Futures Point To A Gap Higher
INTEREST RATES
03/29 OVERNIGHT CHANGE to 04:29 AM:BONDS-3
Overnight the Treasury market continued to follow through with the failure
motion documented toward the end of last week. It would seem that the trade is
already rushing to factor in a potential improvement in the US jobs situation.
In fact, with early estimates calling for a 125,000 to 150,000 gain in non-farm
payrolls, it is understandable that some longs are moving to the sidelines.
STOCK INDICES
03/29 OVRNIGHT CHG to 04:29 AM:S&P+370, DOW42,
NIKKEI -52, FTSE+20 For some reason there seems to be a good feeling circulating
and maybe the breakdown in the Treasury market is facilitating hope for the
coming jobs report. In fact, we have to think that the stock market is
singularly focused on the jobs situation, especially since a recent poll
confirmed that the American public is more concerned about jobs, than they are
about terrorism. We have to think that anticipating a good payroll report is
going to be a lot easier than actually getting a favorable report on jobs.
DOW
The Dow chart is pointing up this morning with the first resistance coming in at
10,137 and critical support seen at 10,179. The weekly COT report showed the net
spec position to be short as of last Tuesday, so that would seem to leave the
market with plenty of fresh buying capacity.
S&P
The net spec long in the S&P enters the week net long 21,000 contracts, which
would also seem to allow for significant buying capacity, if the fundamental
picture can provide the impetus to follow through on the upside. Critical
resistance in the June S&P comes in today at 1114 and critical pivot point
support comes in down at 1106.50. Maybe the June contract manages a climb to
1125 ahead of the report Friday, if it does, longs should take profits and exit
ahead of the report!
FOREIGN EXCHANGE
US DOLLAR
While the outlook for the US jobs report Friday from
the Treasury market and from the US stock market, would seem to be for a strong
reading, the Dollar isn’t showing any such inclination. In other words, the
factors driving US Treasuries down are not yet influencing the US Dollar.
Overnight there would seem to be conflicting dialogue flowing from the Euro zone
and that also hasn’t lent much direct buying interest to the Dollar. There is a
Fed speech this morning and that might provide the Dollar with a minor lift but
the real decision for Dollar players is, will the numbers Friday justify the
consistent rise off the February lows? We suspect that the Dollar is poised to
breakout to the upside on the charts, but without clear-cut help from the
payrolls, we suspect that the Dollar will fall right back to the March
consolidation lows of 88.00. Therefore, it would seem as if a major decision is
about to be encountered and the June Dollar will either manage a trade above
90.40 by the end of the week, or it will quickly head back down to 88.00. We
favor the upside in the coming sessions!
EURO
The EU seems to think that their recovery is coming
along fine and that the rising Euro isn’t hurting their recovery. However,
overnight the Euro zone industrial output readings declined by 3.2% in January
and that is a major decline that many think will result in the ECB cutting
interest rates. However, the ECB will probably wait to see if the US employment
report is strong enough to take the burden off them. In other words, if the US
numbers are good, that could mean better times ahead for the EU, which has
significant export business to the US. Furthermore, a strong US payroll report
means that the Euro could weaken and provide the ECB with the benefits of a cut,
without a cut! In the meantime, look for the Euro to slide lower in the range,
with a target of 120.00.
YEN
The Yen would seem to be primed to test the old
contract high this week. However, with the Dollar potentially finding strength
early in the week, the Yen might be restrained. The path of least resistance is
up but the charts do present significant overhead resistance in the Yen.
^next^
SWISS
A new low for the move overnight was rejected but we
have to think that the Swiss is preparing to move to a new lower trading range.
Look to sell a rally this week to 78.12, with an objective of 76.98.
BRITISH POUND
Evidence that consumers continue to borrow
aggressively in the UK, would seem to foster the need for higher rates and that
issue might well be holding the Pound back from near term gains. It would seem
that the Pound reached an oversold status last week and that the gains this
morning are merely technical short covering. Therefore, traders should look to
sell the June Pound on a rally to 181.11.
CANADIAN DOLLAR
Near term technical resistance comes in at 75.73 but
the performance last week, has to give the bull case in the Canadian significant
credibility. In fact, we suspect that the Canadian is primed to breakout to the
upside and that resistance at 76.20 will fall later this week.
METALS
OVERNIGHT
GLD-0.80, SLV-4.20, PLAT-3.10 London A.M.
Gold Fix $420.90 +$3.40 LME COPPER STOCKS 196,550 -5,425 tons COMEX Gold stocks
3.595 ml -600 oz Comex Silver stocks 122.2 ml -503,870 oz
GOLD
Maybe gold traders were put off by the articles in
the Press concerning the overbought status of gold as an investment. It is also
possible that some bulls were put off by the talk that the Euro zone economy was
doing good enough that a rate cut might not be necessary. However, overnight the
EU suggested that their recovery was still on track and that the growth in
demand was serving to offset the potential negatives of the rising currency.
SILVER
The net spec long in silver was 97,000 contracts and
with the market looking to come in slightly below the level where the COT was
measured, we doubt that the silver market is holding a record spec long.
However, the silver long is historically long and would seem to have some
outside negatives confronting the trade to start the week. Not only does the
Dollar lack a defined direction, but it also isn’t clear if the macro outlook
for the global economy is going to be good enough to continue to push silver
into even higher ground.
PLATINUM
Talk that Chinese demand for platinum is slowing
could be a serious undermine of the bull trend, but we doubt that the overall
trend is due to breakup. After all, flight to quality issues look to
periodically re-enter the equation and the supply of platinum remains tight.
Therefore, following a correction to $895.5, we would suspect April platinum
would find support and return to the bull action seen consistently over the last
seven months.
COPPER
From the overnight action it would seem that copper
will enter the week in a stronger position that it ended last week. Despite
potentially negative Euro zone Industrial output readings, it would seem that
buyers are interested in copper and that could be because of the good numbers
posted from the US late last week. The weekly COT report showed the net spec and
fund long to be only 32,000 contracts, which is down slightly from the prior
week and that possibly puts the market in a better technical position.
CRUDE COMPLEX
From the latest rumor mill it would seem that the
upcoming OPEC production cut is still up in the air. The Iraqi oil minister
suggested that it was not clear if output would be cut, while the Algerian Oil
Minister suggested that OPEC must cut in order to avert a price decline later in
the year. The Qatar Oil Minister did indicate some concern for the high price of
oil but in order for OPEC to steer away from the anticipated production cut,
OPEC might want to see if the US weekly crude stocks are on the cusp of a
pattern of big gains.
NATURAL GAS
The natural gas market finally managed to reverse
the recent trend of selling, with a higher close on Friday and that recovery
move was inspired by the strong reversal in the crude oil. The weekly COT report
showed the usual split consensus in the small spec and fund positioning, with
the funds increasing their net short and the small spec paring their net long.
With the price declines seen since the COT report was measured, we have to think
the funds are even shorter and the small specs are less long.