Futures Point To A Mixed Open

INTEREST RATES

01/21 OVERNIGHT CHANGE to 04:21 AM:BONDS+6 The
Treasury market seems to be getting a slightly positive tilt from the State of
the Union Address and the New York State Budget offering. In other words, the
Treasury market sees the recent political developments as fiscally responsible
and that serves to check fears of soaring Treasury supply. The trade also
expects economic information due out today to show some minor weakness and that
is also providing an underpin to prices.

STOCK INDICES

01/21 OVRNIGHT CHG to 04:21 AM:S&P-50, DOW-4,
NIKKEI -100, FTSE-4 We are concerned that the stock market is about to run low
on fresh buying interest. While the State of the Union address gave off some
semblance of fiscal responsibility (and the market seems to be benefited as a
result of that dialogue) the speech seemed to question whether or not past
stimulative measures would be left in place. Furthermore, it was clear that the
President was preparing to do political battle in the upcoming election and that
could scare some investors to the sidelines.

DOW

The Dow has already shown a slight correction from the highs posted Tuesday and
that could be a sign that prices are set to correct. We doubt that the market
will see intense selling but light profit taking is to be expected until the
point where the bull camp can unearth a fresh catalyst. Critical support in the
March Dow comes in at 10,490. Buying support in the March Dow comes in down at
10,443.

S&P

A correction back to trend line support of 1127.90 would not be surprising. In
fact, a correction down to 1123 wouldn’t be surprising but even that type of
break wouldn’t rupture the up trend pattern in place since the end of December.
Furthermore, we really don’t see a specific issue that is poised to drive prices
down aggressively. In fact, if the market manages to rise above 1139.00 this
morning, that could discourage profit taking and leave the market in the
existing bullish posture.

FOREIGN EXCHANGE

US DOLLAR

Overnight commentary seems to leave the Dollar in a
downward motion, as another ECB official suggested that the ECB wasn’t prepared
to sell Euros. While the US State of the Union Address seemed to promote fiscal
responsibility, it would not seem like the President brought anything to the
table that would alter the near term direction of the Dollar. With US economic
numbers today expected to be soft, the Dollar looks to remain in a minor slide.
The next critical pivot point support in the March Dollar comes in down at 86.32
and then again down at 86.13. Since US election dialogue looks to kick into
action, we suspect that a loud chorus of concerns will be lodged against the US
economy and that could foster even more selling of the Dollar. In fact, foreign
investors look to be bombarded by negative views on the economy from Democrats
that are looking to foster an environment of change. Overnight the headlines are
trumpeting how many jobs have been lost during the current administration and
that is exactly the kind of talk that will inspire foreign sellers of the
Dollar.

EURO

With a European official suggesting that the ECB
will refrain from cutting rates, or selling Euros, it is clear that more buying
will surface in the Euro. However, until the March Euro manages to rise above
the critical pivot point of 126.40, we are not ready to suggest that the bull
trend is back on. In fact, a decline back below 125.50 could still be pretty
negative to a market that was seriously undermined in the January break. In
fact, with Euro zone CPI coming in below expectations, it isn’t entirely ruled
out, that the Euro zone might be forced to cut rates, just to keep deflation and
the rising Euro from slowing the recovery progress. In other words, regardless
of what the ECB said this morning they might be forced to act down the road.

YEN

A decent break in the Nikkei this morning seems to
undermine the Yen, which has surprisingly managed to hold below 94.00 despite
overt Dollar weakness. However, the Press is wondering if the rate cut is going
to inspire an influx of foreign buying of Japanese stocks, which in the end will
serve to lift the Yen. We have to think that the impetus is toward higher yen
action, with resistance seen at 94.00 and then again up at 94.14.

SWISS

Next upside targeting in the Swiss comes in up at
80.69 and then again at 81.00. While the short term trend in the Swiss appears
to be up, it is not entirely clear that the Swiss is poised for a massive run.
In order for the up trend to resume, we think the March Dollar will have to
close below 86.32.

BRITISH POUND

The Pound up trend is set to resume, as the Pound
provides the most direct leadership against the Dollar. In fact, we expect to
see the Pound at new highs late this week or early next week. The only drawback
to the bull tilt, is the BOE minutes, which point out some structural weaknesses
in the UK economy. In any regard, the trend is up in the Pound and little looks
to discourage persistent buying.

CANADIAN DOLLAR

As we suspected, the Canadian isn’t making straight
away gains against the US Dollar weakness. While we think that the Canadian will
make some near term gains, we are doubtful that the bull trend will return in
earnest. Therefore, aggressive traders might consider getting short the March
Canadian at 77.70 using a stop up at 78.18.

METALS

OVERNIGHT

GLD-1.10, SLV+1.70, PLAT+3.80 London A.M.
Gold fix $411.25 +$2.95 LME COPPER STOCKS 392,125 tons -2,050 tons COMEX Gold
stocks 3.37 ml Unchanged Comex Silver stocks 125.3 ml Unchanged

GOLD

The gold market was able to consolidate the Tuesday
gains overnight in Asia and that serves to solidify sentiment. Overnight Barrick
Gold reiterated their desire to continue cutting their hedge book and confirmed
that they reduced their hedge book by 600,000 ounces in the 4th quarter 2003,
which is bullish. Countering the slightly bullish Barrick news were suggestions
from the Bundesbank that the central bank would seek to sell 600 metric tons of
gold in any new Central Bank sales pact.

SILVER

Since the silver market didn’t bounce with the gold
Tuesday, the bull camp must be questioning its desire to jump back into silver.
In fact, it might take a rise back above $643 to reverse what appears to be a
negative chart setup. Since the silver market has recently been driven by the
small spec and fund camps, it will have to get its fresh buying from those
sectors.

PLATINUM

If the Chinese buying potential has been fueling the
market, then the upcoming Chinese New Year holiday should rob the market of
broad based buying interest. However, given the overnight action it would seem
that the Platinum market has the capacity to remain strong, regardless of the
holiday. Unless there is a macro economic sentiment collapse, platinum looks
poised to make fresh contract highs.

COPPER

The lack of a direct labor threat didn’t even cause
a ripple against the bull trend in copper. In fact, the copper market looks to
remain strong despite an extended Chinese trading holiday. With a number of
Asian firms moving to cut back copper production, due to concentrate shortages
from the Grasberg troubles, it is clear that many buyers are scrambling to
secure supplies from any source.

CRUDE COMPLEX

Ongoing cold weather and an explosion at an
Algerian liquid natural gas facility early Tuesday morning, sparked prices
sharply higher across the complex. Not only did the blast spark a rise in
natural gas prices, but it also fueled speculative buying into the regular
energy complex, as the market is reminded how any supply disruption could throw
the world into an ultra tight condition. The market also saw some spec buying
off the explosion because some traders thought the explosion was terrorist
related (so far that hasn’t been seen as the cause of the blast).

NATURAL GAS

The natural gas market put in some disappointing
action Tuesday, despite the leadership of the regular energy complex. The
weather should continue to be supportive to prices but the further into the
future one looks the less supportive the outlook becomes. Since the natural gas
market didn’t manage to rise sharply off the massive natural gas facility
explosion in Algeria (late Monday early Tuesday morning), then the market is a
little closer to balance than we expected it to be.