Futures Point To A Lower Open
INTEREST RATES
12/24 OVERNIGHT CHANGE to 04:24 AM:BONDS+7 Apparently
a 2-year Note auction Tuesday impacted the market a little more than many
expected and with the US stock market extending the pattern of news highs, its
understandable that some longs moved to the sidelines. We didn’t see the
economic information yesterday, as strong, nor do we think that the weak Dollar
provided much selling pressure to the Treasuries, which means that the auction
did manage to dominate sentiment. However, despite the negative impact off the
stock market, there would seem to be enough ongoing economic uncertainty to
prevent bonds from seeing a full trend reversal.
STOCK INDICES
12/24 OVRNIGHT CHG to 04:24 AM:S&P-40, DOW-8,
NIKKEI -1.2, FTSE+31 The stock market has made a habit of discounting the
negatives in the month of December, with the market overcoming a disappointing
monthly payroll report early in the month. The market also clearly rejected the
fears off a revival of the terrorism issue over the most recent weekend and this
morning, it would seem that the mad cow issue is creating some early weakness.
However, the pattern of trade in stocks has been to open weak, reject the
selling and then forge a rise into mid session or into the close.
DOW
Since the Dow has already corrected 41
points from the high Tuesday, we suspect that the initial mad cow threat is at
least partially priced. Therefore, we would expect the March Dow to hold support
down at 10,280 but the market must get a sweep of supportive economic
information to relegate the mad cow issue to the back burner. If 10,280 fails to
hold, the next support level isn’t seen until 10,244.
S&P
Initial support in the March
S&P comes in at 1091.50 and then again down at 1089.90. We suspect that mad
cow issue only dominates the action into the durable goods number, but if the
market doesn’t come out of the reports with a good feeling, that could lower the
chance of a follow through on the recent Santa Claus rally. One can’t fight the
uptrend but one can demand that the market begin to reverse the early weakness
posted in the overnight action within the first hour of trade! In conclusion,
remain bullish but skeptical.
FOREIGN EXCHANGE
US DOLLAR
size=2>One could look at the mad cow issue in two ways. First of all, the
development is a negative, or potentially a negative fundamental to the Dollar.
On the other hand, since the mad cow revelation, it would not seem like the
Dollar is showing much in the way of weakness, even though it stood right on
critical contract lows on the charts! In other words, if the sellers are waiting
in the wings to attack the Dollar, they seem to need something additional to
kick off the slide. It is also possible that the US equity market action is
putting the bears off balance and it is possible that the flurry of numbers from
the US this morning, is serving to underpin the Dollar. In the end, the Dollar
hasn’t shown much of a correlation to US economic information and therefore
either thin conditions are saving the Dollar, or the Dollar trend is in the
process of changing. However, one really doesn’t have a fundamental reason to
call a low, but might have had an argument for a low if the renewed terrorism
threats hadn’t surfaced again! Traders should only be holding “risk definedâ€
long positions in the Dollar.
EURO
We are
a little surprised that the Euro hasn’t managed more of a rise, in the wake of
the mad cow development in the US. We are even more surprised that the Euro
hasn’t moved back to the recent highs considering the US news and the favorable
economic information released from France this morning. In fact, solid
improvements in French sentiment readings should have given the Euro more of a
benefit than the 16 tick overnight rise. Therefore, we suspect that resistance
of 124.04 will hold in the trade, unless the US stock market falls hard or the
US numbers are extremely weak! We do expect consolidation support of 123.14 to
hold up the Euro in the near term.
YEN
While
many would suggest that the Yen is coiling, the coiling appears to have an
upward bias. We would think that the conditions this week favor investment in
Japan, which might be considered to be in the second tier of terrorism targets
due to its Pacific Rim location. However, with the Japanese posting a decline in
supermarket sales overnight, the macro economic attraction to the yen is reduced
slightly. Furthermore, unless the Dollar manages a new low for the move, it
would seem unlikely that the Yen would manage to climb above close-in
consolidation resistance of 93.53. In the end, the Yen would seem to have more
upside potential than downside potential. Support is pegged at 92.99 today.
