Futures Point To A Slightly Higher Open
INTEREST RATES
The path of least resistance is pointing up in
bonds as the numbers continue to favor the bull camp. In fact, the numbers
yesterday could be considered shockingly weak and not only lower the odds of a
June rate hike, but might even challenge the recovery theme. Economic numbers
today might temporarily countervail the bullishness generated yesterday by the
scheduled reports, but we have to think that the bull camp won’t relinquish
overall control of the market.
STOCK INDICES
We are very surprised in the action yesterday and
in the overnight action. With both the Dow and the S&P managing to extend the
recovery action in the face of renewed terrorism threats and weak economic
numbers, it is clear that some investors are upgrading their views on the
future. While some buyers were seeking security stocks, we have to think that
the recent strength is mostly due to the softening of energy prices.
DOW
The action of the last 24 hours is really supportive, as the market could have
decided to take a weaker path. We don’t really see sharp gains or heavy volume
especially with the pre-holiday trade atmosphere expected to kick in early
Friday morning. Near term upside targeting comes in at 10,180 and then at even
numbered 10,200. The top of the down trend channel comes in up at 10,405 and
that is a long way up.
S&P
Like the Dow, the S&P has shaken off the bearish tilt and is into a moderate
short covering rise. Near term resistance is targeted at 1122.30 and that could
be an easy target for the S&P if the scheduled reports come in at expectations.
FOREIGN EXCHANGE
US DOLLAR
The Dollar continues to slide and that is probably a
direct function of the softer than expected US economic numbers and the reduced
threat of a US rate hike. We also think that the US economy is thought to be
more vulnerable to soaring energy prices and has recently been found to be more
vulnerable to upcoming terrorist threats. In other words, there would not appear
to be a high yield potential in the Dollar and the risk of holding the Dollar
might be considered excessive. However, US numbers today could temporarily
diffuse some of the negative attitude toward the Dollar. In short, we think the
Dollar can bounce but that it probably won’t end the downtrend tilt with the
numbers today. Seeing a close below 89.42 would seem to target 89.00. Seeing the
Dollar manage a close back above 89.60 could call a temporary end to the slide.
EURO
On the charts, the Euro has managed to climb above
long term down trend resistance lines and would seem to be in an uptrend.
However, we just can’t rationalize buying the Euro on the basis of its stagnant
economic growth. One can not fight the near term uptrend pattern, but with US
numbers today possibly showing a little more strength than recent readings, it
might be possible to see a setback to near term support of 120.99.
YEN
We see a near term top in the Yen with the quasi
double top at 89.94 holding the trade down. However, a correction today to 89.38
in the June Yen should be considered a buying opportunity.
^next^
SWISS
An impressive overnight probe into new high ground
suggests that the Swiss has follow through capacity. Near term upside targeting
is seen at 79.37 and then again up at 79.60.
BRITISH POUND
Despite the Pound being extensively overbought
technically, it seems like the currency retains buying power. Near term upside
targeting comes in up at 182.23 and then again up at 183.66. A track all the way
to contract highs is probably not out of the question in the coming two weeks.
CANADIAN DOLLAR
We are a little discouraged by the lack of upward
extension in the Canadian. In fact, we suspect that the June Canadian will see a
correction today off the US numbers back to 72.75. The inability to climb above
73.35 before the close Friday might be considered a major negative development.
METALS
OVERNIGHT
London A.M. Gold Fix $391.45 +$.95 LME
COPPER STOCKS 135,200 mt tons -2,025 tns COMEX Gold stocks 4.446 ml Unchanged
Comex Silver stocks 119.6 ml -144,151 oz
GOLD
While the gold market is showing periodic weakness,
the frequency of buying interest does appear to be reaching higher levels. In
other words, the gold market is seeing consistent long interest in a fashion
that suggests a trend is in place. With the Dollar taking out the critical 89.42
low overnight, it is trading at the lowest level since early April and that in
turn has pulled in another wave of gold buyers.
SILVER
The chart pattern in the silver shows a well defined
uptrend pattern, with a series of higher lows. Short term technicals remain in a
buy mode with near term resistance targeted at $617 and then again up at $632.
Unfortunately volume and open interest levels continue to decline on the rally
and that suggests the trend isn’t overwhelmingly strong.
PLATINUM
A Johnson Matthey quarterly report released May 17th
projected an end to the annual deficit situation in platinum, partly because
they showed increases in production and some ongoing weakness in jewelry demand.
The report did confirm that Chinese demand is very critical to platinum and that
is why last week’s upgrade of the Chinese situation gave platinum prices such a
lift. We have to think that July platinum has additional near term upside but
once it encounters resistance at $854 more gains could be hard to come by.
COPPER
Higher Chinese copper prices overnight give the US
copper market a much needed lift. After the dismal economic reports from the US
and escalating terrorism fears we expected copper prices to sag but the
overnight action has to be taken as a very impressive rejection of the negative
macro economic condition. In other words, the market sees the Chinese buying
interest as a sign that a major demand sector remains healthy.
CRUDE COMPLEX
It would seem like the energy complex is on the
verge of a technical and fundamental failure. Not only have prices slumped to
critical support levels on the charts, but the fundamental case is softening.
While actual supply remains an entrenched bull issue, the fact that so many
producers clarified their ability to produce additional oil flow temperS the
bull posture.
NATURAL GAS
We continue to be impressed with the strength of
bullish resolve in natural gas, as the market is shaking off weakness in crude
and holding within striking distance of the recent highs. However, because the
natural gas market has mounted such an aggressive rally over the last two
months, the market hasn’t had the chance to form solid close-in support on the
charts. The weekly inventory report calls for an injection of 60 to 100 bcf and
that could be considered a bearish set of numbers, if the market were reacting
to the weekly inventory readings.