Futures Point To A Slightly Stronger Open
INTEREST RATES
OVERNIGHT
CHANGE toÂ
AM
BONDS
-6 — The bonds continued to fail in the overnight action and that comes because
the trade continues to look through the war and to a long-term economic
recovery. We also have to think that technical considerations have a great deal
to do with the weakness in bonds, as there was significant volume and open
interest thrown at the long side of bonds in the 111-26 to 112-10 zone in late
February and those longs were forced from position this week. The fact that
is moving surface-to-surface missiles into an attack
position, means that the war is probably unavoidable.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
+310, DOW +13,
NIKKEI +96, FTSE -3Â — It seemed
like the progression toward war might stall yesterday when it appeared that the
Turkish government might allow US troops to access
through
Seeing the Northern attack corridor open to ground troops could have delayed the
start of the war as the
would have changed the set battle plan at the last minute. Some traders were
also concerned that political developments in the
could remove the
at the last minute and that would have made the war seem a lot more daunting and
costly to the
FOREIGN EXCHANGE
DOLLAR: Now that the war is close at hand, the longs in the Dollar
are becoming less convinced of their positions. There is also a story
circulating that the
might have bugged EU offices and that could certainly stall the rally in the
Dollar. Make no mistake about it the market is fully expecting the war to start
soon and for the outcome of the war to be known before the end of the week. The
fact that
will only vote on the use of its airspace, is also a minor negative to the
Dollar. In other words, some traders were hoping that
would allow the
to deploy through their country at the last minute. Recent
economic numbers were very weak and the US Fed decided to hold steady on rates
and that is also a slight undermine of the US Dollar. However, there is no
accounting for the continued long-term technical short covering influences n the
Dollar. We would not be surprised to see the Dollar correct below 101.00
basis the June contract, especially if
uses chemical weapons or weather delays the start of the war.
EURO: We expect the Euro to pause the slide
seen over the last few weeks, as the market will wait to see how the war
unfolds. European opposition might quickly end if
is found to be using banned weapons against attacking forces. Critical support
in the June Euro comes in at 105.00 but a failure to 102.60 could be possible if
it becomes clear that a quick victory is at hand. Near term resistance is seen
at 106.16.
YEN: A critical pivot point is seen at 84.00
and it would appear that the start to the war might push the Yen below that
support. Overnight the Japanese stock market was concerned about how much the
government would be able to do to support equities prices. In fact, the
government suggested that they could not fully support the stock market
artificially. Therefore, we see the Yen as vulnerable.
SWISS: One can hardly expect the Swiss to
ignore the potential for flight to quality buying. While the Swiss violated
critical support at 72.00 it did manage to recover and may try to stay positive
for the next 24 hours. Critical resistance is seen at 72.75.Â
POUND: The political battle in the
is causing a wholesale liquidation and we suspect that a decline to 152.50 is
underway. The Blair government is seeing key resignations and that is a direct
undermine for the Pound.
CANADIAN: In the initial hours it would seem
like the Canadian is going to slide toward support of 66.86 but we doubt that
the Canadian will slide below that level. The Canadian economy continues to post
the best numbers in the G7 but one can’t forecast the ebb and flow of flight to
quality trading sentiment for at least the coming 48 hours.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +0.80, SLV
+2.7, PLAT -0.70;
London Gold Fix $339.00, -$5.90; LME Copper
Warehouse
stks
829,675 ton, -1,375 tns;
Comex Gold stocks 2.335 ml, -3,511 oz;
COMEX Silver stks
108.7 ml oz, Unchanged; OVERNIGHT: Minor long interest in Asia as the proximity
of war means little
GOLD: While gold attempted a comeback rally
yesterday and is showing positive direction overnight, there is by no means a
frenzy to buy gold. Maybe the trade is a little put off by the fact that the
stock market and energy complex are signaling a quick end to the war, or maybe
buyers are waiting for the hostilities to start. We have to think that some
buyers Tuesday were hoping that the Fed would cut interest rates, which in turn
could lead to inflation if the war was quick and decisive.
SILVER: Considering the low of $4.445 in the
May contract this week, we suspect that silver has mostly extracted its war
premium. Like gold, the silver will have to transition from a flight to quality
investment, to a physical demand driven commodity. In the near term, one can
hardly get excited about the physical demand posture of silver, especially since
many traders think that even a quick war will slow the economy somewhat.
PLATINUM: A strong attempt to rally
overnight was rejected and some technical damage was logged on the charts. Like
gold, platinum is not getting the anticipated lift from the proximity of the war
and disappointed longs are bailing out. First downside target in the April is
$665. Â
COPPER: The copper market is sitting just
above the mid point of the weeks trading range and that is impressive
considering the pace of economic readings this week and the potential for
hostilities soon. Chinese copper prices were down overnight and it appeared that
Chinese traders were easily prompted to bank profits from buys made last week.
In other words, the trade seems to have temporarily lost a bull catalyst.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE -4,
HEAT +35, UNGA
+66Â –Â The bear camp didn’t seem to be daunted Tuesday by the prospect
that the Iraqi wells could be destroyed in the coming attack, or by the
potential that US supplies might show signs of expanding in the inventory
reports today. The Iraqi oil for aid oil shipment flow should begin to taper off
now, as the
shuts down and closes shipping access.
NATURAL GAS
Slightly
colder weather in the
and a possible pause in the aggressive selling action in the regular energy
complex, could mean a weak bounce in the natural gas
market. In fact, as long as May natural gas manages to consolidate above $5.19,
the bears might be uncomfortable attacking this market.