Futures Point To A Slightly Weaker Open
METALS
OVERNIGHT
CHANGE to
4:15 AM
:GLD-0.20
,SLV+0.5Â ,PLAT+5.00 Â London
Gold Fix $362.60 -$2.40 LME Copper Warehouse stks
725,950 tns -4,775 tns Comex
Gold stoc 2.471 +1 oz COMEX Silver stocks 105.5 ml
oz -630,040 oz OVERNIGHT: Asian traders are simply not showing fresh long
interest in gol
GOLD:
Technically gold isn’t into a breakdown mode until prices fall below $361.1 and
$359.4, but the fundamental story in gold is deteriorating. Maybe the Dollar
trend will reassert itself after the ECB decision this morning or maybe the
string of gains in the stock market will abate but if they don’t, gold will
continue to waffle with a growing chance of a washout. After all, the gold
market is still sitting with a significantly over extended long spec and fund
position.
SILVER:
The silver appears to be pointing to a downside breakout on the charts. However,
it should be noted that COMEX silver stocks are edging down and have forged a
downside breakout of sorts! Since the silver hasn’t been acting in tight
correlation with the equity market action, we doubt that it is ready to run
higher off the hope for improved physical demand. The positive thing about
silver is that open interest has declined enough since the May high to put the
market in a slightly better technical position.
PLATINUM:
The October platinum contract is showing all kinds of gap action on the charts,
which means that players will have to weather significant volatility in both
short and long side plays. We are still not sure what the fundamental focus is
in the platinum market but we have to think that the positive equity market
action is beneficial to platinum. Countervailing the positive influence of
stocks is the ongoing concern toward the auto sector.Â
Â
COPPER:
The divergence between the stock market and copper is evidence that the copper
market is either exhausted off the May rally, or has found a fair value price
zone. Chinese and LME copper prices were weaker overnight setting a partially
negative tone for the
US
copper
market. It would seem that part of copper recent gains have come off the weaker
Dollar and after the ECB rate decision there might be a resumption of the down
trend in the Dollar, if not then copper might continue to languish in the upper
70 cent area.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE -15Â
,HEAT-4Â Â ,UNGA-14
 In our opinion the energy complex saw a shot across the bow of the bull
camp Wednesday, with all the inventories showing a build. Perhaps the most
bearish development is that the refinery-operating rate leaped higher.
NATURAL
GAS
The trade
is expecting a triple digit weekly inventory injection with the top end of the
expectations reaching 120 bcf. In fact, just to show
how bullish some market players are, a source interviewed by Dow Jones newswires
suggested that gas prices will make a new contract high if the build today is
less than 100 bcf and that is pretty close to the
average build for this week in history.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS
-3 One still has to give the bull camp in bonds credit, as Treasuries are
hanging right around the highs despite all kinds of bearish news flowing to the
market place. In addition to better than expected ISM non-manufacturing
readings, the Treasuries had to weather another impressive rally on Wall Street.
In the last two weeks, we have seen better economic readings from the
manufacturing and service sectors and yesterday we even saw investors turn a
favorable eye toward airline stocks.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P-330 DOW -32 NIKKEI +99 FTSE -9Â The bull march
continues with the regularly scheduled economic reports giving the market a
necessary lift Wednesday, in the face of potentially negative developments in
the auto sector. A good bull market typically finds a way to uncover fresh
supportive items and Wednesday was a prime example. We are getting closer to a
near term top as more of the talking heads are suddenly forecasting sustained
growth and are talking about the “Bull Market”.
FOREIGN
EXCHANGE
DOLLAR:
The Dollar really isn’t acting that impressively considering the macro economic
information flowing from the
US
economy
and the gains being posted in the
US
stock
market. In the past, the slightest leadership from the
US
stock
market was more than enough to channel money into the Dollar. The market is
certainly waiting for the ECB rate decision this morning and the expectation is
that the ECB will cut rates. We are not sure how the market will react as the
Dollar has seen some support off the idea of a cut, as that reduces the interest
rate differential of the Euro and should put some money into the
US
.
However, some might argue that a change in rates isn’t enough to alter what
appears to be a major historical condition. In other words, the trend has been
down in the Dollar and the rate decision by the ECB would not seem to be enough
to alter entrenched sentiment. The fact that the
US
economy
is coming around, is a more probable bottoming
influence for the Dollar but we have not detected a tight focus on that
fundamental in the daily action. We
are skeptical that the Dollar will bottom and are not convinced that the ECB
will act. If the ECB didn’t act the Dollar might rise because of the
stubbornness of the ECB. Look at some cheap Dollar puts for a resumption of the
trend but we are not sure a short Dollar play is appropriate.
EURO:
The Euro continues to repel against the downside breakout on the charts. The
euro might be between a rock and a hard place as a failure to cut might cause
the world to degrade its view toward
Europe
, while
a cut could cause money to leave, looking for higher rates of return elsewhere.
From a classical fundamental sense the Euro should fall but this market hasn’t
been playing by fundamental rules.
YEN:
The Yen continues to wait on direction from the Euro and the Dollar. Undermining
the Yen is a weak leading indicators report reading that suggests deflation
might be a problem again. Therefore, we can’t favor a long Yen play even though
that might be the direction the currency takes.
SWISS:
It is clear from the downside breakout in the Swiss that the up trend has been
broken. Considering the consistent equity market gains and the improved macro
economic sentiment, the market is correct in down grading a flight to quality
currency like the Swiss. Near term targeting is just above 75.00.
POUND:
The BOE left rates steady and the Pound seems to be favorable to that decision,
as it is streaking toward the recent highs. Maybe the Pound is the benefactor of
the indecision in the Euro and the Dollar! No stopping until the high of 165.34
is encountered.
CANADIAN:
We think the Canadian will eventually rise to a new contract high, but the
action in the coming 24 hours could be quite volatile. We would not rule out a
correction to 72.86, especially if the US Dollar manages a climb above 94.11 on
a close basis. Call options might be a better short-term tool than long Canadian
futures.