Futures Point To A Flat Opening

• August 11, 2003
• Brice Wightman

INTEREST
RATES

OVERNIGHT
CHANGE to   4:15 AM :BONDS +4
The bond market appeared to come to the end of the corrective balancing act,
with the spike high late last week. With the FOMC meeting this week, the market
could put whatever rate cut hopes there are to rest, but with the minutes of the
last FOMC meeting released later in the week, the trade should have a pretty
good idea of where the Fed stands. In looking ahead to the report slate this
week, there is certainly a heavy schedule but mostly the numbers are second
tier.

STOCK
INDICES

OVERNIGHT
CHANGE to   4:15 AM:S&P+190
DOW +12  +160 FTSE +10 While
the market certainly managed to right the ship last week after flirting with
technical disaster, it will have to prove that it can manufacture addition
upside this week. It would seem from the economic report slate that the market
will have plenty of information from which to garner an attitude and the Street
is already trying to put a bullish spin on things by suggesting that the tax
cuts are beginning to show up in the economy. However, the stock market will
have to discount rising energy prices and rising tensions inside Iraq.

FOREIGN
EXCHANGE

Dollar:
The Dollar starts the week out on a strong note with the Dollar managing to
climb back above most of last weeks weakness. With the US economic report slate
full this week and the US Fed scheduled to meet, there would not seem to be that
much mystery on the economic front. Over the weekend, tensions inside Iraq
flared with demonstrations and it would seem that the whole situation there is
coming to a head politically.  In
fact, it would be a very good time to end the Saddam hunt, as his ability to
elude US forces is certainly resulting more opposition than would have been the
case. We mention the Iraqi situation because that certainly has a way of
dampening the interest in the long side of the Dollar. In order for the Dollar
to return to the July and August highs this week, it will need a clean sweep of
solid economic numbers and it might also need some political luck in Iraq. In
short expect more minor gains but for resistance to become formidable around
97.02.

EURO:
Technically the Euro is partially damaged to start the week, with next support
not seen until 112.00. Economically we see very little in the news to discourage
the light liquidation effort in the Euro unless the US manages to produce much
stronger than expected economic readings and then the Euro might see additional
selling and a decline to 111.21.

YEN:
The BOJ has its work cut out for it, as the market senses the vulnerability of
the Central banks intervention position. After recent Press reports highlighted
the amount invested in keeping the Yen down, it seemed like a natural for the
market to take it to the BOJ. Economic numbers from Japan continue to be strong
enough that the typical repatriation flow is slowed but it could be possible
that investors see opportunity in deflated Japanese assets and that results in
an aggressive rally in the Yen. In fact, given the recent action in the Yen it
could be headed to 85.00 resistance. In other words, with a significant rise in
Japanese machine orders (+2.4%) it would not be surprising to see money flow
aggressively into Japan.

SWISS:
Since the Euro isn’t providing much in the way of leadership and the Swiss has
already forged a technical failure on the charts, we would not be surprised to
see the Swiss make a low this week of 72.70, especially if US numbers are in any
way strong.

 

POUND:
Like the Swiss, the Pound has also managed a technical failure on the charts and
appears headed to 159. A minor rise in PPI readings from the UK confirms that
deflation isn’t a significant threat in that economy. However, right now just
proving you’re your economy isn’t slowing, isn’t enough to garner investment
flow. More minor declines expected ahead. CANADIAN DOLLAR: A partial end to the
Canadian beef import ban (selected cuts only) could give the Canadian new life.
We are not sure how much of a negative influence the ban has been on the
Canadian, but it has been some influence. Therefore, we need to see the Canadian
manage a rise back above the critical 72.00 level in the September, to get trend
traders interested.

METALS

OVERNIGHT
CHANGE to 4:15 AM:GLD+0.70 ,SLV-0.2 ,PLAT+8.60, CP -5  London Gold Fix
$357.00 +$3.50 LME Copper Warehouse stks 620,325 tns +12,400 tns Comex Gold stks
2.74 ml oz +982 oz Comex Silver stks 104.9 ml -477,703 OZ OVERNIGHT: Upside
momentum continues possibly fueled by gold mining share action

GOLD:
Apparently the gold mining share buyout competition is prompting some investors
to buy gold futures. Certainly a slight slide in the US Dollar makes outright
gold purchasing more attractive but with the Dollar managing to climb above the
majority of last week’s action, it might not be a straight away upside track for
gold in the near term. The weekly COT report shows the net spec long position in
gold to be 96,000 contracts or a decline of 20,000 contracts from the last
report.

SILVER:
We are seeing rather consistent declines in COMEX silver stocks, its just that
the total isn’t really down to a level that signals a potential tightness. The
weekly COT report showed 77,000 contracts long by the funds and small specs but
that position was down slightly from the prior weak, which is a clear indication
that the market undertook a little balancing. Critical support in the September
contract comes in at $4.95 and then again down at $4.91.

PLATINUM:
A gap up trade overnight leaves the platinum market in much better position than
it was to into the close last week. Apparently, platinum can dislodge itself
from the daily action in the stock market, even with the technical position
rather overextended. Near term resistance is seen at $691.2 basis the October
contract.  

COMMITMENT
OF TRADERS ANALYSIS – FUTURES & OPTIONS 
July 29-August 05, 2003

              
LARGE SPEC         
COMMERCIAL          
NON-REPORTABLE

                
NET                 
NET                  
NET

           
POSITION   NET CH   
POSITION    NET CH   
POSITION   NET CH

SILVER         
52320    -1011     
-77164      1518      
24843     -507

COPPER         
34442     3670     
-46932     -3602      
12490      -67

GOLD           
56112   -19724     
-96475     20028      
40363     -303

PLATINUM        
5201      -55      
-5984       
29        
783       26

 

After
the massive range last Friday the market appears to be entering this week in a
break down mode. With the COT report COPPER: showing a net spec long of almost
47,000 contracts there is certainly a technical vulnerability. With the copper
strike in Chile solved over the weekend that certainly leaves the market open to
profit taking and possibly outright selling off the slack view toward the global
economy.

CRUDE
COMPLEX

OVERNIGHT
CHG to   4:15 AM  
:CRUDE -30  ,HEAT-79 
,UNGA-98  Some conflicting reports have been floated on OPEC
production, with the July figures mostly showing stabile production of 26.38
million barrels per day and that would seem to favor the bull camp. In looking
back at last week’s action it’s clear that energy prices are trying to
consolidation into a new higher trading range.

NATURAL
GAS

The
natural gas market finished last week above most of the July action, with many
traders thinking that a cyclical bottom is in place. We suspect that a number of
hedge buys were made last week and that combined with the forecast for a very
hot end to August, threatened the short fund position.