Futures Point To A Flat Opening
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS +1 — The Treasuries were certainly
justified in their reaction to events on Thursday, as the threat against the
world economy is real, especially if world health officials are unable to check
the spread of the SARS virus. Unfortunately, the SARS issue might become every
bit as damaging as the war with
and the threat of terrorism. With suspect infections being reported in countries
with very little domestic control (
and others) the odds are extreme good that this disease isn’t going to go away
quickly.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
-130, DOW -20,
NIKKEI -155, FTSE -15
— Historically, the stock market doesn’t perform well off a consolidation
pattern. In other words, the best rallies in the stock market seem to come right
off of a massive washout and not after several days of sideways chopping. The
trade is sufficiently bearish the economy off the SARS issue and because of that
tone, we suspect that good
economic numbers this morning will have only a limited bullish impact on stocks.
FOREIGN EXCHANGE
DOLLAR: The recovery bounce in the Dollar this morning is not because
the fundamental picture has improved but is more than likely the result of
technical considerations. After the beating in the Dollar this week, it makes
sense for the trade to take profits, especially if we come in next week and find
out that
is seeing some regional medical systems overwhelmed by the SARS infection. In
total, the
economy would seem to have posted enough favorable economic information to
discourage the attack on its currency, but right now interest rate and economic
differentials are not driving foreign exchange prices. Even if the Dollar
rallied to the 99.30 level, that would not alter the pattern in the Dollar. In
fact, we only see the Dollar recovering with the coalition forces providing
proof of weapons of mass destruction in
or it becomes clear that the SARS issue is going to be a historical plague. In
other words, the Dollar only turns off the selling with some major headline
developments.
EURO: Like the Dollar, the Euro is profit
taking and is not seeing a distinct change in the fundamentals that put the
currency up to the recent highs. It is possible that the Euro suffers a little
more profit taking than other currencies, because it seems to have garnered the
lion share of the flight to quality buying early this week. Critical support is
seen at 109.26, but a decline to 108.99 should be considered a strong buy.
YEN: Apparently the SARS scare and the North
Korean tensions are more than enough to send the yen below critical chart
support. With Japanese auto production and exports falling for the first time in
many quarters it is clear that the Japanese economy is still on the ropes.
Therefore, the Yen might be headed to 82.68. If SARS spreads, the Yen could
easily fall to 82.20.
SWISS: The need for flight to quality
temporarily abates and that should see the Swiss slide toward support of 72.74.
POUND: A significant reversal off the recent
high indicates that the action early this week was overdone and not specifically
supported by the fundamentals. The
also floated a marginally weak GDP reading and that reading should pale in
comparison to the GDP readings from the
today. GDP in the
+0.2%, in the
2.0% to 2.3%!
CANADIAN: It would not be good for the
Canadian to re-test levels below 68.33 today. The time for
to easily contain the SARS spread is now, as containing the disease at a larger
exposure level is extremely difficult. If Canadian can’t isolate the disease,
has no chance of isolating the disease. Buy Sept Canadian at 67.95 but also
protect that position with a long June 67.50 put for 32 ticks.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD -0.80, SLV -0.4,
PLAT +4.00, CP -5; London
Gold Fix $333.40, -$.40; LME Copper
Warehouse
stks
776,900 ton, -1,900 tons; Comex
Gold stocks 2.380, unchanged; COMEX Silver
stks 108.1 ml oz, Unchanged; OVERNIGHT:
Lackluster overnight Asian action with Australia closed for
holida
GOLD: The gold market looks to remain in a
$6 range bound by a $336 and $330 range but a rise above $336 into the weekend
might foster speculative buying in anticipation of SARS developments. Since the
last COT report when the small spec and fund long was roughly 50,000 contracts,
the gold market has rallied $11 and that could put the net long in the report
tonight at 60,000 long. In other words, the gold market is partially
overextended but not nearly as overextended as it was around the February highs.
SILVER: Silver remains roughly 30 cents off
the April low and we suspect that the net spec long is going to come in at
roughly 30,000 contracts, which would be up only 7,000 contracts on the prior
week. Therefore, silver has made a lot of ground but really isn’t overly long in
the spec position. However, we might add that the net long in the silver is
almost totally in the small spec position, as the funds were net short in the
COT report dated April 15th.
PLATINUM: The platinum market comes into the
week near the highs of the week but this market is also showing inconsistent
focus. In other words, platinum at times correlates positively with the stock
market and at other times manages to rally, as if flight to quality interest is
at work. With Japanese holidays ahead, and the stock market seemingly making a
temporary top this week, we have to think that platinum will lack upside
momentum in the near term. Resistance is seen at $630 and support is seen at
$620. A minor bear tilt is anticipated.
COPPER: Copper comes into the session today
oversold technically and cheap fundamentally but only if the SARS issue can
slowly fade from the headlines. Chinese copper prices were slightly lower or
mostly unchanged overnight, but it is clear that the SARS issue was playing on
the mind of the LME traders overnight.
copper stocks came in at 53,133 tons, up 1,497 tons and that is a slight
negative.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE -13, HEAT -07,
UNGA +13, NG -13 — Two things
are apparent with the energy market action Thursday afternoon. The first thing
is that the market didn’t like the comments from OPEC that another production
cut would probably be needed in June.
NATURAL GAS
Expectations for the weekly inventory report were for a draw of 30 to 55
bcf and the actual reading came in with an injection
of 61 bcf. In other words, the bulls got caught flat
footed by the injection and that must have come from some players throwing back
some unneeded supply at the end of the heating season, as recent temps would
seem to have been conducive to decent late season use.