Futures Point To A Slightly Weaker Open
INTEREST RATES
Seeing US and world equity prices soar served to
keep the pressure on bonds on Monday. However, the market seems to be without
fresh news to drive prices significantly lower. In fact, given the oversold
technical standing of the small spec and fund positioning in bonds, the market
probably needs patently bearish news flow just to forge even lower pricing.
STOCK INDICES
While stock prices remain within striking
distance of the recent highs, we are a little concerned about the ability to
sustain the upward thrust in prices. The stock market certainly deserved to
benefit from the recent slide in energy prices and certainly the residual from
the monthly US payroll report was cause for optimism, but we are not sure that
prices are going to keep rising. In fact, in order to keep the bull camp in
charge, we think that prices need to climb above the recent high in the early
action today.
DOW
The June Dow did manage to make a higher high, with the overnight action and it
would not seem to be suffering from lost momentum like the S&P contract.
Furthermore, short term technical indicators in the Dow are not yet giving a
sell signal! Therefore, as long as the early numbers are positive to US growth
(and not too hot) we suspect that more gains will be seen in the Dow. Near term
targeting comes in at 10,406 and then again at 10,438.
S&P
While short term technicals in the S&P are overbought, the June S&P has managed
to rise above four month old down trend channel resistance lines and that could
signal more gain ahead. While momentum does seem to be slowing, the market has
yet to totally exhaust itself. Near term resistance comes in at 1142 and then
again at 1146.20.
FOREIGN EXCHANGE
US DOLLAR
While the Dollar is short term oversold the short
term technical indicators haven’t signaled a bottom yet. We are also not sure
that the fundamental track for the US economy has become solid enough for the
market to stop pressuring the Dollar. Near term downside targeting today is
88.00 in the September Dollar Index. However, maybe the Richmond Fed readings
today will provide the Dollar with a temporary bounce, but it is pretty clear
that the Forex trade is not focused on the macro economic differential.
Therefore, the trend is pointing down and any rally induced by US economic
numbers should be considered a selling opportunity. In order to shut off the
down trend pattern, the September Dollar might have to rise back above 89.52 and
even then we suspect that the sellers would be all over the Dollar with sell
orders. Until the Fed distinctly hints at higher rates, the trade is going to
sit on the Dollar.
EURO
German Industrial output came in much stronger than
expected at +2.2% for April and that helps facilitate even more gains in the
Euro. Surprisingly the market isn’t paying much attention to US numbers but it
is paying attention to Euro zone numbers. Near term upside targeting in the
September Euro comes in at 123.35 and near term support comes in at 122.75.
Maybe the Sept Euro is headed back to the January and February consolidation
that was bound by 123 and 127.50.
YEN
The Nikkei continued to rise overnight and that
provides a positive bias for the Yen. With the Japanese seeing favorable
earnings reports it’s safe to assume that the economy is growing and that money
is going to continue to flow toward the Yen. Near term upside targeting is seen
at 92.90 but the market must first manage to climb above a near term pivot point
of 91.72.
^next^
SWISS
Given the Euro zone numbers this morning, a slightly
weak US Richmond Fed reading today could propel the Swiss back to the 2004 highs
of 82.33. While the market is overbought technically the trade isn’t concerned
with the technical condition.
BRITISH POUND
Surging home prices in the UK, might foster ideas of
rising rates and that might provide some initial buying interest into the Pound.
However, the Pound seems to have lost positive momentum and is currently within
a tight consolidation. In fact, we suspect that the Pound is preparing to make a
critical decision. Go with a breakout of a 184.69 and 182.55 trading range.
CANADIAN DOLLAR
As we suspected the Canadian was primed to run
sharply higher. However, with the overnight spike up rally, the market seems to
have temporarily gotten ahead of itself. We continue to think that the trend is
up but that fresh longs might have to wait for a correction to 73.84 to re-enter
long plays.
METALS
OVERNIGHT
London A.M. Gold Fix $394.95 +$1.50 LME
COPPER STOCKS 124,650 mt tons -1,425 tns COMEX Gold stocks 4.391 ml -323 oz
Comex Silver stocks 118.0 ml -56,092 oz
GOLD
While the Dollar isn’t giving much in the way of
direction overnight, the gold market has been able to forge more gains. Chinese
spot gold prices action was a little weaker overnight suggesting that
international buyers are not nearly as keen as those in the early US action.
Given the action in the Dollar following a major fundamental release last week
it would certainly seem like the trend is pointing down in the Dollar and that
should allow the gold to return to the breakout zone around $400.
SILVER
Silver continues to be pulled up by gold, but the
rate of gain is pretty anemic. Silver has managed to climb above the 40 day
moving average but seems to have significant overhead resistance up around
$6.00. Unfortunately for silver bulls this market appears to be mostly a
commodity market and it’s a market that hasn’t seen much in the way of actual
tightening of stocks.
PLATINUM
An upward bias continues to control platinum prices
but platinum has a distinct edge over gold and silver, as it truly has tight
supply and demand conditions. While some increased production is being seen and
demand has softened slightly, the potential for a deficit is present, especially
if Asian demand remains strong. Therefore, we see July having the potential to
track to near term resistance of $850, with near term support coming in down at
$825.
COPPER
We are not sure if the macro economic optimism is
going to continue to dominate the daily action in copper. Chinese copper futures
were higher overnight on suggestions of tight supply and that should really
underpin the market. With a State Agency in China indicating that they might
deliver some physical copper to the exchange, some of the near term tightness is
alleviated but the move demonstrates the ongoing demand for copper inside China.
CRUDE COMPLEX
After another aggressive downward probe on Monday
crude oil managed to recoil from the lows and close back up near the highs. With
prices somewhat higher again this morning we suspect that even more short
covering is taking place. In fact, when one considers the magnitude of the
recent slide and the fact that US supply still hasn’t been rebuilt aggressively
it is logical for the bear camp to pause.
NATURAL GAS
Trend line support in August natural gas comes in at
$6.129, with the bias in the market still pointing down. However, with temps
heating up and crude oil showing a surprise reversal off the low Monday the
selling pressure might be mitigating in natural gas. However, while warmer
Midwest temps are set to provide some support to prices, slightly cooler temps
in the west might countervail aggressive buying interest off the first warm
spell of the year.