Futures Point To A Flat Open
11/1/2004
Â
INTEREST RATES
The Treasury market comes into the session just
below the mid point of the last month’s trade and with the energy market showing
some signs of strength again, we have to think that propensity for concern over
the economy will provide some support to prices. The weekly COT report showed a
mostly balance small spec and fund combined position of 10,000 contracts long
and even that reading is overstated due to price weakness since the report was
measured. The economic report slate over the coming two sessions is probably not
that critical to near term prices, as the election and the direction of energy
prices will probably dominate the markets focus.
STOCK INDICES
The stock market seems to be leaning toward more
gains but the presence of firming energy prices and the looming election
probably robs the market of some buying fuel. It would seem like the GDP numbers
last Friday disappointed the market, which has somewhat stalled the market
around the highs posted late last week. The Chicago Purchasing Managers report
showed some extremely strong readings last week, but the trade didn’t seem to
give those numbers much credence, even though the Production Index was the
highest since August 1950 and the New Orders Index was the highest in nearly 20
years.
DOW
The December Dow has not been held back by last week’s highs, as it comes into
the new week with more new highs for the move. According to the last COT report,
the combined small spec and fund long in the Dow was mostly balanced and that
means that the 10,000 level is a logical resting point for the coming 36 hours
of trade. The short term bias is up but in order to extend that bias, one
candidate or the other must win and energy prices have to remain under control.
Critical support comes in at 9,981 in the December Dow and resistance is seen at
10,047.
S&P
The December S&P comes into the action this morning holding just below last
weeks highs. The funds were actually net short the S&P early last week and the
small specs held a minimal long position. Therefore, we don’t see the market
being excessively vulnerable to stop loss selling and under the right
conditions, stock prices might be able to rise significantly, before a
moderately overbought condition is encountered. Critical pivot point support
comes in at 1127.60 and resistance is seen up at 1131.90 and 1133.50.
FOREIGN EXCHANGE
US DOLLAR
The Dollar did manage a new low for the move
overnight but the shorts decided to take some profits, as the market rebounded
aggressively. The path of least resistance is still down and the US Dollar will
have to find something significantly positive to alter a very entrenched down
trend pattern. The big spike up bounce in the Dollar on October 28th probably
balanced the technical condition enough, that a round of fresh lows is likely
under the slightest sign of conflict in the coming US election. We do think that
the Dollar has seen significant selling interest off the expectation of a long
drawn out legal battle following the election. We also think that part of the
Dollar declines have come compliments of ever soaring oil prices and oil prices
are showing signs of strength again today. Therefore, the path of least
resistance is down but the scheduled US economic numbers could serve to mitigate
the downside this morning. Critical resistance is seen at 85.62 and minimal
support is seen at 84.90.
EURO
The Euro continues to garner most of its buying
interest off the persistent negative view toward the US and with the election
looming the interest in the Euro might reach a crescendo. In other words, the
Euro probably rises to a new contract high in the coming 24 hours, but the big
question is will that be a major top? Seeing the Euro consolidated around the
127 to 128 level would seem to suggest that momentum is waning but we would
suggest that traders look to go with a breakout of the 126.80 to 128.20 trading
range in the December contract.
YEN
The Yen seems to have reached an overdone level
around the highs last week and with the oil price situation firming again and
the outlook toward the US cloudy, we have to think that the Yen is set to back
and fill with downside targeting seen at 93.57.
SWISS
The Swiss certainly continues to have a solid chance
for significant flight to quality buying, but given the massive spike high last
week, we have to think that a number of longs are already in position and that
an extension of the upside will be very difficult, unless the US election spins
into court. The November Swiss options have 4 days until expiration and
therefore, the at-the-money options would seem to be a very good tool to
consider.
BRITISH POUND
The Pound like other currencies is seemingly in a
waiting posture. The Pound has solid support at 182.00 but given the lack of
follow through momentum following the October rally, we have to wonder if a
major top hasn’t already formed.
CANADIAN DOLLAR
The Canadian has a pronounced consolidation after a
significant new high and that speaks of a potential top. Traders shouldn’t exit
long futures but might consider buying two November Canadian 81.50 puts against
the futures to hold into this coming Friday.
METALS
OVERNIGHT
London Gold Fix $428.10 +$1.90 LME COPPER
STOCKS 77,925 metric tons -925 tons COMEX Gold stocks 5.334 ml Unchanged COMEX
Silver stocks 104.6 ml -1,825 oz
GOLD
With oil prices firm again it would seem like some
of the speculative crowd is willing to move back into gold on the long side.
However, the Dollar is a little higher overnight and that could dampen the
prospects for gold somewhat. Some traders continue to think that gold is being
pushed upward by concerns over the US election and those same traders think that
gold prices will slide following the election.
SILVER
The silver market comes into the week fresh off a
moderately aggressive correction last week and for that matter the COT report is
probably overstated. However, the silver market holds an 84,000 contract spec
and fund long and that leaves the market vulnerable to liquidation, if gold
doesn’t provide consistent leadership. Trend line support in December silver
comes in all the way down at $7.06.
PLATINUM
While copper seemed to signal an all clear with
respect to Chinese demand with a large rally last week, it would not seem like
platinum is capable of climbing above the $840 level without some concentrated
outside leadership. The platinum market continues to hold a moderate spec and
fund long position and it is pretty clear that a pattern of lower highs has put
a quasi technical cap on the market.
COPPER
After the massive rally last Friday the copper
market seems to be poised to take some profits and balance its technicals.
Apparently the large Shanghai copper stocks decline got the ball rolling on the
upside Friday, but once critical technical levels were taken out on the upside,
the funds showed an aggressive desire to be long. Therefore, we have to think
that the small spec and fund long of 18,000 contracts in the last COT report is
dramatically understated into the opening today.
CRUDE COMPLEX
The crude oil market managed an impressive
recovery bounce Friday afternoon and that in some ways tempers the building
aggressiveness of the shorts. With the market mounting the most aggressive
liquidation since the August correction, there is certainly more balance in the
marketplace than has been seen for a while. Recent inventory numbers have shown
a pattern of increases in crude oil stocks, but so far US distillate stocks
remain tight.
NATURAL GAS
While the December natural gas market seems to have
solid support at $8.52, there is no doubt that the market is vulnerable. The
weekly COT report showed a net spec and fund long of 41,000 contracts, which is
just barely into the extreme category. However, the natural gas market has
decline sharply since the COT report was measured and therefore the net spec
long is probably a little overstated at 41,000 contracts.