Futures Point To A Higher Open
7/20/2004
INTEREST RATES
The Treasury market comes into the session this
morning under a slight bit of pressure, as the trade fears the Greenspan
dialogue will present a little more upbeat assessment of current economic
conditions. Left to its own interpretation, the Treasury market is generally
downbeat on its outlook for the economy and we suspect that the Chairman of the
Fed will do a little cheerleading this morning. We also think that a bit of
basic technical balancing and profit taking is being seen in the market this
morning.
STOCK INDICES
The drift downward in prices looks to continue as
the market doesn’t have a solid reason to expect faster growth ahead. In fact,
US economic numbers continue to confirm slower growth ahead and that seems to be
putting off would-be buyers. Apparently earnings are coming in good, but the
market sees that information as old news.
DOW
Some might suggest that trend line support in the Dow comes in all the way down
at 10,048, but we don’t expect the Dow to bottom until it tests the top of the
May consolidation down at 9,981. In other words, we need to see exhausted
technical sell off, or an improvement in the fundamental outlook to call for a
bottom.
S&P
We had a big range down rejection going yesterday afternoon but the market
failed to close above 1102 to confirm the technical signal. While the S&P has
managed to return to the top of the May consolidation (which could be solid
support) we doubt that a bottom is in place already. In fact, we now see the
scope for temporary probe of the 1090 level.
FOREIGN EXCHANGE
US DOLLAR
Some Dollar shorts might have a little fear of the
coming dialogue from Greenspan, but that is probably because of the overdone
technical status of the Dollar, as opposed to what Greenspan will have to say.
It is certainly possible that Greenspan could end up talking the Dollar up for a
few sessions, but we doubt that the Chairman will change his stance and suggest
that inflation concerns in the US are going to force the Fed to raise rates
repeatedly. We also doubt that the Fed Chairman is going to surprise the trade
with suggestions that the US economy is much stronger than everyone expects.
Therefore, what ever fleeting bounce (if any) is generated by Greenspan or the
US housing numbers today that bounce should be seen as an opportunity to get
short the Dollar. We continue to see a downward drift to levels below 87.00
unless Euro zone June numbers soften, which in turn takes the focus away from
the weakened Dollar. Resistance today should be solid at 87.76.
EURO
We have been expecting June numbers from the Euro
zone to follow the same pattern of slowing seen in the US but with the German
ZEW numbers for June showing an improvement it doesn’t appear like the Euro zone
is weakening like the US. However, it is possible that the German numbers are
surveyed readings and that sentiment is holding in above the level where actual
numbers might stand. Therefore, after a slight correction today to 123.56, we
would suggest that buyers move into the Euro, expecting the Fed commentary to be
only a fleeting support of the Dollar.
YEN
The Yen could be in a bit of trouble, as the
Japanese stock market showed signs of concern overnight and the outlook toward
the US (as an export market) isn’t all that heartening. Therefore, longs in the
Yen might be vulnerable to a corrective slide ahead. With the range in the Yen
fairly violent last Friday, we have to think that many longs might decided to
blow out of positions on a slide below 92.06 this morning. However, as long as
the 92.06 level holds we suspect that the Yen chart will hold together.
SWISS
A critical pivot point in the Swiss comes in today
at 80.95. The 40 day moving average comes in all the down at 80.45 but we
suspect that the Swiss will be able to respect support unless the US dialogue
today is surprisingly strong toward the Dollar.
BRITISH POUND
Given the overbought status of the Pound and the
potential failure early of a critical pivot point of 184.86, it would not be
surprising to see prices slide down to 183.95 and then make a firm bottom.
However, with UK debt figures easing slightly, it is possible that the trade is
latching onto the idea that the UK economy is starting to slow a little and that
could make the recent high in the Pound something more significant.
CANADIAN DOLLAR
The Canadian would seem to be poised to take out the
recent consolidation high zone of 76.49 to 76.55. We suspect that the slight
improve in dialogue toward the US economy will give the Canadian just enough
favor to foster more gains ahead. Targeting in the Canadian is now 77.00.
METALS
OVERNIGHT
London Gold Fix $405.50 -$1.45 LME COPPER
STOCKS 93,000 mt tons -2,100 tons COMEX Gold stocks 4.446 ml +29,050 oz Comex
Silver stocks 114.7 ml -1.18 oz.
GOLD
The gold market seems to have a slightly better bias
than was seen at the end of last week, as Reuters suggested that a survey has
gold respecting $400 support for the rest of the year. While European gold
market action was supposedly higher overnight due to Dollar weakness, the Dollar
appears to have righted the ship coming into the US session. We could see the
Federal Reserve dialogue today being somewhat supportive to the Dollar and
therefore a little negative to gold.
SILVER
The correction Monday balanced a slightly overbought
short term condition but with gold generally tilted upward and exchange stocks
mounting another moderate decline, we see the fundamental bull case in silver
firming. Exchange stocks dropped another 1.18 million ounces to stand at 114.7
ounces and that is the lowest level in at least 11 months. Aggressive buyers
could buy September silver on a decline to $6.57 looking for the market to fill
the gap left up at $7.19.
PLATINUM
Apparently labor concerns are still an issue in
platinum and that has sparked a sharp upward adjustment in platinum prices this
morning. It seems that Anglo American Platinum has seen workers reject a company
offer. Therefore, it could be an easy trek for October platinum to rise to the
May high of $841.
COPPER
It would seem like some labor issues are less
supportive this morning, as Mexican miners agreed to extend a strike deadline.
However, Chinese copper action showed declines and did so off reports of fresh
selling interest. On the other hand, copper could be given some support off the
ongoing prospect of labor problems and by the fact that German economic stats
were stronger overnight.
CRUDE COMPLEX
The crude oil showed slightly more favor than the
unleaded market yesterday but the entire complex seems to be riding a crest of
support off last week’s Iraqi pipeline explosion. We are actually surprised that
crude held the gains Monday considering the news that US crude imports in May
averaged 10.324 million barrels per day, with Mexico being the top importer into
the US. Having Mexico meeting a large share of US needs should lower the risk
for the US and that in turn should dampen speculative demand slightly.
NATURAL GAS
Another new low for the move leaves the bears in
control of the market. While a large portion of the US is seeing warm temps, the
forecast calls for a cool-off later in the week and that leaves the weather
outlook firmly in the bear camp. Near term downside targeting still comes in at
$5.75, but we wouldn’t rule out a decline to $5.656 in the coming sessions, as
the small spec summer seasonal longs could be washed from their positions.