Futures Point To A Flat Opening
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS -3 — Given the talk about the SARS
issue in
and the potential impact on Asian business activity, we are a little surprised
that the Treasury market didn’t come into the
session showing an up tick in prices. While we continue to see overall macro
economic anxiety levels declining, we are not seeing as much economic optimism
as one would have expected considering the favorable outcome of the war.
However, it is possible that Treasuries are starting the week out on a softer
tone because the Treasury Secretary is offering up a compromise on the dividend
tax cut and because the trade expects to see generally favorable earnings
reports from Wall Street.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P +310, DOW
+19, NIKKEI +94,
FTSE Closed — The stock market comes into the week in a bullish
posture but a posture that seems to lack significant momentum. The earnings
parade will continue with a number of key companies releasing earnings this
morning. We are actually surprised that the stock market was showing signs of a
positive opening in the overnight action, considering the reaction to SARS in
some physical demand driven commodity markets.
FOREIGN EXCHANGE
DOLLAR: While the Dollar might have rejected the downside pressure
into the close last week, it would not seem to be in a markedly improved
position coming into this week. We suspect that regularly scheduled economic
information today will undermine the Dollar, as the leading indicator report is
expected to show a contraction. However, traders should note that there will be
a large number of Fed speeches this week and those speeches might provide a
confidence boost toward the
economy. After all, the anxiety from the war should be lifting and US corporate
profits are also coming in positive. However, the
continues to be out of favor from an international political standpoint and that
more than anything seems to be undermining the Dollar. In conclusion, the Dollar
might avoid further losses but will probably remain caught in a range bound by
99.17 to 100.76.
EURO: With most of the European markets
closed due to Easter holiday today, the Euro might see less support than it saw
for most of last week. A critical moving average line would be violated on a
decline back below 107.45 and some are even suggesting that the Euro needs to
take out the April 2nd high this week, in order to reconfirm the pattern of
higher highs. On the other hand, a decline back below 107.13 could signal a
major top in the Euro. In the near term, one has to assume that the trend is up
until something significant changes in the headlines and the attitude toward the
Dollar changes.
YEN: With the Nikkei up overnight in the
face of the SARS issue, it is clear that the Japanese economy is somewhat immune
to the issue. However, because the Yen recently saw flight to quality buying off
the slide in the Dollar, we have to think that the Yen is now vulnerable profit
taking. Therefore, the Yen could slide to 82.91 and not really violate technical
support on the charts.
SWISS: The Swiss peaked out above critical
moving averages last week but then failed. In fact, we have to assume that
flight to quality issues are draining away and that the Swiss could easily slide
back to chart support of 71.51 in the coming weeks.
POUND: The Pound seems to have run out of up
side momentum. In fact, with the Pound unable to close above 156.87, we now
expect it to slide to 156.00 and possibly down to 155 by the end of the week.
CANADIAN: The up trend pattern remains
entrenched, with support coming in at 68.00. Apparently the end of the
war hasn’t undermined the Canadian and that gives hope that the up trend pattern
will simply charge on. Next upside targeting in the June Canadian is seen coming
in at 69.35.
METALS
OVERNIGHT CHANGE to
4:15 AM
GLD +1.70, SLV
+2.0, PLAT +2.70; London
Gold Fix $326.10, Closed; LME Copper
Warehouse stks 787,250 ton, Closed; Comex
Gold stocks 2.401 mil, +17,975 oz; COMEX
Silver stks 107.5 ml oz, -237,248 oz; OVERNIGHT:
gold closed due to holiday but Asian gold was slightly higher.
GOLD: The gold market is higher despite the
evidence that the fund and small spec position remains burdensome at 48,000
contracts. It is possible that gold is getting some support from the SARS issue,
which cost two senior Chinese leaders their jobs over the weekend. The threat of
SARS is evidently causing some problems for some physical demand driven markets
like soybeans and copper, as some think that the fear of SARS will effectively
shut down business in
or large portions of
SILVER: The silver market could regain a
critical moving average line today with a trade up to $4.53, while a downtrend
channel line could be taken out at $4.54.3. The COT report showed the small
specs to be long 23,000 contracts and that is a somewhat vulnerable position.
The silver market seems to need consistent support from the physical demand
component and that would seem to require persistent gains in the equity market
just to keep buyers interested in the market.
PLATINUM: The sharp overnight rise in
platinum prices would seem to suggest that the market has been stirred out of
its recent slumber. Considering that the COT report showed the spec and fund
position to be long only 2,000 contracts, this market should have upside
capacity. We suspect that July platinum prices are headed toward resistance up
around $634.5.
COPPER: So far the early US action is not
showing much pressure on copper prices even though Chinese copper prices were
sharply lower off the SARS issue. Even Chinese soybean prices were down
overnight on the fears of SARS and that could leave US copper prices under
pressure early this week, if the
equity market can’t manage to stay positive. With the
market closed, the US copper market might not have seen as much selling pressure
as would have otherwise been seen.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE -8, HEAT +34, UNGA
-9 — Coming into the OPEC meeting later this week, the members find their March
output up nearly 350,000 barrels per day over the February total. Surprisingly,
prices remain relatively firm despite a real potential that Iraqi oil will
probably flow sooner than many expected leading up to the war.
NATURAL GAS
With
natural gas managing to sustain most of the April gains, it is clear that the
annual deficit is tight enough to keep the small specs chasing prices higher.
With the COT report showing the small specs to be long nearly 32,000 contracts
(as of last Tuesday) we think that the small specs come into the week net long
35,000 contracts, which is a record spec long.