Futures Point To A Slightly Stronger Open
INTEREST RATES
03/10 OVERNIGHT CHANGE to 04:10 AM:BONDS-1 It is
impressive that Treasury prices have managed to hold almost all of the recent
gains despite the fact that macro economic numbers have been decent. In fact,
overnight some economists are suggesting that US GDP growth could maintain
around 4.7%, which might be surprising to a number of players. In other words,
just because hiring and jobs growth isn’t present, doesn’t mean that the US is
prevented from posting decent growth.
STOCK INDICES
03/10 OVRNIGHT CHG to 04:10 AM:S&P-10, DOW21,
NIKKEI -98, FTSE-14 While it seems that periodic value buying has been able to
surface, we still get the sense that the market is in a short term down trend
pattern. In fact, when one looks around at outside market action, there would
seem to be plenty of reason for concern in the equity markets. Not only are
there signs of inflation, on a disappointingly weak economy, but there are also
a number of negative technical signals being thrown off by recent price action.
DOW
Considering the chart violations this week and the lack of a “change catalyst”
we see prices drifting even lower, with the next targeting coming in down at
even numbered 10,400. The 10,400 level might hold some magic but without a
change in investing and economic sentiment, there is little reason to suddenly
halt the slide in prices.
S&P
In looking to the June S&P contract, the near term support comes in at 1136.10
and then again down at 1132.20. However, until we see a big range down reversal
move, we suspect more selling but the selling should lack momentum. In order to
turn the trend back up, the June S&P would need to regain 1144.
FOREIGN EXCHANGE
US DOLLAR
The June Dollar has managed a gap higher overnight
move and that seems to shift sentiment back into the bull camp. While we still
don’t see the US economy being strong enough to justify a long term upside move
in the Dollar, economic developments outside of the US are making US growth look
a little more impressive. Yesterday UK trade figures showed that one of the
stronger G7 recovery stories, might be prepared to falter and at the same time
some traders might began to fret over the Euro zone recovery, especially if the
same trade weakening trade balance stories surface for the Euro zone in coming
reports. In other words, the Dollar isn’t climbing off its own economic prowess,
it is climbing on the back of potential weakness in other countries. The fact,
that the Dollar managed to rally in the face of the BOJ pulling buy orders for
the Dollar, points to a little more interest in the Dollar than many had
assumed. In other words, the Dollar is finding favor on more than one front. We
can’t rule out a near term bounce above 90.00 and that is why our recent short
play was done with an extremely cheap near to expiration put option.
EURO
With the gap lower action overnight, it is clear
that something has changed and that a decline to the 120 level is possible in
the near term. As we began to suggest yesterday, one should expect upcoming Euro
numbers to come in much softer, as the Euro zone releases February data. In
other words, Euro zone data for January was weak and February readings should be
even weaker. We think the slightest decline in trade surplus readings in the
Euro zone will suddenly put the ECB in a rate cut posture. Therefore, expect the
June Euro to slide and maybe slide aggressively, if the US economy can generate
any positive traction.
YEN
The rumors that the Bank of Japan pulled buy orders
for the Dollar yesterday had a temporary result of driving up the Yen but the
market wanted no part of that rally. We think the trend is down and that the BOJ
has more intervention staying power than many realize, as they could simply take
profits on US Treasuries and book a substantial profit. In the mean time, a
return to 91 isn’t ruled out, as volatility in the Yen remains very high.
^next^
SWISS
After a gap down overnight the Swiss has managed to
reject part of the big loss and attempt to return to the consolidation bound by
78.24 and 78.87. The Swiss is going to be pulled around by indecision in the
Dollar and Euro, therefore don’t expect a trending pattern.
BRITISH POUND
The trade balance surprise undermined the Pound and
the newfound interest in the Dollar is applying even more pressure. A near term
decline below 180 support should not be ruled out. Wait for fresh buy plays.
CANADIAN DOLLAR
The Canadian is managing to forge some respectable
support on the charts and with the weakness in the Pound and Euro, there is
certainly less downside pressure on the Canadian. However, we are not sure that
a clear-cut trend is prepared to present itself, but we still think that the
path of least resistance is pointing down in the near term. Longs have more risk
that shorts.
METALS
OVERNIGHT
GLD-3.60, SLV-6.50, PLAT+11.80 London
A.M. Gold Fix 400.80 -$1.20 LME COPPER STOCKS 255,700 -4,475 tons COMEX Gold
stocks 3.52 ml Unchanged Comex Silver stocks 124.0 ml +600,903 oz
GOLD
Just as quickly as the gold and silver markets came
back into favor they seemed to have fallen from grace in the overnight action.
While the gold market didn’t take its lead from the Dollar action Tuesday it
could be taking the Dollar rise today seriously, especially with the Dollar
gapping higher overnight. Chinese gold was lower overnight in response to the
London and Sydney price weakness and that sets a negative tone for the US
opening.
SILVER
The May silver contract has critical close-in
support at $7.07 but could easily fall to even lower support at $6.985. As
mentioned in the gold comment, silver players seem willing to take quick profits
even after showing moderately intense buying interest in the prior sessions.
Therefore, it is clear that traders are short term orientated.
PLATINUM
The platinum market is showing almost no quit and
has once again made a new high overnight. The net spec and fund long is probably
at a new record into the opening today but that probably won’t prevent the
market from making additional gains. With the idea of inflation and strong fund
interest in gold and silver, the platinum market looks even better, as it has a
bullish fundamental story that doesn’t look to be changing anytime soon.
COPPER
While Chinese copper prices were mostly lower
overnight and LME price action was soft, it is possible that copper attempts to
respect support around the previous days close of 127.20. The fact that gold,
silver and platinum have been showing signs of inflation and the fact that the
US economic outlook might be revised upward, should give pause to the sellers.
However, as we have already mentioned, the magnitude of the gains in copper over
the last five months, leaves the market vulnerable to more margin stop loss
selling.
CRUDE COMPLEX
Gasoline prices led a slide Tuesday in what
initially seemed to be a simple profit taking correction. However, when the
energy complex failed to rally off supply concerns floated by the EIA, it was
clear that the bull camp was moving to sidelines for more reasons than simple
profit taking. Certainly many players feared an increase in the crude stocks
reading due out this morning and others decided to dump some positions in the
face of the lower EIA demand forecasts for the 1st and 2nd quarters of 2004.
NATURAL GAS
We are really surprised that the natural gas market
didn’t slide more aggressively in the face of the weakness in the regular energy
complex yesterday. In fact, it is a stretch to think that slightly colder than
normal current temps in a large portion of the US is going to transition the
natural gas market back into a bull market. On the other hand, we are a little
uncomfortable in getting short the April below $554.