Futures Point To A Flat Open
11/18/2004
INTEREST RATES
The Wall Street Journal recently questioned the
Treasury market impact off the potential Chinese currency revaluation. However,
it would certainly seem like the Chinese currency situation or more succinctly
the sharp decline in the Dollar is driving some buying into Treasuries, as the
rest of the macro economic information of late would seem argue against the
upside action. While the recent move might have been mostly technical in nature,
there is apparently a portion of the trade that continues to doubt the US
recovery.
STOCK INDICES
While the stock market continues to show bullish
action we are a little concerned that Treasury prices continue to show strength
and the Dollar remains weak. We are also a little concerned about the Leading
Indicator report this morning, as early expectations call for an unchanged or
minimally higher leaders reading. In other words, if the economy is really
expanding, why is it that the leader indicator readings are expected to be
somewhat anemic? We are also a little concerned about the recent recovery in
energy prices, but with recent signs of rising crude oil supply, we really doubt
that energy prices will return to ultra high levels seen in late October without
some fresh physical supply disruption.
DOW
The Dow lingers near its recent highs on the charts and is probably a little
overbought from a short term technical perspective. Top of the recent up trend
channel comes in today at 10,601 and critical pivot point support comes in at
10,531. Don’t fight the trend, but it would be surprising to see this market
rise all the way into the end of the week, without some type of minor corrective
slide mixed into the action.
S&P
Trend line support today in the December S&P comes in at 1181.10 and near term
resistance is seen up at 1185.90. Traders should be buyers of a decline down to
1177.90, with an objective of new highs next week.
FOREIGN EXCHANGE
US DOLLAR
It would seem like US officials are calling on the
Euro zone to do more to stimulate their economies, while Euro officials are
poised to complain that the US needs to do more to restrain deficits. In short,
the fundamental and technical setup continues to point to lower Dollar action
and we hardly any players even hinting at intervention there is little to stop
the trend. Therefore, the only thing supporting the Dollar is the fact that the
market is oversold. It has become very clear that stronger US economic numbers
are of no concern to the Dollar, just as it is unimportant that the US remains
the only country poised for even higher interest rates. In short, none of the
usual driving forces seem to be impacting trade decisions and the market is
content to accept the current trend. Therefore, continue to look for a downside
target in the December Dollar of 82.00.
EURO
As suggested in the Dollar section, it would not
seem like economic reports have much to do with the track of currency prices.
Therefore, one can hardly argue against even higher Euro prices. It would almost
seem as if the revaluation of the Yuan will have no impact on the Euro and that
could be because the Euro zone doesn’t have the trade deficit problem that is
present in the US. Trend line support in the December Euro comes in down at
129.60 and the next upside target comes in up at 131.40.
YEN
While the Japanese stock market is growing concerned
over the slide in the Dollar relative to the Yen, that doesn’t seem to have
tempered the bullish capacity of the Yen. Certainly the Yen is extremely
overbought but that shouldn’t alter what seems to be an up trend.
SWISS
Like the Yen and the Euro, the Swiss managed a
rather aggressive overnight rise and might need to correct some of that
overbought status. However, on a pullback to 85.65 we suspect that a number of
traders will be pulled back in on the long side.
BRITISH POUND
October UK retail sales actually contracted by 0.4%
and that undermines the Pound. Given that support in the Pound isn’t seen until
184.63, a corrective swing could be seen in the coming 24 hours.
CANADIAN DOLLAR
Overnight the Canadian violated a series of critical
channel support lines and that might evoke a more aggressive profit taking.
Therefore, longs might brace against a decline all the way down to 82.40.
METALS
OVERNIGHT
London Gold Fix $444.30 -$0.20 LME COPPER
STOCKS 63,875 metric tons -1,450 tons COMEX Gold stocks 5.347 ml -482 oz COMEX
Silver stocks 101.5 ml +6,446 oz
GOLD
Another new high overnight but the gains didn’t seem
to be off a fresh theme. Therefore, the bulls might be temporarily without a
driving force. Certainly the Dollar managed another new low for the move
overnight but coming into the opening this morning, the Dollar has managed to
bounce back up toward the prior session’s closing value.
SILVER
Positive leadership from gold leaves silver in a
positive track but trend line support doesn’t come in until $7.54. Exchange
stocks continue to hover just above levels that could attract some attention,
but favorable action in copper and platinum yesterday make it easy to pull
buyers into silver. Trend line resistance is seen up at $7.75 today and at $7.76
on Friday.
PLATINUM
The platinum market has been unable to hold the
gains forged into the Monday morning high and that is partly because the private
report on platinum failed to spin a convincingly bullish forecast for the
market. We also think that the mere threat that the Chinese government might
sell some copper, seemed to take the heart out of the Asian platinum demand
argument early this week. The chart setups in platinum looks like one big
massive broadening top formation, or possibly even a long-held rather wide
sideways consolidation pattern.
COPPER
So much for the concern of Chinese sales, as prices
overnight leaped into higher ground. It would seem like December copper is
indeed headed back to contract highs as London exchange stocks continue to
tighten, the broad economic view is improving and nobody is exactly sure which
side of the market the Chinese State Reserve Bureau is actually on. Some traders
are suggesting that the State Reserve is in fact poised to take delivery and
that simply gives the bulls another indirect lift.
CRUDE COMPLEX
The energy complex certainly showed that another
increase in US crude stocks wasn’t important, as the heating oil market forged
an aggressive recovery bounce off a minimal decline in distillate stocks. It is
likely that Saudi Arabian comments (regarding a cut back in supply, in the face
of any supply rebuilding) was the real catalyst behind the sharp bounce
Wednesday. We also think that comments from the EIA regarding unusually strong
distillate demand for this time of year, added to the speculative long interest.
NATURAL GAS
Expectations for the weekly inventory report call
for an unchanged to minimal injection and that could provide the market with a
psychological lift. In other words, seeing an early end to the injection season
could foster talk of increased demand and in turn partially confirm the argument
that natural gas will indeed see spill over buying from the regular energy
complex this winter. While the weekly distillate stocks readings weren’t that
supportive, the energy market did come away from the report with renewed
concerns for winter heating supplies and that indirectly means that natural gas
prices are going to participate with some near term gains.