Futures Point To A Higher Open
9/13/2004
INTEREST RATES
While the Treasury market did show some weakness
last week, in the end it managed to post a pattern of higher highs and managed
to forge solid support above 110-22 in December bonds and 112-01 in December
notes. We are a little surprised that Treasury prices haven’t moved higher this
morning, off weekend Fed comments that seemed to suggest that the Fed could
afford to be patient with rate hikes. Certainly what little bias there is in the
market, is pointing upward but we are still not sure that Treasury prices
deserve to rise above the recent highs without a significant rally in energy
prices, or a sentiment damaging geopolitical development.
STOCK INDICES
Despite the fact that the Treasury market
continues to show price action that registers concern for the US economy, it
would seem that equity prices are poised to start the week out on a firm note.
Some traders are suggesting that an extending edge for Bush in the polls is
providing some buying interest, as the market did come under pressure from the
June highs, off the fear that a Kerry win was going to result in a rollback of
the tax cuts. With the COT report showing a “net short†fund positioning in the
Dow and S&P reports and only minimal long, or even net short small spec
readings, the market is surprisingly well positioned for even more gains.
DOW
Near term resistance and targeting for the December Dow comes in today at 10,340
and then again at 10,400. However, in order to avoid undermining sentiment, the
December Dow needs to hold above 10,258.
S&P
With triple witching expiration ahead we can expect to see wider trading ranges
ahead and that may actually serve to benefit the bull camp. Near term upside
targeting is seen up at the gap of 1130.50 to 1134.30. Critical support in the
December S&P comes in at 1120.00, while a close below 1117.00 could be extremely
damaging.
FOREIGN EXCHANGE
US DOLLAR
The Dollar seems to have rejected the low forged
last week at 88.38 and might be poised to attempt a return to the 89.00 even
level. With the US equity market showing signs of even higher action ahead it
certainly makes it difficult for the bear camp to continue attacking the Dollar.
However, with a US Fed member indicating that the US could afford to hold off on
near term rate hikes, the Dollar will remain undermined from an interest rate
differential perspective. In the near term, the December Dollar could easily
fluctuate from 88.00 to 89.00 but until the US numbers show signs of firming, we
have to think that the down trend pattern in effect since the May high generally
remains intact.
EURO
The Euro has certainly recoiled aggressively from
the high posted last week and that would seem to suggest that the bull camp
lacks resolve. One might even suggest that the pattern of lower highs since the
July high, favors the bear camp and with the potential for more US equity market
gains we wouldn’t be surprised to see the December Euro fall down to 122.00 and
perhaps even lower by the end of the week. In fact, to turn the short term trend
away from the downside, the December Euro would have to climb back above 122.79
early this week.
YEN
The coiling in the Yen seems to have a slightly
bearish track. In fact, a close below 91.05 could be very damaging to the charts
and could project a slide down to 90.00. However, strength in the Japanese stock
market and the potential for improved sentiment toward the US economy would seem
to provide some support to the Yen.
SWISS
Despite the impressive upside breakout last week,
the Swiss seems to be slightly off balance to start the week. However, of all
the currencies the Swiss does seem to have the most bullish track against the
Dollar.
BRITISH POUND
Like the Swiss, the Pound seems to be in a slightly
better position against the Dollar. Therefore a continued trade above the 178.30
level leaves the Pound with a positive tilt. In fact, with the August UK PPI
coming in at +0.2% it would seem that the UK economy is in much better position
than the US economy, which recently posted a contractionary PPI reading.
Therefore, the path of least resistance is pointing slightly higher in the
Pound.
CANADIAN DOLLAR
The Canadian had some slightly disappointing
fundamental information last week and that seems to have left the currency in an
undermined position. However, as long as the 77.14 level holds, one has to
assume that the uptrend pattern remains intact. Trend line support in the
Canadian comes in early this week at 77.01.
METALS
OVERNIGHT
London Gold Fix $400.75 +$.10 LME COPPER
STOCKS 105,650 mt tons -1,025 tons COMEX Gold stocks 4.885 ml -4,178 oz COMEX
Silver stocks 110.2 ml +600,981 oz
GOLD
While the gold market has managed to recoil from the
lows last week and managed to see a moderate liquidation in the overly long fund
and small spec positioning, we don’t get the sense that the market is capable of
rising above the critical pivot point of $405. Even though the net spec and fund
long saw a decline of 25,000 contracts, the market is still long a lofty 126,000
contracts. However, in a big picture sense December gold still maintains a long
term upward bias off the May low.
SILVER
Trend line support in December silver comes in at
$6.122 but it would not seem like the market liquidated a healthy enough portion
of its spec and fund long to be confident that near term support is going to
hold solid. While silver is given some support from a sagging Dollar, we suspect
that the market is looking for better news on the economy than has been forth
coming. On the other hand, we would think that December silver is capable of
holding above the deflated price zone of $5.50 to $6.00 but only as long as the
market is assured of a positively progressing US economy.
PLATINUM
So far the $825 level appears to be solid support
but like silver, the platinum market needs to see a better outlook for the world
economy to return to the recent highs. Considering the lackluster action since
the August high, the platinum market continues to carry a rather overdone small
spec and fund long position. Therefore, we can’t rule out a slide down to $800.
COPPER
Chinese copper prices were higher again overnight
leaving the market with a slightly supportive tilt. In fact, with Chinese prices
generally showing positive leadership, we can understand the US copper markets
ability to hover in an upside breakout zone. However, we are surprised that
prices have remained strong in the face of talk that the Peru labor issue will
be resolved without significant down time.
CRUDE COMPLEX
Despite a huge range on Friday and an attempt to
breakout to the upside the energy complex finished last week back on its heels.
While the US inventory report last week certainly gave the bull camp a renewed
sense of vigor, it seems like bullish mentality is a fleeting condition. While
the market could be fearful of the upcoming OPEC meeting, it is clear that short
term concerns for US product tightness and other supply issues off the weather
will continue to provide support to prices.
NATURAL GAS
In order to turn the trend back up, the December
natural gas will have to manage a climb above $6.47 early this week. We suspect
that natural gas will see some support off the weather but seeing a more
Easterly track by hurricane Ivan could cause natural gas prices to slide. In
fact, while the regular energy complex probably helped natural gas rally last
week, we also think that a considerable amount of buying was seen off the
prospect of a category 5 storm disrupting natural gas facilities in the Gulf of
Mexico.