Futures Point To A Flat Open
10/29/2004
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INTEREST RATES
Treasury prices did manage to recoil off the lows
from Thursday, as if the big slide in energy prices was being partially
discounted. Certainly oil prices will have to stay down and might even have to
fall further to see a quick benefit to the economy. Therefore, Treasuries are
going to wait before jumping to conclusions on the recent weakness in energy
prices.
STOCK INDICES
The stock market would seem to be hanging at a
precarious level on the charts and would seem to need ongoing help from lower
oil prices, US economic numbers and US corporate earnings to extend the recent
gains. On the other hand, it would seem like something has changed with respect
to energy prices and that reduces the risk to fresh longs in the stock market.
In other words, the Chinese rate hike move, in a round about way, could be very
beneficial to the global economy as 5 billion people outside of China have had
to fight for tight supplies of oil, cement, steel and other necessary
commodities and now they may be able to get those important inputs easier and
possibly at lower prices.
DOW
It goes with out saying that the 10,000 level is a critical pivot point. We
suspect that the path of least resistance is up, especially if the GDP is as
expected, or simply above +4.3%. Critical support must hold at 9,955 in order
for the bull stance to continue controlling prices.
S&P
The bulls have control and as long as the December S&P maintains above 1124.80
we are bullish. However, in order to rise above the early September high, in the
action today, the market has to get decent early numbers and will need help from
lower energy prices. A trade above 1132.30 today is a major technical
accomplishment for the bull camp!
FOREIGN EXCHANGE
US DOLLAR
The Dollar can’t seem to get away from the recent
lows and without a clean sweep of early numbers today, we suspect that the bear
camp will attempt to press the Dollar down toward new lows. We get the feeling
that this morning is a major junction for the Dollar, as a decline to new lows
in the face of decent economic numbers shows that the Dollar is tracking lower
off something other than the economy. In other words, one might have to wonder
what will alter the downtrend in the Dollar, if sharply lower oil prices and
decent economic numbers don’t save the currency. In fact, a +4.4% GDP reading
should be a figure massive above the Euro zone, but yet the Euro is strong into
the US GDP reading. Therefore, the trend is down because of the coming election,
the threat of US terrorism, the exploding trade deficit, the exploding budget
deficit, the war in Iraq.
EURO
The massive correction in the Euro certainly puts
the technical condition of the Euro in a position to rally, if the US shows the
slightest weakness in its numbers. However, with Euro zone consumer confidence
numbers soft this morning, that does mitigate the upside tilt in the Euro.
However, we doubt that poor Euro numbers or good numbers from the US will sink
the Euro below 127.09 but sloppy US numbers should make the Euro rally.
YEN
The Yen has decided that the Chinese rate hike isn’t
a severe impact on the Asian economy and in fact some think the move was good
for the region, as that might give other countries access to tight supplies at
cheaper prices. Therefore, the Yen looks to continue to rise and until the Yen
reaches the 96.00 level, we think there is little concern of intervention by the
BOJ.
SWISS
While flight to quality issues seem to be less into
the opening this morning, the Swiss rejected the recent weakness and remains
close to the upside breakout zone. Critical support comes in today at 83.12,
with little resistance until 83.80.
BRITISH POUND
The Pound chart seems to be vulnerable, as it is
significantly overbought and is just barely managing to hover above the 182.00
critical support level.
CANADIAN DOLLAR
the Canadian chart looks poised for a run to new
highs. Decent numbers from the US don’t look to discourage the Canadian in its
coming rise, with the next upside target seen up at 82.65.
METALS
OVERNIGHT
London Gold Fix $426.20 +$3.35 LME COPPER
STOCKS 78,850 metric tons -900 tons COMEX Gold stocks 5.334 ml +16,316 oz COMEX
Silver stocks 104.6 ml -411,540 oz
GOLD
So far the trade is mixed on just exactly what
impact the Chinese interest rate hike will have on gold, as many traders are
convinced that the hike will have a negative impact on base metals. Overnight
gold seemed to come back into favor in Japan and with the Dollar returning to
the vicinity of the recent lows, we have to give the bulls a little edge. In
fact, with the moderate break in gold off the recent high ($11 from the October
25th high to the low yesterday) we have to think that the technicals are at
least moderately balanced.
SILVER
Trend line support comes in at $7.085 but unlike
gold, silver hasn’t recoiled away from the recent lows. In other words, the
silver market seems to be wary of the Chinese metals drag and with the outlook
for the global economy also cloudy, we can understand silver pausing its upward
track, at least until more optimistic economic conditions surface. It would
almost seem like silver needs to drift down to even number support of $7.00 to
really secure a base.
PLATINUM
About the most positive thing that can be said about
platinum is that it did reject the probe below $820. However, the Chinese rate
hike issue and concern for the global economy continues to hang over the market.
Apparently Zimbabwe is asking platinum mines in that country, to open foreign
currency accounts inside the country instead of operating through offshore
accounts.
COPPER
While copper prices come into the session today
almost exactly in the middle of the last two weeks consolidation pattern and
have recently probed toward a downside breakout, it would seem like the market
is set to respect 125 support. We feared that the Chinese rate hike situation
was going to smash copper back toward the August consolidation low around 122
but now the odds of that happening seem to have diminished. Shanghai copper
stocks decreased by 12,326 tons, to stand at only 29,720 tons in the most recent
weekly reading, and that supply tightness goes a long way toward discounting the
fear of slackening Chinese demand.
CRUDE COMPLEX
The market comes into the action this morning
somewhat choppy despite news overnight that Japanese September crude oil imports
increased by 10% over last year. However, the energy complex remains under a
liquidation watch and with the market closing weak two days in a row and the
OPEC President expecting even more losses ahead, it would seem like the near
term setup favors the bear camp. Even after Venezuela tried to whip up bullish
support yesterday by suggesting that OPEC has little excess capacity, the market
decided to stick with a bearish tilt.
NATURAL GAS
The weekly natural gas inventory report showed a
much smaller than expected injection of 26 bcf. In addition to the smaller than
expected injection reading, it should also be noted that the annual deficit
figure narrowed significantly. While the natural gas market is still in a
surplus condition, is has narrowed the surplus significantly and the market is
generally expecting a much larger switch over demand in the coming winter and
therefore more supply than last year is probably needed.