Futures Point To A Flat Opening
INTEREST
RATES
OVERNIGHT
CHANGE to 4:15 AM :BONDS +12
The trade is having second thoughts about the selling efforts lodged Monday
against the Treasury markets. With US economic numbers Monday mixed and the
presence of the Fed meeting today, it would seem that the shorts are a little
concerned about holding positions today. It would not seem like many Fed
watchers expect any action today, but there is a "back of the mind"
potential that the Fed would change their bias in an effort to stem the rise in
long term interest rates.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+70 DOW +5
NIKKEI +120 FTSE +10 The Dow is certainly outperforming the S&P,
as the overnight action has brought it within striking distance of an upside
breakout. The S&P on the other hand, is mired below the mid point of the
last two months consolidation pattern. In other words, the market is a little
more enamored with the upper tier stocks.
FOREIGN
EXCHANGE
EURO:
Define the range in the Euro as 113.75 to 112.10, with a minor bias to the
downside. The euro zone trade surplus increased slightly in June and that bodes
well for the currency but unless more definitive numbers are seen we have to
think that the path of least resistance in the Euro is down. If the US were to
change its bias that could leave the Euro zone economy, as the economy with the
slowest recovery track and that could cause the Euro to slide quickly below
112.00.
YEN:
Once again the Japanese numbers come in better than expected, with the second
quarter GDP up +0.6%. The Nikkei responded to the better numbers but it would
seem that the Yen ran into solid resistance overnight. Maybe seeing the strong
numbers emboldens the BOJ to intervene against the currency rise. In fact, if
the BOJ thinks their economy is on the cusp of recovery, they can easily
rationalize doing what ever is necessary to insure the recovery gathers force.
In other words, it seems like the Yen has made a temporary top. Near term
downside targeting is seen at 84.00.
SWISS:
Chart failure suggests a near term slide to 73.00 and the Swiss will certainly
fall below that level if the US Fed even hints at a bias change. The Swiss
simply doesn’t have the long interest on the sidelines, to avert a near term
slide.
POUND:
A bad chart trade in the Pound overnight, suggests more downside today. Slightly
higher inflation readings argue against deflationary concerns in the UK, but the
numbers don’t suggest much on the economy. Therefore, the technical weakness
might be able to control prices in the coming two sessions. CANADIAN DOLLAR:
Nice technical action suggests that the Canadian bull trend is trying to
re-gather itself. The ending of the export ban is needed to really get the
sentiment toward the Canadian in the bull camp. However, today is a critical
junction, as a sharply higher US Dollar (off the FOMC) would not be a good thing
for the Canadian in its current setup. More upside but traders must watch the
Fed closely.
METALS
GOLD:
While the Asian gold market was down Chinese gold and the London Fix managed a
higher close, which is probably simply catch-up from the big US gains posted
Monday. The FOMC meeting today is not expected to yield much in the way of
sustained developments. In fact, most of the Fed watchers think that the fed
will simply remain on hold.
SILVER:
Speaking of help from the Fed, the silver market really needs some outside help,
as silver has shown no positive effect off the recent strength in gold. In
short, the silver market needs a much better macro economic look than is
currently in place or it needs a much stronger equity market. September silver
needs to consistently trade above $5.035 in order to pull in fresh buyers.
PLATINUM:
The big gap up action Monday in platinum should attract some attention but might
have pushed the net spec long in platinum to a pretty excessive level. Is it
possible that the beginning of Chinese platinum trade Wednesday is prompting
existing platinum markets to pre-position? In the face, of slack physical demand
for platinum, the price chart looks quite explosive and that might mean supply
tightness is the main issue. Resistance is the old highs, the trend is up but
fundamentals don’t confirm.
COPPER:
We think the copper market should be emboldened or at least supported by
comments from BHP Billiton overnight that they would maintain production cuts at
the Escondida mine. BHP also suggested that US mines idled previously will
remain idled and that is positive. Furthermore, Chinese copper futures were
higher overnight and that should set a positive tone for US price action today.
CRUDE
COMPLEX
OVERNIGHT
CHG to 4:15 AM
:CRUDE -16 ,HEAT-36
,UNGA-23 The IEA did the best they could without sounding like they
had a backbone. Even though the IEA was founded to serve as a watchdog group
against the OPEC oil cartel, it seemed to stop short of demanding an increase in
production from OPEC.
NATURAL
GAS
The fact
that the natural gas market soared in the wake of the large short fund position
in the COT report isn’t surprising. In fact, with the anticipation of hot temps
migrating into the Midwest, we are not surprised that a large portion of the
shorts decided to exit quickly.