Futures Point To A Higher Open
5/23/2005
INTEREST RATES
While the Treasury market was cheered on last
week by muted inflation readings and even more muted inflation predictions from
noted Fund managers, it would seem like the bull camp has lost some of its
resolve. We have to wonder if perpetually falling oil prices and relative
strength in equity prices aren’t beginning to have an impact on forward economic
views. We also wonder if the strength in the Dollar isn’t resulting in a
re-evaluation of investing trends.
STOCK INDICES
With the market coming off a very impressive run
last week and the market seeing weaker oil and a higher Dollar overnight, it is
likely that the bulls retain control. With political problems within the EU and
Chinese stocks still showing weakness, the US market certainly maintains an
international edge and that might be a little more important than many might
realize. In fact, with sharply lower oil prices and anything favorable from the
US scheduled economic report slate we suspect that the bull camp will continue
to push up prices this week.
DOW
As mentioned before, sentiment in the marketplace isn’t overwhelmingly bullish
but the charts certainly seem to be poised for even more gains ahead.
The May 17th Commitment of Traders with Options report showed the Dow Jones
Industrial Average Non-Commercial position to be net long 5,610 contracts, while
the Non-reportable position was net long 1,642 contracts. Therefore, the net
spec long is moderate at 7,200 contracts and therefore the spec positioning
should not limit the June contract from attempting a rise to the next resistance
point of 10,576. Near term support comes in at 10,462 and in order to rise to a
whole new trading range, we suspect that oil prices will have to provide the
lion’s share of guidance.
S&P
The S&P would seem to have a near term target of 1195.70, with near term support
pegged at 1186.60. The May 17th Commitment of Traders with Options report showed
the S&P 500 Stock Index Non-Commercial position to be net short 17,900 contracts
and that would seem to leave the market with the technical capacity to rise even
further in the coming sessions. With the combined small spec and fund
positioning this week in the S&P pegged at only 6,000 contracts, this market is
a long, long way from even being nominally spec long, when compared to
historical figures. While many would-be bulls are waiting for distinct bullish
leadership from the tech sector, before jumping into the long side, we suspect
that the market is poised to grind up this week at a slightly slower pace than
was present last week.
FOREIGN EXCHANGE
US DOLLAR
The Dollar would seem to be poised to rise even
further, even if the gains are mostly in response to concern for upcoming EU
political developments.
We also think that Chinese efforts to find an alternative solution to re-pegging
their currency, is providing the Dollar with some lift. In the near term, we are
not sure that the US is going to get the economic numbers to thrust the Dollar
upward, but we do think that consistently lower Oil prices are providing direct
support to the Dollar. In fact, with the US economy thought to be stronger than
the EU, some players think that lower oil prices into the key US demand window
could serve to push the economic differential ahead even further. In looking
forward, the trade is likely to fret over a no vote by the French this coming
Sunday and that followed by a no vote by the Dutch, could cause serious problems
for the Euro, which in turn hugely benefits the Dollar. Winning be default is
nothing new in the currency markets and that is exactly what seems be in the
offing for the Dollar this week! Near term upside targeting is seen at 87.70.
EURO
The chart pattern in the Euro is extremely bearish
with the only clear threat to the bear camp being the moderately oversold status
of the market.
The May 17th Commitment of Traders with Options report showed the Euro
Non-Commercial position net short 9,560 contracts, with the Non-reportable
position net short 2,567 contracts for a combined net spec short of 12,000
contracts. In other words, the market isn’t so short that additional downside
will be difficult to come by. Next downside targeting in the June Euro is 124.00
but a much more significant slide might be seen in the event that the EU
structure is threatened this weekend.
YEN
Surprisingly the Yen seems to have found support and
managed to recoil away from the extremely critical early April lows. However,
with the Chinese stalling on the currency float issue and the BOJ still very
concerned about deflation, we suspect that the Yen will remain vulnerable in the
near term. However, despite the extremely negative track in the Yen, those that
are short would be welll advised to place profit stops at 93.35, as a rise above
that level could signal a key reversal in the down trend pattern.
