Futures Point To A Mixed Open
INTEREST RATES
12/30 OVERNIGHT CHANGE to 04:30 AM:BONDS-10
Apparently the market is going to breakout to the downside, as overnight it fell
to critical support of 109-17 and the trade is picking up indications that the
retailing season was the best in 4 years. In other words, the Treasury market is
in fact finding enough bearish fundamental information to send prices into
something more than a simple low volume technical slide. We also have to think
that the very surprising and persistent rise in the US stock market has been
wearing down the bull camp over the last two weeks.
STOCK INDICES
12/30 OVRNIGHT CHG to 04:30 AM:S&P-150, DOW-13,
NIKKEI +117, FTSE+10 There would seem to be little holding back the market from
driving higher right into the end of the year. In fact, we have to think that
mutual fund managers, which are afraid to miss out on the final pulse up in
prices, are fostering some of the recent buying. In other words, window dressing
might be the primary force impacting daily prices.
DOW
The Dow comes into another session right on new highs and apparently poised for
even more gains. Furthermore, the last COT report reading showed the small spec
and fund position to be net short (as of early last week). Next resistance in
the Dow comes in off the 2002 highs of 10,673. Support is seen down at 10,375.
S&P
The COT report showed the small spec long position in the S&P to be 66,758
contracts and that certainly leaves the market with additional buying capacity.
In fact, with the funds showing a moderately large short, it is clear that some
fund managers were hedging their gains on the year and might now be in the
process of buying back those positions. In short, the market seems to have
fundamental and technical capacity to add to the gains. Near term upside
objectives in the S&P come in off the weekly charts up at 1109.10 and then again
up at 1123. Critical support is seen down at 1106.00.
FOREIGN EXCHANGE
US DOLLAR
While the Dollar continues to project even lower
prices it would seem like the Dollar is falling against the fundamental
information flow. For instance, the US stock market is on fire and US holiday
sales readings have now come in as the strongest sales period in four years.
However, the market seems to be fixated on the bear case in the Dollar and won’t
abandon the trend without cause. We have not seen any additional information
from the ECB on the intervention front and it would seem like the mad cow issue
will keep US beef exports shut down well into the month of January therefore
there are many issues that seem to keep the Dollar in a down trend pattern. Near
term targeting in the March Dollar comes in down at 87.20 and it might take a
close back above 88.15 to alter sentiment in the near term.
EURO
A favorable economic forecast from a German entity
would seem to suggest that the soaring Euro will not derail the recovery in
2004. In fact, the German economic forecast suggests that the Chinese economy
will contribute aggressively to world growth rates. Therefore one might assume
that the threat of intervention against the Euro rise is temporarily reduced and
that should allow the Euro to rise even further. The trade did note that Euro
zone M3 growth continues to hold above target levels and that might leave the
Euro zone in position for a rate hike, ahead of higher rates in the US and that
is another fundamental element that supports the Euro. Next resistance is seen
at 124.94.
YEN
With the market recently getting a reading on how
much the MOF in Japan spent in December on intervention, it is clear that the
bank is working very hard to restrain the rise in the Yen. In fact, in December
the MOF sold 2.25 trillion Yen. Therefore, the bias remains up as the market
should eventually win out, with an upside breakout. However, as we suggested
yesterday, one might be well advised to utilize a strategy that could capitalize
off a temporary slide back to consolidation support of 92.62. Sell a June Yen
and buy 3 June yen 96.50 calls.
SWISS
While the Swiss is seeing less flight to quality
interest, we have to think that the entrenched up trend in the Euro will keep
the Swiss positively poised. However, risk and reward seem to have become
slightly less attractive over the last 5 sessions. In the end, the trend is
still up in the Swiss.
BRITISH POUND
Slightly disappointing UK December confidence
readings would seem to detract from the bull case but the trend remains up.
However, it could take some slightly disappointing US numbers or a correction in
the US stock market to spark another pulse up in the Pound. Near term support
should be solid at 175.97.
CANADIAN DOLLAR
The chart set up in the Canadian remains slightly
negative but the rally up off the December lows has to threaten would be shorts.
We are concerned that the market is preparing to slide back to support of 75.70.
We are also not sure if the mad cow issue is a factor weakening the Canadian,
but that issue can hardly be totally discounted.
METALS
OVERNIGHT
GLD+1.10, SLV+4.00, PLAT+1.90 London A.M.
Gold fix $415.60 +$2.10 LME COPPER STKS 435,425 tons +450 tons COMEX Gold stocks
3.11 ml +50,058 oz Comex Silver stocks 123.6 ml oz +600,879 oz
GOLD
The gold market started the session out firm Monday,
sagged into mid session and then firmed up into the close. In other words, the
market would appear to lack persistent buying interest but does seem to be able
to attract buying on intraday weakness. The weekly COT report showed the net
spec long in gold to be only 180,000 contracts, which is a decline of nearly
5,000 contracts from the prior report.
SILVER
The weekly COT report in the silver showed a net
spec long of less that 80,000 contracts and that was a very minor decline from
the prior reading. Therefore, silver also managed to rise to a higher trading
zone without inflating its spec long positioning. The silver market showed no
intraday weakness like gold and seemed to get added support from the
persistently strong US equity market.
PLATINUM
With strong leadership from gold and silver, April
platinum should be able to respect close-in support of $798. However, the COT
report showed the small spec and fund long to be 5,400 contracts, which is a
moderately large tally when one considers the overall size of the market. Given
that the platinum market is $16 above the level where the COT report was taken,
we have to think that the net spec long is at least 6,000 contracts.
COPPER
At least one labor situation has been solved but it
would not appear that the market was being driven exclusively by supply fears.
Instead it seems that copper concentrate shortages and raw physical demand are
the primary influences in the trade. However, with the Codelco strike in Chile
averted, there should be slightly less upside momentum.
CRUDE COMPLEX
12/30 OVERNIGHT CHG to 04:30 AM:CRUDE+6, HEAT+34,
UNGAS-36 March crude oil finished lower as the trade could not discount the
bearish influence of mild temps through the end of the week. In fact, the 6 to
10 day forecast called for above normal temps in the east and restricted cold in
the Northern Plains and that certainly allows the bear camp to exert some
control over prices in the near term. The weekly COT report pegged the small
spec and fund long to be close to 92,000 contracts, which is a significantly
overbought condition.
NATURAL GAS
We are very surprised that extremely mild temps
didn’t result in natural gas prices coming under more significant liquidation.
However, the bull camp is apparently emboldened by the positive leadership
provided on the economy and by the persistent gains in world equity prices. The
weekly COT report showed the small spec long to be just under 30,000 contracts
and with the market holding just under the level where the COT report was
measured, we have to think that the small spec long position is still close to
30,000 contracts.