Futures Point To A Higher Open
1/3/2005
INTEREST RATES
We suspect that part of the rally late last week
was an overdone move that was made possible by thin holiday conditions.
Therefore, the slide in Treasury prices this morning is perhaps a balancing move
and isn’t indicative of bearish start to 2005. The technical trade has noted the
sharp decline in volume and open interest on the Treasury market slide off the
December high, and that would seem to discount the bear action of the last
several weeks.
STOCK INDICES
The stock market might have finished 2004 with a
slight down day, but the market did manage a decent run early Friday, before
banking some profits into the close. In fact, in looking at the charts this
morning, it would seem like the bulls have control over the near term trend and
that the markets structure is in fact pretty healthy. Furthermore, we suspect
that the US will float some modestly supportive economic information today and
with the expectation for the week ending payroll report also positive, one can
hardly argue against a continuation of the uptrend.
DOW
It would seem like lower energy prices are helping the Blue Chip stocks and in
some cases analysts are raising their views toward transportation stocks!
Therefore, the March Dow would seem to start the week out on a positive note.
Near term resistance and an early target today is 10,872 but we would have to
think that the bull camp is already eyeing the next even number level of 11,000!
To turn the trend down, the market would have to threaten with a close back
below 10,784.
S&P
The top of the channel in the March S&P comes in today at 1223.50 and we suspect
that another higher low will be posted today. In fact, given the slight setback
last Friday afternoon, one might suggest that the market is in very good
technical shape and could be primed to run consistently higher early this week.
FOREIGN EXCHANGE
US DOLLAR
Once again the Dollar made a fresh low late last
week, but the trade has apparently rejected that new low probe into the US
opening this morning. While the Dollar might be getting some support from EU
comments made late last week, we suspect that the Dollar will have to see
consistently strong economic readings just to avoid a restart of the selling
pressure. With a series of annual forecasts calling for more declines in the
Dollar, the market seems to be suffered from a temporary oversold mentality, but
that mentality could be quickly forgotten in the event that the US numbers show
the slightest sign of weakness. The top of the down trend channel in the March
Dollar comes in today at 81.50 and therefore the market could bounce moderately,
without even altering existing trend signals. It is possible that the
expectation of an ultra strong monthly payroll report from the US discourages
near term selling of the Dollar, but in the end the report will have to meet, or
exceed expectations just to have any hope of altering the existing down trend
pattern.
EURO
Late last week an EU official muttered some
complaints about the slide in the Dollar and that seemed to rekindle the idea
that intervention was possible. However, while some might want to discount the
action last week due to the thin holiday conditions, it was significant that the
Euro failed to rise sharply into new high ground on the speculation that the ECB
wasn’t prepared to act! In other words, the Euro seemed to be without direct
follow through buying potential, even when everything seemed to favor the bull
camp. Subsequently the Euro corrected sharply and at least balanced some of the
overbought technical condition of the marketplace. However, it could be
considered an extremely negative development for the Euro to fall back below
135.00 into the close today, as that would seem to give the overnight washout
credence. Assume that the trend is up, but longs probably have seen their risk
parameters expanded greatly.
YEN
The Yen was a big gainer against the Dollar last
week and we suspect that the market will attempt to pick up on that theme again
this week. In other words, the BOJ might have its work cut out for it this week,
as a couple closes above 98.00 might result in an intervention posture.
SWISS
Like the Euro, the Swiss forged a massive washout
overnight, but the trade seems to have re-gathered itself. While the Swiss looks
vulnerable, one has to concede that the trend is still up, and that any short
side play should be placed in risk defined long put positions. In order to shift
control to the bear camp, the March Swiss would have to manage a close today
below 87.65.
BRITISH POUND
The Pound made an extremely damaging trade early
this morning, but has rejected most of that early weakness. However, if the
Pound were to re-visit levels below 189.70 into the close today, that could
ignite a sell off slide all the way down to 187.50.
CANADIAN DOLLAR
It will take more than a quick compacted overnight
slide to totally erase the positive spin derived off the December rally in the
Canadian. In fact, to turn the trend back down, the March Canadian would have to
manage a close below 82.57.
METALS
OVERNIGHT
London Gold Fix $435.15 Closed LME COPPER
STOCKS 48,875 metric tons -500 tons COMEX Gold stocks 5.795 ml +3,472 oz COMEX
SILVER stocks 103.5 ml -653,298 oz
GOLD
The gold market starts the year out on a negative
note with the Dollar looking to open higher. However, the gold market apparently
rejected the overnight probe below the $435 level and it would seem like
February gold will come into the US opening today, right on a critical pivot
point of $437. Near term consolidation support comes in early this week at
$434.4.
SILVER
The silver market remains mired in a consolidation
pattern with a slightly negative technical bias. While the March silver has
managed to respect a pattern of higher lows, the market saw volume and open
interest decline on the December bounce and that is negative. We do think that
the silver market will continue to get some indirect support from favorable
equity market action and from positive macro economic developments, but we doubt
that silver will totally divorce itself from gold and the action in the Dollar.
PLATINUM
After the massive run-up in December, platinum
prices appear to be vulnerable to profit taking. In fact, without a much
improved macro economic outlook, or more positive leadership from Asia, we
suspect that platinum prices will continue to slide back toward the mid December
consolidation zone that was formed just above $840. In conclusion, in the
absence of a rise back above $863, the trend in platinum looks to remain down.
COPPER
Without the leadership of the Asian and London
markets, the US copper market will have to set its own course early. With a
slightly positive early US equity market opening indication, and potentially
supportive US Construction spending to be released this morning there should be
some direction afforded from the macro economic front. We continue to think that
copper prices are a little expensive, with prices seemingly consolidating around
the 145 high for the better part of the last week.
CRUDE COMPLEX
While the bull camp in the energy complex seemed
to get help from the most recent weekly inventory report, we still don’t see the
bullish spin from that report. In fact, with the expansion in annual API crude
stocks surplus to 32.6 million barrels (an increase from the 24.6 million barrel
level previously reported) and the refinery operating rate jumping up sharply,
we would think that the threat of a winter product shortage was dramatically
reduced with the figures last week. Furthermore, with recent temps in the US
coming in extremely mild, the early December cold spell has been mostly
forgotten.
NATURAL GAS
The March natural gas enters the New Year
significantly below the 2004 high of $9.50 and basically at the lowest level
since April of 2004. Certainly the weakness in the regular energy complex and
the mostly mild start to the North American winter is behind the slide in
natural gas prices, but some traders are suggesting that the annual working
stocks surplus is the main component of the bear case. In fact, until demand
ramps up enough to turn the tide in the weekly inventory readings into the bulls
favor, it is possible that prices continue to waffle at levels below the 2004
summer consolidation lows.