Futures Point To A Flat Opening
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS +3
While Wall Street/main street and the economists won’t give the recovery credit,
the Treasury market is having no trouble pricing in a full blown recovery.
Certainly the overwhelmingly negative influence of mortgage activity is
exaggerating the downside in notes and bonds but the market had to have the
numbers to pull the plug on the mortgage positions. While the Euro zone posted
numbers this morning that would leave them in a recession, in the second
quarter, that would not seem to be supportive to US Treasuries.
STOCK
INDICES
OVERNIGHT
CHANGE to  4:15 AM:S&P+160
DOW +14 NIKKEI +170 FTSE +23Â It is clear that the market is still in a
partially negative posture, as the Wall Street Journal; Ahead of the Tape
columnist is attempting to spin the retail sales reading Wednesday into a
negative. We might also add that a number of other columnists and economists
have discounted the latest earnings cycle results as good but not sustainable.
Furthermore, with the German economy posting recession numbers for the second
quarter, the Press is fanning the flames of negative dialogue.
FOREIGN
EXCHANGE
EURO:
With the Euro zone GDP up by a mere +0.2 and the German GDP declining by 0.1% we
would have expected the sellers to attack the Euro. While the euro is weak, the
trade thinks the numbers this morning could be an economic low water mark for
the Euro zone. We suspect that the Euro will find support on a break to 112.10
but that the odds are high that the coiling pattern will continue.
YEN:
The poor technical action overnight suggests that the BOJ is fostering a
breakdown in the currency. Certainly seeing US numbers so strong yesterday helps
the BOJ manifest its case. With the numbers getting progressively better in
Japan (bankruptcy cases were down 23%) we see the BOJ stepping up efforts to
insure the recovery. Therefore the Yen might be headed back down to 83.00 on the
current swing.
SWISS:
Key technical areas will be violated in the Swiss with a slide below 72.73, but
with the depressing German numbers out this morning, it is no sure bet that the
Swiss will be able to hold above that level once it is tested.
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POUND:
After an overnight gap up, the Pound has settled back down below the prior days
close suggesting that the trade isn’t interested in the upside. Better jobless
numbers from the UK would seem to discourage aggressive selling and unless the
Dollar is going to show much more strength, we expect close in support of 159.78
to hold. CANADIAN DOLLAR: If the September Canadian can manage a climb back
above 72.40 on a close basis, we will be willing to grant the bulls control over
the market in the near term. A close above 72.54 might even foster some
technical stop loss buying.
METALS
GOLD:
The gold market showed some life Wednesday and did so without a strong equity
market. In the end, the gold probably got the best of two worlds by seeing the
retail sales reading rise and the Dollar soften. We continue to think that the
long interest in gold is a big picture/long term phenomenon and not a typical
supply and demand driven market.
SILVER:
A couple massive ranges this week seemed to correct an extensively overbought
condition. Near term swing support is now seen at the triple bottom low of $4.91
and overhead resistance is documented at $5.11.Â
Like we suggested in the gold comment, silver seems to be in favor for
long term reasons not necessarily tied to the daily ebb and flow of fundamentals
and that could be because the buying is more investment orientated.
PLATINUM:
It is possible that the platinum market gets a little lift from some buyout talk
as Lonmin from the UK denied overnight that it was the target of a takeover bid
by the Russian firm Norilsk. If Norilsk were to have the cash to carry out such
a deal that would suggest to us that they intend to boost production or increase
exports and that could eventually be a negative for prices. Platinum would seem
to be in a minor corrective mode, but the bigger picture trend looks to remain
in place. Near term support is seen at 684.Â
Another
build in LME copper stocks overnight could set the tone for the biggest weekly
build in stocks in months and that comes COPPER: after a technical breakdown in
prices. Chinese copper prices were higher overnight and with the recent
correction in the US market, we feel a lot better about risk and reward for
those looking to get long. We would prefer to wait for a break to 77.00 but that
probably won’t happen if there is a general strike in Chile.
CRUDE
COMPLEX
OVERNIGHT
CHG to   4:15 AM Â
:CRUDE +27Â ,HEAT+47Â
,UNGA+81 Â The energy complex saw a patently bullish API report on
gasoline stocks and failed to avoid a sell off. In other words, the market might
have become over extended and in need of fresh bullish fundamentals, or the
trade could have honed in on the surprise rise in crude stocks.
NATURAL
GAS
We can’t
help but think that the natural gas market is entering a critical pivot zone
that could easily result in excessive volatility. With the market making
significant gains over the last two weeks, off the threat of a tropical storm
and because of heat building into the US, a large portion of the bull case has
already been factored.