Futures Point To A Higher Open

• March 21, 2003
• Brice Wightman

INTEREST RATES

OVERNIGHT
CHANGE to 4:15
AM:
BONDS
+2 — While the Treasury market has periodically showed some buying interest off
the idea that the war might go slower than expected, this morning that sentiment
has been reversed. In other words, the bonds have to be concerned that the war
might come to a quick end. Seeing the war end would certainly remove a
significant amount of geopolitical headwinds and increase the odds of economic
recovery.

STOCK INDICES

OVERNIGHT
CHANGE to

4:15 AM:
S&P
+520, DOW +48,
NIKKEI CLOSED, FTSE +79 – With
the early rumor mill focusing on the theory that the Iraqi army is not being
directed by its leadership, the trade appears to be factoring a quick end to the
war. In other words, the market is acting on the theory that Saddam was injured
or killed in the initial attack. Apparently,

US
intelligence is not picking up much in the way of directive communications from


Baghdad
and perhaps an even more telling sign, is that Iraqi troop movements show almost
no organized motivation.

FOREIGN EXCHANGE

DOLLAR: The progress of the war is providing the Dollar with buying
interest but so far the justification of the war hasn’t been a major issue. The
fact that Iraq fired even longer range scud missiles into Kuwait overnight shows
that they in fact were hiding illegal weapons but for the big Dollar boost the
possession of chemical or biological weapons must be proved. Fortunately for
Dollar bulls, the war has taken the focus away from US economic reports, which
have been extremely soft. However, the trade seems to think that all economic
reports are old news if the war ends and consumer sentiment improves
dramatically. In our opinion for the Dollar to rise above the last two months
consolidation, we might need to see a strong chance that the war will end over
the weekend. To rise to an even higher trading range and end to the war and
proof of illegal weapons might be necessary. In other words, for the Dollar to
transition into an uptrend pattern the

US
has to fully satisfy the pundits with respect to the Iraqi weapons threat!

EURO: Keep in mind, just how much flight to
quality pricing was factored into the Euro over the last three months. A number
of markets like crude oil, bonds and gold are
returning to December and January consolidation levels and that time and price
zone was the kick off for final wave of flight to quality buying. In other
words, to extract a moderate portion of flight to quality value, the June euro
might have to slide all the way down to 103.03.

YEN: It is painfully clear that the Yen is
extracting its flight to quality windfall of the last two months. One should
also note that the BOJ wants the Yen to fall in order to protect export markets.
Near term support in the Yen is seen at 82.47.

SWISS: The next downside targeting in the
Swiss is seen at 71.27, which is the January low. Unless the war takes an
unexpected turn, the Swiss looks to continue to slide in the coming sessions.

POUND: So far, the Pound hasn’t seen the
vindication that the Dollar has. We would suspect that the Pound will respect
recent consolidation lows of 155.10 and could manage a rise back into the late
February consolidation in the event that the war is expected to come to an end
over the weekend. Therefore we expect a bounce in the Pound to 156.36.

CANADIAN: So far the Canadian has managed to
hold chart support and consolidate, which is a good sign that the Canadian rally
wasn’t only about flight to quality. In our opinion, seeing the Canadian close
above 66.97 confirms that the bull trend will remain intact.

METALS

OVERNIGHT CHANGE to 4:15 AM:
GLD -0.20, SLV
+1.0, PLAT +6.60,
CP +25; London Gold Fix $332.55,
-$2.95; LME Copper Warehouse

stks
827,425 ton, -600 tns;
Comex Gold stocks 2.335 ml, Unchanged;
COMEX Silver stks
109.1 ml oz, +425,641 oz; OVERNIGHT: Gold managed to
rise in Pacific Rim action but only on short covering.

GOLD: With June gold almost ready to
breakout to the downside again it would seem that the war is just not going to
reverse negative sentiment. It would also seem like the platinum and silver are
getting more long interest off the war than is gold. Failing to hold the
overnight low of 332.7 would be pretty damaging especially considering it is the
end of the week and potentially the end of the war.

SILVER: While May silver might have rejected
the trade below $4.40, the pattern of lower lows looks to prevail. However, we
see no reason for May silver to fall all the way down to the October 10th low of
$4.32, unless the world economy somehow flips into back a deflationary spiral.
In the mean time, silver might have to forge an extended consolidation pattern
just to discourage the bear camp.

PLATINUM: The platinum market appears to be
getting some week ending profit taking but we would suspect that platinum would
be the first metals market to begin to stabilize, off the idea of better
economic conditions following the war. In fact, if the trade thinks the war
might come to a conclusion over the weekend that could mean that platinum
anticipates a bottom. Fresh longs in April platinum might have to risk positions
to least $647. Trend line support in April platinum comes in at $651.  

COPPER: The May copper would seem to have
consolidation support at 76.30 today. However, Chinese copper prices were weak
and

Shanghai
copper stocks were down only 2,946 tons to 80,886 tons. In other words, the
Asian copper market didn’t give the

US
market much incentive to rally today.

CRUDE COMPLEX

OVERNIGHT
CHG to 4:15
AM:
CRUDE -42,
HEAT -84, UNGA -179 – The energy
complex found only fleeting support around the lows Thursday, which could mean
additional losses today. We also have to think that the technical oversold
condition of the market is fairly overdone, especially given the magnitude of
the losses seen in such a short period of time.

NATURAL GAS

Some
might suggest that the coiling pattern in the natural gas market is positive
because natural gas is holding together in the face of significant declines in
the regular energy complex. However, because the weekly inventory report showed
a bigger draw than expected the natural gas attempted to rally along with the
crude oil when it became clear that

Iraq
was torching its oil wells.