Futures Point To A Mixed Open
INTEREST RATES
01/22 OVERNIGHT CHANGE to 04:21 AM:BONDS+7 The
Treasury market continues to coil, but generally maintains a positive bias. Even
in the face of a positive housing starts report (that was expected to show a
moderate decline) Treasury prices maintained a light upward tilt. Certainly, the
Central Bank issue is operating in the background and more than likely is
providing a steady flow of buying.
STOCK INDICES
01/22 OVRNIGHT CHG to 04:21 AM:S&P-90, DOW-1,
NIKKEI -1, FTSE-4 The stock market just won’t be discouraged, but one has to
admit it is getting helpful information at very critical junctions. In fact,
every time the market gets into a corrective posture, something positive
surfaces and pulls in a wave of investors. With a number of companies posting
positive earnings and Microsoft set to release today, one can’t argue against
more gains.
DOW
With the market sitting within striking distance of more new highs this morning
and Microsoft expected to release earnings today, we suspect that the bull camp
will have the information to climb into new high ground. Early numbers look to
be uneventful, which should leave the bull tilt in place. Near term resistance
comes in at 10,680 and close-in support is pegged at 10,575. Trend line support
is seen at 10,516 but the uptrend channel looks to be flattening out a little,
with the top of the channel coming in today only minimally above the market at
10,614.
S&P
The big upward thrust yesterday caught some traders leaning on the short side.
We suspect that Microsoft will give the market the impetus to forge more new
highs today and if the early numbers would happen to come in slightly better
than expected, maybe the market can duplicate the impressive and surprising
rally seen on Wednesday. The problem is that the S&P sees little close-in
support on the charts and needs to go high enough, that the Wednesday high of
1148.50 becomes support! Otherwise, the market might be vulnerable to a
correction Friday.
FOREIGN EXCHANGE
US DOLLAR
The market clearly doesn’t heed the talk from the US
that a strong Dollar is in the best interest of the US economy, as the Dollar is
sharply lower this morning and primed for a return to the January lows. With
Kodak expected to cut 21% of its job force, the political campaign issue of
jobs, will be carried in a number of headlines. Therefore, it would seem that
the Dollar is set to slide consistently and doesn’t look to get much help from
the fundamental outlook on the economy. It is a neat trick that the US attempts
to talk up the Dollar but at the same time might be fostering its weakness
behind the scenes. We think that Dollar is falling off natural causes and that
the Chinese will eventually be forced to alter their exchange rate because of
market forces. In the meantime, the only thing capable of turning the Dollar
back up, would be ultra strong US growth (of which there is no proof) or a
distinct move by the US Government. Just think how weak the Dollar would be if
the BOJ weren’t periodically buying Dollars! Next downside target in the Dollar
comes in at 85.54.
EURO
ECB officials continue to reiterate that they are
not going to step in against the Euro and that simply gives the bull camp the
green light. The officials are concerned about the excessive exchange rate
moves, but they are simply not willing to step in and threaten any action. Near
term upside targeting in the Euro comes in at 127.75 and critical support is
expected to hold at 126.53.
YEN
We have to think that the Japanese are already
trying to circle the wagons for the upcoming G7 meeting, as they are desperately
seeking some help in keeping the Yen from rising to even higher levels. However,
with the meeting a couple weeks off, we have to think that the Yen will attempt
to breakout above the recent consolidation highs. Therefore, the bias is bullish
but one has to expect the Yen to fluctuate wildly between 93.60 and 94.15.
SWISS
More gains are ahead, with the Swiss not seeing
resistance until the 82.00 level. However, if the Swiss is really strong it
should not fall back below 80.26.
BRITISH POUND
The UK posted some very strong 4th quarter
manufacturing service sector readings overnight and that should simply give the
bull camp even more reason to thrust the Pound toward new high ground. The Pound
looks to have the strongest up trend pattern, with the least amount of
corrective potential.
CANADIAN DOLLAR
Sharply higher inflation readings seem to be
discounted as a one time event, but that certainly gives the Canadian a better
chance of holding above the recent downside breakout. With the recent rate
action and hot inflation readings, we would think that some speculators find
near term favor with the Canadian Dollar. In fact, it is possible that the
Canadian is saved from a washout, because of the numbers this morning.
METALS
OVERNIGHT
GLD+0.30, SLV+4.70, PLAT+2.40 London A.M.
Gold fix $412.00 +$.75 LME COPPER STOCKS 389,400 tons -2,725 tons COMEX Gold
stocks 3.42 ml +50,101 oz Comex Silver stocks 125.3 ml +968 oz
GOLD
The gold market is showing very little reaction to
the sharp follow through loss in the Dollar overnight and that has to be
discouraging to the bull camp. Maybe the Central Bank sales talk has dampened
long interest or maybe the market will respond positively as the US session
progresses. Seeing the April contract rise above $414.8 would give the market a
little positive momentum but seeing the Dollar fall below 85.54 would be a
really supportive development.
SILVER
While silver did manage to reject the early weakness
Wednesday, it still hasn’t shown much in the way of fresh long interest. Like
gold, it would seem like the recent correction took the speculative fervor away
from the market. Certainly the massive correction chased some fund longs out and
that could leave the market vulnerable to future stop loss selling binges.
PLATINUM
As we expected, the platinum market handily rejected
the correction early this week and has managed to return to within striking
distance of the old highs. Speculative interest continues to be driven by
jewelry demand and therefore we would expect more new highs, with the next pulse
up putting the April contract to a high of $876.
COPPER
The copper will begin a series of sessions where it
will lack the benefit of the Chinese trade. However, the market still managed to
post some positive direction in the early action, leaving the recent up trend in
control of sentiment and pointing prices higher. After the US housing numbers
showed positive progression and that stock market managed new highs on the year,
it would seem like the macro economic case remains supportive.
CRUDE COMPLEX
We are surprised that the energy complex remained
weak Wednesday, as the Saudi Oil Minister suggested that it would be a miracle
for crude prices to fall to $25 a barrel. While some might suggest that such a
statement is paramount to excessive bullishness, there is a large measure of
bullish significance attached to the comment. We think that the Minister is
clearly pointing out that supply it tight enough that ongoing speculative
interest is going to keep prices firm but that fundamentally there is a rational
reason for prices to remain high.
NATURAL GAS
Analysts expect the weekly natural gas inventory
report to show another big draw of 150 to 250 bcf. From the size of some draw
expectations, it is clear that some of the recent cold weather is expected to
impact supplies in this report. It would seem that cold weather is extending and
that is providing support under prices.