Futures Point To A Flat Open
8/31/2004
INTEREST RATES
The Treasury market continues to hover in the
breakout zone but appears to need constant support from the scheduled numbers.
With progressively lower energy prices we suspect that some longs are beginning
to question their positions, especially with an ultra critical monthly non farm
payroll report due out this Friday. It would seem that the economic reports to
be released this morning have the capacity to pump up Treasury prices further,
as the estimates seem to hint at a slightly greater pace of slowing than has
been seen in recent reports.
STOCK INDICES
It would appear that the US equity market is into
the most significant corrective mode since the early August time frame. Even the
Japanese stock market came under significant liquidation overnight as economic
numbers in that country disappointed investors. It seems like the US will be
confronted with some disappointing economic numbers of its own this morning, as
several of the scheduled numbers are expected to post moderately large declines
into the US opening.
DOW
The Dow remains in a short term technical down trend pattern that might not
culminate until the September Dow reaches down to 10,080. If the numbers really
turn off negative and oil prices manage a strong recovery bounce it would not be
surprising to see the Dow slide to 10,043. However, the trend might signal a
recovery ahead if prices manage to regain 10,140.
S&P
Near term downside targeting in the September S&P comes in at 1094.60. Even
lower support is seen down at 1085.80 but that kind of break will need to be
fostered by a distinct deterioration in the macro economic outlook.
FOREIGN EXCHANGE
US DOLLAR
While the Dollar hasn’t been paying too much
attention to the pace of the US economy, we have to think that the next four
sessions will see a closer attention to the numbers. In the report slate today,
it would seem that early expectations mostly call for weaker readings. With the
energy price structure weakening further one might also expect the Dollar to see
a number of longs bank profits. In the near term, it would seem like the Dollar
is poised for a slide to 89.16 basis the September contract but we doubt that
the Dollar will fall below the critical 89.00 even pivot point unless the
numbers are consistently worse than early expectations. In order to turn the
Dollar trend back up the Dollar will have to manage a climb above 89.67.
EURO
Respect for the 120 support zone would seem to shut
off the selling in the Euro and give the currency a solid base. However, while
the Euro might manage a short covering bounce to 122.00, in order to move into
the upper half of the last three months range (122 to 124) the Euro will need to
see extremely weak US economic numbers or stronger Euro zone numbers. Overnight
inflation readings from the Euro zone were mostly steady, which in a sense robs
the Euro of a potential supporting factor. In the end, the bias is up but upside
momentum isn’t expected to be that impressive.
YEN
The Nikkei was moderately lower overnight, as
economic numbers were really disappointing. In fact, July industrial output was
unchanged and essentially below most forecasts and that propagates the concern
for the Japanese recovery. Heavy resistance is seen at 91.34 and support is
targeted at 90.60 and we have to favor the downside in the short term.
SWISS
Like the Euro, the Swiss has managed to forge a
solid support zone on the charts and is apparently poised for a pulse up to
chart resistance of 78.80 but it might also be able to forge a rise to the 79.00
level if the US economic numbers really come in weak.
BRITISH POUND
While the Pound has support at 178.93 and then again
down at 178.69 we are not sure it can mount the same type of recovery being seen
in the Euro and the Swiss. With UK retail sales readings for August slowing
considerably it’s understandable that the Pound remains under pressure. In fact,
if the US numbers manage to come in slightly better than expected, that could
easily put the Pound into a new low for the move.
CANADIAN DOLLAR
The Canadian violated some critical support levels
yesterday and has only managed a slight recoil from the recent lows and that
would seem to leave the Canadian in a weakened posture. However, the Canadian
should have solid support off an uptrend channel in place since the May low.
METALS
OVERNIGHT
London Gold Fix $408.10 +$1.25 LME COPPER
STOCKS 104,950 mt tons -2,875 tons COMEX Gold stocks 4.823 ml -231 oz COMEX
Silver stocks 109.3 ml Unchanged
GOLD
Gold comes into the session with a slightly bullish
bias following the favorable action Monday. Some in the trade are afraid to get
short in the face of hedge unwinding by an Australian miner, while others see
the Dollar reversal as a factor that could serve to boost gold above the last 5
days consolidation highs. We think that the pattern of sharply lower energy
prices is helping gold, as too much global slowing has periodically undermined
gold and silver.
SILVER
The coiling in silver continues but there is only a
slight upward bias in prices. In fact, since exchange stocks haven’t managed to
propagate the recent pattern of declines and volume and open interest figures
continue to decline and that might be a sign that the bulls are backing away
from the market. Critical support in September silver comes in at $6.57 and near
term resistance comes in up at $6.805.
PLATINUM
While platinum prices appear poised for more gains
ahead, there is also a sense that resistance is somewhat formidable around $875.
October platinum has a critical pivot point today down at $838.
COPPER
With Chinese copper prices slightly higher
overnight, the US copper market manages to maintain a bullish bias. We have to
think that ongoing weakness in energy prices is helping copper keep a positive
macro economic tilt but we are not getting the sense that labor issues are
providing as much support as was seen last week. We would expect US economic
reports to weigh on copper prices but fortunately for the bull camp, the copper
market is only paying periodic attention to the pace of the US economy.
CRUDE COMPLEX
After an extremely wild session yesterday energy
prices settled close to mid range. In other words, the market was initially
undermined by the news that the Iraqi southern pipeline was totally restarted
but it was clear that the market wasn’t comfortable keeping prices pegged to the
lows. Even with the Iraqi cleric Al-Sadr calling for his men to lay down their
arms and suggesting that he might join the political process in Iraq, prices
failed to hold the lows.
NATURAL GAS
With November natural gas sliding temporarily below
$5.80, we suspect that the net spec and fund position is approaching the type of
oversold condition that could bring about a bottom. With the regular energy
complex in a corrective mode natural gas seems to have little impetus to shut
off the selling. However, given the technicals and the fundamentals we might be
prepared to pick a bottom on a temporary slide to $5.70.