SWISS
The
mad cow development has served to pull the Swiss up from consolidation support
and what appeared to be a potential downside breakout. Critical support in the
March Swiss comes in at 79.48 but we expect minor gains to be posted today.
However, it is clear that the Swiss is fighting a tide in its rally attempts.
BRITISH POUND
size=2>The mad cow issue should be just enough to push the Pound back up to the
top of the recent consolidation around 176.09. Therefore, the correction last
week is mostly forgotten, with the near term bias in the Pound pointing up.
However, in order to see a new high, we would have to see a fresh contract low
in the Dollar. The trend is up, but momentum isn’t that impressive!
CANADIAN DOLLAR
size=2>It is very clear that the Canadian is in the process of turning the up
trend back and the development of the US mad cow issue certainly gives the
Canadian an added fundamental lift. It would seem that the March Canadian is
headed back to the November and December consolidation that was bound by 75.62
and 76.65.
METALS
OVERNIGHT
size=2>GLD+0.00, SLV-0.30, PLAT+9.20 London A.M. Gold fix
$410.80 +$1.20 LME COPPER STKS 437,550 tons -3,125 tons COMEX Gold stocks 3.06
ml +65,017 oz Comex Silver stocks 124.0 ml oz -994,961 oz
GOLD
It
would seem like the market is leaning toward the bull camp into the extended
market closure and that could be partly because of the increased threat of
terrorism. The market has also managed a pattern of higher lows this week,
highlighting the existence of an uptrend, even if that uptrend has recently lost
momentum. Chinese gold was slightly higher but the trade was apparently narrow
and mostly without direction.
SILVER
Gold
leadership should be enough to keep silver in the hunt for fresh contract highs,
especially since the large COMEX stock influx seen yesterday was mostly reversed
with a 994,961 ounce decline overnight. While we see the increased likelihood of
fresh contract highs, we don’t get the sense that the market has significant
upside extension capacity. We do think that silver is getting an indirect
benefit from the persistent rise in the US stock market.
PLATINUM
size=2>Apparently the correction in platinum has run its course and that is
largely a function of the stock market rising regardless of the renewed
terrorism threat. Just to get back into the old steep up trend pattern, the
April platinum would need to rise to $811. While it is possible that platinum
picks up some speculative flight to quality long interest into the extended
market closure, the platinum market hasn’t seen that type of interest
consistently since the September lows.
COPPER
size=2>Chinese copper prices were mostly higher overnight giving the US rally
Tuesday a little credibility. With the Press documenting a delay in a copper
concentrate shipments from Freeport to a Chinese company, we suspect that buying
interest was kicked up in the Asian market overnight off the shortage theme.
With the LME stocks still showing moderate daily stock declines and the US stock
market posting a pattern of new highs, it would seem that the fundamental
condition of the copper market remains positive, despite the attempted
correction early this week.
CRUDE COMPLEX
12/24 OVERNIGHT CHG to 04:24 AM:CRUDE+14, HEAT+101,
UNGAS+31 Despite the late recovery in gasoline Tuesday afternoon we are not
impressed with the general posture of the energy complex, as the economy is
still under the threat of terrorism and the temperature outlook remains mild.
Furthermore, we would expect the weekly inventory readings to provide only
limited support to prices, even though the pattern of crude stock declines and
product stock increases will probably continue in the reports today. Adding into
the slight negative tilt Tuesday, were suggestions from a private group
“Petrologistics”, that OPEC production rose to 27.7 million barrels per day in
November, which is an increase of about 60,000 barrels per day over the prior
total calculated by the group.
NATURAL GAS
size=2>A massive liquidation tilt Tuesday was partially rejected, possibly
because the trade was overdone and unable to assume that the weather will remain
patently bearish. The weekly inventory report due out today (11:00 cst) is
expected to show another triple digit draw. However, unless the market sees a
draw above 110 bcf it might be difficult to see prices manage much on the
upside.