Futures Point To A Slightly Stronger Open
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS -19 The way the stock
market finished off the week last week and the fact that European equity prices
are higher this morning, has caused bonds and notes to forge a fresh downside
breakout. In fact, with the fear of supply and the fear of recovery in the air,
the bulls have very little to hang their hats on. About the only thing that
remotely suggests that the bear track is overdone is the fact that the net fund
position is getting pretty excessive.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+190 DOW +16 NIKKEI +191 FTSE +35Â Optimism seems
to reign this morning as European stocks were seen building on the weekly gains
posted in the US last week. While there is the expectation of favorable earnings
reports, the real focus seems to be coming off the improvement in the macro
economic outlook. In fact, after ignoring the sweep of favorable regularly
scheduled economic information early last week, the
US
stock
market finally embraced the better flow of US numbers.
FOREIGN
EXCHANGE
Dollar:
The Dollar managed to reverse the overnight weakness and recover into its
opening. We have to think that growing euphoria toward the
US
stock
market and therefore the
US
recovery is making it more difficult for the sellers to attack the Dollar. Even
with strong German economic numbers overnight, the Dollar manages to gather some
light buying interest off the anticipation of
US
numbers
scheduled for the coming week. Considering the aggressive liquidation Friday in
the Dollar, the bounce this morning isn’t that surprising. However, in order for
the Dollar to really gather buying momentum, the September Dollar will have to
rise above 96.18. The
US
economic report slate is thin today but gathers momentum as we progress through
the week. Therefore, we suspect that the Dollar will attempt to climb back above
96.37 early in the week. However, if the Dollar can’t put itself in a strong
position into the monthly payroll reports Friday, longs will have to become very
defensive.
EURO:
The Germany Ifo Index rose to 89.2 from 88.8 while the expectations Index also
rose significantly. Therefore, the Euro certainly sees more macro economic
support than it has had for at least a month. However, we are not sure that the
confidence in the Euro zone recovery is going to rise to the level seen in the
US
outlook. Near term critical support in the Euro is seen at 113.72 and a rally
back above 115.04 would serve to change our near term bearish view toward the
Euro. Right now, we are not sure the Euro can overcome the positive buzz toward
the
US
.
YEN:
Favorable conditions seen throughout the world is serving to press the Yen into
new low ground for the move this morning. The massive rise in the Nikkie
overnight simply reconfirms the recovery capacity and gives the BOJ even more
incentive to press the Yen lower. In fact, if the BOJ sees the prospect of
immediate near term export benefits from a lower Yen, they could really step up
the physical selling of the Yen. Near term downside targeting in the September
Yen is now 83.35.
SWISS:
We are actually surprised that the Swiss didn’t see even more selling in the
overnight action, as the optimism toward world equity markets usually undermines
the flight to quality status of the Swiss. Near term downside targeting of the
Swiss is seen at 73.30 this week.
POUND:
It would not seem like the Euro or the Dollar is taking a leadership role this
morning and that benefits the Pound. With the BOE suggesting that economic
weakness is still driving BOE policy that seems to hint at even more rate cuts
if needed. Therefore, the trade has reason to think that the Pound has even more
upside potential. The Pound has a near term upside target of 163.16.
CANADIAN:
The next five days could be everything to the Canadian, as the currency tries to
return to the old up trend pattern. However, the Canadian would seem to have an
uphill battle proving it has the macro economic numbers to counter the potential
for strength in the US Dollar. This week is a major pivot point for the Canadian
and that could make a volatility play the best strategy to employ. Sell a
September Canadian futures and buy two September 72.50 Canadian Dollar calls.
METALS
GOLD:
The gold market could see some pressure this morning as the COT report showed a
13,000 contract expansion of the spec long and the South African strike was
averted. With the net spec long (net futures and options longs) reaching 72,000
contracts as of July 22nd and the market gaining another $10 since that report
was measured, we have to peg the net spec long to be 82,000 contracts on the
opening this morning. As we suggested last week, we don’t think that a large
portion of the long position in gold was put in place because of the threat of a
mining strike and that is a good thing for the bull camp because the AngloGold
strike was averted over the weekend.
SILVER:
While silver continues to consolidation the massive gains of the last week this
market is significantly overbought. The COT report showed the net spec long in
silver to be nearly 53,000 contracts and since the report was measured silver
gained another $.30. Therefore, one might peg the net spec long in silver to be
74,000 contracts.
PLATINUM:
Another massive range in platinum hints at a topping pattern. The net spec long
in platinum is close to 6,000 contracts and that is fairly long for a market
that doesn’t typically see big volume. We also think that more gold longs will
consider selling platinum today against gold positions as a temporary hedge.
Â
COPPER:
Another massive upward extension overnight suggests that copper is willing to
assume the improvement in the economy will continue. Certainly recent economic
numbers and action in the
US
equity
market fosters the acceptance of the improvement in the macro economic view and
that view looks to receive additional confirmation this week. Chinese copper
futures were higher overnight possibly off an Australian smelter being idled.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE -32Â ,HEAT-48Â
,UNGA-77 Â We continue to think that energy prices are caught in a
range but maintain a slight upward bias. The situation in
Iraq
continues to shift toward a
bearish condition but OPEC has already shown the capacity to remove oil from the
market as Iraqi oil comes back on line.
NATURAL
GAS
The
annual inventory deficit has narrowed to 537 bcf and one would expect that to at
least provide some measure of support to prices. However, the weather in the
US
simply gives the bears the
green light to attack the market and about the only limitation to even more
aggressive selling is that the market is already significantly short.