Futures Point To A Flat Opening
METALS
OVERNIGHT
CHANGE to 4:15 AM: GLD -1.10, SLV -2.0, PLAT +3.00 Â London Gold Fix $341.25
+$3.05 LME Copper Warehouse stks
771,850 ton +3,775 tons Comex Gold stocks 2.360
Unchanged COMEX Silver stks 108.1 ml oz UnchangedÂ
OVERNIGHT: Upward bias exists as gold holds above a recent chart breakou
GOLD:
Considering the magnitude of the Dollar slide and the potential that money
leaving the Dollar is vesting itself in gold, this could indicate a longer-term
cyclical trend higher in gold. While the bulls might be disappointed that gold
doesn’t seem to have a single theme driving it higher, we see that as a good
thing. In other words, the gold market would seem to be gathering periodic long
interest from SARS, Dollar concerns and the economy.
SILVER:
The recent increase in volume surprisingly comes on the back of a decline in
open interest and that suggests the extension up from $4.56 is a little suspect.
However, it would appear that the July contract is intent on returning to the
January consolidation that is bound by $4.80 to $5.00. Like gold, it would
appear that silver is into a long-term cyclical move higher and that solid
support will be respected at the February and March consolidation of $4.70 to
$4.73.
PLATINUM:
The platinum market continues to be vulnerable on the charts and off the
fundamental look. With the bonds and stocks pricing concern over global growth,
it’s understandable that a very expensive metal like platinum is seeing
persistent selling. We continue to see confirmation of production increases in
South Africa and we have to assume that Russian output sources are working to
cut down on export red tape and that means we have a slack demand outlook and a
chance of slightly higher supply ahead.
COPPER:
A counter trend rise in LME stocks hinders copper and with the outlook toward
the economy rather concerning, we don’t see July copper mounting a rise above
74.40. While we see the next big move in copper to be to the upside, we
understand that the Chinese situation is undercutting bullish sentiment.
Shanghai
copper
stocks fell by 3,579 tons to 49,554 tons and that is partially supportive but
until one can definitively say SARS is contained, we have to think that copper
prices will be restrained.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE +40Â
,HEAT+107 ,UNGA+83 Â Oil company profits certainly depict favorable
refinery profit margins but at the same time big oil is suggesting that they see
margins falling in the coming months. In other words, should we expect the
refinery-operating rate to decline and for that action to serve to tighten
product inventories.
NATURAL
GAS
As
mentioned before, the
US
weather forecast is slightly
supportive to natural gas because of the potential for cooling needs in the
Southwest. However, with the 57 bcf injection in the
weekly inventory report released yesterday, the natural gas is probably under a
little more negative tilt than the regular energy complex.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS
+2 A large brokerage firm is apparently touting the long side of bonds, which is
tantamount to suggesting that the
US
economy is going in the can!
In our opinion, seeing another sustained contraction in the economy that would
serve to make bonds a good investment from current levels,
would mean that American Airlines, United Airlines and maybe even one of the big
three auto makers would cease to exist. Certainly the bond market has been
justified in making recent gains, as the economic numbers are still soft but
corporate profits are improving and we did have a favorable sentiment shift in
April for the better. The SARS issue is also providing a backdrop of confidence
for bond bulls and with fresh reports of 100 infections in
Taiwan
, it is clear that we are not
done with the SARS issue and its negative impact on economic sentiment.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P-10Â DOW -6
NIKKEI +43 FTSE +11Â This is a real choppy market, as the trade basically
had the market down to some critical failure points on the charts yesterday but
then bargain hunters stepped in to save the day. It would almost seem like the
earnings reports have been relegated to a background status and with a number of
energy companies releasing earnings today, we see almost no impact on the broad
market, from the earnings reports today. Certainly the stock market will pay
attention to the payroll report, which is already anticipated to be somewhat
ugly.
FOREIGN
EXCHANGE
DOLLAR:
The trade is seeing some wild forecasts on where the Euro might trade and the
net effect of that is an additional undermine of the Dollar. We still think that
the Dollar is seeing a historical re-alignment that is partially coming from
international investors deciding to take down over weight investment allocations
in the
US
. In
fact, we think that the sharp decline in the Dollar is actually pushing some
money into gold. If investors are taking long-term money and putting some in
Europe
and
other geographically diversified areas it seems to make sense to reconsider
gold. We also have to think that investors see all currencies at risk in the
event of the SARS virus and that could also be why some money is leaving the
Dollar and going to gold and silver.
EURO:
We understand that money favors the Euro and we accept that the Euro is set for
more gains but the Euro just does not deserve to appreciate as quickly as it
has. We also think that the Euro zone should not be seen as immune to the SARS
crisis. German Preliminary retail sales declined along with a sharp contraction
in German April manufacturing orders and that is certainly an example of poor
rate of return potential in the Euro zone, but again the “smart money”
doesn’t seem to care about the economic differential. We predict that the Euro
will continue to rise but none of our money will be placed on that forecasts as
risk and reward aren’t right, the fundamentals don’t sanction it and the
valuation is too rich.Â
YEN:
The Japanese monetary base continues to grow at a rapid pace and that is
evidence of the BOJ attempt to battle deflation. Lost momentum on the charts
would seem to depict a temporary top in the Yen and that would seem to go along
with the renewed fears of SARS in
Asia
that
propped up overnight from news of 100 infections in
Taiwan
.
SWISS:
It would appear that the Swiss is a little overbought from a short-term
technical perspective and hasn’t been able to rush into new high ground like the
Euro and Canadian. Therefore, the bias is up but the risk of getting long here
is poor.
POUND:
A slight pause in the upside pattern is seen, because the Pound appears to be
overbought technically. Support should be respected at 159.88.
CANADIAN:
Upside projections for the Canadian are 72.50 and higher the further one looks
into the future. If there is a long-term reallocation of international
investment away from the
US
, the
Canadian will be a major benefactor. Traders should stay long using options to
control risk and book profits (if you don’t understand how to use options to
book profits and stay long, give us a call at 312-786-4450.