Futures Point To A Slightly Stronger Open
INTEREST RATES
OVERNIGHT
CHANGE to 4:15 AM: BONDS -8 — The bull camp
suffered a significant blow last Friday, even though fixed income price action
wasn’t overly weak as a result of the economic information. However, because the
economy garnered some respect from the
numbers, we have to think that the bull camp is vulnerable. Even
inflation numbers were hotter than expected, creating a potential undertow of
concern for bonds and notes! Considering the flow of news from last Friday, the
earnings reports due out early this week, take on a more significant role for
Treasuries.
STOCK INDICES
OVERNIGHT
CHANGE to
AM
S&P +160, DOW
+18, NIKKEI -64,
FTSE +29 — The stock market comes into the action this week in a
partially disappointing position. After seeing the
war go much better than expected and hostilities coming to an end, many expected
Wall Street to erupt in a rally but instead the trade turned its focus toward
soft earnings expectations. With a flurry of earnings reports due out this week,
there is the chance that the official end of the fighting won’t spark a rally in
stock prices.
FOREIGN EXCHANGE
DOLLAR: The
certainly posted a positive string of numbers last Friday but the currency
markets hardly gave the economic differential any consideration. In fact, the
trade is pretty disjointed on its opinion. It would seem that no country enjoys
an edge. Even with the situation in
going much better than many would have expected the US Dollar is getting little
benefit. Maybe the comments that
Syria
might be next, is undermining the Dollar, as that would certainly fuel the theme
that the
US
is out to control the
Middle East
We are simply shocked that the combination of joyous celebrations in
and much better than expected US numbers on Friday, failed to drive the Dollar
sharply higher. In fact, if the Dollar were to fall back below 100.23 that could
signal a significant technical and fundamental failure. On the other hand,
seeing the Dollar rise above 101.47 could prompt a significant long-term short
covering reaction from position players.
EURO: Economic stats from the Euro zone
continue to hinder the Euro. In fact, if it were not for the economic weakness
in
we suspect that the Euro would have mounted a rally and close back above 108.00
last week. We see no trend in the euro but we do think that the Euro is rather
expensive on a long term basis, considering that it is still 10 points above
where is was trading in December of 2002. In other
words, does the Euro deserve to maintain the vast majority of the war premium
interjected into its price?
YEN: The Nikkei made another 20-year low
overnight and the SARS issue would seem to be a negative for the Yen. The BOJ
did suggest that market volatility off the
war is declining and that might help in stimulating consumer demand and an
improvement in the world economy. We continue to see the Yen lose flight to
quality, or war premium and that could mean a downside breakout this week. Near
term downside targeting is seen at 82.68.
SWISS: Like the rest of the currencies, it
would appear that the Swiss is giving up its flight to quality premium. In fact,
the overnight low in the Swiss leaves it right on critical chart support. A
failure to hold above 71.71 could mean a decline all the way down to 71.15.
POUND: The fact that the
and US economies are both showing some signs of
inflation, could mean that those economies have a little more momentum than was
expected. We already think that the Pound has been pushed down too far,
considering the circumstances and that the Pound might be set to recover to
158.00.
CANADIAN: The Canadian is overbought and the
need for flight to quality is lessening. At this point, the Canadian seems to be
the only currency that hasn’t seen its war premium extracted. Therefore, we have
to be a little defensive toward the Canadian but still fully expecting the up
trend to continue.
METALS
OVERNIGHT CHANGE to
4:15 AM
GLD
-2.30,
SLV +0.2, PLAT +3.30,
CP Unch;
Gold Fix $325.60, +$.55; LME Copper
Warehouse stks 796,500 ton, -2,050
tns;
Comex Gold stocks 2.378 ml, -129 oz;
COMEX Silver stks 107.9 ml oz, +65,893
oz; OVERNIGHT: Minor Asian losses seen.
GOLD: The gold market comes into the week
vulnerable despite a moderate correction in the early part of April. Because the
net spec long in gold was still 51,000 contracts, (as of last Tuesday) the
market is vulnerable to stop loss selling, particularly if the war is downgraded
as an anxiety event. While the $320 level seemed to be a fair value support
zone, considering the magnitude of the net spec long of roughly 54,000
contracts.
SILVER: The net spec long in silver is less
than 22,000 contracts and all of that long is in the small trader category. A
quasi-triple top at $4.515 is resistance, while support is seen at $4.45.
Traders should have banked a profit last week on the rise above $4.50 and should
be looking for a decline to $4.42 to re-enter the long position.
PLATINUM: Like gold, the platinum market
isn’t really showing much positive correlation to the usual fundamentals. With
the
showing inflation and better than expected growth last Friday, we would have
expected platinum to rally but it didn’t. Therefore, we have to expect to see
July platinum return to the bottom of the April consolidation low of $600.
COPPER: Slightly higher
copper prices, give some credence to the strong overnight action in the US
copper market. The much better than expected economic readings from the US on
Friday gave copper prices a lift and considering that the funds were net short
as of last Tuesday, we have to expect to see some short covering buying today.
We still think that the copper market needs positive leadership from the equity
market to rally aggressively but even without favorable stock price action, July
copper might be able to rise to the 76-cent level.
CRUDE COMPLEX
OVERNIGHT
CHG to
AM
CRUDE -46,
HEAT -100, UNGA -54 — The energy
complex managed a moderate recovery off the lows last Friday but the market
remains on the ropes. While the weekly COT report showed the net spec position
in the crude oil to be almost 29,000 contracts short, that reading was taken
around the highs last week.
NATURAL GAS
The
weekly COT report showed the small specs to be holding a significant long
position and that was before a pretty significant upside extension late in the
week. Considering that a massive rally followed the COT report, we have to think
that the small specs are now net long at least 35,000 contracts and the funds
are also net long a minimal amount.