Futures Point To A Higher Open
2/15/2005
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INTEREST RATES
On Monday the Treasury market showed that a
weakened technical setup wasn’t that much of a consideration, as prices rejected
the early weakness and finished impressively. Certainly the Treasuries were
lifted by the disjointed and weak Kansas City Fed manufacturing Index but it was
clear that the market was pre-disposed to look to the positives, because the
trade almost completely discounted the slight improvement in the Philly Fed
survey. In a change of pace, the market is mostly expecting weak economic
readings in the scheduled numbers this morning and that could take away some of
the bullish potential that the market has garnered from expecting positive
numbers that fail to materialize.
STOCK INDICES
While the stock market was weak on Monday, it
would seem as if the market is poised for a recovery bounce early this morning
off positive European leadership overnight. We are a little surprised that the
market has managed to put a positive spin on the overnight news, as German 4th
quarter GDP numbers showed an unexpected contraction. We are also surprised that
prices have managed to forge a positive overnight tilt in the wake of poor Coke
sales projections.
DOW
As suggested before, the Dow was weak Monday but overnight has seemingly
reversed the tide and has returned to the general vicinity of the recent highs.
One has to concede that the trend is up but the risk of being long would seem to
increase during the action Wednesday and Thursday. Unfortunately we are a little
lost on what factor is capable of igniting fresh buying interest, unless the
expectations for a decline in retail sales, a slowing of New York State
manufacturing and a rise in business inventories this morning are all proven to
be wrong! Near term critical pivot point support comes in at 10,806 and then
again at 10,793.
S&P
Like the Dow, the March S&P would seem to be poised to rally, even if the
fundamental information due out today is expected to be soft. In fact, we are
also concerned about the coming Fed testimony, but apparently the stock market
is simply not that concerned about the macro economic look! S&P critical pivot
point support comes in 1207.00 and then again at 1206.30. In conclusion, this
market is showing some bullish wherewithal, despite what could be considered a
short term bearish tilt in the typical news flow.
FOREIGN EXCHANGE
US DOLLAR
The Dollar remains vulnerable on the charts but for
some reason the trade sees some support around the prior days low. However, even
after some potentially supportive slack German GDP readings overnight, the
Dollar doesn’t seem to be showing much in the way of fresh long interest. On the
other hand, we hardly expect buyers to be lining up for the Dollar considering
the expectation for a clean sweep of soft US economic numbers today. Some
players are also expecting the Dollar to come under attack following the US
Federal Reserve Chairman testimony on Wednesday and Thursday. In fact, many
players think that the Fed Chairman is set to sound the alarm on the US deficit
situation or is set to downplay the need for another US rate hike! Therefore,
the Dollar would seem to be vulnerable to even more losses. However, traders
should be careful selling the Dollar so far off its recent highs, especially
since the Federal Reserve Chairman has usually assumed the role of a cheerleader
for the US economic condition. In short, we see the March Dollar sliding down
toward consolidation support at 83.45 but we also see the prospect for increased
volatility in the coming sessions. In the end, it would be a neat trick for the
Dollar to make it through the coming three sessions without concern for the twin
deficits rising to the forefront.
EURO
Fortunately for those long the Euro, the German ZEW
readings came in strong and that countervailed concerns that German 4th quarter
GDP contracted, as that technically leaves the German economy close to recession
status. On the other hand, the German ZEW numbers might be more forward looking
than 4th quarter GDP readings. We also note that Spanish 4th quarter GDP was
+.8% and Euro zone GDP was +0.2%. In other words, the Euro zone growth rate was
just barely positive in the 4th quarter and that hardly seems to foster much
long interest in the Euro. However, we suspect that near term buying interest in
the Euro zone will not come from Euro zone developments, but will come from
negative US economic developments. On the other hand, it might be difficult to
see the March Euro rise above 130.50 unless the US shoots itself in the foot.
