Futures Point To A Slightly Stronger Open
METALS
OVERNIGHT
CHANGE to
4:15 AM
:GLD+0.40
,SLV-1.0,PLAT+4.80. CP +30 Â London Gold Fix $342.65 +$2.15 LME Copper
Warehouse stks 799,975 tns
+28,125 tns Comex Gold
stocks 2.46 +196,933 oz COMEX Silver stks 108.1 ml
oz Unchanged OVERNIGHT: A slight pause in action as the market waits on the US
Fed outcom
GOLD:
The June gold contract appears to be coiling into a tight range for a near term
decision. With the market easily moving into new ground last week, we have to
think that gold will manage an upside swing on the next major move. Because the
gold market might be in the midst of a long term revival of investment demand,
the rate of gain on the upside might not be that impressive and in fact gold
prices might forge a long slow grind higher as investment money trickles back
into gold.
SILVER:
Unlike the gold, silver continues to show an upside path, as it stands right on
an upside breakout point into the
US
opening
this morning. It would appear that July silver is headed toward a $5.00 trade.
However, with volume and open interest declining during the most recent
aggressive adjustment higher, it would not seem like the trade is inclined to
chase prices.
PLATINUM:
From the overnight action, the platinum market might have found a bottom, as it
forged a minor gap up. Open interest and volume has dried up and that could
signal a waning interest in the short side. However, a pattern of lower lows,
since the March highs, means that the recent low of $590 must hold to discourage
the sellers. We just don’t get the sense that the macro economic outlook is
going to be strong enough to launch the market into a sustained upside run.
Â
COPPER:
We are a little shocked that the overnight copper indication is for a slightly
higher trade, as the LME stocks exploded for a massive gain. While that increase
might be logically spread over a couple sessions (because of the recent holiday
closure) even an averaging of the increase in stocks yields a daily inventory
rise in excess of 14,000 tons! The Asian copper action saw some Japanese buying,
which probably came as a result of the strong gain in the Nikkei. However, with
the Euro zone posting some weak economic readings and all eyes turned toward the
US Fed’s assessment of the
US
economy,
it would not seem like copper is going to spring away from the recent lows
easily.
CRUDE
COMPLEX
OVERNIGHT
CHG to  4:15 AM Â
:CRUDE -39Â ,HEAT-66Â
,UNGA-41 Â The energy complex managed to repel off the lows Monday,
in what might be a sign that the market is capable of forging a cyclical bottom
above $26.00 in the June contract. Even with the energy complex confronted with
the idea that Venezuelan production had reached 3.2 million barrels per day, the
market managed to climb off the days lows.
NATURAL
GAS
The
fundamentals were not apparently the main factor behind the spike rally in
natural gas Monday, as the cash trade suggested that thin volumes allowed the
move to unfold. There were supposedly some unplanned power plant outages and
that resulted in unusually high demand for replacement, or alternative power.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS
-5 The trade is mostly expecting the Fed to confirm that the
US
economy remains in a soft
spot. The trade is also positioned to think that the war was not the only thing
holding back the economy. In other words, a large portion of the trade is under
the assumption that the
US
economy suffered some
structural blow and that conditions won’t get better in the near term, even with
less geopolitical restraints.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+230 DOW +17 NIKKEI +176 FTSE +39Â For all the
negative dialogue flowing toward the US economy in the bond market and all the
negative sentiment flowing toward the Dollar in the currency markets, the US
stock market is behaving quite impressively. Some key earnings reports today
might provide some fresh direction for technology issues and might serve as a
pleasant diversion from the weak regularly scheduled US economic report slate.
The historical track record for the stock market and the Fed isn’t that
favorable, but with the current situation lacking the usual uncertainty,
it is possible that the Fed meeting will pass without too much fanfare.
FOREIGN
EXCHANGE
DOLLAR:
About the only thing discouraging the Dollar from a direct slide lower, is the
fact that the Euro zone posted some soft price readings, which would seem to go
along with a soft economic view. The
US
might
be trying to alter the decline in the Dollar by offering legislation that would
prompt offshore money to move back toward the
US
but
that seems to be a poor attempt to change the flow of money away from the
US
. With
some currency analysts suggesting that money is flowing away from the US due to
interest rate differentials and the Fed not expected to move on rates today, it
would appear that the status quo is to remain in place and that should mean that
the Dollar continues to slide. Some former Fed members suggested that the
US
might
seek to intervene if the Euro rose to 115 but in the
mean time little looks to alter the slide in the Dollar.
EURO:
If one can take the muted rise in the Euro zone PPI readings as a sign that the
euro zone economy is soft, that should only serve to temper the long side
interest. In fact, the trade seems almost too confident in the Euros ability to
rally. However, as mentioned in the Dollar comment, there would seem to be very
little to alter the trend in the near term. Targeting of 115?Â
YEN:
The Nikkei continues to soar and that seems to put the Yen on a path to test the
April highs up around 85.22. Apparently the SARS issue isn’t going to damage the
Japanese economy, or the prospects of the Japanese Yen. Even with the BOJ
minutes showing some concern over long-term interest rates and inflation, the
trade is not discouraged from buying the Yen.
SWISS:
Even without a crisis, the Swiss seems to be poised to rally and the March highs
of 75.77 would seem to be an easy target for the Swiss.
POUND:
With improving numbers seen in the UK April Services PMI and confidence rising
following the Iraqi war, the market is able to discount a downturn in
UK
manufacturing and the threat of future job losses. In every case, the overt
weakness of the Dollar allows other currencies to gloss over any economic
imperfections. Solid support is seen at 160.00, with resistance seen at 161.15.
CANADIAN:
The US Dollar is simply paving the way for more gains in the Canadian. In fact,
we now think that the Canadian is set to climb toward the 75.00 level on the
weekly charts.