Futures Point To A Higher Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS -4 — The Treasury market is
undermined by the strength in the equity market and an ultra weak US Dollar.
However, even with very impressive corporate earnings reports, sentiment toward
the economy doesn’t seem to be improving, as much as many would have expected.
In fact, in the
the BOE seems to be throwing around the idea of cutting interest rates.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P +390, DOW
+18, NIKKEI +2.92,
FTSE +72 — Finally the market is accepting of the improved outlook!
While the SARS issue could still step up and upset the bull tide, we have to
think that a move to close schools in
for two weeks is a good step toward containing the disease. With the earnings
parade simply producing much better than expected reports, it would seem that
investors are getting interested in the market. As we suggested last week,
geopolitical headwinds have lifted and the market deserves to appreciate.
FOREIGN EXCHANGE
DOLLAR: The Dollar remains down despite news that
is calling for an end to the Iraqi sanctions. The Dollar also remains weak with
corporate earnings reports coming in much better than expected. In other words,
there are a number of reasons why the Dollar should be viewed with a little
better attitude but the market doesn’t appear to be that interested in anything
bullish toward the Dollar. If the
stock market manages to rise sharply again today, that should begin to make
Dollar shorts nervous and that could spark a minor short covering bounce.
However, unless something surfaces to alter the negative entrenched view toward
the Dollar, a rally is probably an opportunity to get short. In fact, we would
be surprised to see the June Dollar rise above 99.30. An issue to watch is the
potential religious flap that is surfacing in
as that could result in the
getting into another political problem with the Arab world. An issue that could
suddenly drive money into the Dollar would be for the SARS issue to breakout and
become a major global scare!
EURO: On a correction to 108.98, traders
should probably be a buyer of the June Euro, as it seems to maintain the favor
of the world. Even with weak economic numbers the Euro is not undermined as both
the
and US are producing signs of a weak economy. In fact, EuroCoin actually showed
an expansion of economic activity in March and that countervails fears that the
German economy is holding back the Euro zone recovery. The pace of gains in the
Euro, look to be restrained by the strength in the
stock market.
YEN: The Nikkei did not follow the favorable
trend in the rest of the global equity markets and that could be because the
Japanese trade surplus declined much more than most analysts expected. We also
have to think that concern for SARS has to impact the Japanese economy more than
any other G7 country. We suspect that the Yen could slide to support on the
charts just below 83.00.
SWISS: With the Swiss at the top of the
recent consolidation zone and the market lacking a clear direction, we have to
think that a short-term correction is possible. Middle of the range in the Swiss
is 72.48.
POUND: There is talk that the BOE might have
to cut rates to give the sagging
economy a lift and that is undermining the Pound. An increase in March borrowing
figures would seem to suggest that the
economy is still hanging in there. Therefore, we see the Pound caught in a tight
range bound by 156.48 and 157.52.
CANADIAN: As long as the SARS issue doesn’t
bite the Canadian economy, the Canadian Dollar would appear to be poised to
rally. Critical near term support is seen down at 68.69 and then again down at
68.38. Fresh longs might have to wait for a dip to 68.38 to get long.
METALS
GOLD: At times the gold market shows signs
of strength but then the market goes dead in the water without any response to
the slide in the Dollar. Yesterday the Dollar fell nearly 100 points but gold
showed almost no response and that leads us to believe that the Dollar isn’t an
ultra critical impact on gold prices. We do see gold garnering ongoing flight to
quality buying as a hedge against an economic disaster in
but again we think long term bulls would be better served by a good old
fashioned stronger than expected recovery that could spark a minor bout with
inflation.
SILVER: Even though silver didn’t maintain
all the gains posted early Tuesday, it did manage another upside breakout. Near
term resistance comes in at $4.628 today. We are not sure if the silver is
correlating to the equity market but that would appear to be the case.
PLATINUM: Moving averages turn up in
platinum with a trade back above $641 and it would also seem like platinum is
tracking the
stock market. In other words, both silver and platinum are trading higher off
the hope for an improved physical demand patterns ahead. Considering that
platinum has been historically impacted by Japanese jewelry demand patterns we
are a little surprised that platinum didn’t buckle under the slide in the Nikkei
on Tuesday. The path of least resistance remains up in platinum but with the
market sitting $30 above the April lows, we are just not that inclined to chase
this market.
COPPER: We are a little surprised that the
Chinese copper market ended the overnight session mixed, considering that China
now thinks that the SARS threat is great enough to close schools for two weeks.
Aggressively responding to the disease control is the best way to contain the
disease and a rapid response by
now is a good thing for affected markets. Traders should note that LME copper
stocks fell a massive 4,800 tons overnight and are on a rather significant
downtrend.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE -6, HEAT
+28, UNGA +56 — The energy complex came
under some pressure Tuesday because Iraqi oil production officially restarted.
While the initial production total is only 10,000 barrels per day the coalition
expects to increase the production to 50,000 barrels per day within days.
NATURAL GAS
According
to some sources the natural gas market could see a squeeze causing a significant
rally and for that reason we are still very interested in a combination play
(long July futures and long 3 July puts against that position. With the trade
expecting another weekly draw of 30 to 55 bcf, we suspect that prices will
remain supported.