YEN
The Yen might have risen too far too fast,
especially given the concern for the US economy over the coming two sessions. In
fact, the Japanese stock market is pretty concerned about the coming Greenspan
dialogue and with the Japanese GDP numbers due out tonight, we can understand
some long profit taking ahead. Near term critical support is seen at 95.26 but
we can’t rule out a slide to 94.57 in the coming three sessions.
SWISS
The Swiss has extended its recent gains overnight
and would seem to be poised to reap the flight to quality benefit associated
with the coming Greenspan testimony. In fact, we suspect that the March Swiss is
poised to return to the late January consolidation zone up at 84.00 to 84.40.
BRITISH POUND
Like the Yen, the Pound seems to have re-evaluated
its recent run up and with UK CPI readings showing a moderate contraction of
0.5% in January we don’t get the sense that the UK economy is moving forward
impressively. Therefore, the Pound might not be poised to catch as big of a
benefit off coming Dollar weakness, as the Swiss. In fact, we would not be
surprised to see the March Pound slide back to support of 188.19 today and then
recover on Wednesday.
CANADIAN DOLLAR
While the Canadian is short term overbought and
poised to correct, we suspect that it will benefit from the coming weakness in
the Dollar. However, we do see a temporary correction back to 80.62 before the
near term trend of the Canadian attempts to push the currency back toward the
recent highs.
METALS
OVERNIGHT
London Gold Fix $424.60 +$1.80 LME COPPER
STOCKS 55,750 metric tons +275 tons COMEX Gold stocks 5.916 ml Unchanged COMEX
SILVER stocks 102.0 ml Unchanged
GOLD
By adding to the recent gains and holding most of
the gains into the close yesterday, the gold market looked to remain in a
bullish posture. In fact, the April gold contract would appear to be flirting
with a 40 day moving average up at $428.7 today and with little in the way of
near term chart resistance until $430 the bulls would seem to maintain control.
However, the initial overnight action seems to temper the bullish sentiment
somewhat, especially since physical gold players seemed to step back from the
market overnight, as if prices were too expensive.
SILVER
Like gold, the silver market is also back off its
highs but the silver market isn’t showing nearly as much weakness as gold.
Certainly the 88 cent run in 4 sessions leaves the silver market overbought but
we suspect that May silver will be able to hold near term support at $7.285,
with slightly lower support seen at $7.20. While we suspect that May silver has
the ability to rise toward $7.60, we doubt that prices will reach that level
without some back and fill action.
PLATINUM
In addition to the support being derived from the
strength in the gold and silver market, the platinum market certainly gets
additional support from news that Anglo American Platinum was moving to reduce
its annual production target by 100,000 to 200,000 ounces. With platinum
generally basing the bull market psychology on the tightness theme, seeing lower
production is certainly helpful in reconfirming the bull tilt in prices.
However, with an aggressive profit taking slide overnight, it would seem like
platinum players are discounting the bullish forward supply fundamentals.
COPPER
The copper market flashed higher on Monday in what
some traders thought was return buying by Asian traders. In the overnight
action, the copper market added to the Monday gains and did so in the face of
weaker precious metals prices. The copper market is seemingly boosted by soaring
profit readings at BHP and it would seem that the prospect of rising supply is
simply not as important as the expectation for improving demand.
CRUDE COMPLEX
The energy complex waffled around on both sides
of unchanged during the action Monday, as OPEC comments were seen as conflicting
but concerns for Iraqi supply flow seemed to leave the overall bias in the bull
camp. However, ongoing mild US weather seemed to deflate the bullish impact of
the pipeline problems inside Iraq. On the other hand, seeing a key political
figure killed in Lebanon, combined with the oil sector attacks in Iraq reminds
the market of the uncertainty of supply.
NATURAL GAS
While periodic strength in the crude oil market is
helping natural gas respect near term support on the charts, we continue to see
the market as vulnerable to more weakness. In fact, with the near term weather
outlook extremely mild, we hardly see the scope for a rise above $6.38 basis the
May contract. On the other hand, one might expect May natural gas to fluctuate
in a range bound by $6.05 and $6.40.