Futures Point To A Flat Open
INTEREST RATES
12/10 OVERNIGHT CHANGE to 04:10 AM:BONDS+10 The
Treasuries continue to coil without direction and that would seem to be fair,
when one considers the lack of direction in Fed policy. Even the economy seems
to be fostering a lack of direction in prices, as the economy appears to be in
recovery mode but the pace of that recovery is anemic. Even the outlook toward
prices, is confusing with the Fed mustering the opinion that the odds of a
deflationary problem have declined marginally but the risk between deflation and
inflation remains balanced.
STOCK INDICES
12/10 OVRNIGHT CHG to 04:10 AM:S&P-130, DOW-19,
NIKKEI -213, FTSE-43 We expected the Dow to run up to 10,000 and then setback,
but we are a little surprised at the magnitude of the failure and the residual
downside follow-through. Certainly the market has been undermined by the
scheduled economic information and the Fed meeting provided almost no direction
at all. In fact, it is possible that the Fed take on the economy, is negative
because they seem to think that the economy is a long way away from needing a
rate hike and that the risk of deflation has only marginally declined.
DOW
We suspect that near term buying support in the December Dow comes in at 9,858.
However, it is possible that the Dow manages to respect closer in support of
9,910. Over the last three months, the Dow has had a pattern of making highs
early in the month and fading into the end of the month but that pattern could
have been fostered by a series of favorable payroll reports. In other words, it
wouldn’t be surprising if the market sagged into Christmas and then managed a
recovery rally. In the near term, the bears look to have control over prices.
S&P
If the December S&P comes out of the current consolidation with a trade below
1057.80, it could be poised to settle down into a range bound by 1047 and 1057
and that would fit the chart pattern present in each of the last three months.
It would seem that holiday shopping influences are going to disappoint in the
near term and that prices are probably headed down until December 22nd. In fact,
seeing a break to December 22nd to 1047 would bring a lot of technical and
fundamental factors together for a really solid low!
FOREIGN EXCHANGE
US DOLLAR
The market is pausing because of the US/Chinese
interaction Tuesday and because the BOJ is thought to be intervening in a very
aggressive fashion. It is also possible that a sharp decline in German export
figures this morning, is giving pause to those that think the decline in the
Dollar hasn’t had any affect on other economies. However, we would think that
the Dollar would continue lower off the idea that the Chinese are open to a
floating currency. If the market has overshot the Dollar on the downside, in
anticipation of the Chinese currency floating, then the change of stance by
China could cause the Dollar to bounce. Since the downtrend in the Dollar has
been in place for so long and recent US numbers have been soft we are not
inclined to get in a hurry to predict a bottom in the Dollar. In the near term,
it is possible that the Dollar mounts a bounce to 89.25 but until it closes
above that level and sees dialogue that other countries are concerned about its
value, we see no key bottom.
EURO
As mentioned before the German export decline is the
first real sign that the soaring Euro is hurting the European economies. In
fact, the October trade figures show the surplus contracting from 14.3 billion
to 10.8 billion Euros and that is quite a drop. Considering the torrid pace of
gains in the Euro recently, one can’t rule out a sharp correction to 121.87 but
we are not of a mind to get short for the correction as that is trading against
an entrenched trend. In fact, closer in support in the December Euro of 122.19
might manage to hold up the currency.
YEN
Apparently the BOJ is throwing the kitchen sink at
the Yen in an effort to repel the recent impetus to breakout to the upside. The
overnight action shows the treacherous nature of a market where intervention is
an unknown factor. However, the movement by the BOJ highlights the concerns of a
central bank that realizes the fundamental and technical capacity of the yen on
the upside. It could take a couple days before the BOJ’s influence on the market
wanes and therefore a return to 91.50 might be a significant buying opportunity.
However, in order for the Yen to manage an upside breakout, the downtrend in the
Dollar will have to be reconfirmed following the meeting with the Chinese.
SWISS
A double top in the Swiss at 79.39 seems to be a
rather significant near term top and given the overbought condition of the Swiss
into that high, it is natural for prices to correct. Near term corrective
targeting is seen at 78.75 but close in support at 78.96 might manage to hold up
the trade.
BRITISH POUND
For some reason the market is becoming concerned
about slumping UK oil sales and the impact on its trade readings. However, we
don’t see the Pound as overbought technically, as the Euro and therefore the
Pound should see very muted corrective action in the near term. Expect the Pound
to hold above 173.47, or not to make a new low on the session.
CANADIAN DOLLAR
The Canadian consolidation is beginning to look like
a broadening top and a failure below 76.00 could be quite damaging to near term
sentiment. In order to see the Canadian up trend restart, the US Dollar has to
show that its downtrend remains intact with a trade back below 88.69.
METALS
OVERNIGHT
GLD-1.30, SLV-5.00, PLAT+1.70 London A.M.
Gold fix $407.30 -$.95 LME COPPER STKS 457,425 tons -1,300 tons COMEX Gold
stocks 3.059 ml +1,077 oz Comex Silver stocks 123.9 ml oz -970 oz
GOLD
At this point we don’t think that the US/Chinese
meeting altered the course of the Dollar but with the rally in the Dollar
overnight, some gold players have turned a little defensive toward gold. One
must be a little careful with the Dollar in the near term, because it would seem
that the Chinese were open to the idea of a floating exchange rate. We really
think that the interest in gold has broadened from the strict Dollar focus that
was the hallmark of the market earlier this year and that February gold will
manage to find support around $403.7.
SILVER
A slight overbought condition combined with a
negative tilt from the Dollar and gold, could apply some liquidating pressure to
silver today. Unfortunately trend line support in silver doesn’t come in until
$5.512. The market is vulnerable because the rally off the $5.38 low has come on
some extremely low volume totals, which would seem to suggest that the rally has
been built on a rather weak foundation.
PLATINUM
Apparently the trade thinks seeing platinum prices
rise above $800 will attract even more buyers. In fact, the interest in gold
probably continues to give platinum spillover buying, as the fundamentals in
platinum are much more supportive than those in silver or gold. Critical near
term support in platinum comes in at a recent consolidation of $796 in the
January contract.
COPPER
The market seems to have run into a little
resistance around the recent highs and that could be a delayed reaction to the
slightly disappointing economic outlook in the US, or it could be a result of
the market becoming forward bought. Traders should probably expect a
consolidation between 98.80 and 96.55 basis the March contract until more
leadership from China is documented. Apparently the Andina Codelco facility is
seeing reduced production due to maintenance and the ongoing effects of the
strike at that facility, which is supportive to prices.
CRUDE COMPLEX
12/10 OVERNIGHT CHG to 04:10 AM:CRUDE+28,
HEAT+85, UNGAS+54 While energy prices finished the session lower Tuesday there
wasn’t a bearish revelation in the market to force prices down significantly. In
fact, we have to think that the energy complex was simply a little over extended
and in need of a minor corrective setback. While it is possible that the recent
trend of tightening supply continues in US crude inventories, it might take a
very bullish set of inventory readings just to justify prices moderately above
the highs posted Tuesday.
NATURAL GAS
While the February natural gas market managed a
slight higher high, in the action Tuesday and then fell back on the session,
prices are still holding within striking distance of the recent high. Some
traders are suggesting that natural gas prices are pricing in a perfect storm of
bullish fundamentals but if upcoming inventory readings show a moderate draw and
regular energy complex prices manage to hold up around $33.00 in January crude,
it might be hard to break natural gas prices down significantly. Considering the
massive overbought step up traders should protect longs or take profits.