Futures Point To A Slightly Weaker Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS +14 — Apparently a Manpower survey
showed only 22% of the companies surveyed, expected to hire additional workers
in the coming quarter and that gives the bonds a bullish lift to start the week.
While only 9% of the companies surveyed by Manpower indicated they would reduce
their workforce, in the coming quarter, the employment tilt is supportive to
bonds after the initial claims and ongoing claims figures released last week.
The economic report slate this week is pretty thin with the exception of a home
sales reading on Tuesday and a Durable goods report on Thursday.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
-190, DOW -19, NIKKEI
+51, FTSE -15 — The stock market is
vulnerable to a moderate washout, as prices have managed to rise moderately
above recent support, at the same time that fundamentals appear to be worsening.
In fact, the concern over war is already being seen in the airline industry
headlines, with US Air and United already posturing for a government bailout. A
German newspaper suggested that a number of US airlines wouldn’t make it through
a war, is just a sample of the negative sentiment surfacing in the Press this
morning.
FOREIGN EXCHANGE
DOLLAR: The flight to quality isn’t exactly focused toward the Euro
and that in a sense takes away some of the selling pressure from the Dollar.
Until the outcome of the UN vote is seen, we suspect that the Dollar will be in
a slow grind down. In the event that the
gets enough votes to pass the use of force resolution, the Dollar would undergo
a massive short covering rally. Most experts suggest that some countries might
abstain from the vote, while at least three countries with veto power are
expected to be no votes! Therefore, the odds would seem to be against a surprise
short covering rally. In the mean time, we also see the
economic numbers softening, creating a down draft for an already weak US Dollar.
Near term chart support is seen at 99.12 and we suspect that the Dollar will
hold above the February lows until it is clear that the
is going to attack unilaterally.
EURO: The fact that the Euro isn’t showing
solid upside gains overnight stems from the fact that the Euro is no longer the
prime flight to quality currency. One might consider the Canadian the prime
flight to quality currency along with the Yen. There were rumors overnight that
the ECB might be considering a rate cut and that gives off the scent of concern
toward the Euro zone economy. In any regard, if the Dollar is weak enough that
means the Euro will rise despite itself. We assume an upward bias but the risk
and reward of being long the Euro is extremely unattractive.
YEN: The overnight breakout up targets the
January highs in the Yen, which is surely seeing flight to quality long
interest. Even in the face of poor Supermarket sales and declines in Department
store sales, the Yen is in favor partly because of flight to quality and partly
because the Japanese recently suggested they would not seek coordinated
intervention.
SWISS: Near term support comes in at 72.87
and we would probably be a buyer of the Swiss at that level. However,
considering the impact of the war/no war decision on the Swiss, we would
probably buy the Swiss at the market and buy a March at the money Swiss put.
POUND: Near term support comes in down at
157 but the Pound is about to enter a critical political pivot point. This
morning the
suggested that they are ready for war and also suggested that a UN resolution
wasn’t necessary and that lumps the Pound in with the same negative fundamentals
as the Dollar. Therefore we have to assume a downside track for the Pound.
CANADIAN: Make no mistake about it, the
Canadian is making a statement in the upside breakout overnight. It is clear the
world sees the Canadian economy as out of harms way and the one country that
could benefit significantly from its business with the
(which is perhaps the strongest growth area in the world). Therefore, the
Canadian looks set to climb toward the upside target, we mentioned last week
around the 67.10 level.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +2.00, SLV
+0.0, PLAT +4.50;
London Gold Fix $352.90, -$1.20; LME Copper
Warehouse
stks
824,850 ton, -50 tns;
Comex Gold stocks 2.263 ml, Unchanged;
COMEX Silver stks
108.0 ml oz, Unchanged; OVERNIGHT: Light buying in Australia and Japan but long
interest is unimpressive.
GOLD: The market would seem to have found
some support around $350 in the April contract, partly because of the upcoming
UN debate on the use of force resolution and partly because of the potential to
see a rate cut from the ECB. It would also seem like the outlook for the economy
is worsening, with the numbers last week softening and the promise of even more
job losses ahead. Therefore, the gold market could be in line for a little macro
economic uncertainty but traders have to make sure the economic tilt doesn’t
degrade into a fear of deflation.
SILVER: The weekly COT report showed a net
spec long of almost 51,000 contracts, which is down about 10,000 contracts from
the prior reading. With the outlook for the economy sloppy, the silver needs
gold to show solid leadership, or silver will tend to sag. However, given the
overnight action in silver, it would seem that the bull camp holds a slight
edge.
PLATINUM: A positive bias in platinum
especially since the funds and small spec position remains a nominal 5,000
contract long. The $660 level would seem to be a critical pivot point with near
term resistance not detected until $664. Those long platinum should carry some
cheap April put coverage into the coming war decision.
COPPER: We are really surprised that copper
made the run it did last week, partly because the macro economic outlook is
sagging and partly because the issue of war still looms. It would appear that
the funds were the heavy buyers, which probably pulls up the net fund long from
26,000 in the last COT report to possibly 32,000 contracts. Since the COT
report, copper has gained 280 points! However, more gains would appear to be in
order as both
and
action was higher.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +32,
HEAT +95, UNGA
+72 — The residual bullish sentiment off the explosion last Friday
morning combines with another cold blast to start the
week out on a supportive note. The fact that gasoline prices exploded on the
fear that a terrorist act was behind the fire in
highlights the precarious situation in the energy complex.
NATURAL GAS
The
massive extension up in the April natural gas on Friday was mostly responsible
for the rally Friday, but the weather for early this week turned a little colder
providing another leg higher. The weekly COT report showed the natural gas to be
net spec long 81,000 contracts, which is historically a record net spec long.