Futures Point To A Lower Open
9/9/2004
INTEREST RATES
While the Treasury market deserved to rally off
the balance of information Wednesday, we are not sure that prices deserve to
take out the September highs off the current fundamental setup. However, in the
near term one can’t argue against a temporary rise to the vicinity of the 112-00
basis December bonds and 112-22 in December notes. Because the trade is
apparently expecting to see a pretty significant contraction in initial claims
this morning that could initially undermine prices but then we see some support
coming in off the Chicago Fed Midwest Manufacturing Index.
STOCK INDICES
The corrective tilt looks to remain in place for
at least another session and we suspect that the overnight terrorism incident is
simply an excuse to press prices. While we are a little surprised that the stock
market is taking the Greenspan dialogue as a negative but that is apparently the
case. In the recent past the stock market would have spun the dialogue yesterday
into a positive, but in the current posture the market is looking for a reason
to bank long side profits.
DOW
With a weak downward bias in place, we suspect that the December Dow has the
capacity to trickle down to 10,250 support but we wouldn’t be surprised to see
the market manage to hold above 10,284.
S&P
Near term downside targeting in the December S&P comes in at 1114.00 and at
1112.80 in the September S&P. In order to turn off the downward tilt, the
December S&P will have to manage a rise back above 1121.20 early today.
FOREIGN EXCHANGE
US DOLLAR
The Dollar quickly slide down to critical chart
support but did manage to find support off even numbered 89.00. While the
Greenspan spin on the US interest rate outlook was disappointing to the Dollar,
we are not sure that the Fed’s view on the economy is such that the Dollar is
destined to fall all the way down to 88.00. In our opinion, to slide to the
88.00 level, the last US payroll report needed to disappoint by coming in
significantly below expectations. While the market currently seems convinced
that the Fed will not act to hike rates in the September 21st meeting, we have
to think that shorts in the Dollar will want to exit, as that meeting draws
closer. In fact, if energy prices continue to decline and the equity market
regains upside momentum, we would expect to see the Dollar firm up. In the mean
time, we doubt that the Dollar will be supported by the initial claims report
this morning, even if it shows strength in the US economy. On the other hand, a
weak Chicago Midwest Fed Manufacturing Index reading might inspire some follow
through selling. Near term downside targeting in the December Dollar comes in at
88.86 today.
EURO
While the ECB suggested overnight that the recovery
continues, they also suggested that high oil prices are holding back growth. The
ECB did suggest that growth in 2005 should be stronger but that is hardly the
type of dialogue that will serve to lift the Euro in the near term. In other
words, the way the Euro rallies is by declines in the Dollar. Therefore, we
doubt that the December Euro will be able to climb above 122.00 without
something significantly negative being seen toward the US economy. Those that
are long the Euro should take profits on a minor rise today and continue to
trade both sides of the 122.00 to 121.00 trading range.
YEN
Japanese machine orders were soft overnight and the
Nikkei was lower and that should facilitate more minor declines in the Yen.
However, the bottom of the consolidation zone in the December Yen comes in at
91.05 and we see no reason to take prices below that level.
SWISS
A pattern of lower highs in the Swiss would seem to
limit the currency in the near term. We suspect that the overnight terrorism
incident provided some lift but that buyers are simply not waiting in the wings
to push up the Swiss. Therefore, longs might consider taking profits on a minor
rise today.
BRITISH POUND
The recent rally in the Pound is more than likely an
opportunity to get short. An expanding trade deficit due to high energy prices
isn’t an exclusive problem to the UK but with the recent down grade of the UK
economy almost any factor can be considered a reason to re-sell the Pound. Near
term downside targeting is seen at 175.95.
CANADIAN DOLLAR
Now that the Canadian has absorbed the rate hike and
partially corrected its overbought technical condition, we suspect that the up
trend can re-gather momentum. However, it would not be a positive development to
see the December Canadian fall back below 77.22 in the action today.
METALS
OVERNIGHT
London Gold Fix $399.25 +$1.15 LME COPPER
STOCKS 107,800 mt tons -1,075 tons COMEX Gold stocks 4.880 ml Unchanged COMEX
Silver stocks 109.6 ml Unchanged
GOLD
While some traders might cite the bombing in Jakarta
as a reason to buy gold today, the real issue behind higher prices will be a
lower US Dollar. With the Dollar gapping down and flirting with the lowest trade
since August 23rd, we should see long interest surface and prices climb back
toward the critical pivot point of $405. We still see the gold focus on a
falling Dollar as a short term fix for the bull camp, but until the outlook for
the US economy improves a weak Dollar and periodic terrorism issues might be the
only fundamental issue capable of lifting prices.
SILVER
The chart action in silver isn’t very good, as
prices have been unable to recoil away from the recent washout level. Trend line
support comes in at $6.072 and to turn off the downward tilt in prices, the
December contract will have to manage a close above $6.28. We are still having
trouble arriving at a consistent focal point in silver and that could be why
some of the fund longs dumped positions.
PLATINUM
The platinum market has managed to recoil away from
the recent low, but would appear to have significant overhead resistance just
under the $850 level. Critical trend line support comes in down at $829.3, while
the top of the consolidation range is seen up at $875.
COPPER
The copper market is hung up in a trading range but
is seeing some residual support from labor concerns in Peru. However, we have to
think that the subdued attitude of the US Fed Chairman is a limiting factor for
copper prices. Asian copper prices gave almost no direction overnight, which
would seem to suggest a similar trade today in the US.
CRUDE COMPLEX
The energy complex continued to show weakness
Wednesday and even failed to hold a mid day attempt to rally and that shows that
the near term trend is in fact still pointing down. Even more surprising is the
fact that energy prices failed to rally in the face of very supportive
projections from the EIA. In fact, with the EIA upgrading the 2004 world demand
forecast by 590,000 barrels per day we would have expected prices to have firmed
yesterday.
NATURAL GAS
With the hurricane season kicking into high gear and
the next storm Ivan possibly carrying a more westerly track than the last two
storms, the natural gas market is seeing some short covering and some fresh
buying. However, it is still possible that the ultimate storm track will be too
far East to really drive natural gas prices up. At this point, we doubt that the
December contract will manage to return to the recent lows and aggressive buyers
might have to try to buy December on a correction to the near term pivot point
of $6.155.