Futures Point To A Mixed Open
9/10/2004
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INTEREST RATES
The Treasury market continues to maintain a
positive bias despite a surprising decline in prices yesterday afternoon and
concerns about recent auction activity. It seems that some recent Treasury
buying circumvented the usual primary dealer connection by going directly to the
government and that has made it extremely difficult to measure the interest in
recent offerings. It also seems like interest is highly variant among maturities
and that is also creating some confusion.
STOCK INDICES
The stock market seems to have lost the bullish
tilt it maintained for most of August. However, we don’t get the sense that
the market is poised to fall sharply. On the other hand, the negative tilt could
intensify if energy prices manage to ramp back up to the August highs.
DOW
While the December Dow has already managed a moderate decline off the recent
high, it might not find solid support until the 10,100 level. About the most
positive development is that volume has remained so light, that selling momentum
might not be able to carry the Dow down sharply.
S&P
While the December S&P has initial support at 1116.70 and 1114, we would not
be surprised to see prices fall all the way down to 1110 in the action today. In
order to turn the short term trend back up, the December S&P will have to
manage a rise above 1120.30 early in the action today.
FOREIGN EXCHANGE
US DOLLAR
A gap down trade in the Dollar and a move below the
critical pivot point of 89.00 could mean that the Dollar is headed all the way
down to 88.00. While we really don’t see the number flow from the US to put
the Dollar down directly to the 88.00 level, it would seem that the Dollar is
headed to a lower range of trade. So far, rising energy prices have not given
the Dollar the type of support it was seeing over the last three weeks. If there
is a positive for the Dollar, it is that few other currencies have the setup to
really turn up the pressure on the Dollar. In fact, with the downgrade of the
Japanese economy and the slightly disappointing reaction to the Canadian payroll
report this morning, the Dollar is saved by weakness in other currencies.
Therefore, we assume that the path of least resistance is down, but the track
lower won’t be that clear cut. In fact, seeing a close back above 89.00 today
could leave the impressive of a failed downside auction in the Dollar.
EURO
While the Euro has managed an upside breakout
overnight, we are not sure that the Euro is going to muster the long interest to
extend or even hold the gains. In fact, a slide back below 121.85 today could
seriously undermine the Euro from a technical perspective. In fact, we can see
the Dollar trading into a lower range but we can’t see the Euro managing to
trade into a higher range. The higher range in the Euro is defined as 122.00 to
123.90.
YEN
The negative economic views continue to flow on the
state of the Japanese economy and that has undermined the Japanese stock market
and has forced the Yen toward consolidation support around 91.00. Unlike the
Euro and the Dollar, we can easily see the Yen moving down into an even lower
trading range. In fact, the upcoming trading range in the Yen could be defined
as 91.00 to 90.00.
SWISS
The Swiss continues to be held back by significant
overhead resistance and the lack of a strong economic story. Therefore, longs in
the Swiss should consider taking profits on a bounce to 79.77. However, solid
support should be seen down at 79.00.
BRITISH POUND
The Pound has managed an impressive recoil away from
the recent lows and has managed to climb back above a critical pivot point at
177.00. However, it would really be an impressive trick for the December Pound
to manage a climb above heavy overhead resistance of 178.00.
CANADIAN DOLLAR
Apparently the Canadian Dollar wasn’t impressed
with the Canadian jobs figures this morning. It is possible that the Canadian
rally of the last 2 weeks made it virtually impossible for reality to meet
expectations but with the employment level actually declining we suspect that a
number of longs are pushed into taking profits. Critical support comes in at
77.14 and a close below that level could project a slide down to 76.80.
METALS
OVERNIGHT
London Gold Fix $400.65 +$1.40 LME COPPER
STOCKS 106,675 mt tons -1,125 tons COMEX Gold stocks 4.885 ml +5,380 oz COMEX
Silver stocks 109.6 ml -8,099 oz
GOLD
We are not sure if the gold market is peaking out
above resistance because of simple technical short covering, or if there is
really a surge in fresh buying interest. Certainly it helped gold to see the
Dollar slide below critical 89.00 chart support, as that would seem to suggest
that the Dollar could now be headed all the way down to 88.00. Some traders are
suggesting that the Jakarta bombing is supporting prices from a flight to
quality stand point, but it is a little surprising that flight to quality buying
wasn’t seen sooner after the blast.
SILVER
While gold is showing signs of making a run higher,
the silver market is languishing around the recent spike down low and that is a
negative sign. We suspect that the $6.15 level is a critical pivot point but
that a test of $6.00 is possible in the near term. We are convinced that silver
needs a favorable view on the economy to resume the uptrend that was in place
from the May low.
PLATINUM
Like silver, platinum prices remain on the ropes
technically and don’t appear to be getting the same favorable lift as gold. We
are beginning to wonder if platinum prices above $825 are too expensive for
current fundamentals. In fact, if October platinum were to close below the $825
pivot that could project a return back to the middle of the April to August
range which is bound by $825 and $764.
COPPER
The copper market seems to have a positive tilt this
morning and might be given an added boost by firmer price action in China.
Surprisingly the Chinese market was fueled higher by talk about tight supplies.
In fact, it is a little surprising that Chinese copper prices were higher off
supply concerns, as Shanghai copper stocks increased by 2,852 tons in the weekly
inventory report.
CRUDE COMPLEX
The energy complex started out higher yesterday,
drifter higher into the weekly inventory report and then basically exploded in
the wake of a mixed crude stock reading and a clearly bullish gasoline stocks
reading. Even more surprising is the fact that energy prices shook off the prior
session’s bearish tilt and rallied even in the face of comments from the
International Energy Association prediction that organized economy oil
inventories would begin to rise over the coming months. With the product markets
exploding it seemed like the inventory readings were behind the burst of buying
but in retrospect we think a number of issues combined to send prices soaring.
NATURAL GAS
Since the regular energy complex exploded, the
natural gas market could hardly help but be pulled up in the wake of the broad
based rise. We also think that the uncertain track of hurricane Ivan is
generally assumed to be bullish for natural gas, but into the close today, the
market will have to make a call for the weekend and that could result in
significant volatility late in the session. We continue to think that traders
can be long for a look at a seasonal bottom but we would not skimp on the use of
options coverage, as a way to ride through some wild potential price action.