Futures Point To A Flat Opening
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS -6 — Just when it seemed that the end
of the war would not usher in a better feeling toward the economy, a better
feeling toward the economy surfaces. In addition to the "better feelings" it
would seem that corporate earnings reports are establishing a better than
expected pattern and that is undermining Treasury prices. Following last Fridays
better than expected economic report readings, it is possible that Treasuries
fail to get a rise out of an anticipated decline in Industrial production.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
+270, DOW +32,
NIKKEI +86, FTSE +70 — At least
in the near term, investors and consumers will behave as if things are going to
get better. The stock market has already responded to the lessening of
geopolitical headwinds and it would appear that sentiment is also improving with
respect to the terrorism threat. A New York Times poll indicates that a large
majority of the
now thinks that the war on terrorism is being won and that is a critical
addition to the end of combat in
FOREIGN EXCHANGE
DOLLAR: Given the early setup, we should see the Dollar rise hard
against the Euro. However, because the trend in the Dollar has been down for so
long, it would seem that the trade isn’t that interested in buying the Dollar.
Overnight European economic stats continued to come in soft and therefore the
has a chance to gather some momentum. With a flurry of US corporate earnings
reports fostering a better attitude, the Dollar could really make a run but
again it would seem that the trade isn’t easily convinced that the
is the place to be. We still think that the
will have to justify the war with evidence of mass destruction weapons and at
the same time the
might have to avoid whipping up a confrontation with
In other words, the world is less upset with the
over
but with the potential for another action in
the currency trade sees the increased reward potential of the US Dollar, being
offset by increased risk. In other words, the
is just too controversial for investors to throw money at the Dollar, even when
conditions seem to favor the
economy.
EURO: Maybe one shouldn’t label the economic
forecasts from the Euro zone this morning as negative, but they do show the
ongoing sluggishness of activity. We still have to worry that the Euro is
holding a large portion of the flight to quality premium, interjected off the
war, with the Euro 900 points above the December lows. A key brokerage firm
today released a dismal outlook for European growth with extremely negative
views toward the manufacturing sector and that leaves us skeptical of the Euro.
Therefore, we at least think that the Euro is due to slide to consolidation
support just above 106.00.
YEN: The Nikkei managed to reverse a
disconcerting pattern of losses and that could discourage the Yen from breaking
out to the downside. However, like the Euro and Swiss, we have to think that
more flight to quality liquidation is to be expected, especially if the SARS
issue continues to hinder Asian more than the rest of the world. A trade below
82.95 could mean a downside adjustment to 82.60.
SWISS: The Swiss is on the verge of a
downside breakout. The reason the Swiss rallied from 67.00 to nearly 76.00 was
mostly off the war and the war is finished. Therefore, the Swiss will need some
fresh anxiety event in order to avert a liquidation slide. Near term downside
projection for the Swiss is 71.00.
POUND: We think that the Pound will manage
to hold above 156.00 and will begin to crawl higher in the sessions ahead.
However, for the Pound to transition into an up trend, it will have to manage a
close above the down-trend channel resistance line of 157.36 today and a lower
transition Wednesday at 157.22.
CANADIAN: Because the Canadian isn’t showing
signs of fading off a liquidation of the flight to quality theme, it might stay
in the bull trend. With reports that the Quebec Separatists look to lose the
Provincial vote, more of the negative stigma that took the Canadian down sharply
in the 90’s is removed. In other words, the Canadian has a chance of returning
to the 72.50 level, if it can get beyond the flight to quality liquidation
window.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD -0.40, SLV
-0.8, PLAT +2.00,
CP +50; London Gold Fix $323.70,
-$1.70; LME Copper Warehouse
stks
791,975 ton, -4,525 tns;
Comex Gold stocks 2.383 ml, +4,436 oz;
COMEX Silver stks
107.9 ml oz, Unchanged; OVERNIGHT: Minor selling gold against a backdrop of
higher world equity mkt.
GOLD: The big gains in the equity markets
and what would appear to be a pattern of declining anxieties might mean that
gold prices continue to fall back toward chart support. Decent corporate
earnings reports combine with the official end to combat in
to channel some money away from gold and other flight to quality instruments.
Completing the slightly bearish mix of factors this morning is a stronger
Dollar.
SILVER: While the economic outlook is
brightening, we are not sure that traders should pay up for silver above $4.55,
as support could easily be revisited down around $4.50. We have yet to see a
consistent decline in COMEX stocks but we suspect that prices will mount a
decent rise in anticipation of that type of fundamental improvement. As the
economic clouds lift from over the economy, the silver market will look
increasingly more toward equities, for daily price and trend direction.
PLATINUM: Already platinum is showing signs
of a making a major bottom, with a breakout above the critical $620 level
possible today. In fact, with the Nikkei making a gain for
the first time in 5 sessions, its possible that jewelry demand hopes begin to
add to the slight amount of upward momentum in prices. We suspect the
$620 level in July platinum will now become support instead of overhead
resistance.
COPPER: The favorable action in the equity
markets overnight gives the copper market a chance to breakout up today. With
LME copper stocks mounting a significant decline over the last year (down close
to 100,000 tons since April of 2002) we have to think that copper has a leg up
on all other industrial demand driven markets. In other words, because copper
has kept its supply in a declining pattern it might not take as much improvement
in demand to cause prices to rise sharply.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE -8,
HEAT +0, UNGA -16 — The energy
complex managed to recover Monday afternoon possibly because of the significant
short position that was present around the lows Monday. We also saw some support
off ongoing cold weather in the Northeast but the weather should no longer be
supportive of prices.
NATURAL GAS
The
natural gas market surprised the trade again with ideas that inventory levels
were continuing to contract and that cold in the Northeast was extending the
draw season on top of an already significant annual deficit tally. The natural
gas market might find some thin support at $5.57, with resistance coming in at
$5.79.