confidence to bid prices up further. Given the fact that the Treasury
market comes into the session on the brink of an upside breakout, it goes
without saying that the retail sales report will have a dramatic impact on the
market.
STOCK INDICES
The stock market seems to be a little off its
recent game, as prices have managed a slight correction from the strong pulse up
on Monday. Overnight Asian prices were certainly following the US action from
Monday but some investors might be a little concerned about soaring energy
prices and the track of hurricane Ivan. With such a strong storm almost
certainly destined to slam into the US, it would seem that many investors are
less interested in pushing stock prices up.
DOW
In the end, the storm and weak scheduled US numbers gives the bears a temporary
edge. However, we doubt that the December Dow will manage a slide back below
near term chart support of 10,285. In fact, if the market is really strong, it
will be lower early and recover late.
S&P
The trend is up, but the market is overbought and is seeing some fundamental
reason to bank some profits. In fact, one must watch the retail sales release
early as that could really set the tone for the session. However, the pattern of
this market has been to charge right through the negatives. Those that are long
the December should stay long and use stops at 1123.80. However, since the
market is in the direct lead up to quadruple expiration, that could serve to
exaggerate early liquidation but that could also facilitate a bounce later on.
FOREIGN EXCHANGE
US DOLLAR
While the Dollar isn’t showing much in the way of a
trend, it should be noted that open interest is soaring in the Dollar! From the
action in the Treasury market and recent comments from the Fed about holding off
on hiking interest rates, we are surprised that the Dollar hasn’t managed to
continue the fall that it started last week. In fact, with a soft retail sales
report expected this morning, there would seem to be the fundamental impetus to
continue lower. However, some traders suggest that weak German sentiment figures
this morning, are serving to countervail the potential weakness in the Dollar.
While the Dollar might be showing signs of returning to the 89.00 level, we
would become an interested seller of a rally to 89.15, looking for an eventual
decline to 88.00.
EURO
While German ZEW sentiment figures showed
contraction overnight and the Euro is in a weak technical position, we doubt
that the Euro will see a decline back below critical support of 121.71 in the
December contract. The German ZEW almost fell by 7 points in September and that
really makes it difficult for the Euro to achieve a leadership role against the
Dollar. However, traders should still be looking to buy the December Euro on a
break to 121.84 using a stop down at 121.48.
YEN
While the Japanese stock market managed another
overnight rise and some Japanese stock measures managed to gain significant
technical levels, the outlook for the Japanese economy isn’t improved and there
is once again concern for rising energy prices creeping into the equation.
Therefore, the near term path of least resistance is apparently pointing down
but we doubt that support at 91.00 will be violated without significant cause.
SWISS
Technically the Swiss is in a failure mode, with the
support level of 79.00 an easy target. However, the early US retail sales
reading might provide a temporary bounce to 79.71 before the Swiss resumes the
downside trek later in the week.
BRITISH POUND
A series of highs around 178.85 seems to limit the
Pound on the upside. The UK saw a moderate CPI rise this morning of +0.3 and
that again makes the US economy look pretty weak. However, we are not sure that
the December bond will manage to avoid a near term slide to 177.74 before solid
support is found.
CANADIAN DOLLAR
The correction in the Canadian should have run its
course but a decline to 76.55 can’t be ruled out in the event that US numbers
this morning comes in stronger than expected. Traders should look to get back in
the long side today on a break to 76.70.
METALS
OVERNIGHT
London Gold Fix $403.50 +$2.75 LME COPPER
STOCKS 104,125 mt tons -1,525 tons COMEX Gold stocks 4.884 ml +3,119 oz COMEX
Silver stocks 110.2 ml Unchanged
GOLD
While gold has continued to show signs similar to
the upward tilt in the rally off the July low, the market certainly lacks the
type of interest that engineered the July and August rally. While the recent COT
report showed a moderate liquidation in the small spec and fund long, that
reading is still holding above the level seen during the July and August rally.
Furthermore, open interest continues to hover at a much higher level than was
seen at the beginning of the July rally and that means that gold will easily
become overbought on minimal upside action.
SILVER
The silver market continues to coil but it would
seem that $6.28 resistance is holding the market down. With open interest
sliding sharply since the August high it would seem like the funds have backed
away from silver and that leaves prices with just barely enough support to hold
above the deflated zone of $5.50 to $6.00. While volume totals have been
somewhat active since the second half of August, the parallel decline in open
interest just doesn’t seem to send off a bullish signal to speculators.
PLATINUM
While platinum and copper showed signs of being
lifted by macro economic optimism (its daily prices are tracking equity prices)
it still seems that the $850 level is an extremely thick resistance zone on the
charts. We just can’t get over the negative look of the charts, as the pattern
of lower highs seems to make it difficult to forge consistent upside action.
COPPER
The copper market continues to hover in the breakout
zone and with Chinese copper prices ending higher overnight the market appears
to have discounted the potential end to labor issues in Peru. With 2 southern
Peru Unions ending their walkout, one might have expected prices to sag but
instead the market shows that the threat of a supply issues from Peru was not a
mainstay of the run off the September lows. Apparently the copper market is
feeling better about the macro economic condition of the world economy and is
expecting Chinese demand to smooth out sloppy demand from Europe.
CRUDE COMPLEX
The energy complex took no chances with the track
of hurricane Ivan, as traders bid up prices aggressively to start the week. As
mentioned yesterday the technical condition of crude and unleaded is such, that
the upside tilt should not be restrained by the technical condition of the
marketplace. For prices to have stayed firm through the bearish comments from
OPEC on Monday it is clear that the market is leaning toward the upside.
NATURAL GAS
With natural gas prices holding significantly above
the September low and just under the May through August consolidation and that
would seem to leave natural gas in a precarious position. We have to think that
Hurricane Ivan is responsible for at least 80% of the recent gains and that left
to its own internal supply and demand fundamentals we suspect that natural gas
prices could quickly return to the September lows. With the track of hurricane
Ivan showing signs of hooking to the East, we suspect that natural gas prices
will come under more aggressive liquidation.