Futures Point To A Slightly Weaker Open
METALS
OVERNIGHT
CHANGE to 4:15 AM:GLD+0.40 ,SLV-2.0 ,PLAT+2.80,CPÂ
 London Gold Fix $343.00 +$.35 LME Copper Warehouse stks
796,350 tns -3,625 tns Comex
Gold stocks 2.46 Unchanged COMEX Silver stks 108.7
ml oz +576,650 oz OVERNIGHT: Minor
setback as Asian buyers show slightly less long interest.
GOLD:
Despite a lack of clear-cut direction from the Dollar and the Asian gold market,
the overnight gold futures appear to be prepared to rally. We have to think that
the steep Dollar slide Tuesday is the type of action that solidifies long-term
investment interest in gold, especially if the Euro manages to rally another 200
points before the issue of intervention surfaces. With the shares of a major
gold producer possibly coming under pressure due to legal wrangling, (labor
issues) it is possible that gold futures continue to be seen as an interesting
investment alternative for those that think gold prices are headed higher.
SILVER:
Like gold, the silver bull trend will not be without some corrective action and
therefore current support in silver doesn’t come in until $4.74 and that would
seem to allow for a moderate dip without injuring the up trend. While silver
hasn’t shown much correlation to physical demand issues, we have to think that
recent macro economic revelations and the threat against the Asian economy is
holding back silver. The US Fed reading on the
US
economy
was bad, the EU numbers today are soft and we already know that Asian activity
is being pinched by the SARS virus and that means that silver is maintaining its
stellar April gains in the face of bearish fundamentals.
PLATINUM:
While the macro economic case hasn’t been that favorable over the last 24 hours,
the platinum market is apparently getting itself in a much better technical
posture. While some might suggest that platinum is forging a rally in a bear
market, a trade above $624.5 would see the market climbing above a critical down
trend channel resistance line. The platinum would be back above a critical
moving average line on a rally to $626 today.Â
COPPER:
The copper market is peaking out above recent chart resistance and that could be
because the WHO (World Health Organization) is praising
Hong Kong
and
Chinese efforts to control SARS. While the outbreak continues, there is the
feeling that it is about to peak. In other words, there is hope but the numbers
don’t show an arrest of the disease.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE -8Â Â
,HEAT-19Â ,UNGA-24 Â The
energy complex saw a fresh wrinkle in the action Tuesday, as
Russia
indicated that they would be
set to increase oil production in May by 10%. With a production of 8.23 million
barrels per day,
Russia
continues to see their
production total climb back toward the late 80’s when they almost produced 12
million barrels per day.
NATURAL
GAS
Part of
the unjustified natural gas rally was extracted Tuesday. The anticipation of a
big injection Thursday combines with the weaker regular energy complex price
action to favor the bear camp in the coming sessions.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS
+12 One has to give credit to the bond bulls, as they have held onto their view
that the world economy is still weak and they are getting confirmation from the
headlines that is indeed the case. However, it would appear that the divergence
between the stock market action and bond market action will continue and that
bonds will even be able to rise in the face of significant declines in the US
Dollar. In the end, the Fed message is that the economy remains weak and that
there is still a greater risk of deflation than inflation.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
:S&P-330
DOW -26 NIKKEI +26 FTSE -3.0Â Considering the recent action in the Bond
market and the slide in the US Dollar, one has to be very impressed with the
action in the stock market yesterday. Some might suggest that either bonds or
stocks are in error, in their outlook on the economy, but one making that
statement might be discounting the fact that stock prices might have been
relatively undervalued coming into the month of April. In other words, stock
prices prior to April were not factoring a recovery,
they were factoring some pretty ugly future conditions.
FOREIGN
EXCHANGE
DOLLAR:
The fact that the Dollar can’t rally on days in which the trade thinks the ECB
is going to cut rates, while the
US
is
apparently on hold WITH RATES, suggests that the interest rate differential
isn’t behind the slide in the Dollar. Furthermore, seeing the Dollar fail to
rally on news this morning that German job losses continue to mount is a sign
that the Dollar isn’t capable of getting a lift off the economic differential.
In short the Dollar wants to go down and the market is not looking for reasons
to alter that trend. Even with some sources suggesting that some intervention
might be ahead, to support the Dollar, it hangs near new contract lows. We are
not sure what changes conditions and good traders will simply suggest that one
should follow the trend. Next downside targeting in the June Dollar would seem
to come off the monthly charts and the December 1998 consolidation low, which is
another 240 points below the current market.
EURO:
The German labor office suggested that they have structural problems with the
44,000 loss in jobs in April. Furthermore, the market is now expecting the ECB
to cut interest rates and that might be the reason why the Euro isn’t taking
profits off the recent rise. We are equally surprised that the Euro is showing
only minor weakness today, with the German labor office suggesting that they
don’t see an improvement in the labor condition until 2004! In the end, the
market really doesn’t care about short-term economic developments, as it is
sticking with the trend.
YEN:
Reports that Japanese auto imports fell for the first time in 5 months suggests
that the Japanese economy remains soft and that a bigger rise in the Yen might
be needed before any change in import patterns is documented. In fact, we would
not be surprised to see the Yen rise all the way to the March highs, especially
since the World Health Organization is hinting at a possible control of the SARS
virus.
SWISS:
We see the slight weakness in the Euro zone economy as being a benefit to the
Swiss, as some traders might want a play against the Dollar, but don’t want to
bet on the Euro zone economy. However, the Swiss is overbought and vulnerable to
a correction. Near term support is seen down at 74.84.
POUND:
Traders are suggesting that a MPC rate cut Thursday,
might be possible and that is supposedly sparking some buying of
UK
stocks.
However, the Pound is overbought and slightly vulnerable in the near term.
Correction support is seen down at 159.80. The trend is still up but it might
see a pause today and Thursday.
CANADIAN:
The Canadian gapped higher overnight and soared aggressively but then fell
sharply off the highs and that might mean that the market is indeed overextended
and in need of a correction. Recent economic readings have been soft causing
some longs to consider taking profits. We still see 75.00 as a target but given
the blistering pace of the gains since mid April, traders should expect wild
volatility ahead.