Futures Point To A Higher Open
1/21/2005
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INTEREST RATES
The Treasury market continues to hover around the
highs and was certainly given a big assist in holding high prices with the
shocking decline in the Philly Fed survey report yesterday. We suspect that
Treasury players are feeling more confident about the markets ability to rally,
than they were at the beginning of the week, as inflation concerns have been
dampened and the net shake from the US economic front this week favors the bull
camp. Growing concerns about GM debt ratings and mostly lackluster equity market
action, following generally positive earnings information, also seems to give
the bulls a little edge.
STOCK INDICES
The stock market continues to exhibit fickle
activity, as the favorable Citigroup news yesterday failed to inspire bullish
action and this morning patently negative information from Sony hasn’t put
pressure on early US equity prices. However, the disconcerting Sony information
did undermine the Nikkei and that means that part of the global equity market
crowd will hold a negative attitude into the US session. The Press is also
throwing around concern for Chip stocks and with the US producing an extremely
disappointing Philly Fed survey yesterday, it certainly feels like the bears
continue to hold an edge over the bulls.
DOW
Near term downside support in the March Dow comes in at 10,442, especially if
the 2 day low of 10,473 fails to hold in the early action today. We would
normally expect a big throttle down in prices given the technical and
fundamental setup, but at this point we don’t see a likely fundamental catalyst
for a big washout. While GE earnings on the face of the report seem to be
supportive, we are not sure that the market is even prepared to embrace and
react to bullish information. In fact, GE even forecasted some very positive
forward statements on future sales but so far that hasn’t served to whip up much
bullish impetus in the broad market. GE is a bellwether stock and the ultimate
track off its earnings is key indicator! In our opinion, the failure to see
positive residual from GE will be another sign that the bear camp still controls
the market. Our pick for an ultimate low in the March Dow is 10,400 to 10,380.
S&P
The March S&P continues to show respect for consolidation support but that is a
thin excuse to jump into the long side of this market. If we had seen better
economic news this week, or more favorable response to good corporate earnings
reports, we would be a little more inclined to buy chart support and use a tight
stop. However, we continue to fear an ultimate low in the March S&P at 1171 and
possibly even 1169.
FOREIGN EXCHANGE
US DOLLAR
The Dollar seems to be a in a profit taking mode
this morning, but given the slate of international economic news overnight, we
suspect that light selling interest toward the Yen, Pound and Euro will provide
an underpin for the Dollar. Unfortunately, US economic information this week has
been mostly disappointing, at the same time that international economic
information has been disappointing and that leaves the Dollar without a
definitive tilt. US economic information today is expected to be a little
discouraging but probably doesn’t cause much of a sustained reaction in prices.
However, if all things remain constant from a fundamental perspective, the bear
camp probably can’t downplay the mostly favorable technical condition of the US
Dollar. While we seriously doubt that the Dollar will be able to regain the 100
day moving average line today, a close in the March Dollar above 84.00 would be
a psychological boost. Next week a major down trend channel line could be
regained at 85.09 and that along with the 100 day moving average at 84.89 could
set the market up for a big upside extension.
EURO
The pattern of lower highs remains and the
fundamental track doesn’t look to be definitive enough to overcome the bearish
technical track. In order to turn the near term trend away from the downside,
the Euro would have to regain 130.85.
YEN
The disappointing Sony news undermined the Japanese
stock market overnight and has also put some pressure on the Yen. The Yen has
failed at critical support and continues to extend a pattern of lower lows.
Therefore, we see a near term downside target of 96.41 in the March Yen.
SWISS
A series of lower lows and almost no support from
the Euro, seems to leave the Swiss entrenched in a downward slide. Near term
downside targeting in the March Swiss comes in at 83.00 and that is somewhat of
a significant downside projection.
BRITISH POUND
With the December 2004 UK retail sales report
posting a massive decline of 1% and the UK also indicating that Christmas 2004
was the worst in 20 years, we are surprised that the Pound is managing to hold
together in the early going today. However, with the Euro and the Swiss weak,
that is making it harder for the Pound to breakout of the current consolidation
pattern to the downside. In fact, while we see the potential for a slide to
185.00, we are not convinced that there is enough impetus today to press the
Pound below 185.57.
CANADIAN DOLLAR
The Canadian managed to bounce off the 100 day
moving average and given the chart setup in the Canadian, we are not inclined to
be short. In fact, aggressive traders might be lightly long looking for a return
to the 82.20 level.
METALS
OVERNIGHT
London Gold Fix $423.30 +$1.60 LME COPPER
STOCKS 43,475 metric tons -150 tons COMEX Gold stocks 5.934 ml -643 oz COMEX
SILVER stocks 102.3 ml +24,985 oz
GOLD
While the probe down yesterday undermines gold
slightly, part of the bear tilt is mitigated by the markets ability to recoil
away from the lows. In effect the gold market remains in a coiling pattern but
the gold market will remain vulnerable, as long as the US Dollar hangs out
around an upside breakout point on the charts. We continue to see gold merger
and buyout news and that helps to improve sentiment toward gold in general.
SILVER
About the most optimistic thing we can say about the
silver market is that it has also rejected a sell off attempt and returned to
the middle of the recent consolidation. It is really disappointing that the
Asian demand theme evaporated so quickly early this week, as that is the type of
information the market needs to construct a bull trend. The Press continues to
talk about scale down buying and we suspect that is probably a reliable market
factor and that is also why we would be interested in selling May silver 620
puts on any decline to yesterdays lows of $6.47.
PLATINUM
The platinum market continues to hold near the highs
and that is impressive when one considers the lackluster action in both gold and
silver. On the other hand, the platinum market seems to be tracking copper
market action closer than the precious metals action and that is proof that
platinum players are generally bullish. According to Press reports overnight
from Dow Jones, some long term contracts are rumored to have been constructed
between Asian buyers and Russian suppliers, at prices under current market
prices, or at least at prices that fail to foster optimism for future price
levels.
COPPER
While copper seemed to be stalled on several
occasions this week, the overnight action shows no such indecision. With Chinese
copper prices higher overnight and Shanghai copper stocks showing a 2,589 ton
decline for the week (total stocks now stand at 29,347 tons) we can understand
the bullish tilt. Apparently cash prices in China continue to rise and with
stocks falling, one can’t fight the uptrend.
CRUDE COMPLEX
The energy complex initially extended the
downside action Thursday morning to effectively factor in the slow repair job
that is taking place in US energy inventories. However, during the session
Thursday, there were some mitigating developments which caused the energy
complex to recoil from the lows. For instance, a private forecasting agency once
again suggested that OPEC tanker movements had fallen off and that in
conjunction with rather upbeat EIA demand projections seemed to give the bull’s
fresh life.
NATURAL GAS
We are really surprised that natural gas prices
managed to rally yesterday, especially in the wake of the early declines in the
regular energy complex. However, we suspect that natural gas was the recipient
of bargain hunting buying. On the other hand, the natural gas market doesn’t
seem to have the fundamental setup to rally prices extensively.