Futures Point To A Slightly Stronger Open
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS
+12 It is pretty clear that the Treasury market paused its downside thrust
once the employment Index of the ISM was considered Tuesday morning. However,
because the majority of the ISM readings were really strong that should
suggest that in the future, even the employment portion of the ISM could
improve. What the Treasury markets come away with from the action Tuesday, is
that recent conditions still showed extremely weak employment numbers and that
probably gives some bulls hope that the Friday numbers will bail them out from
the selling pattern present since the August 28th and 29th double top of
106-13.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+170 DOW
+19Â NIKKEI +25 FTSE +43Â Finally
the S&P confirmed the new highs already posted in the Dow last week and
that seems to put the market back in a bullish technical balance. While we
take the new high moves as a sign that Wall Street is beginning to give credit
for the recovery on Main Street, the level of optimism isn’t that significant.
In other words, while prices seem to have a positive bias it would not seem
like this market is poised to run aggressively higher.
FOREIGN
EXCHANGE
EURO:
Certainly the euro deserves to make a new low for the move but the question
becomes does the market have the capacity to drive prices sharply lower.
Standing against a big washout in the Euro this morning, is a favorable August
PMI services reading. However, the question becomes, is the Euro zone economy
strong enough to attract investment funds away from the US. We think the PMI
numbers are certainly strong enough to temper the selling but not to stop the
selling in the Euro. Therefore, we have a downside target in the September
Euro of 107.35.Â
YEN:
It would seem that the efforts of the BOJ are not turning the Yen directly
down and with the market itching to test the resolve of the BOJ it would not
be surprising to see the Yen rise toward resistance of 86.40. Cross spread
trading seems to be deflating part of the Yen rise but unless the US Dollar
manages a sharp rise today, the bias in the Yen is considering to be up.
SWISS:
The Swiss seems to be capable of respecting support of 70.27, which is
enforced by a quasi consolidation pattern. However, big range days down last
week, seem to offer so much overhead resistance that the Swiss probably won’t
be able to rise much against the downward bias.
Â
POUND:
Pretty weak August numbers from the CBI would seem to undermine, but the
Services PMI countervails the selling pressure. It should also be noted that
PMI readings showed improvement in employment and right now that kind of
reading carries significant weight. Therefore, the numbers would seem to argue
against a downside breakout in the Pound but the direction of the Dollar
remains paramount. CANADIAN DOLLAR: The Canadian missed the opportunity to
breakout to the upside. Therefore a slide to the middle of the recent
consolidation around 71.37 seems likely today. +Â The outlook toward the
US economy is simply too strong, to allow the Canadian a window to rally.
METALS
GOLD:
The gold market would seem to be vulnerable to more profit taking considering
the strong August rally and the relative overbought positioning of the fund
and small spec players. The trade is attempting to discount the historically
large small spec and fund long position, suggesting that increased global
investment and increasing commodity fund holdings make the historical
comparison of COT numbers less significant. We have to agree that gold can
certainly carry a larger long position but the question becomes just how much
above the old 135,000 contract record, can the gold market safely hold without
transitioning into a volatile back and forth market.
SILVER:
Trend line support in December silver comes in at $498, while a critical
upside pivot point is taken out today with a rise above $507. It is very
disappointing for silver to have discounted the favorable economic reports
Tuesday and the rally in the stock market. In other words, silver isn’t being
driven by the hope for improved near term physical demand.
PLATINUM:
The favorable economic information released Tuesday and the rise in US equity
prices, rationalizes recent gains in platinum and probably fosters additional
gains in the sessions ahead. It’s pretty simple in platinum, economic recovery
means more demand on top of an already tight supply condition. Â
COPPER:
The copper market is having trouble this morning holding all the gains posted
Tuesday morning. Clearly the improvement in the US ISM numbers helped copper,
as that hits right at physical demand prospects. Chinese copper prices were
higher overnight giving the US session a positive start and a chance to follow
through on the upside.
CRUDE
COMPLEX
OVERNIGHT
CHG to    4:15 AM Â
:CRUDE +14Â ,HEAT+81Â
,UNGA+46Â The last time the energy complex broke so aggressively,
the market was coming off news that OPEC would not defend the bottom of the
banding mechanism. In other words, a break of the magnitude seen Tuesday, has
in the past been caused by a significant fundamental event.
NATURAL
GAS
Critical
support in the October natural gas was violated Tuesday but the market managed
to recoil away from those lows and close back above the July lows. We suspect
that the market would temporarily violate the July lows but with the regular
energy complex so weak, we wouldn’t be surprised if another test of the recent
lows was undertaken this week.