Futures Point To A Lower Open
3/16/2005
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INTEREST RATES
The action yesterday has to be disappointing for
the bull camp in Treasuries, as the market showed fleeting signs of strength,
seemed to get a supportive reading from retail sales and more importantly had
recent shorts on the ropes. While it isn t clear if the anticipated OPEC action
will result in consistently lower energy prices, (which in turn take the
pressure off the economy) it is clear that the anthrax scare from Tuesday was a
false alarm. While a 50 cent decline in crude oil prices from $56.00, isn t
exactly cause to celebrate, there is certainly less psychological support for
Treasuries when energy prices are off the front page.
STOCK INDICES
While the stock market seemed to dodge a number
of potentially damaging issues yesterday like anthrax, rising Treasury yields
and disappointing retail sales figures, the market is seeing the benefit of
slightly lower energy prices in the early going today. It should also be noted
that the anthrax scare was removed overnight by news that later tests ended the
scare. While the stock market might be poised for a bottoming, we are not
convinced that the scare from high oil prices and a slack economy is past!
However, while Disney stock tried to carry the market yesterday, it is clear
that the market lacks a bull theme from which buyers can garner consistent
support.
DOW
The pattern of lower lows seem to point to lower prices ahead, but we would not
be surprised to see the June Dow attempt to bounce in the wake of the OPEC news.
However, the US economic report slate isn t exactly set to support the bull camp
in the early going today and we can t help but note that energy prices have
recently failed to slide on patently bearish weekly supply data. In other words,
the bears seem to have a better case than the bulls but neither camp has a
dominating story! Near term trend line support in the June Dow comes in at
10,775 and resistance is seen up at 10,813 today.
S&P
While some might suggest that the June S&P has a double bottom going at 1218.00,
the S&P usually doesn t bottom impressively from a consolidation pattern. In
fact, it is out opinion that the strongest bottoms come off a spike down
reversal. Unless the regularly scheduled US economic information crosses up the
analysts, with much better than expected readings, we suspect that a bottom in
the June S&P will come in between 1205 and 1190. We see a solid value zone down
around 1196.60 but traders should be patient in buying breaks this morning.
FOREIGN EXCHANGE
US DOLLAR
The Dollar has surrendered recent strength overnight
despite the potential for lower oil prices. In other words, the Dollar doesn t
appear to be benefited by a reversal in one of the risks that seemed to drive
the Dollar down in early March. We would have expected the Dollar to garner some
support from weak European economic numbers overnight but apparently the market
is already looking forward to potentially weak US economic readings. In fact, it
is possible that weak housing starts data fosters a “housing Bubble” dialogue,
which turns up the selling pressure on the Dollar. If the housing starts report
isn t enough pressure for the Dollar, it would seem like another rise in the US
current account deficit reading will add in its pressure to the equation.
Therefore, the Dollar looks set to fall back to the bottom of the recent
consolidation zone that is located down around 81.32. In the short term, we don
t see a specific trend and it could be that the recent rally was almost
exclusively technical in nature and that the Dollar is indeed headed back down
to the December lows around 80.64.
EURO
The Euro has already flashed away from the overnight
low and now looks to have a double bottom down at 133.25. In fact, the overnight
employment news from the Euro zone was easily weak enough to undermine the Euro
but the trade is simply not paying any attention to the macro economic
differential or the interest rate differential between the Euro zone and the US.
In fact, some of the employment data from the Euro zone is historically soft but
giving the broad based diversification focus, the numbers are simply irrelevant.
Therefore, we suspect that the June Euro is poised for a return to the recent
highs of 135.10.
YEN
As we suggested early this week, the Yen is poised
for a return to the recent highs up at 97.25. In fact, with oil prices softer,
the threats against the US economy slightly reduced and renewed optimism toward
the Chinese economy, the Japanese economy and the Yen look to be in a solid
position. Therefore, the path of least resistance is up in the Yen over the
coming sessions. The top of the trend channel in the June Yen comes in at 97.31
today.
SWISS
While the flight to quality issue is missing, the
Swiss is at least poised for a rise to 87.56 and a round of weaker than expected
US economic information could give the Swiss an eventual upside breakout
potential in the coming three sessions.
BRITISH POUND
Despite the pattern of lower highs in the Pound, it
would seem that the currency is poised for a rise back above 191.98 but one
should expect the market to have more significant resistance up at the 192.27
level.
CANADIAN DOLLAR
A pattern of higher lows would seem to put the
Canadian in an uptrend pattern. However, in order to effectively post a
breakout, the market will have to show it can rise above the recent spike high
of 83.57 and that could be difficult in the short term.
METALS
OVERNIGHT
London Gold Fix $441.20 +$0.65 LME COPPER
STOCKS 49,450 metric tons -125 tons COMEX Gold stocks 5.916 ml oz +2,812 oz
COMEX SILVER stocks 101.6 ml +204,683 oz
GOLD
With the Dollar lower in the early going, equity
prices a little higher and the market focused on the US current account balance
report, it would seem like the bull camp has a slight edge. While the current
account deficit is expected to soar again today, we are not sure that the
current account carries as much impact as the trade deficit report. Nonetheless
we suspect that the current account report will support gold prices.
SILVER
The silver market seems to have rejected the
aggressive weakness on Tuesday and the temporary washout probably went a long
way in balancing the somewhat overbought technical condition of silver. We
suspect that silver derives more benefits from slightly lower energy prices than
the gold market and that might make close-in support of $7.39 a little more
solid today. However, the silver market will need positive leadership from gold
in order to manage a climb back above $7.50.
PLATINUM
The Platinum market certainly appeared to make some
noise yesterday and probably managed that pulse up off a private forecast that
implicitly favored platinum over palladium. We can t argue against upside action
in platinum, but we do think that risk and reward of fresh long plays above $875
are very unattractive. In our opinion, platinum really needs an improved
economic outlook to justify even more gains from already high historical price
levels.
COPPER
The copper market would seem to be poised to
breakout to the upside but in order to accomplish that, we suspect that the US
economic information flow today will have to be supportive (most specifically
the Industrial Production report). With other base metals like zinc providing
consistent bullish headline support for copper, it would seem that the old China
magic continues to fan the bull flames. Despite the fact that the net spec and
fund long position remains overdone, the market is not bought out and incapable
of forging more contract highs.
CRUDE COMPLEX
The energy complex managed a temporary probe
above the $56.00 level in May crude oil yesterday despite the fact that Kuwait
and Saudi Arabia were both calling for OPEC to raise the production ceiling by
500,000 barrels per day. In fact, the energy complex not only managed to
discount the potential for a higher near term production ceiling, but it also
managed to discount a potential additional ceiling increase into the April 10th
OPEC meeting. However, sources inside OPEC did suggest that they would meet to
consider the supply situation before making the proposed April 10th decision.
NATURAL GAS
We continue to think that Natural gas is vulnerable
to a correction but only if the weather normalizes and OPEC actually follows
through with the proposed expansion in the production ceiling. However, in the
event that crude prices manage to get through the morning session, without
serious pressure, it is possible that natural gas will be able to respect near
term pivot point support of $717. However, it should be noted that May natural
gas rallied from a $6.05 low in late February, to a recent high of $7.35 and
more than likely now holds an even larger all time record small spec and fund
long position! However, in order to break natural gas down, the crude oil will
have to lead, because the relative BTU price comparison between crude and
natural gas will support natural gas in the event that crude oil prices are
stabile.