Futures Point To A Slightly Weaker Open
METALS
GOLD:
On one hand, the gold market was pretty impressive in mounting a sharp rally
Tuesday, in the face of a strong Dollar and generally strong equity market.
However, we just don’t get the sense that gold has a driving theme and the
capacity to trend sharply higher. There is no doubt that classic fundamentals
are supportive to gold but with the net speculative long already pretty large we
don’t get the sense that gold has the “buzz” that it had a couple
weeks ago.
SILVER:
While the recent rally in silver prices was accompanied by a slight rise in
volume and open interest, the overall levels of volume and open interest suggest
that the June rally had narrower participation than the February and April
rallies. We still think that September silver values around $4.50 are cheap and
deflated but we are fearful of adding in fresh long plays nearly 10 cents above
the long term value zone. In fact, given the poor technical action overnight and
the sharp rise in Comex silver stocks, we would not be surprised to see silver
slide back toward support of $4.52.
PLATINUM:
The platinum market really made a disappointing trade off the improved macro
economic look toward
Asia
yesterday. In fact, given all the favorable macro economic readings yesterday
and the weak action in platinum, it would seem that physical demand hopes are
not enough to drive prices up. Therefore a slide toward chart support of 638.7
in the October platinum contract is possible in the near term.Â
Â
COPPER:
The copper market certainly responded to the favorable global economic upgrade
seen Tuesday. The Japanese stock market has risen roughly 18% since the March
lows and that more than anything highlights the potential for an improvement in
Asian copper demand. The
Shanghai
copper
market managed a 3-month high overnight and if the
US
stock
market remains positive and US economic numbers don’t countervail improving
attitudes, we see September copper climbing toward the 80.60 highs.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE -45Â ,HEAT-80Â
,UNGA-72 Â The energy complex lacked definitive direction Tuesday,
despite an improved macro economic outlook and trade expectations of a decline
in the weekly crude oil inventories. The product market found support from news
that a refinery outage in
Louisiana
would extend into the third
quarter.
NATURAL
GAS
The
upward extension off the recent low hasn’t been that impressive and becomes even
less impressive if one realizes that temperatures are supposed to be rising and
could run above normal in the next two weeks. The trade also saw reports Tuesday
that imports of natural gas into the
US
are set to rise sharply
because
US
production has failed to
expand to meet growing demand and that type of talk should favor the bull camp.
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS +0
The Treasury market certainly has had cause to slide in the last two sessions,
as the macro economic readings have come in better than expected and the threat
of deflation has been downgraded. In effect, the market is lowering the
probability that the Fed will cut interest rates 50 basis points in the meeting
next week. If one were to simply look at the economic numbers, that have been
released, there is really isn’t a strong case for a 50 basis point rate cut, but
if we had seen an ultra soft PPI or CPI reading that could have caused the Fed
to push the panic button on the deflation issue.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+20Â DOW -3
NIKKEI +59 FTSE +20Â While the stock market did manage to forge another new
high for the move Tuesday, we think the performance was disappointing
considering the favorable early morning setup and the assistance from the US
numbers. Furthermore, it would seem that the market is now burning a lot of fuel
on rally attempts. While triple witching expiration typically inflates volume
and open interest, it would seem that volume and open interest, have already
reached rather lofty levels.
FOREIGN
EXCHANGE
DOLLAR:
A large fund is suggesting this morning that the Euro zone recovery is set to
lag behind that of the
US
and
that appears to be lifting the Dollar this morning. From the economic numbers we
saw yesterday it would appear that the US and Euro zone economies are pretty
evenly matched. Some traders think that the US Fed is a little better positioned
to act against deflation but with the deflation threat lowered across the board
this week, that should not be an issue driving exchange rates. In the near term,
the
US
has an
empty economic report slate and the Euro zone showed flat CPI readings this
morning. Therefore, there would seem to be little to discourage more short
covering in the Dollar. Maybe a surprise rise in US crude oil inventories this
morning, would provide a surprise lift to the Dollar but the odds of a sharp
energy price slide are low. Therefore we see the September Dollar extending the
slow rise in prices until resistance is encountered at 93.70. It would take a
close above 94.40 to turn the long term down trend in the Dollar to the upside.
EURO:
Because of the lofty level of the Euro, some are suggesting that a flat CPI
reading partially fosters deflation fears. However, there really isn’t expected
to be a driving force in the Euro today. Therefore, the profit taking action in
the Euro might continue with a near term down side target coming in at 116.73
and then again down at 116.28.
YEN:
The Nikkei continues to impress with its strength. In fact, many traders are
expecting the improved industrial production readings from the
US
and
Euro zones, to preclude an export expansion in
Japan
.
Therefore, with economic prospects in
Japan
improving, the Yen continues to see less repatriation money flowing back into
the country. Because the Japanese economy is an underpin, instead of a
detriment, we hardly seen the Yen falling below support of 84.33.
SWISS:
We continue to see the Swiss on a declining path. Near term downside targeting
is seen at 75.88 and then again down at 75.60.
POUND:
The tight up tend pattern in the Pound is beginning to get the attention of the
BOE. In fact, the BOE seems to be a little concerned about rising home prices
but currently there isn’t any movement expected from the central bank that would
alter the trend in the Pound. The currency is overbought technically but it
could take a significantly stronger US Dollar to derail the Pound in its current
stance.
CANADIAN:
A trend line is violated with a decline below 73.75 today but it could take a
close below 73.65 to really suggest that the trend is in jeopardy.
Unfortunately, for the bull camp in the Canadian, the US Dollar doesn’t appear
to be in a weak posture and that could make gains harder to come by in the C$.