Futures Point To A Mixed Open
10/15/2004
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INTEREST RATES
The Treasury market continues to edge up toward
the September highs and with a significant amount of US economic information due
out today, one might expect an expanded trading range in Treasuries. While we
doubt that an “as expected†US retail sales gain will turn the trend in the
market down, seeing December Bonds approach 114-00 would seem to create the need
for progressively weaker economic readings. However, it is pretty clear that the
fear of even higher oil prices, combined with the fog of the election, is
keeping investors and consumers on edge.
STOCK INDICES
The stock market continues to be off balance and
generally in a position to see lower prices. The combination of new legal
challenges to the Insurance Industry and the ever present concern of rising oil
prices is simply too much for a market that can’t seem to get solid confirmation
that the US economic has achieved positive traction. The Federal Reserve
Chairman will speak today and the market expects an update on his opinion that
high oil prices will not totally derail the economy.
DOW
From the fundamental setup this morning we could see a minor short covering
bounce in the early trade but in order to hold the gains into the close the
market needs help from the early US numbers and energy prices will have to
remain calm. Just a normal retracement of the October slide would seem to allow
a bounce to 10,032 but that is a little aggressive for a market that is seeing
investors migrate to the sidelines. While the market might bounce today, we
doubt it is set to change the downward bias.
S&P
We suspect that the early action will bring about some light short covering
buying and possibly some fresh buying. In order to send prices into something
more than short covering, the numbers will have to surprise and Greenspan will
have to definitively indicate that energy prices are not ultra damaging issue
and that the US economy still has positive traction. We can’t argue against a
short covering bounce to 1112.20 but we need to see the fundamental deck
reshuffled to see a true trend change.
FOREIGN EXCHANGE
US DOLLAR
The technical action in the Dollar seems to point to
lower action ahead. However, today could be a bounce day for the Dollar, as the
trade is temporarily fooled by minimally positive economic readings and cheer
leading from the Fed Chairman. However, Greenspan is not afraid to call it like
it is and it is always possible that he has second thoughts about the impact of
high oil and the positive traction argument. In all fairness, crude oil prices
are now $16 a barrel above the level where the Fed first began to downplay their
influence on the US economy. The top of the down trend in the December Dollar
comes in at 88.61 and that is a level we would be willing to enter into fresh
Dollar shorts. However, traders need to be careful getting short at the bottom
of the range, especially since the Dollar has managed to recoil from the
vicinity of 87.40 on a number of occasions since the July low.
EURO
Given that the Dollar is at consolidation support
and the Euro is at consolidation resistance, we would suggest that traders look
to get short the Euro on a rally to 124.25, looking for a slide back down to
123.00. However, one should be careful being short into the Greenspan speech, as
a capitulation on the idea that the US economy has positive traction, might be
enough to spark an upside breakout in the Euro.
YEN
The Yen could easily manage another rise of 25 ticks
without seeing a chart breakout, but in our opinion to see an upside breakout in
the Yen, oil prices need to slide aggressively, or the Dollar needs to track
below 87.30. Until there is some reason to discount the down trend channel (that
has been present since June) we will look to sell probes to 91.90.
SWISS
Coming into the session this morning, the Swiss is
on the verge of an upside breakout, but yet there doesn’t seem to be a flight to
quality situation prompting the strength. In other words, the Swiss is garnering
something other than flight to quality buying and that could be considered
significant. However, our gut suggests that buying the Swiss above 80.60 carries
significant risk.
BRITISH POUND
Besides waffling in the range, the Pound would seem
to have little fundamental or technical direction. The near term trend is
certainly up but getting above 179.64 could require a misstep in the US
situation.
CANADIAN DOLLAR
The trend is still up, but longs have to accept the
potential for a slide back to channel support of 78.92. One might also watch for
a rise above 87.92 in the Dollar, as that could spark an even more significant
washout in the Canadian Dollar.
METALS
OVERNIGHT
London Gold Fix $417.80 +$1.15 LME COPPER
STOCKS 87,875 metric tons -650 tons COMEX Gold stocks 5.194 ml +15,598 oz COMEX
Silver stocks 104.5 ml -2.275 ml oz
GOLD
The gold market managed to regain some confidence
with the gains posted on Thursday, but the recent washout has put a number of
would-be longs on the sidelines. However, with Chinese gold up slightly that
could give the market a slight upward bias to start the session. In order to
foster a fresh wave of fresh buying off the Dollar action, the December Dollar
will have to slide back below 87.40 and that is certainly possible given the
heavy slate of US economic information scheduled for release today.
SILVER
The silver seems to have rejected the massive
washout and has managed to consolidate back above critical support of $7.00. We
do note that exchange stocks of silver continue to decline but are not yet at
the ultra critical and psychological level of 100 million ounces. Trend line
support in December silver comes in at $6.77 with an upside pivot point seen at
$7.08.
PLATINUM
The platinum market has noted the end of the Impala
strike in each of the last two sessions and with the January platinum, forging a
series of highs around $846 we have to assume that the market has solid
resistance at that level. In fact, unless gold springs higher today, we doubt
that January platinum will be able to climb above $846. Define the January range
as $823 to $846.
COPPER
Apparently the copper market is going to
consolidation the losses forged early this week. Chinese copper smelters have
apparently moved to cut prices and that would also seem to suggest that prices
have found a new lower trading level. Weekly Shanghai copper stocks increased by
10,432 tons for the week and that figure would also seem to put a cap over
prices in the near term.
CRUDE COMPLEX
The markets managed to eek out another new all
time high probe and managed that move Thursday in the wake of dialogue from the
EIA and the weekly inventory readings. With a US governmental official voicing
concern that US distillate stocks might already be set to peak for the coming
winter, it is clear that even more speculative fever rushed into the market.
Because of that EIA statement and the statements from the OPEC President, that
oil prices looked to continue rising off strong demand, the trade quickly took a
bullish spin from the weekly inventory readings.
NATURAL GAS
The weekly natural gas inventory figures showed an
injection of 67 bcf and that once again served to narrow the annual surplus to
178 bcf. Early this year the annual surplus reading was moderately above 443 bcf
and that shows an aggressive reduction in inventories in a short period of time.
With crude oil hitting new all time highs on Thursday and natural gas prices
holding moderately below their recent highs, we have to think that natural gas
prices will be supported against near term selling.