Futures Point To A Flat Opening
INTEREST
RATES
OVERNIGHT
CHANGE to
4:15 AM: BONDS
+6 — Apparently economic sentiment is going to deteriorate despite the end of
the war, slightly higher equity prices and even a smattering of better than
expected corporate earnings reports. In other words even if a number of
optimistic developments the market isn’t finding enough evidence to put a happy
face on the
US
economy. It’s a little far
fetched to downgrade the
US
economic outlook on the SARS
issue and it’s also folly to think that conditions are not improving.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
: S&P
+380, DOW +34,
NIKKEI -57, FTSE
+34 — The stock market is simply unwilling to fully embrace the positives.
While equity prices have certainly risen since the fall of
Baghdad
, we are
surprised that the market didn’t respond more significantly to the recent sweep
of favorable corporate earnings reports. Some traders are suggesting that the
absolute levels of earnings projections were so low, that it was easy to come in
above the established expectations.
FOREIGN
EXCHANGE
DOLLAR:
The Dollar has filled a gap on the charts but we don’t get the sense that the
US
has
filled the political or diplomatic gap that is causing a number of former allies
to nit pick
US
policy
at every junction. Therefore, the Dollar looks to remain out of favor and at
this point we are not sure what event could be seen that would alter the
equation. In other words, the
US
economy
isn’t looking good enough to discourage sellers and the policy front isn’t
making any friends either. With the Canadian Defense Minister reaching all the
way into a hypothetical situation in an effort to bash the
US
(suggesting they wouldn’t turn over Saddam if they capture him) its clear that
diplomatic relations are going to keep the Dollar down. Ideas that US special
forces are inside
Syria
looking
for weapons and Iraqi leaders, under the doctrine of "hot pursuit" is
simply another stance that the world won’t accept. The
US
should
give up and let the weapons from
Iraq
spread
to the corners of the earth. More downside with a test of the March lows is
likely.
EURO:
The Euro continues to get the benefit of the doubt and would appear to be headed
to contract highs. In the near term, it doesn’t matter whether or not the Euro
zone offers a higher rate of return. We like a long Sept Euro futures, combined
with a purchase of three September Euro 103.50 puts. You would have 231 option
ticks on the table with that position. If the Euro goes to a contract high, the
trader would have recouped over 1/3rd of the premium spent!
YEN:
Apparently the yen was capable of shutting off the selling and benefiting from
the weakness in the US Dollar. If the June Yen closes above 84.00 today we will
assume it intends to establish a range bound by 84.00 and 85.00. Like the Euro,
there would appear to be no fundamental reason for the run up in the Yen but
that is the direction of prices.
SWISS:
The trend in the Swiss remains up but the Swiss did reject a big rally
overnight. Support should be seen at 72.75 and resistance at 73.60.
POUND:
The Pound appears to have reached a temporary overbought condition in the run
overnight. We suspect that support of 156.80 will be respected. It is possible
that weak figures from the
UK
housing
sector undermined the Pound, but that issue is not something that is expected to
alter the up trend pattern.
CANADIAN:
Trend line support comes in at 68.32 and that level should be bought if traders
can manage to weather a risk to 67.89. The Canadian should continue to be the
best trending currency, especially with the
US
thought
to be making the wrong turn at every diplomatic junction.
METALS
GOLD:
While the Asian gold market was higher, it should also be noted that Asian
equity prices were down, while the European and early
US
equity
market action now look to be slightly higher. While June gold might have mounted
a minor rally over the last two sessions, the gold market is probably going to
post another burdensome small spec and fund long on Friday, which is a market
holiday but not a government holiday. In other words, the long camp can expect
to get some negative technical news between the close today and the opening
Monday.
SILVER:
A better equity market opening indication could temper the selling pressure seen
in silver yesterday. All week long, our re-entry point for long July plays has
been $4.43 to $4.46 and the market almost got down into that zone yesterday. The
silver needs a little better economic outlook in order to trend higher.
PLATINUM:
The platinum market is simply not displaying a tight correlation to outside
markets and really can’t hope for strong physical demand, unless the outlook on
the
US
economy
improves, or the SARS issue is brought under control in
Asia
. Seeing
the virus brought under control takes the pressure off the Asian economy and
could help jewelry demand for platinum improve in the region. Therefore, one
should not be surprised if July platinum were to fall to $600 again. Seeing the
July contract rise above $632 would violate a downtrend channel line.
COPPER:
The copper market might be short term overbought unless the US equity market
manages to give traders some help in the action today. We suspect that initial
claims readings will be slightly negative toward copper and with Chinese and
London
market
action showing no direction, there could be an incentive to take profits in the
US
session.
The trend is up in copper but the longs had to be disappointed with the
collection of economic information and the response in the
US
equity
market to a lifting of some of the economic headwinds.
CRUDE
COMPLEX
OVERNIGHT
CHG to
4:15 AM: CRUDE
+34, HEAT -19, UNGA
+73 — Apparently the energy complex didn’t get too much of a sustained
lift out of the 4.4 million barrel decline in API crude oil stocks. The rest of
the API/DOE numbers were insignificant, unless one considers a minor build in
gasoline stocks to be a negative.
NATURAL
GAS
The trade
is already poised to see another draw in the weekly inventory report and that
will play right into the hand of the bull camp. We suspect that an extended draw
season will set the market up for a tight summer cooling season and that is
apparently enough to push prices up even in the face of overdone techncials.