Futures Point To A Flat Opening

• September 23, 2003
• TradingMarkets Editors

INTEREST
RATES

OVERNIGHT
CHANGE to   4:15 AM :BONDS -12
In a vacuum the Treasury market might be able to find support off the slackening
macro economic view but the weakness in the Dollar isn’t allowing the market to
focus on the economy. In looking at the recent COT report it is clear that a
large portion of the September 16th to September 19th rally was fueled by fund
and small spec short covering. It is also possible that the rally last week in
Treasuries was in fact, fueled by foreign central bank buying.

STOCK
INDICES

OVERNIGHT
CHANGE to  4:15 AM:S&P-130 DOW
-15 NIKKEI CLOSED FTSE -19 The technical traders are turning negative on
the stock market, suggesting that the current correction is going to be a
significant correction that simply carries into the seasonally weak October time
frame. Certainly the slide in the Dollar is generating undue concerns, but in
the near term, little looks to displace the Dollar headline, as the main focal
point of the market. According to White House sources the President will
continue to maintain a hard line stance toward control over Iraq and that could
serve to propagate the downside interest.

FOREIGN
EXCHANGE

Dollar:
The Dollar could see a massive continuation considering the comments of a number
of widely followed currency analysts. We would think that the US Dollar is at
least headed down to the June lows around 93.05 and that rallies back to 94.41
should be seen as a selling opportunity. Since the US economic report slate is
empty and the US stock market continues to slide, it makes it easier to attack
the Dollar. In fact, considering the views of the G7, about the only thing
capable of halting the downside slide in the Dollar would be to see the US
manage an agreement on Iraq in the coming 48 hours. Considering recent
statements from the White House, it would seem almost impossible for the US to
pull out of Iraq within 9 months. Therefore, the status quo looks to maintain
and the Dollar looks to make a series of new lows in the coming weeks.

EURO:
The pattern of “higher-highs”, shows the Euro to be garnering favor at
the expense of the Dollar. With the Yen the only currency outperforming the Euro
against the Dollar, it is clear that traders aren’t fully ready to embrace the
Euro. A noted currency analyst this morning even suggest that some traders would
turn to gold instead of the Euro in an attempt to get away from the Dollar. In
other words, the Euro has an upward bias but the long interest is somewhat
skeptical. In fact, some traders think that the December Euro might be unable to
get above the late July consolidation high of 115.03, without some significant
failure in the US economy.

YEN:
The trade is accepting of the idea that the BOJ is going to back off from
aggressive restraint of the Yen rise. However, we hardly doubt that the BOJ is
going to stand by and allow a soaring currency to derail their macro economic
recovery. In fact, the Japanese did indicate they would continue to intervene
despite the G7 statements calling for flexible exchange rates. In other words,
the BOJ might be back soon to intervene, with a holiday in Japan today, few
expect any change in the current upward bias.

SWISS:
Seeing the head of a major “currency trading” firm, suggest gold over
the euro, highlights the potential volatility in all markets and that should
benefit the Swiss. While we see the Swiss heading to 75.00, it might not be a
straight track toward that level. Near term support is seen at 74.00 and that
should hold the trade up, especially considering the technical balance that
existed in the Swiss after the mid September consolidation pattern. 

POUND:
The Pound appears poised to rise toward the June high of 166.90. We suspect that
the new support zone in the December Pound comes in at 164.00 and that a 164 to
166.50 trading range is to be expected in the near term.

CANADIAN
DOLLAR: Too much of a good thing has punctured the bull trend in the Canadian as
the trade is concerned that a sharply lower US Dollar, will result in the
Canadian economy losing significant business to US competition. Therefore a
correction back to 73.25 wouldn’t be surprising. Trend line support comes in
down at 72.99 today.

METALS

OVERNIGHT
CHANGE to  4:15 AM:GLD-0.40 ,SLV+2.0
,PLAT+3.80, CP-30 London Gold Fix $386.45 +$.15 LME Copper Warehouse stks
591,075 tns +50 tons Comex Gold stocks 2.729 ml oz -129 oz Comex Silver stks
107.1 ml Unchanged OVERNIGHT: Sideways action in Asia but prior days gains were
consolidated

GOLD:
Using the most recent COT report reading (adjusted for the action since the
report was measured) should leave the gold net spec long at 165,000 contracts
into the open today. We would have thought that the net spec long position in
gold would have been a little more inflated, considering the persistent upside
action and the breadth of the bullish dialogue seen for the last two months.
Furthermore, the Dollar continues to head lower and that should leave the gold
market in an upward bias.

SILVER:
While the silver market has managed to respect a pattern of higher lows, the
inability to make a higher high has to be discouraging the bull camp. From the
action yesterday, it is clear that the silver market is tracking the equity
market more so than gold. In other words, silver is behaving like an industrial,
or physical demand driven commodity, while gold is seeing mostly investment
interest.

PLATINUM:
A major Mining company thinks that due to the high cost of platinum and the
inability to expand production could cause the auto industry to turn back to
palladium. In other words, the auto industry might look to diversify its
catalytic converter needs by using more palladium. While the shift to palladium
could take an extended period of time, the platinum market is already in
weakened posture on the charts and is carrying a significantly large open
interest. Considering the weakness in the equity market, the negative
fundamental tilt and the overbought status of platinum, the path of least
resistance is pointing down.  

COMMITMENT
OF TRADERS ANALYSIS – FUTURES & OPTIONS 
Sep 9 – Sep 16, 2003

              
LARGE SPEC         
COMMERCIAL          
NON-REPORTABLE

                
NET 
                NET                  
NET

           
POSITION   NET CH   
POSITION    NET CH   
POSITION   NET CH

SILVER         
55655    -1547     
-87838      2173      
32183     -626

COPPER         
34520    -2139     
-44539      4085      
10020    -1945

GOLD          
110757    -8709    
-159468      9845      
48712    -1134

PLATINUM        
5361     -512      
-6180      
758        
819     -246

 

Finally
the deteriorating view toward the US economy is impacting copper prices. With
the Chinese copper market seeing COPPER: aggressive profit taking it would only
make sense for December US copper to correct back toward trend line support at
80.40. The COT report showed the spec long in copper to be pared back by 4,000
contracts but the net spec long remained somewhat burdensome at 44,000
contracts.

CRUDE
COMPLEX

OVERNIGHT
CHG to    4:15 AM  
:CRUDE +23  ,HEAT+106
,UNGA+45 The energy complex managed to respect recent consolidation support
but can’t seem to shake the weakness apparent on the charts. With the OPEC
meeting looming we are not sure what the impact will be from the Venezuelan
flack over the issue of Iraq attending the meeting.

NATURAL
GAS

The
natural gas market showed a net fund short of 38,044 contracts and considering
the downside since the report was measured, the fund short is probably now at a
record short. The big probe down Monday was mostly rejected but we still don’t
see the basis for a major bottom.