Futures Point To A Mixed Open

INTEREST RATES

12/16 OVERNIGHT CHANGE to 04:16 AM:BONDS+10 The
market action in Treasuries is becoming quite strange, as the persistent
strength in the equity market is being totally ignored. Certainly the bond bulls
have found justification for their opinion, in the regularly scheduled US
economic numbers, which have remained soft since the disappointing US monthly
payroll report. While Manpower Inc has come out with a 1st quarter hiring
survey, that would seem to indicate growth early in 2004, the market is simply
not in a position to pressure Treasury prices.

STOCK INDICES

12/16 OVRNIGHT CHG to 04:16 AM:S&P+310, DOW29,
NIKKEI -219, FTSE-6 The market disappointed the trade Monday by failing to
maintain a Saddam rally. However, the bear camp continues to shape conditions to
their advantage by suggesting that opposition in Iraq will continue. It almost
seems like the opponents of the Bush Administration think that capturing Saddam
was of no importance.

DOW

The Dow violated the even number 10,000 level in the futures overnight but
seemed to garner some long interest on the dip. However, unless there is some
fresh positive revelation from Iraq, or the US numbers come in better than
expected, the bear camp might have a slight edge. On a break to 9,980 we would
probably become a buyer of the March Dow, looking for an objective of 10,169 and
using a risk of 9,896.

S&P

While we expect the Dow to find support quickly, we are not as confident that
the S&P can hold up without a moderate setback in prices. In fact, we would wait
to buy the March S&P until prices fall back to 1059.60, because fresh longs
might require a stop down below 1050. We suspect that the S&P reached a small
spec long of 90,000 contracts around the high Monday and therefore corrective
action in the S&P should be greater than the corrective action expected in the
Dow. However, seeing prices hold above 1065.50, for the first couple of hours
today, could effective discourage the bear camp and secure a near term bottom.

FOREIGN EXCHANGE

US DOLLAR

Another new low in the Dollar proves that the
political situation is not the element that has been forcing the Dollar down.
Alternatively, we have noted in good and bad economic times, that the US economy
is not the driving force behind the Dollar slide. Therefore the slide in the
Dollar must be an orchestrated development by the US government, or is a natural
result of international trading conditions. In either regard, it would seem that
the Dollar slide will continue until a major headline change takes place, or
several G7 countries begin to talk about putting an end to the Dollar slide.
Right now, it would not seem like anything can stop the near term action. Our
next target for the Dollar on the downside is 88.00 and when we get to that
level we will lower our objectives again.

EURO

There are some ECB comments this morning that seem
to detract from the potential strength in the Euro, as officials are suggesting
that the launch of the Euro, has yet to contribute to growth in the economic
zone. However, with the trend in the Dollar down and ECB comments relatively
benign, we have to think that the Euro will continue higher, even if the pace is
less stellar, than the pace seen in the early November and December rallies.
Next upside targeting in the Euro comes in at 124.40.

YEN

The BOJ was out overnight with an upgrade of its
economic outlook and that seems to discourage the Yen from rising even more
aggressively. Certainly the suggestions from the BOJ minutes that the rising Yen
is a major problem creates concerns of intervention but the bias would seem to
remain up in the Yen for the near term. It would seem that many traders expect
the BOJ to wait for a return to the recent highs of 93.66 before intervening
again. Critical support is pegged at 92.95.

SWISS

A new high for the move clearly suggests that
another wave up is expected and with the US economic report slate expected to
produce soft numbers this morning, it would seem that the Swiss has fundamental
and technical rational to rally. Near term upside targeting comes in at 80.26.

BRITISH POUND

Trend line support comes in today at 172.76.
However, with soft UK inflation readings today, the up trend in the Pound is
deflated slightly. We suspect that the entrenchment of the bull trend in the
Pound will carry the currency through near term weakness and produce a new
contract high before the end of the week.

CANADIAN DOLLAR

For some reason the Canadian hasn’t shaken off its
weakness, as quick as one would expect given that the Dollar has returned to new
low ground! Therefore, something might have changed with respect to the
Canadian. Longs should be defensive, looking to buy puts against fresh long
futures plays.

METALS

OVERNIGHT

GLD+0.80, SLV+3.80, PLAT+2.70 London A.M.
Gold fix $409.70 +$5.20 LME COPPER STKS 456,200 tons -2,150 tons COMEX Gold
stocks 3.063 ml +3,635 oz Comex Silver stocks 123.8 ml oz Unchanged

GOLD

Despite the attempted rally last week the Dollar has
still managed a 3% decline in the month of December and with the recent
correction in gold we have to think that the technicals could now easily support
a run to $420. Our objective for at least three months in gold has been $415 to
$420 but with the recent COT readings using less speculative fuel than we
expected in achieving the last new high and two hard breaks seen this month, it
is possible that the February gold will be able to climb to a $425 to $430 high
target. Top of the up trend in February gold comes in at $415.7 today and at
$416.4 on Wednesday.

SILVER

After the massive throttling Monday and the recovery
into the close, the bear camp has to be reeling. Given that March silver
corrected 31 cents from the December high, one would think that the market was
balanced technically and capable of returning to new contract highs today.
However, the silver story is mostly a gold and Dollar story and will need those
markets cooperation to get to new contract highs.

PLATINUM

Using the April contract it would seem that the sky
is the limit in the platinum but with the presence of several gap up trades, off
the November lows, one has to think that the technicals are getting way ahead of
themselves on the current run. However, traders can’t stand in the way of a
market that can’t seem to get enough supply flow and where bringing on more
supply has proven to be extremely difficult. Therefore, until a historical
extreme is documented or some fundamental change takes place, one has to wait
for a topping signal.

COPPER

Another strike threat is apparently prompting higher
copper prices, even though Asian action overnight was initially weak before
being resurrected by late Chinese buying. The press is suggesting that profit
taking prompted the slight setback in prices in the overnight action but the
early US action is showing no such weakness. With the new low in the Dollar
overnight, it is possible that arbitrage buying is lifting copper, as the Dollar
impact on copper has been shifting 180 degrees from one day to the next.

CRUDE COMPLEX

12/16 OVERNIGHT CHG to 04:16 AM:CRUDE-3, HEAT+41,
UNGAS-18 After the opening slide in prices Monday, the energy market quickly
managed to shake the weakness off the Saddam capture and that clearly shows that
bullish fundamentals and speculative fervor still have the ability to sustain
the bull market, even at rather lofty price levels. It seems that the Iraqi
bombing, that took place a day after Saddam was captured, gave the market
confidence that Iraqi oil flow might still be threatened by forces not under the
control of the ousted President. Since the energy complex managed to avoid a
correction, even with an overbought technical condition and the prospect of some
warmer temperatures it is clear that the bull camp has broad based support.

NATURAL GAS

In the face of warmer than expected weather and an
early correction in the regular energy complex, natural gas failed early Monday.
However, the market showed its true color by flatly rejecting the downside tilt
and returning to a strong position in the late afternoon action Monday. We
continue to think that the March contract has the potential to see $7.30 pricing
but with recent COT report readings pretty level, it is now possible for March
natural gas to surpass the $7.30 level and continue even higher.