Futures Point To A Flat Opening
June
23, 2003
OVERNIGHT
CHANGE to 4:15 AM:GLD-0.40 ,SLV+0.2Â ,PLAT+1.20
unch
 London Gold Fix $356.05 -$3.55 LME Copper Warehouse stks
680,175 tns -2,525 tns Comex
Gold stocks 2.516 -517 oz COMEX Silver stocks 107.8 ml oz +1,080,603 oz
OVERNIGHT: Slightly weaker Asian action means Fed decision is insignificant
GOLD:
The gold market needs to de-link itself with the Dollar or more longs might be
forced from position. With the small spec and fund long in gold rising by 4,000
contracts in the last week, to almost 106,000 contracts, the gold market is
overbought and vulnerable to liquidation. Furthermore, with the Dollar rising to
the highest level since May 16th, it is clear that something has changed in the Forex
markets and that change more than likely isn’t supportive for gold.
SILVER:
The weekly COT report in silver shows the net spec long position to be 38,000
contracts and that is probably a little overstated given the slide in prices
since that report was measured. With COMEX silver stocks rising moderately and
gold somewhat undermined, it is not a good thing that the silver charts are
vulnerable. With critical support at $452 and the technical and fundamental
setup bearish, we would not be surprised to see September silver slide toward
the June lows.
PLATINUM:
The platinum market appeared to become exhausted last week and could slide below
near term support of $649, with a full technical liquidation causing a slide to
$639.
COPPER:
Chinese copper futures were down overnight and with the net spec long position
in copper at nearly 28,000 contracts, more liquidation might be seen this week.
The bottom of the consolidation in September copper comes in at 76.00 and with
the Dollar rising, that could make US copper a little
more vulnerable than
London
or
Shanghai
copper
prices. In the end, the copper market might be supported by the Fed meeting but
with the stock market chopping lower for 5 sessions in a row, the macro economic
case is in need of something fresh.
CRUDE
COMPLEX
OVERNIGHT
CHG to  4:15 AM Â
:CRUDE +15Â ,HEAT+43Â
,UNGA+85 Â We have to think that the action Friday was motivated by
the idea that OPEC was implementing the April production scheme and because of
the anticipation of significantly hotter weather in the US. Supposedly Saudi
production dropped by 293,000 barrels to 9.093 million barrels per day and that
total is well above the current quota of 8.256 million barrels.
NATURAL
GAS
We are
surprised that the natural gas faded off the highs Friday, partly because the
coming hot temps and partly because of the strength in the regular energy
complex. The weekly COT report showed the net spec long to be 23,000 contracts a
decrease of 7,500 contracts and that helps balance what was an overbought
condition.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS
+6 Wall Street
is suggesting that the
standoff between the bond and the stock market, has resulted in the bonds being
the first to cave in. However, considering the last 5 days action in the stock
market, it might be premature to judge which sector is the most vulnerable. In
fact, until the September bonds slide below 117-26 we don’t see the big trend
shifting down.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+50Â DOW +2
NIKKEI +16 FTSE -30Â We are probably in a “sell the fact swing” in
stock prices, as the market has accepted a slightly higher chance of economic
recovery. However, in order for the stock market to rekindle the consistent
upside action seen since the March lows, we might need to get a gift from the
Fed. While some might suggest that a 50 basis point cut could spook the market,
(because that would suggest that the Fed is really concerned about deflation) it
would seem like the bulls lack a convincing theme.
FOREIGN
EXCHANGE
DOLLAR:
The Dollar would seem to be acting like the Fed is it’s
friend. We are a little surprised that the Dollar has managed to breakout up,
with the macro economic differential between the
US
and the
Euro zone too difficult to call. Furthermore, it would seem that the interest
rate differential could shift against the US Dollar with the action this week.
However, some currency traders are evidently thinking that a 50 basis point rate
cut would go a long way toward insuring strong performance by the
US
economy. Therefore, the interest rate differential is being discounted, or
thrown out of the equation. The economic report slate from the
US
is
pretty thin to start this week and therefore the US Dollar has the edge over the
Euro because of the recent trend in pricing. With a gap filled in the September
Dollar and the market apparently headed toward the early May consolidation of
95.20, the bulls win the coming battle, even if they don’t end up winning the
war later in the week. We thought that the Fed had to cut interest rates 50 basis
points in order for the Dollar to breakout up and continue higher. A move back
below 94.30 temporarily defeats the bull camp.
EURO:
Technical damage on the charts is probably going to cause even more margin or
capital selling in the Euro. In fact, with the 40-day moving average being
violated late Friday and early today, a number of trend traders might be ready
to vacate long positions. About the best thing that can be said of the Euro is
that open interest had already begun to liquidate early last week and that
reduces the stop loss selling impetus.
YEN:
We doubt that the Yen is going to rise in the face of a strong Dollar, but with
the Euro overtly weak and the Japanese trade surplus rising sharply into the
Euro zone, it is possible that a surge higher unfolds. It should also be noted
that the Yen would climb above a critical moving average this week, with a rise
above 85.15.
SWISS:
Surprisingly the Swiss isn’t as weak as the Euro and that could be because the
trade is using a short Euro, long Swiss spread to play the dive in the Euro. The
Swiss has actually showed some ability to respect support around 75.00 and that
takes away some of the downside momentum.
POUND:
The Pound has also violated some critical technical support levels and could
fall all the way down to 162.32 without even violating the 40-day moving
average. There is talk that the
UK
could
join the EU within the next year and that fosters the downside, as many think
the Pound will have to adjust its exchange rate sharply lower to meld into the
EU.
CANADIAN:
With the Dollar strong, the Canadian is under pressure. It is becoming clear
that the majority of the up trend in the Canadian was a result of the Dollar
weakness instead of Canadian economic prowess. A 40 day moving average is
violated with a decline below 72.26 and we have to suggest that longs take
profits and replace the position with calls or stay on the sidelines altogether.
METALS