Futures Point To A Lower Open
8/12/2004
INTEREST RATES
We suspect that the longs are getting a little
uncomfortable with the recent action, as the slide toward 110-02 was done in the
face of weak equity prices and a soft Chicago Midwest manufacturing reading. For
the week, the economic pendulum is mostly balanced as Monday’s numbers were
soft, Tuesday’s numbers were strong and Wednesday’s numbers were neutral.
Therefore, economic sentiment could swing in either direction off the retail
sales report this morning.
STOCK INDICES
Apparently prices around this week’s lows are
attractive to buyers, as the market has managed to recoil away from those levels
on a number of occasions. Surprisingly the market isn’t managing the periodic
recovery action off corporate news, which has been coming out mostly supportive.
In fact, following a couple key earnings reports, the stock market behaved
negatively despite the fact that the earnings met or exceeded expectations.
DOW
Given the setup today, we might see the September Dow manage a rise to the 9,933
to 9,989 zone. However, in order to turn the trend up, the Dow would only have
to manage a close above 9,955. On the other hand, the failure to hold above
9,900 in to the close would seem to give the bears an advantage in the action
Friday.
S&P
While the market has posted some impressive recovery action, it is also clear
that resistance around 1077.20 is pretty solid. It would seem that the bull/bear
line comes into the S&P today at 1062.50 and without a solid retail sales
reading before the opening (above +1.1%) the bulls might lose their early grip.
FOREIGN EXCHANGE
US DOLLAR
Surprisingly the Dollar is weakening into what could
be the best US economic report of the week. With retail sales expected to rise,
one might have expected the US Dollar to hold most of the gains forged from
early in the week. It is possible that the Dollar is being slightly undermined
by the flow of information from the Euro zone, but those numbers didn’t really
appear to offer anything significant. Therefore, the Dollar should be intensely
focused on retail sales and in effect needs a strong number to discourage what
seems to be a mostly negative tilt since the July highs. With the Yen seemingly
rising off comments that the BOJ will leave rates low, as long as possible and
the Dollar rising off its rate hike move, it doesn’t seem like the markets are
making an interest rate differential distinction. Therefore, pace of economic
growth is probably the main driving force but the problem is that no single
country is showing enough direction to pick a winner.
EURO
The Euro zone apparently liked the information
floated from Germany and France overnight, as the market must have been
expecting softer readings. In the end, both Germany and France eked out minimal
GDP gains for the second quarter and that was enough to give the Euro a positive
tilt. However, in a big picture sense the 2nd quarter GDP readings from the Euro
zone are significantly below those seen in the US and that would seem to leave
the Euro behind in the macro economic differential comparisons. We see near term
support in the Euro at 122.23 and a breakout taking place with a rise above
122.69.
YEN
The Yen has coiled into a tighter pattern than many
would have expected, given its strength early in the week. We suspect that a
good retail sales reading from the US will serve to boost the Yen but overhead
resistance is pretty significant and unlikely to be taken out at 90.75, unless
the US retail sales is above early expectations.
SWISS
An impressive hook up overnight in the Swiss is
given added credence by the fact that the Euro numbers were seen as mostly
supportive. Therefore, the Swiss might be set to rise to resistance of 80.00 but
if US numbers are good that should limit the upside.
BRITISH POUND
The Pound managed to reject the 182 level but given
all the commentary from the BOE, the Pound might be forced to fight heavy
resistance ahead. On a rally to 182.90 traders might consider getting short the
Pound.
CANADIAN DOLLAR
The Canadian is bordering on a downside breakout,
with a 75.36 trade more than likely a sign that prices are headed down to 74.88.
It would seem that a strong US retail sales report could foster more selling in
the Canadian.
METALS
OVERNIGHT
London Gold Fix $396.25 Unch LME COPPER
STOCKS 81,325 mt tons -425 tons COMEX Gold stocks 4.711 ml -1,933 oz COMEX
Silver stocks 111.6 ml +640,346 oz
GOLD
The gold market has managed to reject a portion of
the aggressive selling seen on Wednesday, but we are not sure that the bull camp
has enough information to continue to discourage long liquidation. With the US
stock market down aggressively yesterday and then managing to recover, the trade
seems to be unwilling to foster economic anxiety. With the US stock market
recovering yesterday that also seems to provide some indirect support to the
Dollar.
SILVER
Like gold, silver has also managed a pattern of
higher lows and higher highs since the late July low. Unfortunately exchange
stocks managed a slight rise right after that measure moved close to some
important historical low levels. We suspect that silver will get a little more
of a boost from the retail sales readings than the gold market but unless the
funds decide to move back into play it will be difficult for silver to mount an
aggressive rally.
PLATINUM
While platinum continues to hold above the critical
pivot point of $8.40, we are a little concerned about paying up for longs at
this price level. Critical resistance comes in at $851 and key support is seen
at $838.
COPPER
The copper market continues to hold near the
critical pivot point at 127.55. Chinese copper futures were slightly higher but
apparently the Press doesn’t see the usual bullish sentiment in that
marketplace. Apparently the copper market has been driven higher this week by
the expectation for Chinese demand and with the slackening Chinese outlook this
morning that could make resistance a little more formidable.
CRUDE COMPLEX
While the energy complex acted sluggish for most
of the session Wednesday, it eventually managed to close firm and is showing
strength in the early action today. However, the reaction to the patently
supportive weekly inventory report was nothing short of disappointing for the
bull camp. In our opinion, the lack of a concentrated reaction to the weekly
inventory readings is a sign that the market is in fact becoming extensively
overbought.
NATURAL GAS
Even with the regular energy complex clawing its way
higher and a series of hurricane threats on the radar screen, we are surprised
that the natural gas market finished so close to the consolidation lows. We
suspect that the injection report today could provide an additional pressure to
prices in the near term, as the much lower than expected cooling demand pattern
and the slower economy should be resulting in less of a draw on storage levels.
We still think that October natural gas prices are destined for a move back to
the lower $5.50 range.