Futures Point To A Flat Opening
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS +15 — The Treasuries finished close
enough to the recent highs Thursday to bring the bull camp into the session
today, in full control of prices. Apparently the bond market will be able to
maintain a slightly different view on the economy than the stock market, but
many traders think that the Fed is already buying Treasuries in the background.
Other traders simply think that the stock market is wrong in its action and that
bonds are factoring the reality of the economy.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P +60, DOW
+5, NIKKEI +133,
FTSE -13 — The stock market continues to defy economic gravity and
to a degree is defying the bond market with its positive price performance.
Considering that the Nikkei was moderately higher overnight and the overnight
equity price action is positive, it is clear that another plunge in the Dollar
isn’t dampening investor confidence. In fact, the bull camp might be benefited
by the lack of fundamental news on the schedule today.
FOREIGN EXCHANGE
DOLLAR: The term “catch a falling knife†would seem to apply to the
Dollar. Considering the big range down overnight in the Dollar, insignificant
international economic readings and an empty slate of US reports today, we see
no reason for the Dollar to halt its slide unless foreign central banks decide
to talk intervention. Therefore the most likely development to support the
Dollar against the existing selling pressure, would be for the BOJ to act. A
less likely source of support would be for the ECB to talk intervention. The
least likely source of support for the Dollar today would come from the
which has already suggested that they will try to limit their dialogue on the
value of the Dollar. Therefore, the trend is your friend and little would look
to upset the trend unless the shorts feel the need to take profits from
positions into the close.
EURO: German CPI readings showed only
moderate declines in price readings and that would seem to discount the threat
of deflation slightly and that simply adds into the bull track already existing
in the Euro. Reports that Saddam’s son Uday might be considering surrendering to
US forces might temper the Euro rise (because that helps the Dollar) but besides
that development, little else looks to alter the up ward run in the Euro.
YEN: We have to think that the BOJ is
intervening or the Yen would certainly be rising sharper than the overnight
trade is registering. A negative Department store sales reading in
this morning (-5%) comes on top of fears that a soaring Yen could hinder the
Japanese recovery. One thing is clear, that the Yen is not seeing the influx of
capital that it was in early May. One can hardly be short the Yen at current
levels on the charts, with the Dollar falling away.
SWISS: The Swiss is poised to rally but for
some reason the price action overnight isn’t as impressive as it has been. Maybe
the market is accepting of the trend in the Dollar and isn’t seeing the need for
flight to quality buying of the Swiss and that is restraining the up side. We
suspect that a new contract high will be seen in the Swiss today or early next
week.
POUND: 1st quarter UK GDP remained at +0.2%
and that is a minor but supportive development. Considering the slide in the
Dollar, the Pound isn’t getting as much long interest as would be expected in a
market poised to make a contract high. Maybe some traders are concerned about
paying up for the Pound!
CANADIAN: The fact that Mad Cow remains a
topic this morning is negative to the Canadian. There are also rumors that SARS
isn’t totally eradicated in
but we have to think that those stories are coming from
situation which are fostering SARS talk, instead of actual SARS developments
inside
impacting the Canadian. It would seem that the trade is using the mad cow issue
as an excuse to correct the Canadian. It is also possible that the falling
Dollar is becoming a negative for future economic growth in
Since the
imports 4% to 7% of its beef from
and that flow of exchange is shut down due to the mad cow issue we can see a
negative impact on the currency. More minor downside ahead.
METALS
GOLD: Considering the magnitude of the slide
in the US Dollar overnight, we are surprised that the Asian gold market managed
to forge a profit taking session. It might be clear by the end of the session
that the
gold market is leading the Asian market, as we suspect that the sharply lower
Dollar will right the ship and push gold prices higher. Apparently the WHO
(World Health Organization) is lifting its travel advisory on
but it is possible that
becomes the “hot-spotâ€, as the number of cases reported there is growing
rapidly.
SILVER: We suspect that silver will respect
the recent low of $4.65 unless gold falters. However, we are skeptical of silver
considering the slack economic outlook and therefore silver gains should lag
behind gold, if the metals continue to find favor as a sector. There has
recently been a moderate decline in Comex silver stocks and that could also be
considered a supportive issue.
PLATINUM: Looking at the charts it would
seem like platinum is in a slight liquidative tilt. In fact the platinum fix
overnight was $6 lower than the prior day suggesting a weak session for
platinum. It is possible that platinum is being spread against gold and with
gold primed to bounce off a recent slide, platinum might be sold as protection
against long term position plays in gold. Critical support is seen down at $650
in July platinum.
COPPER: The weekly Shanghai copper stocks
reading showed a decline of 2,679 tons to 57,717 tons and that sends a signal
that SARS isn’t directly impacting copper demand in China. However, Chinese
copper futures were slightly lower overnight and that countervails the potential
bullish benefit of decline in stocks. The Dollar is sharply lower in
this morning and that could actually make US copper a little more attractive off
the arbitrage play with
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +23,
HEAT +28, UNGA
+68 — The energy complex showed some volatile action Thursday with the market
weak early, recovering in unleaded around mid session and then choppy to
sideways into the close. In other words, it would not seem like the bear camp
has the capacity to take prices down.
NATURAL GAS
The
weekly inventory readings came in at an injection of 90 bcf. Because the market
took that injection as a bearish development, the bull camp is seeing its grip
on the market weaken.