Futures Point To A Flat Open
INTEREST RATES
12/11 OVERNIGHT CHANGE to 04:11 AM:BONDS-5 The
Treasury market is really trading without a definitive direction, as prices
seemed to firm yesterday but come into the session today, right back down near
recent chart support. Because the Treasury market was without any macro economic
guidance yesterday, the retail sales report this morning takes on an added
importance. While it is possible that a slightly firmer Dollar is providing some
foreign buying interest to US Treasuries, we have to think that no single focus
is set to dominate interday price action.
STOCK INDICES
12/11 OVRNIGHT CHG to 04:11 AM:S&P+120, DOW20,
NIKKEI +164, FTSE-3 On Monday it seemed like the stock market was clearly going
discount the slight weakening in the US numbers but since then, the market has
seen many investors move to the sidelines. The big risk to stocks in the near
term is that the lack of a “bullish story”, as the lack of a bullish story might
foster continued year-end profit taking. In fact, we have a feeling that a
failure to kick up fresh long interest this morning (off retail sales readings)
could foster a broad based exhale, with prices sliding slowly down over the
coming 5 to 6 sessions.
DOW
While it would seem that the Dow is going to come into the session today, with
an initial positive bias, the US numbers have to give the market a “reason” to
rise. We would not be surprised to see the December Dow rise to 9,962, or fall
back to support of 9,896 but we do think that the Dow is going to act
significantly better than the S&P. One can’t argue against weak gains, but we
just can’t accept being long at current levels because of the unfavorable risk
and reward ratio.
S&P
Since the S&P seems to be a little more fickle than the Dow, the retail sales
report today is a critical report. In our opinion, the S&P can’t simply rally
off the status quo, like the Dow, it needs some added incentive. We would prefer
to stand back and buy the December S&P down in a range of 1057 to 1047 (which
equates to a 1055 to 1046 the March S&P) but the market might not produce that
big of a break. Nonetheless on a decline to 1051, we think the small spec net
long in the S&P will be near the lowest level since April and that would seem to
be a very good time to get long. Short-term traders might expect a weak rally
that fails to hold today, whereas position traders should wait for a decline to
1051 to get long for a hold into Christmas.
FOREIGN EXCHANGE
US DOLLAR
The Dollar is starting the session out strong and
has managed to regain some critical technical levels on the charts. We thought
it might be possible for the Dollar to resume its downtrend this morning off
ideas that the Bush Administration was preparing to throw up fresh trade
barriers to protect US steel producers but so far that hasn’t happened.
Therefore, we have to think that persistent intervention on the part of the BOJ,
is giving the Dollar a technical lift, against what could be considered negative
fundamentals. It is also possible that the market is watching the action in the
Dow and deciding to liquidate short Dollar positions. While the US economic
numbers haven’t been tightly correlated with movements in the Dollar, a weak US
retail sales report could provide some light selling incentive to the Dollar,
after it mounts an early rally. In order to turn the trend back up in the Dollar
we expect to see a headline type development and thus far we have not seen a
headline type development. However, if the December Dollar were to climb above
89.40 that could kick off another wave of technical short covering that manages
to push the Dollar back up to the 90.00 level.
EURO
As would be expected the Euro has fallen back below
some critical chart support points and with the sharp decline in trade surplus
figures yesterday, the bulls in the Euro no longer have a free ride. The Euro
zone managed to produce some favorable auto registration numbers today but that
probably only serves to mitigate a light profit-taking slide. On the other hand,
with the ECB predicting an anemic 2004 growth target of 1.6%, it is possible
that a large number of longs decide to exit positions and that could see the
Euro fall to 120.97 on the current correction.
YEN
The BOJ continues to intervene and that is having an
impact on the currency. In fact, with the BOJ obtaining significant capital to
force the currency down, the speculative trade is simply unwilling to get in the
way of the steamroller. It is possible that the Yen manages to slide below
critical chart support of 92.00 to the bottom of the consolidation zone at
91.23. At 91.23, long-term traders might consider adding to long positions
again. However, trading the range in the Yen, seems to be more effective than
position trading and that action might continue into the new-year.
SWISS
With the Swiss sitting on extremely high open
interest and the market violating critical support levels on the charts, it is
possible that the Swiss declines to 77.65 in the coming sessions. To turn off
the near term bearish track, US numbers have to be extremely disappointing.
BRITISH POUND
The Pound doesn’t look to be into the same type of
corrective posture as the Euro and Swiss. In fact, the Pound looks to respect a
very impressive upward channel. Also it would seem that favorable numbers from
the CBI overnight are capable of putting a firm fundamental condition behind the
Pound in the near term.
CANADIAN DOLLAR
A major technical failure on the charts is certainly
fostered by the BOJ intervention against the Yen. With the BOJ expected to
continue pumping money into long Dollar moves, the Canadian might be poised to
decline to 75.00. With volume and open interest rising on the recent failure, it
would appear that the Canadian has the potential for downside momentum.
METALS
OVERNIGHT
GLD-2.00, SLV-3.50, PLAT-3.70 London A.M.
Gold fix $404.00 -$3.30 LME COPPER STKS 462,925 tons +5,500 tons COMEX Gold
stocks 3.059 ml Unchanged Comex Silver stocks 123.9 ml oz Unchanged
GOLD
With the Dollar climbing back above critical points
on the charts, the gold market is being pressured. With the gold market recently
reaching a net spec long of 190,000 contracts, the trade is certainly vulnerable
to profit taking and stop loss selling. Seeing the December Dollar rise above
89.33 could spark yet another liquidation wave, as that would put the Dollar
back above a steep down trend channel line.
SILVER
We would have to think that the silver will follow
gold, with another session of weakness. However, March silver could be in a
position to fall to trend line support of $5.435. Recent corrections in March
silver have been 29, 28 and 19 cents and that could mean the market will find
initial support up at $5.545 and avoid the steeper correction to $5.43.
PLATINUM
It would not seem like the corrective action in gold
and silver is set to have much of an impact on platinum prices but the market
will be hard pressed not to see some light profit taking after the recent
aggressive pulse up in prices. Critical support in the January platinum comes in
today at $803.5, while trend line support is seen at 798.5. Platinum remains a
bull market despite weakness in other precious metals.
COPPER
Only minor upward direction documented in the London
action, leaves the US market without a clear-cut trend today. It should be noted
that LME stocks jumped by a notable 5,500 tons overnight but one should not be
too concerned unless there is a pattern of gains in stocks. While the copper
market hasn’t paid much attention to the macro economic reports, the US retail
sales reading today might be important because the Asian action really didn’t
send a definitive direction signal.
CRUDE COMPLEX
12/11 OVERNIGHT CHG to 04:11 AM:CRUDE-9, HEAT-29,
UNGAS-64 The energy complex continues to get a mostly bullish spin from the
weekly inventory reports, as crude stocks declined by 8.9 million barrels at the
API and by 6.4 million barrels at the DOE. However, as long as product stocks
continue to build that should countervail the bullish impact of tightness fears
in the crude stock arena. In other words, the last three week’s inventory
readings have been bullish to crude and negative to the products.
NATURAL GAS
The natural gas market was lifted by rumors that the
NWS and a private forecasting company changed their forecasts to colder
outlooks. It is also possible that the market was lifted by the expectation that
the draw today could be as big as 90 to 100 bcf. In fact, if the draw is found
to be running in triple digits early in December, that speaks volumes for the
bull camp.