Futures Point To A Lower Open
INTEREST RATES
Some of the risk to the long camp has been
reduced by the corrective slide off the recent high. In fact, the December bonds
look to come into the report this morning a full point off the recent highs. At
times yesterday the bonds were as much as 1 1/2 points off the recent highs.
STOCK INDICES
The stock market seems to have a strong opinion
on the coming payroll report, or thin volume has simply allowed the market to
climb to a level that normal activity would never have allowed. With Tokyo
stocks sharply lower overnight, sentiment could be set to start the session in
the most negative posture in over a month. Apparently Japanese auto makers are
beginning to show negative results because of US slowing and that also seems to
downgrade the macro economic outlook.
DOW
Traders should look to buy a September Dow 10,200 put ahead of the report this
morning, as we think that stock prices have rallied too far without cause and in
general the market has set an extremely high bar for the report this morning.
Without a good number, the Dow quickly falls back below 10,200.
S&P
Like the Dow, the S&P has pumped up prices in a way that would seem to take
a good payroll report for granted. We strongly suggest that longs secure some
September put coverage, while those looking for a fresh position should consider
buying the S&P 1115 puts for a day trade.
FOREIGN EXCHANGE
US DOLLAR
For the Dollar to hold recent support it might only
take an as expected report from US payrolls. Cushioning the Dollar against a
downside slide are concerns for the Euro zone economy and signs of weakness in
the Japanese economy. However, from a big picture sense, it would seem that the
Dollar remains mired in a downtrend pattern from the May high. As suggested
before, the currency markets seem to have a slightly lower bar than the Treasury
market for the jobs report and that could reduce the chance that the Dollar is
set to be driven sharply lower. As usual, the US economy will be held to a
higher standard as a disappointing jobs report could still bring about a 100,000
gain in non farm payrolls and that compares to an actual jobless increase in
excess of 20,000 in Germany earlier this week. We still think that the 89
September Dollar Index puts and calls are the way to play the report this
morning, but pushed into the market, we might be inclined to buy the Dollar
Index puts.
EURO
Shifting to the December Euro contract for new
positions, we expect to see a critical pivot point at 122.12 and 121.36 on the
downside. Once again the Euro is simply a reactionary currency and can only
rally aggressively if the US stumbles this morning. Like the Dollar, the Sept
Euro, at the money options offer a unique way to position ahead of the report.
If the Euro does rally off a disappointing US reading, we suspect the rally will
run out of steam early next week unless the payroll gain is really dismal.
YEN
While the Japanese Yen is showing signs of pulsing
up ahead of the critical payroll report it, should be noted that the Nikkei was
very weak overnight and that market is concerned that US demand for Japanese
products is tailing off. Therefore, the Yen might initially rally off a weak US
number but in the big picture, a rally today probably sets the yen up for
failure very soon. A rise above 92.23 is a breakout, with the top of the trend
coming in up at 92.65.
SWISS
While the Swiss has come a long way off the recent
lows, it does have significant overhead resistance. On the other hand, the Swiss
doesn’t have the negative baggage that the Euro has off recent employment
stats. The only thing that results in a defined trend in the Swiss, is for the
US payrolls to meet expectations and then the Swiss drives lower. The odds are
high that the Swiss continues to track without a trend.
BRITISH POUND
The Pound has fallen consistently into the US
payroll report but most of those losses came from internal slowing in the US and
are not a buildup to the US numbers. However, if the Dollar falters off the
report, the Pound is the most oversold currency technically.
CANADIAN DOLLAR
If the Pound is the most oversold currency, the
Canadian might be considered the most overbought currency into the US payroll
report today. Take profits on long Canadian positions, or consider buying an
at-the-money put option that expires on the close today.
METALS
OVERNIGHT
London Gold Fix $405.80 -$2.00 LME COPPER
STOCKS 110,375 mt tons -800 tons COMEX Gold stocks 4.880 ml Unchanged COMEX
Silver stocks 109.6 ml -1,031 oz
GOLD
While the Press continues to suggest that gold
players are waiting on a speech reaction and are poised for a reaction to the
monthly payroll report, the impact on gold is an indirect relationship. It would
seem that as a result of the lackluster to weak action of the last 24 hours, the
gold market is peaking out below near term support on the charts. We continue to
think that gold is holding a rather burdensome small spec and fund long position
and that the afternoon COT report could highlight that overdone position and
potentially scare away some would be buyers.
SILVER
Critical trend line support in silver comes in at
$6.65 today but with volume and open interest tailing off, it would seem like
bull interest is declining slightly. Over the past several months, the silver
market seemed to have been carried upward by the funds and that is why the
moving average of $6.61 might be considered a critical pivot point. We do
suspect that silver will be less impacted by the economic reports today, but in
the event that gold does make a big move, that will certainly influence silver
indirectly.
PLATINUM
Negative chart action in platinum puts the market in
a vulnerable position and with near term support coming in all the way down at
$859, longs are probably a little concerned. We also have to think that platinum
is a little more susceptible to weak macro economic numbers than either gold and
silver and that platinum needs a decent payroll reading to hold above trend line
support of $853.
COPPER
December copper comes into the session just above a
critical channel support line of 123.50. Overnight Shanghai copper stocks posted
a moderate increase of 4,300 tons, with the total currently standing at 25,712
tons. While copper has mostly ignored the macro economic slowing evidence of the
last two months, it is clear that prices have been deflated because of concerns
that demand is set to slacken.
CRUDE COMPLEX
After a significant pulse up this week it would
seem that the energy complex is poised to carve out a slightly higher trading
range. With the Yukos situation apparently back in play and an Iraqi pipeline
explosion in Northern Iraq, it would seem that a host of old bull items are back
in play. However, unless the Yukos situation looks to shut down supply flow, we
doubt that prices are going to extend the recent upside motion.
NATURAL GAS
Since the natural market eventually managed to
recoil from the fresh lows, it would seem that the regular energy complex is
providing some spillover support. The weekly inventory report showed an as
expected injection of 81 bcf and that didn’t seem to influence prices
significantly. It would not seem like hurricane Frances is going to influence
prices today but with the frequency of storms expected to remain high, it might
become difficult for the shorts to rationalize their positions.