SWISS
The Swiss should remain captive to the general
direction of the Euro but it is possible that some money rotates out of the Euro
and into the Swiss in a quasi flight to quality play ahead of the coming weekend
French EU vote. In other words, the Swiss might be poised to fall, at a slightly
slower pace than the Euro in the coming week.
BRITISH POUND
While the Pound managed to respect last Fridays lows
in the action this morning, we are not sure that there is cause to suspect a
bottoming. We suspect that the Pound will fall the least of all currencies
against the Dollar this week, especially since some players might decide to be
long the Pound against the Euro. Near term resistance of 183.80 in the June
Pound should be a pretty solid resistance zone.
CANADIAN DOLLAR
The Canadian continues to flesh out what appears to
be a bottoming formation. In fact, several more sessions of prices holding above
79.00, might build enough of a consolidation that the bears will begin to lose
resolve. However, in order to turn the trend up, the June Canadian will have to
manage a rise above the trend line at 80.34 today and at 80.27 on Tuesday.
METALS
OVERNIGHT
London Gold Fix $417.60 -$3.20 LME COPPER
STOCKS 50,850 metric tons -1,050 tons COMEX Gold stocks 6.619 ml oz -388 oz
COMEX SILVER stocks 105.6 +291,902 oz
GOLD
While a partial holiday in Asia dampened trade
action in gold, the bias would still seem to be pointing downward. In fact, with
Indian gold reports touting slackening demand and the Dollar holding up around 8
month highs the bear camp has a good case. In fact, even the technicals seem to
favor the bear camp, as the May 17th Commitment of Traders with Options report
showed the Gold Non-Commercial position to still be net long 63,803 contracts,
with the Non-reportable position also still net long 25,709 contracts for a
combined spec long positioning of 89,000 contracts.
SILVER
After last Friday’s massive slide, the silver market
remains vulnerable but we wouldn’t be surprised to see the July silver manage to
hold above the up trend channel line down at $6.95. The May 17th Commitment of
Traders with Options report showed the Silver Non-Commercial position to be net
long 23,203 contracts, with the Non-reportable position also net long 21,566
contracts for a combined spec long of 44,000 contracts. We suspect that the
economy is potentially good enough to discourage a press down to deflated silver
price levels below $6.60, but in the near term we can’t rule out a slide back to
the May lows of $6.82.
PLATINUM
With a rather aggressive initial overnight probe, it
would seem like platinum is in a vulnerable position to start the week. The most
recent COT reports pegged the Non-Commercial position to be net long 3,317
contracts, with the Non-reportable position net long 848 contracts. Therefore,
the combined small spec and fund positioning in platinum is moderately long at
4,000 contracts but the market comes into the action today $3.00 below the level
where the COT report was measured.
COPPER
The copper market did manage to forge a bounce off
the sharp May slide but the magnitude of the bounce seems to suggest that the
bull camp isn’t totally in control of the near term trend. The May 17th
Commitment of Traders with Options report showed the Copper Non-Commercial
position to be net long only 3,651 contracts, with the Non-reportable position
net long a mere 25 contracts. Therefore, the net spec and fund long is minimally
long 3,600 contracts and that would seem to reduce the potential for significant
additional long liquidation.
CRUDE COMPLEX
After showing periodic signs of bottoming early
last week, the energy complex weakened and forged a new low for the move last
Friday and that leaves the market tilted to the downside at the start of this
week. It was clear that prices were given some temporary support off a US
refinery glitch but in order to turn the head of this market back up, there will
have to be something more significant from the supply front. In the meantime,
the market seems to be content to slide back toward what OPEC has suggested
might be "minimum pricing" of $40.00 in the basket price of crude oil.
NATURAL GAS
As long as crude oil remains weak, we suspect that
natural gas will be pinned down on the charts. However, the natural gas market
should get some similar speculative interest, as the unleaded market in
anticipation of coming supply threats. However the natural gas supply threats
derive from the hurricane season and the unleaded supply issues derive from the
refinery situation.