Futures Point To A Flat Opening

• August 4, 2003
• Brice Wightman

INTEREST
RATES

OVERNIGHT
CHANGE to   4:15 AM :BONDS +14
Usually it takes a couple of sessions to work a surprising US payroll report
into the Bond market. Furthermore, we would have to think the report favored the
bull camp, as the market was certainly over extended on the downside and the
report leaves the concern of a jobless recovery in the mind of the market. In
fact, given the report schedule this week, we would not be surprised to see
Treasuries consolidation well above last weeks lows.

STOCK
INDICES

OVERNIGHT
CHANGE to 4:15 AM:S&P+320 DOW +28 NIKKEI -158 FTSE +14 While the market
was disappointed with the monthly payroll readings last Friday, attitudes are
not than injured on Wall Street and Main Street. Apparently the market saw the
decline in the unemployment rate as an offset to the non-farm payroll loss. In
fact, later in the session Friday, a number of other readings countervailed the
loss in manufacturing jobs.

FOREIGN
EXCHANGE

Dollar:
It is clear from the early action that the Dollar is no longer going to defy
gravity. If one were to see a simple retracement off the July rally in the
Dollar, that would seem to allow for a decline to 96.46, which was the overnight
low in the Dollar. A 50% retracement would seem to allow a slide down to 96.05.
We would expect to see the factory orders report stem the selling slightly but
not end the pattern of liquidation. We had thought from time to time last week
that the trade was buying the Dollar because it anticipated another US rate cut
or an atypical easing move by the Fed. We still think that an easing is a long
shot but not something that should be ruled out. We have to think that the
Dollar will fall back to 95.71 on this cycle down and possibly even 95.35 unless
the ship is righted on the open this morning by the US factory orders report
coming in much stronger than expected.

EURO:
The overt weakness in the Dollar opens up the door for a moderate rise in the
Euro, as the Euro was extensively oversold late last week. This morning the Euro
zone posted a slight decline in its June PPI and that could limit the upside in
the Euro, as a decline in inflation readings seems to hint at deflation. In the
end, there really isn’t a dominating theme in the market and technical
considerations might control prices. Near term targeting in the September Euro
comes in at 113.48. 

YEN:
The Yen gets a direct lift from the weakness in the Dollar and the question
becomes will the BOJ throw itself against the coming rise. Japan just documented
the 30th straight month of monetary growth and that shows just how hard the BOJ
is working to keep the ship afloat. With the overnight rise halted and rejected
it is possible that the BOJ did step in to dampen the rise BUT it would seem
that volume was so light that the market had no appetite for Yen prices above
83.56. Therefore, a quick slide back down to the recent lows of 83.00 appears
likely today. 

SWISS:
The sharp reversal off the lows seems to project a rise to 74.00 and possibly
even 74.55. Since we don’t see a flight to quality or panic type liquidation in
the Dollar, the rise in the Swiss should be measured.

POUND:
UK July manufacturing PMI readings increased but the export readings were down.
However, the PMI readings also noted a slowing of the pace of job losses and
that bodes well for the Pound. With the Dollar undermined and the Euro lacking
leadership capacity, the Pound has to have the near term edge. Near term upside
targeting is seen up at 161.86, while critical support will be seen at 160.00.

CANADIAN:
Coiling continues in the Canadian and the coming week could be a very critical
time frame. As long as the September Canadian manages to hold above 71.09, we
give the currency a good chance of holding longs in place. A pattern of higher
highs, since the July low, gives the bull camp some hope of bottoming. We still
don’t detect a solid fundamental or technical correlation in the Canadian and
that keeps us from forming a solid opinion on its direction.

METALS

OVERNIGHT
CHANGE to 4:15 AM:GLD+2.80 ,SLV-2.2  ,PLAT+1.10
 London Gold Fix $348.95 -$4.10 LME Copper Warehouse stks 611,625 tns -800
tns Comex Gold stks 2.74 ml oz +2,244 oz oz Comex Silver stks 105.6 ml -835,773
oz OVERNIGHT: A moderate bounce in Asia as some shorts bank a quick profit

GOLD:
According to the Press the gold declines last week were fostered by long funds
liquidating positions. Since the gold market’s net spec long position from July
29th was 116,000 net long the market was certainly primed to washout some spec
longs. Considering the decline in gold since the COT report was measured (-$7)
we think gold enters the week net spec long more than 100,000 contracts.

SILVER:
Two consecutive significant reductions in COMEX silver stocks should begin to
get the attention of silver bulls. An article in the Dow Jones news wire in Asia
this morning suggested that the silver market is possibly coming alive and that
helps foster buying. However, in order to really get the headlines flowing on
silver tightness, it might take a COMEX stocks reading below 96 million ounces.

PLATINUM:
Like gold and silver the platinum market remains vulnerable to macro economic
selling and possibly short spreading against long gold positions. Commercial
hedging interest might be enough to put additional downside pressure on
platinum. Near term downside support in the October contract is seen at $668 and
then again at $660.   

 
COMMITMENT OF TRADERS ANALYSIS – FUTURES & OPTIONS 
July 22-29, 2003

              
LARGE SPEC         
COMMERCIAL          
NON-REPORTABLE

                
NET                 
NET                  
NET

           
POSITION   NET CH   
POSITION    NET CH   
POSITION   NET CH

SILVER         
53331    21213     
-78682    -25951      
25350     4737

COPPER         
30772     7725     
-43330    -11167      
12557     3442

GOLD           
75836    37456    
-116503    -44013      
40666     6556

PLATINUM        
5256      186      
-6013      -223
        757      
37

 

COPPER:
We are a little surprised that copper held together as well as it did last week
in the face of such damaging outside developments. The net spec long in copper
was 43,000 contracts as of last Tuesday and that is rather over extended if the
macro economic case isn’t optimistic. We would continue to look to the equity
market for direction as that is the best gauge of sentiment.

CRUDE
COMPLEX

OVERNIGHT
CHG to   4:15 AM  
:CRUDE -28  ,HEAT-98 
,UNGA-69  While the initial strength Friday appeared to be sparked
by fund buying and a Venezuelan refinery outage, the trade suggested that no
single event sparked the rise. Apparently fund buying was a big feature in the
action and with the last COT report showing a crude oil fund long of 62,517, (as
of July 29th) and the market rising another $2 above that level, we have to peg
the net fund long to be at least 74,000 to 76,000 contracts coming into the
week.

NATURAL
GAS

A massive
upside reversal late last week probably sets a firm low in place in natural gas.
In fact, we would advise hedgers to seek coverage for winter supplies before the
market climbs back into the $5.00 to $5.39 trading range.