Futures Point To A Flat Open
9/8/2004
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INTEREST RATES
Now that the short covering effort has taken
place off the most recent payroll report reaction, the Treasury market will have
to find something fresh to fuel the bull case. Apparently some in the trade
think that the Fed Chairman today will bolster the bull case in Treasuries, by
suggesting that energy prices have indeed slowed the economy considerably. We
would be a little surprised to see the Fed Chairman flip flop on the energy
situation, as the Fed has tended to downplay the impact on the current economy.
STOCK INDICES
The slow and gradual rally approach seems to be
keeping the stock market in a solid technical condition, despite the fact that
the rise off the August low is becoming quite significant. As we mentioned
yesterday, the last COT report showed most of the stock index futures to have
minimally long spec positions and that should continue to facilitate more upside
gains. While energy prices seemed to have lost their direct daily correlation to
equity prices action sometime last week, there is still a positive connection to
lower energy price action and that connection should be supportive again today.
DOW
The June Consolidation highs in the September Dow are 10,471, but the bottom of
the upper consolidation pattern might offer some initial resistance to prices
around the 10,354 level. A long term down trend resistance line, off the series
of lower highs in 2004, comes in today at 10,365.
S&P
The top of the June consolidation pattern comes in at 1146.20 and the 2004 down
trend channel resistance line comes in at 1135.70 today and 1135.40 on Thursday.
The trend is up, but after another big gain today, it might be wise to begin
running tight profit stops.
FOREIGN EXCHANGE
US DOLLAR
It would seem like the market is poised to bid the
Dollar higher and is probably fostering the buying interest off the hope that
Greenspan will continue to hint at rising interest rates in the US. If the
payroll report hadn’t manageD to show positive readings last Friday, we doubt
that Fed hints of higher interest rates would have provided as much support for
the Dollar. However, unless the Fed emphasizes concern for ultra high energy
prices and the pace of the US recovery, we doubt that the Dollar will suddenly
fall sharply as a result of the talk today. On the other hand, we would not be
surprised to see the Fed Beige book provide a little late selling pressure to
the Dollar, especially if the early action today results in the Dollar being bid
up. Unless one can really get the sense that the US economy is set to charge
forward, we doubt that the Dollar is set to rise back above the July highs.
EURO
In the near term, the Euro looks content to slide
back to the June, July and August consolidation lows. While short term
technicals have signaled an oversold status, the only way the Euro lifts sharply
away from the consolidation lows, is for the US economic outlook to stumble
badly and the upcoming report slate doesn’t seem to offer up that type of
information. Those looking to trade the range in the December Euro should wait
for a slide to 119.78 before getting long, as fresh longs probably have to risk
the position to 119.20.
YEN
The yen seemed to run into a wall around the 92.00
level but we doubt that prices are set to slide below 91.50. However, in looking
only at the charts, one gets the sense that the Yen remains in a down trend
pattern and that 91.00 and below will be seen in the coming weeks.
SWISS
The technical picture is pretty negative in the
Swiss, with the next downside target seen at 78.31 and then again down at 78.15.
Like the Euro the Swiss would only seem to bottom in the face of some major
negative development toward the US economy.
BRITISH POUND
While short term technicals are in a buy mode, we
really don’t see the fundamental cause to pick a bottom in the Pound. However,
the closer the December Pound gets to the 174 level, the more difficult it
becomes to get short the Pound.
CANADIAN DOLLAR
The Canadian reached a significant overbought
condition with the highs yesterday. In fact, it might be extremely difficult for
the Canadian to avoid a correction back to 77.15 following the massive run off
the August low.
METALS
OVERNIGHT
London Gold Fix $398.10 -$3.70 LME COPPER
STOCKS 108,875 mt tons -550 tons COMEX Gold stocks 4.880 ml Unchanged COMEX
Silver stocks 109.6 ml Unchanged
GOLD
While gold has managed to hold above the prior
session’s low, it remains within close proximity of the recent lows and seems to
be on the verge of another failure. We really think that recent pressure has
come from those players who were expecting the Dollar to fall and for macro
economic uncertainty to dominate the financial markets. With the monthly US
payroll report stemming the concern for the economy and energy prices continuing
to decline, it would seem that economic uncertainty is declining on a number of
fronts.
SILVER
While the silver market has seen a significant
liquidation, short term technical indicators remain in a sell mode. Furthermore,
with gold also lacking a consistent theme, it is possible that silver manages an
additional decline to consolidation support down at $6.15. With the last COT
report showing the net spec long in silver to be 74,000 contracts and the market
61 cents under the level where that report was measured, we are getting closer
to a leveled technical condition but from the stats one can’t rule out
additional weakness.
PLATINUM
Apparently ideas that Greenspan is set to talk about
rising interest rates and that is keeping platinum in a negative bias. Near term
downside targeting in October platinum comes in at $834.5. Trend line support in
platinum is seen at $835.4.
COPPER
In retrospect, we suspect that part of the copper
rise Tuesday came off the generally favorable macro economic views as equity
prices were rising and energy prices were falling sharply. It is also possible
that some in the trade were anticipating the International Copper Study Group
prediction of a big deficit. With the ICSG projecting a deficit of 682,000
metric tons, that should rekindle the tightness theme, which is given better
standing by the hope for a better economy.
CRUDE COMPLEX
The most significant development in the action
Tuesday was the fact that prices showed almost no reaction to the weekend
bombing in Iraq. However, the comments from the OPEC President were pretty
bearish, as he suggested that prices should be set to decline by as much as 30%.
In addition to the negative price projection made by OPEC, the OPEC President
also suggested that world production might be running as much as 1.5 million to
2 million barrels per day above daily world consumption.
NATURAL GAS
We suspect that the natural gas market is sensing
the threat of a hurricane and that the new storm will have a slightly higher
chance of disrupting natural gas transportation flow in the Gulf of Mexico. With
open interest beginning to hook upward, it is also possible that natural gas has
in effect already made a significant bottom. With the brunt of the hurricane
season still ahead and the market managing a significant bounce off the recent
lows, we doubt that shorts have the desire to resume their attack on this
market.