Futures Point To A Slightly Weaker Open
INTEREST RATES
01/07 OVERNIGHT CHANGE to 04:07 AM:BONDS-8 The
Treasury markets might have gotten ahead of itself with the upside action
Tuesday. It would also seem that currency market action will yield much less
intervention buying of US Treasuries in the action today. Certainly the US
economic numbers gave the bulls confidence, especially after the supportive Fed
dialogue, but we are not convinced that prices are set to power all the way back
up to the December highs.
STOCK INDICES
01/07 OVRNIGHT CHG to 04:07 AM:S&P-190, DOW-16,
NIKKEI -56, FTSE-4 The market is in a corrective mood but the recent pattern has
been to shake the profit taking posture after 2 to 3 sessions of minor declines.
It was pretty clear that the investors were coming in and picking up values on
weakness yesterday, as outside market action could have sparked a steep decline
in stock prices but the market managed to find enough fresh buying interest to
offset those moving to the sidelines. The economic report slate is empty today,
with a Fed speech expected late after the close.
DOW
Initial support is targeting at 10,479 and then again down at last weeks
consolidation low of 10,398. Short-term technicals have been in a sell mode
since December 23rd and have been wrong, so we have to wonder if the market
isn’t correcting its technical positioning with sideways trade. Trend line
support in the March Dow comes in today at 10,409 and we would become a buyer at
that level.
S&P
The March S&P should have a critical pivot point at 1120.00 but near term
support doesn’t come in until 1118.00. Trend line support would seem to allow a
slide back down to 1113.85. The market lacks a bullish buzz and without
scheduled reports, prices might be set to chop with a minor bearish bias. In
order to rekindle the bull tilt, the trade will have to have a reason to expect
good things from the payroll report on Friday morning!
FOREIGN EXCHANGE
US DOLLAR
The overnight action in the Dollar is violating some
technical resistance levels on the charts, suggesting that more upside might be
seen. We have to think that the residual intervention effects are lifting prices
but more than likely technical considerations are also causing some gains in the
Dollar. We have to think that the Dollar was extensively oversold and that weak
Euro zone numbers overnight facilitate the short covering in the Dollar. In
order to catch the attention of trend traders the March Dollar would have to
rise above the gap at 86.85. Therefore, stand back and allow a minor bounce but
be ready to sell into the rally, as the trend is down and little looks to change
the trend in the coming two sessions. However, one will have to be careful
around the unemployment report Friday morning, as that report could generate
some fireworks. We suspect that aggressive traders could get short around 86.67
using a stop at 86.95.
EURO
With Euro zone confidence down and consumer
sentiment weaker, it’s understandable that some longs decide to bank some
profits. We doubt that the Euro will fall aggressively because the US economy
has recently showed some weakness but considering the magnitude of the rally in
the Euro since the November lows, one can’t be surprised with a moderately large
corrective setback. Initial support in the March Euro comes in at 126.23 and
then again down at 125.97.
YEN
While the intervention threat remains, it would seem
that upward pressure on the Yen has been temporarily reduced. While short-term
technicals are in a sell mode, the readings are not at levels that indicate a
big washout is needed to correct the markets standing. However, we would think
that the BOJ would want to propagate weakness and intervene in a down market, as
they might get a bigger reaction than selling into a buying frenzy! Don’t be
surprise if the March contract slides all the way down to 93.84.
SWISS
Trend line support in the Swiss comes in down at
80.63 and with the economic report slate empty, there would seem to be little to
prevent a further slide in the Swiss today.
BRITISH POUND
We are really surprised that the Pound hasn’t found
strength this morning, as numbers from the CBI are pretty impressive. Therefore,
the market must be significantly over done technically and in need of a pause
before resuming the upside track. When one looks at the CBI readings it is still
clear that the UK economy is really strong!
CANADIAN DOLLAR
Short-term technicals are close to a sell mode and
that breakneck pace of gains seen in December, could now haunt the bull camp.
Near term corrective support on the charts comes in at 76.99.
METALS
OVERNIGHT
GLD-1.70, SLV-9.80, PLAT-4.10 London A.M.
Gold fix $420.65 -$7.35 LME COPPER STOCKS 426,075 tons -2,500 tons COMEX Gold
stocks 3.12 ml -201 oz Comex Silver stocks 123.6 ml oz -1.18 mil oz
GOLD
The action Tuesday looked very much like a blow off
top but with the fundamentals behind the up trend in gold still in place, we
have to think that the market will re-gather itself after a brief consolidation.
With the Dollar trading nearly 100 points above the low-posted Tuesday, we can
certainly understand some weakness in gold. Chinese gold was lower overnight on
profit taking and a lack of fresh long interest and therefore traders should
expect prices to probe lower levels.
SILVER
Short-term technical indicators are in a sell mode
and the silver market appears to have posted a massive spike top. Like the gold
market, silver had to have a massively overbought spec position around the highs
Tuesday and is probably set to balance that position with more selling today.
Due to the sharp rise in prices, the charts don’t offer too much support around
current prices.
PLATINUM
Trend line support in platinum comes in at $817 and
when one considers the magnitude of the corrections in gold and silver
overnight, it is a little surprising that platinum hasn’t shown some aggressive
liquidation. About the most positive thing that can be said about platinum, is
that the net spec long hasn’t shown that much variation and certainly wasn’t as
inflated as gold or silver following the recent run up in prices. Expect the
rally to pause but for the up trend to generally continue later this week.
COPPER
While it would seem that Asian buyers were still
somewhat interested in copper overnight, it is clear that copper was
significantly overbought around the highs this week. The overnight buying was
physical buying and not necessarily speculative buying, which means that the
market might find fresh long interest on minor price weakness. LME stocks
continue to decline providing a backbone for the market, but we have to think
that the US economic information yesterday created some doubt in the minds of
the demand bulls.
CRUDE COMPLEX
01/07 OVERNIGHT CHG to 04:07 AM:CRUDE-5, HEAT-14,
UNGAS+4 With extreme cold blanketing the US and the forecast out to January 16th
showing cold temps in the East, the energy complex was able to discount the weak
US economic readings released Tuesday morning. While the macro economic reports
aren’t a critical factor driving energy prices, it is easy for the market to
become bulled up in the face of ultra strong economic readings it is also easy
for the market to question the bull case in the face of slack economic reports.
In the near term the weather and a fresh reading on supply looks to drive
prices.
NATURAL GAS
We continue to stand by the projection of a $7.30
trade in the March contract. We also have to think that the benefit of the
current cold could end with more gains early in the session today. The natural
gas market has been taking its lead from the regular energy complex and
therefore we suspect that the weekly inventory reports will be extremely
critical to the natural gas market today.