Futures Point To A Higher Open
11/24/2004
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INTEREST RATES
The Treasury market continues to take the falling
Dollar as a positive and while that could come back to haunt the market and
might be hard to explain, that is the trend of the daily action. It is possible
that the market is now feeding higher off the expectation of a BOJ intervention,
which would certainly increase the chance of more foreign Central Bank Treasury
purchases. In fact, unless Japan, China and maybe even the ECB want to see their
currencies continue to soar, they might be forced to do just the opposite of
what the market expects under a falling Dollar and that is move money into the
US.
STOCK INDICES
The way the stock market is managing its gains
(down early and then regaining the losses in the afternoon) has taken away a bit
of the positive psychology. However, the bias of the market is still generally
favorable, despite a recent rise in energy prices, slack US economic numbers,
mixed corporate news and a falling Dollar. It is possible that energy prices
could be a main driving component for stock prices this morning as the market
will be presented with yet another weekly inventory reading this morning.
DOW
The December Dow should now have the 10,500 level as a solid base of support
from which the market can work higher. There might be a little bit of resistance
around 10,562, but if the market manages to get to that level today or Friday,
we suspect that a pulse to even higher highs will be seen relatively quickly. We
would be long, but watchful of the early weekly oil inventory data. If the oil
market doesn’t soar early, we suspect that stock prices will grind upward.
S&P
Overnight the S&P managed to climb above a critical pivot point and looks to
have a near term targeting of 1186.20. It would not be a positive for the
December S&P to fall back below the key pivot point of 1177.90, especially in
the early trade today. The early correction this week should leave the market
poised to run, especially if the numbers today remain uneventful.
FOREIGN EXCHANGE
US DOLLAR
We are not sure if the most recent wrinkle in the
Dollar debacle is the fact that Russia is moving to lower its Dollar holdings,
or if the Dollar is simply falling because of other economic concerns. In any
regard, it would seem like the Dollar is set for another major slide, with the
overnight declines certainly enough to upset Central Bankers. With the Russians
also suggesting that Middle East banks might also begin to dump Dollars, there
is a considerable volatility threat. We have to think that a major volatility
event is ahead and that history might be in the making. In fact, unless the US
economy gathers momentum quickly, and in some way creates an attraction for
investors, we have to think that the Dollar is going to continue falling
sharply. Even if intervention pops up, that might only temporarily alter the
course of the Dollar. Furthermore, we are not sure intervention is a match for
long term historical rotation out of the Dollar. Next downside target is seen at
82.00.
EURO
The Euro zone saw some inflation figures that came
in below expectations (from Germany) but right now the macro economic or
interest rate differential doesn’t seem to be ready to play a role in currency
prices. Even with a decline in Italian retail sales for September, it would seem
like the Euro is poised for more significant gains ahead. The Europeans hate the
Dollar right now, but they are soon to be relieved of significant export
business as a result of their intentions. About the only negative we can come up
with for the Euro, is that a number of analysts projections, for where the Euro
is headed before the end of the year, are becoming quite shocking with 135 to
150 being mentioned!
YEN
The trade continues to look toward the BOJ as the
most likely Central Bank to react! The METI posted some contractionary September
industrial activity, but again the current action has nothing to do with the
numbers, it has everything to do with psychology. Some predicted 96 and 97 for
intervention but those levels have come and gone and the Yen is already at the
highest level since early 2000. Some traders now project a rise to 100 in the
yen.
SWISS
Next upside targeting in the Swiss comes off the
monthly charts up at 89.73 and unless there is a major coordinated intervention,
little looks to change the current course of trade.
BRITISH POUND
Next upside targeting in the Pound comes in at 190
and then up at 191.02.
CANADIAN DOLLAR
The up trend resumes in earnest, especially with the
US economy strong enough that the Canadian export flow is rising off activity
and being knocked down only slightly by an unfavorable exchange rate. Next
upside targeting comes in up at 85.20.
METALS
OVERNIGHT
London Gold Fix $448.65 +$1.65 LME COPPER
STOCKS 62,050 metric tons -300 tons COMEX Gold stocks 5.357 ml Unchanged COMEX
Silver stocks 102.8 ml Unchanged
GOLD
While the overnight Asian action didn’t show much in
the way of definitive direction, it should be noted that the currencies pulsed
up against the Dollar around 4:40 cst and therefore the Asian trade might have
missed the majority of the overnight Dollar slide. We are not sure why the Asian
trade was pausing ahead of the US numbers, because expectations call for a mixed
set of readings today on the US economy. Given the trend in the Dollar, we doubt
that mixed numbers will do anything to alter the pattern and therefore we doubt
the numbers will upset the up trend in gold.
SILVER
Surprisingly the silver market is not showing much
upward progression in the wake of gold gains and that makes the recent
consolidation more damaging to the up trend pattern. The silver market just
can’t seem to get a clean shake from the demand front and also can’t seem to get
consistently favorable outside market action from platinum and copper. While
copper has generally provided positive leadership to silver, back and forth
action in platinum has undermined some bull interest in silver.
PLATINUM
While platinum has recently managed a rise off a
critical low, it also has a significant amount of overhead resistance on the
charts. It should be noted that January platinum did manage to regain a key
pivot point overnight with a trade above $860, the platinum market has
considerably more overhead resistance than the silver market. In short, gold
market will have to be ultra strong to drag platinum higher.
COPPER
Another new high for March copper leaves the trend
pointing higher. Chinese copper futures were sharply higher again overnight
giving the US a very positive tone. The Chinese exchange apparently notified
members of potential volatility ahead in the copper contract.
CRUDE COMPLEX
The crude oil market mounted an aggressive rally
yesterday but really failed to hold all of the gains. We suspect that the market
was partially factoring another tight or unchanged US weekly distillate stocks
reading today and was also factoring in concerns that Iraqi production was
halted in the North due to threats of sabotage. As if that weren’t enough, Iraqi
exports to the south were literally reduced by up to 350,000 barrels per day,
due to an actual attack on a pipeline.
NATURAL GAS
While we think that the outlook for the natural gas
market was shored up slightly by the turn of events Tuesday, in the regular
energy complex, we still see some vulnerability in the near term. Even after the
massive attempt to rally yesterday the market fell back and remains close to a
downside breakout on the charts. Because of the holiday Thursday, the weekly
inventory readings will be released today but we don’t see the market reacting
to those readings as they should be.