Futures Point To A Higher Open
12/15/2004
INTEREST RATES
The Treasury market was cheered on by the
suggestions from the US Fed that the US economy can continue to grow without
seeing inflation risks rise. The Fed also seemed to suggest that US jobs growth
could continue without sparking inflation and that makes would-be longs more
comfortable paying up for fresh longs at almost the highest price since October.
We also have to think that the bull camp was generally cheered along by the
economic information released yesterday, as the market has generally thought
that the US economy was gathering momentum, but after seeing the countervailing
readings floated yesterday, one can’t definitively say that the economy is
beyond the soft spot.
STOCK INDICES
Despite the fact that scheduled US economic
numbers have continued to be disappointing, it would seem like the stock market
is capable of creating its own optimism. While the merger mania isn’t
necessarily the most stabile fundamental condition for a bull market, it is
apparently capable of carrying the ball for the bull camp. Certainly the stock
market was cheered on by the fact that the Fed sees ongoing low inflation and
continued growth.
DOW
We continue to see an upside target in the March Dow of 10,727 and possibly even
10,900 by the close Thursday afternoon. The question now becomes, will there be
another headline type merger to spur the market on and take the focus away from
the non-descript economic condition. Critical near term support in the March Dow
is seen this morning at 10,657.
S&P
The expiration looms ahead and the market is near term overbought. However, we
have to think that momentum is going to carry the market to more new highs
today. Longs with profits should consider picking a point just above the current
market and looking to bank a profit, as the coming three sessions could exhibit
significant volatility in both directions.
FOREIGN EXCHANGE
US DOLLAR
The Dollar has already violated a series of critical
support levels on the charts and it would appear that more declines are ahead.
US economic numbers have been nothing to write home about and that combines with
the knowledge of a significant Trade Deficit expansion, to give the bears
control over near term prices. However, we must note that the Canadian trade
surplus continued to narrow and apparently reached the lowest level in a year
and that could be a sign that the ultra low Dollar is beginning to spark
increased exports for the US. We suspect that the October trade deficit was a
low water mark, as the price of oil began to fall sharply after October and that
could make the next US trade deficit reading improve dramatically. However, in
the near term the Dollar seems to be getting some passive foreign support but
apparently not enough support to totally discourage lower Dollar action. In the
near term, we suspect that the March Dollar could slide back to 81.76 but we
just don’t think that a return to the lows is in the cards under the current
macro economic setup.
EURO
The Euro appears to be poised to rise to the top of
the recent consolidation but must first manage a rise above critical resistance
at 133.92. With German debt issuance coming in slightly below expectations, we
have to think that the Euro is given some support, as many traders feared that
slow grow and ongoing spending in the Euro zone, was set to violate debt to GDP
rules. In the short term, technical weakness in the Dollar is apparently set to
provide direct support to the Euro and while we expect some near term gains, we
don’t see the scope for a round of new highs in the Euro. Near term critical
support comes in today at 133.38.
YEN
A massive range up move in the Yen surprises the
trade and would seem to foster technical stop loss buying all the way up to
97.00. It would seem like the Tankan report was slightly better than the mostly
negative expectation for the report. Apparently the report forecasts a peaking
of sentiment in the 4th quarter but apparently the market was expecting a more
negative reading for the 4th quarter. Therefore, the Yen has solid support at
96.17 and now has a short term positive bias.
SWISS
The Swiss shows the most bullish overnight action
and probably has the most bullish chart setup of all the currencies. Therefore,
one can’t argue against a rally to 88.48.
BRITISH POUND
Apparently a decent UK job report is going to
facilitate more near term gains in the Pound. While the jobless claims for the
month were only moderately better than expected, the 3 month improvement shows
that the UK economy is moving forward. Earnings also rose and that gives
fundamental justification for a possible return to the December high of 193.89.
CANADIAN DOLLAR
After the disappointing Canadian trade surplus
numbers and the evidence of lower export flow, we are a little a surprised that
the Canadian has managed to benefit from the recent Dollars weakness. However, a
short term bounce is possible but aggressive traders should be prepared to sell
a rally to 82.00. On the other hand, a close above 82.26 could be a little
concerning for the bear camp.
METALS
OVERNIGHT
London Gold Fix $437.80 -$0.80 LME COPPER
STOCKS 55,425 metric tons +575 tons COMEX Gold stocks 5.577 ml Unchanged COMEX
SILVER stocks 103.8 ml +604,658 oz
GOLD
While the US gold market appears to have a positive
bias this morning, there would seem to be moderate resistance at $441.6. On the
other hand, a rather significant decline in the US Dollar overnight has violated
a series of support points on the charts and that could whip up bullish interest
in gold. In fact, a decline below 81.86 in the March Dollar Index could be
enough to send February gold prices up to $443.
SILVER
The silver market has also consolidated and
re-injected confidence following the massive early December slide and that
should give the market a base from which it can work higher. However,
considering the current pattern of higher lows, it would not be a good thing for
March silver to track back below $6.68. Unfortunately the silver market isn’t
seeing much help from the physical market and isn’t seeing that much optimism
arising from the macro economic outlook.
PLATINUM
The platinum market remains mired under the critical
pivot point of $840 and with the market locked in the middle of a wide
consolidation zone, we really don’t see a clearly defined near term price trend.
We suspect that prices will be locked in a range defined as $840 and $821.
COPPER
Another big upside probe in the overnight action
indicates that buyers are willing to pay up for fresh long plays. Chinese copper
futures were higher overnight despite slightly higher overnight LME copper stock
readings. In short, the copper market has managed to rally this week directly in
the face of rising supply talk and very little fundamental leadership from the
Asian market.
CRUDE COMPLEX
The energy complex managed to shake off several
negative OPEC comments and suggestions from Saudi Arabia yesterday that other
producers need to announce production cuts. Qatar indicated that they would move
to reduce production by 40,000 barrels per day in January and that probably
provided some support to prices on Tuesday. However, the dominating development
of this week continues to be cold weather throughout a large portion of the US.
NATURAL GAS
While some traders continue to point to a moderate
annual surplus in natural gas and want to use that argument against the bull
camp, we have to think that the annual commercial demand growth over last year
could be as much as 4-5%. We also think that industrial use of natural gas is
set to climb and that some future supply might be locked up by forward price
fixing and that could in a sense pull demand forward. In the short term, any
chaining together of cold weather systems could spark even more talk of a normal
or colder than normal winter weather and that alone could give the recent rally
some legs.