Futures Point To A Flat Open
3/15/2005
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INTEREST RATES
The Treasury market has managed to show a
recovery tilt off the lows forged Monday morning and might be able to add to the
gains into the scheduled US numbers this morning. However, we suspect that the
US numbers will only partially dampen the interest in the long side considering
that the Treasury market has recently posted a massive spec and fund short
position in the COT report. We also think that the market has at least temporary
discounted the prospect of rising inflation and is also getting renewed support
from the idea that soaring energy prices are hindering the US recovery process.
STOCK INDICES
Once again the stock market managed to hold up
rather impressively, especially when one considers all the negative developments
confronting the market recently. In addition to a late surge in energy prices
yesterday, the stock market was also forced to consider the prospect of
inflation and recession in the action Monday. In addition to an OPEC Oil
Minister, expressing concern of a US recession off high oil prices, the Press
was also suggesting that soaring base commodity prices are laying the ground
work for future inflation, which in turn has caused some to expect a more
pronounced response from the US Fed.
DOW
The market seems to have solid support, but the market also seems to lack
definitive and concentrated buying interest. Critical pivot point support comes
in at the June low of 10,807 but there would seem to be little resistance until
the 10,873 level. In order for the big cap stocks to re-energize and return to
the March highs, we will need to see a noted decline in energy prices over the
coming 36 hours. Typically the stock market doesn’t tend to bottom aggressively
from a consolidation pattern!
S&P
The market is initially cheered on by the Saudi comments about unilaterally
providing more oil, but we are not sure that is enough to really turn sentiment
into the bull camp. However, the S&P would seem to have a much more positive
technical setup than the Dow and therefore prices could rise to 1216.20 before
significant resistance hinders the trade. Trend line support in the June S&P
comes in down at 1204.70 today.
FOREIGN EXCHANGE
US DOLLAR
Now that the Dollar has bounced and balanced the
oversold technical condition, it could take a clear cut improvement in the US
economic outlook in order to facilitate more upside action. In fact, the Dollar
really needs to see something positive come out of the energy complex in order
to change a distinctly bearish fundamental and psychological setup. While some
of the numbers this morning are expected to be positive, we doubt that the
readings will be strong enough to threaten sustained change. In fact, with the
Euro zone already producing some favorable numbers overnight, the US readings
might have to be good just to keep the playing field level. In the end, we
suspect that rising oil prices have contributed to the Dollar weakness, almost
as much as the international rotation theme and therefore short term traders
should look to crude oil for an indication on where the Dollar will be headed.
In our opinion, the OPEC meeting might result in some temporary weakness in
energy prices, but we suspect that the impact will be fleeting. In other words,
a bounce back to 82.14 is probably a selling opportunity.
EURO
As suggested before the Euro is getting some support
from overnight news that the German ZEW report showed a rise in economic
expectations. The March ZEW showed expectations rising to 36.3 from 35.9 and
that gain was above expectations. However, we suspect that the Euro is set to
see some slight near term declines, before another solid bottom is forged. In
short, it is possible for the June Euro to slide back to 133.59 today.
YEN
It would seem as if the Yen has forged a solid
bottom and if the US can post some favorable numbers and oil prices show some
weakness, it is possible that the Yen returns all the way up to the recent
consolidation highs of 97.15. Keep in mind the Yen’s fortunes have correlated
tightly to the price of oil.
SWISS
At least in the near term, it would seem like the
flight to quality tilt is without merit and the Swiss seems to be a little
vulnerable on the charts. Therefore, we would not be surprised to see the Swiss
slide back toward 86.36 in the coming 24 hours.
BRITISH POUND
Given the reversal off the low yesterday it is
likely that the Pound manages to return to the top of the consolidation up at
191.85 but the market is still without a clear cut trend and is also without a
fresh fundamental theme.
CANADIAN DOLLAR
The pattern of lower highs in the Canadian indicates
that the bull camp is suspect. However, the market generally appears to be
capable of holding the majority of the gains made off the March lows. In the
coming sessions, aggressive traders might become a buyer on a dip down to 82.60.
METALS
OVERNIGHT
London Gold Fix $442.00 -0.75 LME COPPER
STOCKS 49,575 metric tons -300 tons COMEX Gold stocks 5.913 ml oz Unchanged
COMEX SILVER stocks 101.4 ml unchanged.
GOLD
With slightly higher action in the early US session,
the gold market has pulled back away from the downside breakout point seen
around the overnight low of $443.3. With some light physical interest noted in
China overnight, the Dollar slightly lower and the US economic report slate
today a little more active, we suspect that gold will be able to establish
firmer support on the charts. However, in order to shift the Dollar action back
into a distinctly supportive posture, the June Dollar will have to fall below
the critical pivot point of 81.75.
SILVER
Apparently the silver market isn’t too concerned
about an increase in production from a US silver producer, as the focus of the
market continues to be gold and indirectly the direction of the Dollar. The
silver market remains bullishly biased on the charts but must hold above the
prior day’s critical pivot point low $737.5 to shore up bullish sentiment. Trend
line support in May silver comes in at $7.41 but we would not rule out a
temporary slide back to the $7.25 consolidation zone.
PLATINUM
The July platinum market continues to waffle within
the consolidation zone and that seems to point to a loss of upside momentum.
While various private entities continue to favor platinum, even over the
cheaper, sometimes substitutable palladium market, we just can’t get over the
impression that platinum has lost momentum and is holding at extremely high
historical price levels. Critical support comes in down at $865, with resistance
pegged up at $875.
COPPER
The copper market has done a good job of holding up
in the face of slackening economic sentiment and a rising Dollar. While we
suspect that the trend remains up, it is also becoming apparent that the
February and March consolidation zone is beginning to present a solid overhead
resistance zone above the current market. Trend line support in the May copper
comes in at 145.90 today with the top of the trend coming in up at 153.30.
CRUDE COMPLEX
The energy complex managed one of its classical
recovery moves on Monday afternoon, with early weakness replaced by a late
recovery. Initially energy prices faded off Saudi suggestions that OPEC raise
production in the next meeting by 500,000 barrels per day. Also dampening prices
early Monday were suggestions from the OPEC President that capacity at OPEC was
indeed 2 million barrels per day and since that number was in question last week
that revelation prompted some minor selling.
NATURAL GAS
Surprisingly natural gas managed to hold early gains
on Monday, despite the fact that the regular energy complex was weak. Later in
the session Monday, when the regular energy complex managed a strong recovery
into the close, that seemed to lift natural gas prices even further. While the
Press suggested that the buying Monday was short covering, we doubt that was the
case as the funds were holding a minimal net spec short as of last Tuesday and
with the massive rally in the natural gas Monday, we doubt that many short funds
remain in position.