Futures Point To A Flat Open
1/10/2005
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INTEREST RATES
After an extremely violent range last Friday, we
suspect that a number of bulls and bears are afraid to move into the market.
While the US payroll report continued to show positive progression in the
recovery, the numbers failed to live up to the high bar set by the trade. We
continue to get the sense that nothing short of surprising strong growth is
capable of forcing the Treasury market into a sustained down trend pattern.
STOCK INDICES
The stock market seems to have solidified last
weeks lows as a decent support point, but it is also clear that the bull camp
needs a fresh catalyst. Some traders think that the coming corporate earnings
reports will provide the lift for a bounce this week, but given the partial
disappointment off the US Monthly payroll report last Friday morning, the market
might “need” favorable earnings just to hold up on the charts. While we suspect
that pension fund money is waiting on the sidelines for cheaper prices, or for a
more significant a motivating development it is clear that bull interest is
weak.
DOW
As noted in prior comments, the fund long in the Dow futures continued to post
new record highs in the latest COT report and at the same time the combined
small spec and fund long position moved within 5% off an all time high.
Therefore, the market probably remains vulnerable to more long liquidation,
unless the earnings reports show very early that they are better than expected.
Critical support in the March Dow is seen today at 10,592, with resistance at
10,634.
S&P
While the S&P maintains a positive tilt on the charts, we don’t expect the
market to do that well off a consolidation low pattern. In fact, unless the
March S&P is capable of rising above 1191 today, we suspect that a decline back
to 1180 is possible sometime later this week.
FOREIGN EXCHANGE
US DOLLAR
The Dollar certainly impressed a number of traders
with its ability to regain strength after the initial sell off last Friday
morning. However, the Dollar is partially off balance this morning and given
that a vast majority of players have been bearish toward the Dollar, for such an
extended period of time, even the slightest weakness is given credence. We
continue to see the 83.33 level as an extremely critical pivot point but without
some positive guidance from US corporate earnings reports, we suspect that the
Dollar could see a return to levels below 83.00 before a more definitive trend
is forged. The Wholesale trade readings this morning could start the week out
with some volatility, as some Dollar longs would probably like to see at least
some sign of strength in US Trade just to solidify the Dollar turn. As long as
the Dollar doesn’t close below 83.00 or trade below 82.84, we suspect that the
Bull camp retains an edge.
EURO
Until the Euro manages to regain 131.48 we will
assume that the trend is down. We also think that the Euro was spared from a
massive beating by the below expectation US payroll report last Friday. However,
less that expected growth in the US will probably only cushion the Euro against
further declines, it probably won’t rekindle a rally in the Euro. Traders should
consider a slide back below 130.61 as an extremely damaging development for the
March Euro.
YEN
The March Yen seems to have forged a moderately
solid support zone around 95.65, and with the BOJ throwing out some favorable
dialogue on the Japanese labor market and suggesting that the current labor
situation should support a return to full growth; we have to give the bull camp
an edge in the Yen. Near term upside targeting comes in at 96.73.
SWISS
The steep down trend pattern in the Swiss has left
the market extensively oversold and capable of a bounce. Near term upside
targeting should be limited to 85.16 and fresh sellers could consider a sale at
that level.
BRITISH POUND
The Pound chart remains very bearish in our opinion
and in addition to the negative technical setup, the fundamental news of late
also favors the bear camp. In order to turn the downtrend around in the Pound,
the March Pound would have to manage a close back above 187.90.
CANADIAN DOLLAR
Against the back drop of a big decline in the
Canadian unemployment rate, we suspect that sellers will steer clear of the
Canadian. In fact, we would not be surprised to see the March Canadian manage a
rally back to 82.39 in the coming sessions.
METALS
OVERNIGHT
London Gold Fix $421.25 -$1.90 LME COPPER
STOCKS 48,250 metric tons -125 tons COMEX Gold stocks 5.864 ml Unchanged COMEX
SILVER stocks 102.8 ml -449,670 oz
GOLD
With the Dollar showing signs of profit taking and
in a sense pulling back to the prior week’s critical pivot point, the gold
market might have found a needed underpin. In the most recent COT report, the
gold showed a net spec and fund long of 145,000 contracts and that means that
the market is still rather overbought. However, gold does come into the action
today nearly $8 below the level where the COT report was measured, and at times
last week was nearly $12 below the level where the COT report was measured, and
therefore the figures in the COT report are certainly overstated.
SILVER
The silver market has built a moderately solid
consolidation support zone but remains torn between two separate themes.
Certainly the direction of the gold market remains the primary driving force,
but silver managed to shut off the selling quicker than gold last week and is
probably much closer to a fair value low on the charts than the gold market.
Aggressive traders should consider buying the March at $6.41 with a near term
objective of $6.70.
PLATINUM
The platinum charts have to be unnerving the bull
camp, with the market apparently poised to fall below a critical pivot point.
Furthermore, the last three months action has shown extremely disjointed trade
and that has to be sending longs to the sidelines. April platinum continues to
see a critical pivot point at 843 but the failure to hold above $836 could be an
extremely damaging development this week.
COPPER
With Chinese copper prices lower overnight and the
action from International equity market weak and choppy, it would not seem like
the overall look toward copper is that favorable. In fact, with Phelps Dodge
considering selling its Peru copper facility, one might suggest that some of the
luster has come off the copper market. While a rising Dollar applied significant
pressure to copper last week, that issue is reversed in the early going today.
CRUDE COMPLEX
While OPEC seems convinced that oil prices won’t
fall below $40.00 a barrel, they certainly aren’t talking prices up by
suggesting that the decision to cut production in the January 30th meeting is
still very much up in the air. Certainly energy prices have acted pretty
impressive since the late December low, especially when one considers that US
inventory data during the rally has been patently bearish and North American
weather has been very bearish. In short, we have to think that the early
December lows are a value zone that could be difficult to take out on the
downside.
NATURAL GAS
The natural gas market has managed only a weak
bounce and has done so mostly off the leadership of the action in crude oil and
possible off limited fund short covering. However, North American weather is
showing significantly colder weather ahead and that might be enough to inspire
more than simple short covering. The March natural gas would fill a gap with a
rally back to $6.17, and there is another gap up at $6.60 to $6.69, but that
type of bounce would require a clear cut shift back to a new bullish theme.