Futures Point To A Slightly Stronger Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
-8 — It’s a little bit of a mystery why the bonds were able to hold together in
the face of the equity market action Monday. Maybe the trade is thinking that
the Friday payroll role numbers will provide a bullish surprise, or maybe the
trade is not yet willing to accept that SARS is under control in
Certainly, the WHO is suggesting that many places have SARS under control but
there is still a substantial risk that interior
could see the disease get out of control.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P +290,
DOW +27, NIKKEI
CLOSED, FTSE +21 — With the SARS issue
apparently coming under some control Monday, investors felt confident enough to
revive the recent bull track. In a surprise development even McDonalds managed
to provide some bullish fodder and McDonald performance has been one of the
major negatives for the market over the last two years! In other words, a number
of negatives dominating sentiment for the past two years continue to be removed
and that should give investors confidence. Speaking of confidence, one should
note that both the Conference Board and the
of
Confidence
numbers have shown, or will soon show, massive improvement in consumer
confidence and that should lead to improving investor confidence.
FOREIGN EXCHANGE
DOLLAR: Some might see the favorable equity market action, as a
reason for the Dollar to bottom and that is certainly possible. With the Euro
zone recently posting some disappointing survey figures and the
countering with a very impressive set of confidence readings, the bear camp in
the Dollar has to be somewhat concerned. However, the downtrend in the Dollar is
not a weak trend and it could really take some convincing to alter the sentiment
toward the Dollar. In other words, for the Dollar to actually mount a climb all
the way back to the March and April consolidation highs, we will have to see a
shocking headline type improvement in US payrolls. Since the SARS issue seemed
to be a negative to the Dollar, the containment of that disease could prompt
some short covering. In fact, a short covering move to 100.00 in the June Dollar
would not be that surprising.
EURO: A critical pivot point was violated
temporarily in the early morning action at 109.34 and long-term moving averages
don’t turn negative until a trade below 107.89. However, the macro economic
condition in the Euro zone favors some weakness or profit taking in the
currency. However, we doubt that the trend is changed but we do suspect some
profit taking and a decline to 108.90. It should also be noted that Euro zone
money supply figures contracted sharply and that might be the result of poor
management from the ECB. In other words, the Euro is vulnerable and the economy
might have to have another rate cut.
YEN: Critical support is seen at 82.91 but
we have to think that a slight abatement in the SARS threat is a benefit to the
Yen. In fact, it appeared that the Yen fell from above 84.00 simply because of
the proximity of the SARS threat and now that pricing should be put back into
Yen prices. Traders should buy any dip to 83.00.
SWISS: Already the Swiss is breaking out
down on the charts, as the flight to quality longs look to exit. We suspect that
the Swiss is set to decline to 71.90.
POUND: We are not sure if the SARS issue
impacted the Pound as much as other currencies and therefore it might not see
much backlash from the current unwinding seen in the Swiss and the Euro.
Furthermore, a favorable set of consumer confidence numbers from the
help to swing the pendulum into the bull camp on the Pound. Initial resistance
in the June Pound is seen at 159.30.
CANADIAN: What SARS took out of the
Canadian, might have to be put back in. In fact, unless the improved economic
look in the
is going to countervail the long interest in the Canadian, we would expect to
see a new contract high very soon. The June Canadian should not fall back below
critical support of 68.43.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD -1.30, SLV
-0.5, PLAT -14.20,
CP +20; London Gold Fix $332.60,
-$1.10; LME Copper Warehouse
stks
770,975 ton, -4,025 tons; Comex
Gold stocks 2.380, Unchanged; COMEX Silver
stks 108.1 ml oz, Unchanged; OVERNIGHT: A
Japanese holiday muted action. Gold was slightly weaker in Austral
GOLD: We suspect that the Dollar will remain
weak and that combined with concerns for the SARS issue in
will provide a slight support to gold. Barrick Mines
reported a slight decline in gold production in the latest quarter with a 1.26
million ounce tally following a prior output of 1.37 million ounces. It should
also be noted that Harmony mines also showed a decline in 3rd quarter 2002
profits and that also hints at lower production.
SILVER: With the equity market sharply
higher Monday, we would have expected to see silver rise but instead it sagged.
Apparently silver was garnering some flight to quality buying interest off the
SARS issue and now that the disease appears to be coming under control, it would
seem that some longs in silver have decided to move to the sidelines. However
like gold, seeing the end of SARS is really in the best interest of the bull
camp in silver.
PLATINUM: A major probe down was partially
rejected Monday but in order to turn off the bear trend the July contract must
close above $598 today. In fact in order to spark a short covering rally the
July platinum contract might first have to mount a climb back above $608.5.
Volume and open interest figures hardly show enough current interest to start a
major upward thrust.
COPPER: Chinese copper prices were higher
overnight and it would seem that the concern for SARS in
is declining and that should be supportive for copper prices. It should also be
noted that LME stocks are really showing a significant pattern of contraction,
with the decline today above 4,000 tons! If the copper is any good, it should
now at least mount a moderate short covering rally. In fact, we suspect that
copper could easily mount a bounce to 73.40 but only if the world equity markets
can manage to put together a string of gains.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE -41,
HEAT -14, UNGA
-67 — The energy complex managed to recover some of the early losses Monday,
partially because of a strong bounce in the equity market and ideas that the
SARS virus might be coming under control. However, we suspect that the energy
complex will be unable to mount a significant rally, as the trade is already
anticipating another moderate increase in crude stocks in the Wednesday reports.
NATURAL GAS
Warming
seasonal temps and excessive weakness in the regular energy complex should
continue to weigh on natural gas prices. We also have to think that the small
spec long position is under pressure, considering its record level around the
highs last week.