Futures Point To A Higher Open
9/7/2004
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INTEREST RATES
With all the economic upgrades internationally
overnight, we are a little surprised that Treasury prices have managing to
propagate a bounce off last week’s lows. In fact, with energy prices falling
sharply this morning and OPEC projecting a 30% slide in energy prices by the end
of the year, we would have expected Treasury prices to remain within close
proximity to the lows posted last Friday. However, it would seem that a number
of economists are discounting the payroll and unemployment figures and are
suggesting that the payroll readings lag behind the economy.
STOCK INDICES
Apparently the bears can’t keep a good market
down, as prices look to start the week within striking distance of last week’s
highs. While there are whispers of concern that the housing sector might be in
for trouble, it is certainly positive that US payrolls managed to reverse the
pattern of disappointment seen in the two previous reports. Perhaps the most
important news of the day comes from the energy complex, where prices are
moderately lower in the wake of predictions from OPEC that prices could fall by
as much as 30% by the end of the year.
DOW
Overnight it would seem like the September Dow has managed to regain a critical
pivot point at 10,300 and might now be set to climb into a range bound by 10,300
and 10,460. One might expect to see moderate resistance at 10,327 but a major
downtrend channel resistance line isn’t encountered until 10,361.
S&P
For the S&P to turn around the big picture down trend pattern, it would have to
manage a rise above a key trend line at 1136.20. However in the near term, there
would seem to be little to distract the S&P from managing more gains. In fact,
we see near term targeting in the September S&P at 1130. Furthermore, with the
last COT report showing the net spec long to be less than 10,000 contracts, one
might suggest that the technical condition in the S&P could allow significant
buying before an overbought condition begins to limit prices on the upside.
Therefore, the bulls control unless the September S&P falls back below 1109.30.
FOREIGN EXCHANGE
US DOLLAR
Despite the improved macro economic outlook toward
the US economy, it would not seem like the trade is seeing the Dollar in a
bullish light to start the week. We have to wonder if the concern for the US
housing sector is undermining the Dollar view this morning or if the market is
concerned that the Challenger layoff is expected to countervail the monthly
payroll report released last Friday morning. However, in looking at the December
Dollar chart, it would seem like the Dollar is destined to trade in a range
bound by 89.00 and 90.10. With a couple of Fed speeches this week, the market
could get a significant reaction to the events this week but only if the Fed
manages to downplay the housing bubble talk. Middle of the range in the Dollar
is 89.55, but we still don’t detect a trend in the Dollar, as no G7 economy has
garnered the upper hand.
EURO
While we don’t see a specific trend in the Euro, we
do think that prices could easily fall to support down at 120.00. Giving the
Euro some support overnight were economic reports from Germany showing a 3% rise
in July manufacturing orders. Therefore, it is possible that the Euro manages to
respect support of 120.50 instead of 120.00. The top of the range in the Euro
comes in up at 121.88.
YEN
The yen is certainly being boosted by talk that the
Japanese government is set revise their view of the Japanese economy upward.
Near term resistance in the December Yen comes in at 92.19, with the bottom of
the consolidation range seen at 91.05. The yen is also waffling around a
critical moving average but should also be supported by the prospect that energy
prices might be set to slide. Remember the Yen was put under pressure over the
last two weeks by comments from the US Fed Chairman that Japan was vulnerable to
ultra high energy prices.
SWISS
The chart pattern in the Swiss is even more
conflicted than other currencies. In fact, the Swiss is operating in what
appears to be a wide range of 78.14 to 79.93. In order to turn the down trend
pattern in place since the July high around, the December Swiss will have to
manage a rise above the trend line resistance of 80.30.
BRITISH POUND
With UK July manufacturing declining in a report
this morning, the UK economy stands in stark contrast to the US and Japanese
economies. Considering the negative fundamental stance in the Pound and the
slightly undermined technical condition of the Pound, it wouldn’t be surprising
to see a slide toward 175.00 this week.
CANADIAN DOLLAR
One can’t argue with the ultra strong technical
condition of the Canadian. It would seem that the trade expects the Canadian
economy to benefit from the favorable but not ultra strong US economic
condition. Therefore, we suspect that the Canadian is primed for an upside
breakout this week. Critical support is seen at 76.85 and near term targeting is
seen up at 77.30.
METALS
OVERNIGHT
London Gold Fix $401.80 -$4.00 LME COPPER
STOCKS 109,425 mt tons -350 tons COMEX Gold stocks 4.880 ml Unchanged COMEX
Silver stocks 109.6 ml Unchanged
GOLD
While December gold is showing signs of recoiling
away from the low posted late last week, there would seem to be heavy resistance
just above the market at $405. The weekly COT report showed gold to have a net
spec long position of 154,000 contracts but with the market coming into the week
nearly $8 below the level where the report was measured, we suspect that the
reading is overstated. With the Dollar showing signs of weakness early this
morning, a part of the Iraqi pipeline shut for ten days and China announcing it
would allow individual trading in gold, we suspect that gold will have a
positive track to start the week.
SILVER
After the debacle last Friday the silver market
appears to have respected chart support of $6.50 versus the December contract.
The weekly COT report shows silver to have a net spec long of 74,000 contracts,
which is certainly overstated but still shows a market that is somewhat
overbought. While we really think that December silver will respect that solid
support zone at $6.50, we are not sure that the market is primed to resume the
up trend pattern that was present from the May low to the August high.
PLATINUM
A gap down probe overnight was mostly rejected but
the move should scare away some buyers. The weekly COT showed a moderately long
positioning but with the break since the report was measured, the market
probably has a minimally long positioning to start the week. With talk that the
Japanese government will upgrade its view on growth for the Japanese economy and
German numbers favorable overnight, we have to think that platinum will fall to
but will respect critical chart support down at $840.
COPPER
The copper market comes into the session somewhat
vulnerable after last weeks action but it would seem that the macro economic
outlook is a little more positive than it was for most of last week. Chinese
copper futures were down despite gains in the LME market from the prior session
and that could be the result of that Japanese economic upgrade. While we didn’t
see copper prices slide directly off concerns for the US economy, having the
monthly payroll numbers come in at expectations has to give the market a measure
of underlying support.
CRUDE COMPLEX
Energy prices come into the new week under
pressure off comments from OPEC that prices could be set to fall by as much as
30%. With OPEC suggesting a decline to $30 in the basket price following
elections in Iraq it is clear that they are looking beyond a significant amount
of near term turmoil. However, with energy prices falling this morning despite
news that the most recent pipeline blast will shut down 400,000 barrels per day
for 10 days it is clear that the bears have control over prices.
NATURAL GAS
From the price action last week, the natural gas
market is certainly rushing to extract a large portion of the small spec and
fund long. With a large portion of the Midwest getting a late warm pattern it is
possible that some utility buying will underpin prices. However, if the regular
energy complex fails to rekindle wild speculative interest in the long side, we
doubt that natural gas prices will be pulled out of the bear slide.