Futures Point To A Flat Open
10/11/2004
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INTEREST RATES
Market Closed for Holiday!!!
STOCK INDICES
The stock market remains deflated and with just
under 40 S&P 500 Companies expected to report earnings in the week ahead, the
market will be presented with an important decision. Over the past 2 months, the
stock market has been generally able to discount the $13 per barrel rise in
crude oil prices but with the US failing to impress with it latest Non farm
payroll readings, we see the stock market in a more vulnerable position.
Certainly the large cap stocks are feeling more of the pressure off the rising
interest rate and rising energy price environment and therefore traders might
watch the Dow for direction on the broad market.
DOW
Critical support in the December Dow comes in at 10,039 but more important
psychological support is seen down at even numbered 10,000. According to the
last COT report, the Dow futures were minimally net spec short and that could
cushion the prevailing down trend pattern after some additional losses. However,
until there is a lessening of pressure from the oil price front, or a really
supportive earnings trend is detected, the bear camp should have control.
S&P
With the S&P holding a moderately large small spec long position as of last
Tuesday, one might expect more long liquidation in the week ahead. However,
unless the December contract can manage to hold above 1120, there will be a
constant fear of even more aggressive stop loss selling. Given the slack
fundamental information last week and the subsequent technical action, we give
the edge to the bear camp. In fact, until we see a big range down reversal move,
we would expect more minor downside action! To turn the trend up, the December
S&P must manage a rise back above the 1127.30 level.
FOREIGN EXCHANGE
US DOLLAR
With a partial holiday in the pit, the Dollar is
spared some of the follow through selling that would have been present following
the disappointing US payroll report. While we think the market is holding the US
to a higher growth standard than the Euro zone, it is clear that the Dollar is
going to remain on the rocks until there is more definitive evidence of
sustained forward progress in its economy. In short, we suspect that the
December Dollar will remain within striking distance of the consolidation lows
of 87.47. While it is possible that a strong string of US corporate earnings
reports could turn the tide toward the Dollar, that is a tall order for
companies pressured by high oil and rising interest rates. Therefore, we assume
that the path of least resistance is down and that the Dollar will be unable to
climb back above 87.76.
EURO
The path of least resistance is up but traders are
looking around for reasons that justify an upside breakout. However, we have to
think that ongoing economic readings from the Euro zone will discourage fresh
buying so close to the highest Euro pricing since early July. In short, the US
economy will really have to stumble in order to result in an upside breakout in
the Euro. Critical near term support comes in at 123.81.
YEN
Near term targeting the Yen is 92.00 and resistance
above that level comes in at the August high of 92.43. Near term support in the
Yen comes in at 91.43.
SWISS
Like the Euro, we are not sure that the Swiss has
the fundamental tilt to achieve an upside breakout on the charts. Even the
technical setup looks formidable in the Swiss, as the market has significant
consolidation resistance at 80.40.
BRITISH POUND
The Pound comes into the action today, right in the
middle of the last two months trading range and somewhat lost in its fundamental
focus. However, sharp increases in inflation readings might foster talk of
higher UK interest rates and that might serve to give the Pound a slight lift.
However, some traders think that even higher rates on top of a lackluster UK
economy, could result in an economic stall and that could serve to limit the
currency.
CANADIAN DOLLAR
With a holiday thinned trade the Canadian might be
vulnerable to a greater profit taking threat than would otherwise be the case.
With the Canadian economy producing an impressive payroll reading relative to
the US last week, we have to think that the uptrend pattern remains very much in
place but the overbought status of the Canadian and the oversold status of the
Dollar could justify a Canadian correction to 79.46.
METALS
OVERNIGHT
London Gold Fix $421.75 +$3.70 LME COPPER
STOCKS 90,200 metric tons -1,800 tons COMEX Gold stocks 5.135 ml +15,116 oz
COMEX Silver stocks 106.9 ml -23,311 oz
GOLD
The gold market comes into the week moderately above
the level where the last COT report was measured and given that the net spec and
fund long was pegged at 192,000 contracts, we suspect that the gold spec long
comes into the week close to 200,000 contracts. Chinese spot gold prices were
higher overnight despite the prevailing Asian desire to bank some profits off
the large rally last week. We suspect that the tilt will remain up, but in order
to spark a concentrated wave of buying, the December Dollar will have to slide
below the ultra critical consolidation lows of 87.47.
SILVER
The silver remains in the uptrend pattern that was
initially started in early September. However, the small spec and fund long of
74,000 contracts is becoming a little burdensome but it is a positive that the
small spec long actually showed some corrective action in the latest weekly
survey. We suspect that inflation talk and periodic strength in gold will
provide silver with some upward momentum.
PLATINUM
Surprisingly the platinum market has seen the same
type of long interest as gold and silver over the last week. In fact, for some
reason the platinum market is bordering on a technical failure on the charts
with a critical pivot point at $836.5 and that is the overnight low. Apparently
a South African labor dispute is expected to end later today and that takes some
of the speculative interest away from the market.
COPPER
A slight profit taking tilt was fostered in the
overnight action and with the COT report showing a net spec long of nearly
39,000 contracts (and the report is obviously understated due to the rally
following the report mark off) we can seen the need for a corrective slide.
However, the market is well supported by the consistent decline in stocks and by
the general expectation that all base metals prices are set to rise even
further. Overnight Dow Jones floated a story suggesting that Aluminum prices are
expected to stay strong into 2006! While the macro economic and fundamental
outlook is a little negative off the latest US payroll report, one still sees
positive growth in the US and only minor declines in equity prices.
CRUDE COMPLEX
The energy complex continues to rise
aggressively, even without a dominatingly bullish specific headline development.
However, it seems that a tropical storm surfaced and shut down some oil activity
off Louisiana over the weekend and that that simply delays the US Gulf’s return
to full production. Certainly the news of labor problems in Norway and talk that
US Gulf oil operations were still closed and might remained closed for an
extended period of time is more than enough news to justify fresh contract
highs.
NATURAL GAS
The weekly COT report in natural gas showed a
moderately large small spec long but an almost flat fund positioning. We
continue to think that a large portion of the recent strength in natural gas is
coming from spill over buying from crude oil and therefore natural gas needs
December crude oil to hold above $52.10. Critical pivot point support in
December natural gas comes in at $8.10 while the top of the up trend channel
comes in all the way up at $8.55.