Futures Point To A Slightly Stronger Open
METALS
GOLD:
The gold market is weaker this morning because of a slightly stronger Dollar and
lackluster Asian action. The higher London fix is more than likely a function of
the late US rally Thursday as opposed to some isolated supportive factor in that
market. The fact that gold rallied so aggressively off a recent break is helpful
to the bull case but the volatility also suggests that gold is once again a true
player in the investment scheme.
SILVER:
If the gold market is uncertain in it’s near term trend and still wobbly from
the recent correction, we have to think that silver is also vulnerable. We can’t
rule out a decline to $4.50, especially if $4.55 fails. The COMEX warehouse
stock readings are showing significant volatility this week with a “3.2
million ounce” decline documented overnight.
PLATINUM:
A massive decline in platinum suggests that the recent investment bubble in
platinum has been popped. Keep in mind that platinum prices around $680 are a
very expensive historical level! Therefore, we are not surprised that the rug
was yanked out from under the bull camp, as we saw nothing to justify the nearly
$90 May rally. Â
COPPER:
Shanghai copper stocks declined by 3,033 tons on the week and that is another
sign that SARS isn’t directly impacting copper demand as many feared. Chinese
copper futures were higher overnight and the
London
market
was higher, which leaves the
US
market
poised to make some gains today. The LME stocks posted a minor decline but a
decline nonetheless.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:16 AM
 Â
:CRUDE +29Â ,HEAT+34Â
,UNGA+82 Â The market reacted to the weekly inventory readings as if
they were bullish but we think that the market bias was going to be up unless
the report was patently bearish. With US API crude inventories rising sharper
than expected (they rose by 3.3 million barrels) the report could have been
considered bearish but with a much greater than expected decline in gasoline
stocks the net/net impact of the weekly report comes down on the side of the
bull camp.
NATURAL
GAS
The
weekly inventory build was 95 bcf, which was at the upper end of the range and
that seemed to temporarily pressure natural gas. However, the market needed the
technical correction and soundly rejected that liquidation effort when it
unfolded yesterday.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS +4 The bond market got
a big boost from another strong auction in the short end of the market and that
gives the market confidence that investors are still confident in the bull track
of the Treasury market. Following the massive reversal off the high early in the
week and the persistent gains in equity prices and the US Dollar, we can
understand why the bulls were questioning themselves early in the week. However,
it would seem that another wave of refinancing is to be expected and that
promises to make the yield curve action even more volatile in the weeks ahead.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
:S&P+310
DOW +22 NIKKEI +49 FTSE -19Â The stock market took profits Thursday, in a
necessary correction that culminated a pattern of daily gains. We really think
that the performance of the stock market this week is helping improve investor
and consumer sentiment and that is an important distinction. With the passage of
the tax package, a possible restart of Iraqi oil exports and the
US
getting
together with German and France counterparts this weekend, the world is in a
moderately improved position than at any time since the lead up to the
Iraq
war.
FOREIGN
EXCHANGE
DOLLAR:
The Dollar simply lacked the impetus to climb above critical resistance
Thursday, as the trade easily put the Dollar rally down. The trade was prompted
to sell the Dollar by comments made by US Treasury and Fed officials, which seem
to be touting the benefits of the falling Dollar. With the G8 meeting this
weekend, few traders expect the Bush Administration to say anything about the
Dollar, as they probably want the benefits of the falling Dollar to continue
without raising the ire of the countries that are negatively impacted by the
unfavorable exchange rates. While the Dollar looks to resume the downside trek,
we have to think that the pace of the decline might not be as aggressive,
considering the improved view toward the
US
equity
market and the vastly improved attitude by the
US
consumer. Therefore, expect a new low in the Dollar but don’t expect the massive
single session pounding that the Dollar saw frequently in May. Heavy resistance
is seen at 93.32 and until the June Dollar closes above 94.11 the trend is down
in the Dollar.
EURO:
The up trend in the Euro lives on, but because the Pound and the Canadian look
to regain footing against the Dollar, the magnitude of the gains in the Euro
might be more reserved. We also have to think that US economic numbers and the
US stock market performance are factors that will reduce the rate of gain in the
Euro. Critical support in the Euro is seen at 117.94 but the trend is up until
the June Euro slides back below 116.85.
YEN:
The Nikkei posted the biggest gain in 4 years and that is supportive of the Yen.
However, it is also thought that the BOJ has expended significant fuel in
selling the Yen. Therefore, it could be difficult to see the Yen slide below
84.00. The BOJ would probably like to see the Yen trade down to 83.00 but in
order to see that level, the BOJ will have to sell significant amounts of Yen!
SWISS:
A tight consolidation around the recent high suggests that the Swiss is poised
to return to new high ground. However, because the Dollar isn’t a complete patsy
politically and economically, the Swiss gains into new high ground should be
more measured and without the usual measure of flight to quality interest.
POUND:
The UK is seen as the facilitator at the coming G8 meeting and because UK
economic figures have been relatively strong, the Pound will remain poised just
under new high ground. We are getting the feeling that the Pound lacks the
incentive to spring significantly above the recent highs.
CANADIAN:
A nice recovery in the Canadian comes because of the Dollar slide yesterday and
because of trade surplus numbers posted by
Canada
.
Apparently the trade surplus figures reached the highest level in 7 quarters and
that suggests that the rising currency has yet to affect the export market of
the Canadian economy. Therefore, we assume that the trade will make an effort to
push the Canadian back up to the recent highs. However, our gut tells us that
something is less impressive about the Canadian trend!