Futures Point To A Flat Opening
METALS
GOLD:
It appeared as if the gold market was on its way down yesterday, before the
Dollar really began to rise aggressively and that suggests something other than
the Dollar caused the slide in gold. We think the gold break is simply an
ongoing liquidation of that overly long position. We also think that gold and
silver have lost the financial or flight to quality support and that is probably
because the trade isn’t as concerned about the global recovery, as it was in
April and May.
SILVER:
Surprisingly the big wash in gold isn’t hammering the silver market.
Certainly, more downside action is possible but we have to think that September
silver is getting close to deflated pricing. Fresh position longs still have to
risk positions to $4.38, which means that players should not jump in above
$4.50.
PLATINUM:
The pattern of higher lows continues and the platinum market performance is
pretty impressive considering the negative tilt being thrown off by the equity
market. The macro economic outlook for platinum remains mixed and the Dollar
doesn’t look to be that critical of a factor. We have to think that a 50 basis
point cut is beneficial to platinum but probably won’t do anything but foster
a slow upward rise.
COPPER:
The rising Dollar is hindering copper and keeping it in a minor downward slope
on the charts. Near term chart support is seen at 76.60 and we have to think
that the prospect for a rate cut and improved Ifo figures from
Germany
should
help to support copper prices. Chinese copper futures were down overnight and
that gives the market a slight negative bias to start the session.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE -13Â ,HEAT-7Â Â
,UNGA-49 Â The buzz seems to be going out of the bull case in
energies, as the trade is expecting fairly benign supply and demand conditions
ahead. In other words, with gasoline flow from
Venezuela
starting to be picked up by
the trade and the general expectation for an increase in weekly crude stocks,
it’s understandable that prices are soft.
NATURAL
GAS
The
natural gas market is expecting to see a moderately large injection in the
report Thursday and that is apparently preventing the market from responding to
the bullish weather confronting the
US
. However, the bears in
natural gas are looking forward to the forecast for the end of the week where
the high temps could be considered to be below normal.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS +3 The bond market
would seem to have a slight upward bias coming into the FOMC meeting. After all,
seeing widespread expectations for a rate cut insinuates that the Fed is still
concerned about deflation. If the Fed does cut rates by 50 basis points that
might cause a fleeting rally, as that type of move could send a message that the
economy is even more concerning than many expected.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+120 DOW +17 NIKKEI +13 FTSE +7Â We still think the
weakness of the last five sessions was simple profit taking and in the end will
set the stage for another wave higher in prices. The economic report slate has
seen numbers that were slightly better than expectations but not necessarily
showing strong enough growth to buy stocks without regard to price. With the
market showing interest in Brokerage stocks it would seem that the investing
public is coming back to the market.
FOREIGN
EXCHANGE
DOLLAR:
For most of this week the Dollar acted like the FOMC meeting would be a big
supporting issue. However, coming into the decision this morning, it would
appear that the trade is getting cold feet. In other words, some recent longs in
the Dollar are deciding to bank some profits, rather than weather the potential
volatility later today. The better Ifo reading from
Germany
might
also have undermined the US Dollar in the early action this morning. Favorable
interest in the AOL Time Warner shares in the European action could be an
indication that US investments in general are coming back into favor in the Euro
zone and that could also support the Dollar. It is also expected that US
economic stats this morning will be slightly supportive to the Dollar but we
must suggest that the trade is already expecting an improvement in those
figures. We still think that the Dollar needs to see a 50 basis point cut in
order to vault out of the recent consolidation and begin an uptrend! We also
think that the odds of a 50 basis point cut are not that high. Therefore, we
would suggest that conservative traders, that are long, should bank profits,
while aggressive traders might remain long but protect the position with a short
call/long put combination.
EURO:
So far, the Euro hasn’t seen much support off the Ifo readings, possibly
because French consumer sentiment came out weak. While the Euro shows signs of
bouncing off the recent low, a trade back below 114.63 could be very damaging.
In fact, the decline in French spending (for May) was the biggest monthly
decline since August of 1999. Therefore, the Euro doesn’t seem to have the
numbers to shut off the recent track of selling. In fact, if the US Fed cuts 50
basis points that could turn up the heat on the Euro.
YEN:
The Yen seems poised to catch some benefit off the weakness in the Euro and with
the Nikkei higher overnight the bias is up in the Japanese currency. A decline
in Japanese auto exports is rather concerning but that apparently isn’t
directly impacting the Yen.
SWISS:
As long as the US Fed makes it clear they are set to battle and defeat deflation
in the
US
, we
suspect that the Swiss will continue to decline. However, it could be difficult
to get the September Swiss below the 75.12 level today.
POUND:
The most likely victor in the action today could be the Pound, as it looks to
benefit if the Dollar soars and the Euro slides. Furthermore, if the Dollar
fails, the Pound also looks to gain. Therefore, the Pound might attempt to rise
to 166.52.
CANADIAN:
The current formation in the Canadian looks pretty supportive. Since we don’t
think that the Fed will cut 50 basis points we have to think that the Canadian
Dollar is capable of a return to the recent highs. However, if the Fed cuts 50
points, Canadian longs need to watch the reaction of the Canadian very closely.