Futures Point To A Flat Opening
METALS
OVERNIGHT
CHANGE to 4:15 AM:GLD+1.60
,SLV-0.8,PLAT+0.10, CP -20Â London Gold Fix $354.35 -$1.70 LME Copper
Warehouse stks 676,375 tns
-3,800 tns Comex Gold
stocks 2.518 +1,253 oz COMEX Silver stocks 107.8 ml oz -79,013 oz OVERNIGHT:
Some slight buying interest was seen in Asia, off ideas that the US Dollar would
eventually weaken, which means recent $ action is being discounted
GOLD:
It would appear that the gold market has found some support above the mid June
consolidation lows. With the rejection of the Monday lows, it would seem that
the gold market would attempt to remain firm through the FOMC meeting. We are
not sure what the net effect of the FOMC meeting is on gold, but we have to
think that the more aggressive the Fed is the more gold will find support.
SILVER:
It would not seem that silver is locked in sync with the gold market and
therefore more weakness in the equity market and concerns toward the global
macro economic recovery pace could see September silver slide back toward
support of $4.50. Around the lows Monday, the silver was 16 cents off the recent
highs and probably had a net spec long of 30,000 contracts. Therefore, the
market is slightly less vulnerable but just doesn’t seem to have the buzz to
launch into a big rally.
PLATINUM:
The platinum market respected the up trend channel support line yesterday
despite overt weakness in the equity market and dimming views on the pace of the
recovery. Solid support in the October contract is seen at $648 today.Â
Â
COPPER:
Chinese copper futures were lower after
London
selling
surfaced overnight. The chart pattern looks bearish, as the market appears
poised to track back toward the June lows. If the Fed takes a complete pass on
interest rates in the coming meeting, that could
disappoint a number of markets and allow deflation concerns to seize control of
the copper market.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE -26Â
,HEAT-30Â ,UNGA-59 Â The
energy complex launched an initial rally off the weekend talk that a pipeline in
Iraq
was sabotaged. However, later
in the session the trade picked up on the potential that Saddam might have been
killed in a recent attack and that countervailed the fears sparked by the
weekend explosion.
NATURAL
GAS
While the
regular energy complex failed to get a big lift off the hot temps, the natural
gas market did get a lift from the weather Monday. While the natural gas market
is expected to see another big build in the weekly inventory reading on
Thursday, and the market pushed upward regardless of the coming supply fears.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS
-4 Considering the weakness in the equity market, recently firm Dollar action
and the recent deflationary threat, the odds are really good that the Fed cuts
interest rates by 25 basis points. The jury is still out on the potential for a
50 basis point cut but under either 25 or 50 basis point cut, we would expect
the Treasury markets to be able to respect the low posted last Friday. With the
BOE head this morning suggesting that a world recovery isn’t a done deal,
that would seem to telegraph the action of the US Fed Wednesday
afternoon.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
:S&P-240
DOW -20 NIKKEI -217 FTSE -25Â The weakness Monday was a little more than
simple profit taking, as the outlook for the economy seems to be back in
question. In fact, with Wall Street throwing off some disconcerting earnings
speculation, on top of the profit taking condition, it is clear that the bull
camp is severely weakened. In fact, the Nikkei (a recent stalwart performer)
managed an aggressive 217-point decline overnight.
FOREIGN
EXCHANGE
DOLLAR:
The BOE suggested overnight that the
US
economy
is still confronted with a moderate deflation risk and that serves to undermine
the Dollar early today. While some traders are willing to bid up the Dollar into
the Fed decision Wednesday, we are not so sure that a large portion of the trade
is willing to pay up for the Dollar above 94.10. Furthermore, the Conference
Board readings today from the
US
are
expected to be soft and that could add some profit taking inventive into the
Dollar market. Near term chart support in the September Dollar is seen down at
94.10 and then again at 93.90. The problem for the bull camp in the Dollar is
that volume and open interest totals have declined consistently on the late June
rally. In other words, the majority of the trade is not yet behind the long
Dollar action. In conclusion, we think that the Fed has to go long, with a 50
basis point cut, to overcome the entrenched negative bias toward the Dollar.
EURO:
Traders might call the coming 24-hour period a moment of truth for the Euro and
we are detecting some bearish signals from recent Euro price action. For
instance yesterday, the Euro was down against currencies other than the Dollar.
In other words, the Euro/Dollar debate seems to have spread to a Euro/Pound and
a Euro/Yen debate. Furthermore, with the negative chart action in the Euro it
certainly looks like a broadening top has formed and that the long term up trend
in the Euro has come to an end, even if other currencies than the Dollar, end up
making gains against the Euro. Given the risk and reward of a major crossroads,
we have to favor August Euro puts instead of short futures.
YEN:
So far, the Yen hasn’t shown enough upward momentum to indicate an upside
breakout is ahead. In fact, considering the weakness in the Nikkei overnight,
the odds of a correction back toward consolidation support looks to be pretty
high. Overnight Japanese department store sales declined for the 14th straight
month, while supermarket sales declined for the 11th straight month and that
certainly fosters the deflationary spiral concern.
SWISS:
The Swiss continues to firm up support and might be capable of holding above
75.00 even if the tilt on the charts is down and the market has significant
overhead resistance off the May and June price action. A return to the 74.50 to
72.00 trading range might be ahead.
POUND:
If the Euro is out of favor and the trade isn’t enamored with the Dollar that
should leave the Pound with an upward bias. Critical trend line support comes in
today at 164.54.
CANADIAN:
Like the Pound, the inability to see the Dollar, or
Euro rise sharply seems to give the Canadian a slight lift. However, until
the true direction of the US Dollar is determined from the FOMC meeting, the
trend in the Canadian is up for grabs. One has to be impressed with the
overnight bounce in the Canadian but again the up trend in the Canadian has to
be built on significant weakness in the US Dollar.