Futures Point To A Flat Open
9/17/2004
INTEREST RATES
The Treasury market got a 1-2 bull punch
yesterday with a muted inflation reading and a much weaker than expected
Philadelphia Fed Manufacturing Index reading. Even though the Philly Fed
statistics showed moderate improvement in the employment and new orders
components, the Treasury market decided to bid prices up aggressively on the
headline reading. Certainly seeing a lower probability of a U.S.
STOCK INDICES
On Thursday the stock market once again showed an
impressive recovery tilt, despite what would appear to be a sagging macro
economic outlook for the US economy. Overnight the Japanese stock market saw
weakness in the export sector stocks simply because traders there were
downgrading the US economy and in turn downgrading the demand for Japanese
export products. While the Treasury market is convinced that the US economy is
either mired in a slowdown, or at least in a position to see interest rates
remain on hold, the stock market is apparently able to see the glass as half
full instead of half empty.
DOW
We suspect that the Dow will now manage to recover and play catch-up to other
equity market measures. Near term upside targeting is now seen at 10,327 but the
December Dow needs to hold above critical support of 10,229.
S&P
Like the Dow, the S&P has managed to forge a near term low and now seems poised
to rise toward near term resistance of 1130.90. It is a little concerning that
the S&P outlook toward the economy is so bullish while the Treasury market is
registering concern for the economy, as that would seem to mean that either the
S&P or the Bond market is wrong! Between the current market of 1126 and 1131
gains could be easily won, but above 1131 the going could get tougher.
FOREIGN EXCHANGE
US DOLLAR
Overnight the Dollar is showing signs of weakness
and with the soft economic views being fostered in the Treasury market and US
economic concerns being registered in Japanese export stocks, the decline is not
surprising. While the currency market is mostly without a strong driving theme,
we have to think that the Dollar has the ability to slide down to 88.53 level
basis the December contract. Standing against an aggressive Dollar decline
today, are expectations of a slightly positive Preliminary University of
Michigan sentiment reading. On the other hand, numbers from the Euro zone were
strong enough that the downside in the Dollar should be facilitated. In the near
term, one can’t rule out a decline down to 88.00 but the market should at least
temporarily find support at the higher support zone of 88.50.
EURO
With the Euro showing a somewhat impressive +0.4%
gain in July Industrial output there should be a slightly positive response in
the Euro as that reading is at least relative to the recent US Industrial
production reading. However, the Euro zone output reading was below the early
expectations for the report and that reduces the upward capacity in the Euro.
The Euro has a near term pivot at 122.10 and upside targeting of 123.00.
YEN
The Japanese bond market rose on concerns that the
US economy was slowing and that exports from Japanese companies to the US might
be set to decline. Therefore, the Yen looks to be under pressure but we doubt
that the December Yen will slide below the 91.00 level off the current
information mix. Talk about increased Japanese government supply from the MOF,
might evoke an up tick in yields in Japan, but we doubt that will serve to
attack a massive wave of foreign investment. We still see the range in the
December Yen as 90.80 to 92.30.
SWISS
Near term support is seen at 78.87 and a slight
upward bias is seen in the action today. In fact, until the Swiss manages to
rise to 79.96, we see little in the way of resistance on the charts.
BRITISH POUND
While the Pound has made significant gains in the
last few sessions, it would seem to maintain an edge and should be able to
manage a rise to chart resistance of 179.05. With the Dollar and Yen under
economic suspicion, the Pound seems to have a distinct economic differential
advantage over most currencies.
CANADIAN DOLLAR
The up trend pattern looks to reassert itself again,
especially since the outlook toward the US is suspect but also because the
Canadian really balanced its technical condition, with the hard correction early
this week. The top of the uptrend channel in the December Canadian is seen at
77.94!
METALS
OVERNIGHT
London Gold Fix $404.60 +$.20 LME COPPER
STOCKS 102,850 mt tons Unchanged COMEX Gold stocks 4.883 ml Unchanged COMEX
Silver stocks 110.0 ml Unchanged
GOLD
On Thursday, gold and silver prices again showed a
divergent pattern, which might suggest a lack of consensus within the metals
complex. For gold not have shown any sign of strength in the face of continued
Dollar losses, suggests that the bull camp isn’t exactly poised to control
prices. However, given that U.S.
SILVER
At times on Thursday, the silver market appeared to
be in an upside breakout move on the charts. Unfortunately the funds were not
compelled to enter the market in force on the long side in the wake of those
technical pivots and that is discouraging. In a positive note, silver is
tracking favorably with both the platinum and copper markets and that would seem
to insinuate a slight physical/economic demand correlation in the silver trade.
PLATINUM
After periodic long interest in platinum it would
seem like the market is into a profit taking posture. Near term critical support
is seen down at $834.5 and then again down at $825. Surprisingly, the platinum
market isn’t getting consistent Chinese demand support, like the copper market.
COPPER
The copper market started out firmer on Thursday and
then began to escalate its gains. According to press sources, aggressive fund
buying in London started the pulse up, but the rally was more than likely
facilitated by ongoing Chinese supply tightness dialogue. However, the Shanghai
copper stocks report for the week showed a 901 ton increase and that continues a
pattern of weekly gains.
CRUDE COMPLEX
Apparently the energy complex reacted to
hurricane Ivan well in advance of the storm’s actual arrival on shore, as prices
weakened almost at the exact time of landfall. However after moderate declines
early in the session Thursday, energy prices managed to recover into mid-session
and finish above the prior days close. The recovery in prices was actually
managed in the face of news reports that many Gulf Coast refiners were already
beginning the restart processing by mid day Thursday.
NATURAL GAS
Because natural gas prices have already extracted
some of the hurricane premium, with massive declines on Wednesday and Thursday,
it might be difficult to see more price declines in the near term. However, the
natural gas market is finding some support from news that a gas pipeline was on
fire in the wake of the Gulf storm. With the weekly inventory report showing a
larger than expected (99 Bcf) injection, the supply tilt in natural gas remains
bearish.