Futures Point To A Mixed Open
INTEREST RATES
The Treasury market comes into the week in a
slight coiling pattern but with what appears to be a slight upward fundamental
tilt. The outlook toward the US economy continues to be suspect following the
last monthly payroll report and with the exception of a couple third tier
economic reports, we rally haven’t seen a strong set of readings on the US
economy. The fact that the US Dollar continues to fall would seem to make US
Treasuries slightly more attractive internationally, but we have to wonder if
the slide in the Dollar serves to downgrade sentiment toward the US economy.
STOCK INDICES
The stock market is attempting to hold sentiment
together, but the earnings reports and the US economic report flow is simply not
giving the bull camp enough help. Some suggest that Bank and high tech earnings
might save the day at the end of the week, but in the coming sessions, we have
to think that the bear camp will retain control over prices. While one can’t
suggest that earnings and economic reports are bad in the US there is the sense
that the ultra strong earnings pace seen early in the year has diminished and
that the ultra strong economic growth pace seen in the first 5 months of the
year has slowed.
DOW
The September Dow comes into the session this morning coiling around 10,202,
with critical pivot point support seen at 10,150. In order to shut off the down
trend pattern, the September Dow will have to rise back above 10,232. The weekly
COT report showed the Dow to have a net spec short position of 4,000 contracts
and to have an extreme oversold net spec short position the Dow would have to be
short 17,000 contracts.
S&P
The S&P doesn’t usually bottom quietly and with the recent pattern of lower
lows, we probably haven’t seen the culmination of the current downside slide.
The weekly COT report showed the net spec position to be 16,000 contracts, with
an extreme oversold reading in the S&P pegged at 19,000 contracts short the
market isn’t totally sold out yet. Therefore, the technical condition of the S&P
probably won’t prevent the market from falling further. In order to turn the
trend back up, the September S&P would have to regain 1119. Critical downside
support is seen down at 1108, 1104 and then 1100.
FOREIGN EXCHANGE
US DOLLAR
When one looks at the decline in the Dollar its not
surprising that the US equity market is also in a consistent slide. When one
looks ahead to the US economic report slate due out this week, it would not seem
like the numbers are going to materially alter the downside pattern in the
Dollar. The Dollar Index would not seem to have solid support until the 87.00
level is encountered. Even after a weekend story suggesting that Euro zone
growth is going to fail to keep pace with the growth seen in the US, it is clear
that the Dollar can’t even find favor against the Euro. While the terrorism
threats are something that the market is growing accustomed to, it is clear that
the renewed threats add to the downside track in the Dollar. In short, we expect
the Dollar to slide at least into the Wednesday US economic readings and
possibly even beyond that timing.
EURO
As mentioned in the Dollar comment, an economist
study of growth patterns suggests that the Euro zone will be unable to
consistently outperform US growth rates, but that doesn’t seem to have
discouraged the Euro from making minor gains this morning. German CPI readings
this morning came in flat and that should be a very minor drag on the Euro. We
expect the pattern of higher highs will continue but we also think that momentum
on the upside is going to slow to a minimum, as the Dollar weakness comes from
strength in the Pound, Yen and Canadian, instead of the Euro.
YEN
With the Japanese elections fading into the rearview
mirror it would seem that the Yen is going to continue to rise. The Yen should
have decent support at 92.68 and little resistance until the currency reaches
93.40.
^next^
SWISS
The Swiss continues to maintain an upward bias, but
it would seem like momentum is waning slightly. A reversal might be seen with a
slide back below 81.79 but we really don’t see the fundamental basis for a
reversal.
BRITISH POUND
With the Pound peaking out above 185 resistance and
few economies offering up much competition to the UK, we have to think that the
uptrend is set to continue. With the exception of the February high of 187.12,
the Pound really doesn’t have significant resistance until 191.02.
CANADIAN DOLLAR
We have to think that the Canadian payroll reports
last week take some of the upside momentum away from the Canadian, but the
numbers probably won’t serve to end the bull pattern. However, in order to keep
the trend up, the Canadian will have to stay above 75.51. We would suggest that
long futures players sell calls and buy puts temporarily to hedge against a
correction.
METALS
OVERNIGHT
London A.M. Gold Fix $408.55 +$1.95 LME
COPPER STOCKS 97,250 mt tons -1,050 tons COMEX Gold stocks 4.430 ml +32,248
Comex Silver stocks 118.5 ml +110,260 oz.
GOLD
The gold Market comes into the session this morning
holding right up near the highs of last week and with the Dollar falling to even
lower levels for the move, the bias in the gold market has to be considered up.
The weekly COT report showed the net spec long position in gold to be 88,000
contracts, which means that the long position is rising toward overbought but
isn’t so large that additional gains will be difficult to come by. However, with
the gold market rising an additional $16 since the COT report was measured, it
is possible that gold enters the week net spec long close to 100,000 contracts
and that is just entering the extreme overbought zone.
SILVER
Like gold, the silver market has climbed above
critical pivot point resistance at $650 and now appears to be settling into a
new range bound by $650 to $672. The September contract does have a gap up at
$6.72 to $6.905 and that could well become a target of the trade. We are not
sure if the fundamentals are playing a big role in the silver rally, as we have
seen little change in supply and demand.
PLATINUM
The bias remains up in platinum as the improvement
in the outlook toward Asia combines with expectations of decent growth in most
other areas leaves platinum in a recovery mode. The weekly COT report showed
platinum to have a net spec short position of 518 contracts and that explains
the sharp short covering rally last week. Now however, we suspect that platinum
is seeing its net spec long position grow.
COPPER
Even though the Asian copper markets saw dampening
dialogue about demand and high premiums, the Chinese copper market finished
higher. The weekly COT report showed the net spec long position to be 13,000
contracts and with the market up nearly 700 points since that report was
measured, we suspect that copper enters the week net spec long less than 20,000
contracts. In other words, the technical condition of the market should not
hinder the market if it wants to forge more gains.
CRUDE COMPLEX
The energy complex comes into the week
significantly above the June lows and marginally under the May and June contract
highs. The market has swung from an extreme tightness concern, to an
overconfidence that supply was rebuilding. Since the June low, the market has
realized that conditions remain tight and that the US product area is the still
very critical.
NATURAL GAS
With the overnight probe below critical support it
is clear that natural gas is the weakest of the complex and we suspect that
players are anticipating a little weakness in the regular energy complex and
that clears the way for selling in natural gas. Again the weather is simply not
hot enough to support the spec long position, which is rather large and
vulnerable at 35,500 contracts. Seeing the September fall below critical support
at 606, would seem to target even lower support down at $5.95.