Futures Point To A Slightly Higher Open
INTEREST RATES
03/24 OVERNIGHT CHANGE to 04:24 AM:BONDS+4 While
the US economic report slate today would seem to have present a slightly
negative influence on Treasury prices this morning, we think that general
concern for the economy is so widespread, that the US durable goods report will
be mostly discounted. However, if the US durable goods report does manage to
come in significantly above expectations of a +1.5% to 1.7% gain, that could
give some pause to the recent pulse up in Treasury prices. We still doubt that
Treasury prices will be able to drive significantly above the March highs,
unless there is a significant washout in equity prices, a major disappointment
from the numbers, or a significant escalation of tensions in the Middle East.
STOCK INDICES
03/24 OVRNIGHT CHG to 04:24 AM:S&P+290, DOW28,
NIKKEI +83, FTSE+7 The stock market saw mixed action overnight, with the Nikkei
mounting a slight rally and the European stocks attempting to rally in the early
action. However, the US opening indication looks to be slightly lower, with the
decision against Microsoft putting a slightly negative spin on psychology. It is
possible that the market will be supported by the US Durable Goods release, but
we are not sure that a single report will serve to alter existing negative
sentiment.
DOW
The path of least resistance is down! The next downside support is seen at even
numbered 10,000 and then again at 9,990. On a post durable goods bounce to
10,037, we would suggest that aggressive traders get short the Dow, looking for
follow through losses.
S&P
While we might sound like a broken record, the S&P doesn’t have a good track
record of bottoming from a consolidation pattern. In fact, we see the best
bottoming formation coming from a big spike down reversal within a single
session. Fresh downside targeting might now be 1087.50 basis the June S&P
contract. Without a major headline shift, the trend remains down.
FOREIGN EXCHANGE
US DOLLAR
Under other conditions the Dollar would be showing
more significant strength, as the ECB seemed to suggest a rate cut was possible
in the coming month but yet the Dollar is showing only minor overnight gains.
However, the ECB seemed to suggest that they didn’t see the need to act, unless
current growth patterns deteriorate and that probably took away some of the
benefit to the Dollar. We also see the political situation undermining the
Dollar, as the 9/11 Commission political flap, is not only causing the US
Administration to lose respect but the world is generally seeing the US progress
on terrorism undermined as a result of the Capitol Hill blame game. In fact, the
9/11 debate is yet another victory for the terrorist! In short, without the
political news, the Dollar might have been able to return to the 89.00 level in
the June contract. We also think that the general consensus toward the US
economy is undermining the Dollars attempt to rally and therefore it is
important for the durable goods report this morning to come in above
expectations!
EURO
With some improvement in confidence numbers, it
seems less likely that the ECB will have to cut rates but the issue is in the
news because of ECB statements and that undermines the Euro. However, we doubt
that the Euro will fall below critical support of 121.93 unless the US numbers
this morning are much stronger than expected and or the US equity market
surprises the trade with a big rally. We are not impressed with the Euro and
think that the path of least resistance is down but we are not sure that the
news carries enough weight to cause a breakout down!
YEN
Given the action in the Euro and the Dollar, it is
clear that the Yen wins by default. With the market waiting and watching for BOJ
intervention and not seeing signs of that involvement, it is becoming clear to
some that something has changed. Therefore, one can’t argue against a return to
the contract highs.
^next^
SWISS
The uncertainty in the Euro leaves the Swiss in
uncertain position. We suspect that the recent highs are very solid resistance
and that the Swiss has the potential to slide down to chart support of 78.51.
BRITISH POUND
A quasi double top in the Pound would seem to
present a near term top. In fact, critical support in the Pound doesn’t come in
until 181.20. Recent concern about debt levels and the potential negative impact
of falling UK housing prices, alerted traders to the risk in the Pound and many
are dumping longs and moving to the sidelines. A return to 180.00 shouldn’t be
ruled out in the coming week!
CANADIAN DOLLAR
The Canadian is peaking out below critical chart
support and may be primed to slide to even lower support of 74.46.
METALS
OVERNIGHT
GLD-1.50, SLV+2.70, PLAT+8.60 London A.M.
Gold Fix $417.60 +$2.40 LME COPPER STOCKS 209,825 -5,650 tons COMEX Gold stocks
3.56 ml Unchanged Comex Silver stocks 122.1 ml -6,344 oz
GOLD
With the Dollar showing signs of strength early and
getting close to critical upside resistance, it is possible that gold finds it
difficult to add to recent gains early in the session. It is also possible that
ECB comments about lower interest rates could undermine gold as that issue
boosts the Dollar. However, it was clear yesterday that gold gathered momentum
late in the session and did so mostly off the geopolitical headline flow.
SILVER
The silver market remains in favor in the Asian
trade, as the overnight price action showed yet another new contract high probe.
However, the silver does seem to have critical support on the charts close to
the opening at $7.708. The funds continue to be the mainstay of the bull case in
silver and as long as the technicals stay positive, we suspect that silver
prices will have more gains ahead.
PLATINUM
The platinum market seems to be poised this morning
to return to the recent contract highs. If the Dollar continues to strengthen
and in turn puts some pressure on gold it is possible that long platinum/short
gold spreaders provide platinum with enough buying to forge contract highs. We
suspect that the durable goods report will support platinum.
COPPER
The copper market is certainly showing significant
volatility as it recoiled away from the recent highs Monday, fell sharply
yesterday but managed to aggressively reject the lows of 131.65 in the May
contract. From the rate of decline in the LME warehouse stocks, it would seem
that the bull case remains intact but the bull camp has been partially
discouraged by the macro economic report flow. However, today the US durable
goods report could be partially supportive to the bull camp in copper.
CRUDE COMPLEX
While the debate on the SPR seems to be gaining
intensity, we think the market viewed that issue Tuesday as a supportive
element. With the US Energy Secretary suggesting that the SPR was not a tool to
manage prices with, it would seem that the Administration is intent on refilling
the reserve. A large refinery CEO suggested that the US should stop filling the
reserve, or at least use the Reserve as a weapon to deflate speculative interest
in the energy complex.
NATURAL GAS
The natural gas market wanted to breakdown Tuesday,
but the rally in crude oil reversed the early weakness in natural gas prices. We
continue to think that the internal fundamentals in natural gas could easily
result in pricing falling to $5.40 in the May contract, but with crude oil
prices rising back toward $38, the bear camp is at least temporarily frustrated.
In short, it would seem possible for the May gas contract to rise back toward
resistance of $5.80, before prices de-link from crude oil.