Futures Point To A Slightly Weaker Open
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS -9
With the early numbers today expected to show positive results, the Treasuries
might be in for a light liquidation. However, it does seem that the jobless
recovery crowd is getting the attention of the market with a number of articles
trumpeting the loss of manufacturing jobs to overseas markets. It is also clear
that the bulls are shifting through favorable scheduled reports for any
employment weakness and one would have to grant that the initial claims and
ongoing claims reports yesterday supported the bull case.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+180 DOW
+12Â NIKKEI +118 FTSE +10Â The
coiling action in the stock market is really becoming quite tight and that
essentially mirrors the lack of a clear cut macro economic consensus. While most
of the scheduled US economic numbers have been pointing to growth, there
continues to be a nagging concern over jobs, the rate of growth and the
sustainability of growth. The bear camp is successfully highlighting troubling
elements within specific economic reports and is suggesting that tax cuts have
provided only a temporary benefit and that consumers will not get such
assistance later in the year.
FOREIGN
EXCHANGE
EURO:
The Euro posted a number of closes around 108.78 and has now mounted a run above
the recent consolidation. Even recent inflation readings were supportive for the
Euro, as the inflation reading climbed a little more than many expected but that
was because of soaring energy prices and the impact of the intense heat. In the
near term, it is possible that the Euro will mount a rally to 110.00.Â
YEN:
The trade was surprised this morning by two developments. The first surprise is
that Japanese Industrial production increased by +0.5% while the second surprise
was that the BOJ supposedly didn’t intervene with sales of the Yen in the
month of August. We would have to think that those two revelations would
eventually be considered bearish, but in the initial reaction the Yen has broken
out aggressively to the upside. With the Dollar so weak, at the same time that
Japanese numbers improved and the BOJ revealed inactivity, it’s understandable
that the Yen exploded. However, we think the BOJ will eventually act and that
the yen will probably not violate 86.00, or hold above 86.00 over time. Sell
some out of the money Yen calls on the rally today.
SWISS:
It is clear that the Swiss is lagging behind the Euro on the overnight bounce.
However, if the Swiss manages to climb above 71.16 that should spark some stop
loss buying and a rise to 71.39.
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POUND:
Even the Pound has come alive on the vulnerability of the Dollar. With 157.50
providing solid technical support, the Pound might attempt a weak rally to
158.32. CANADIAN DOLLAR: Net/net the Canadian has posted supportive action this
week. In fact, this morning the Canadian is avoiding weakness off the US Dollar.
We still think the most likely path is up but that the Canadian is 40 points
above solid support and might lack a near term catalyst to rally.
METALS
GOLD:
A minor upward bias would seem to remain in place from the overnight action,
especially with the Dollar showing early weakness. Newcrest Mining
(Australia’s largest gold producer) expects to show an 11% increase in
production this year and seemed to promise little change in its hedge book
practices. While slightly higher supply is a negative, we just don’t get the
sense that the gold market is going to be weighed down by supply, as investment
interest and restricted hedging activities, combined with all the other reasons
traders are buying gold, should be enough to see gold prices continue higher.
SILVER:
While silver continues to hold most of the gains of the week there would not
seem to be much support right under the market. The closest support might come
off the top of the August consolidation around $5.10. The silver market might be
a little disappointed with the macro economic spin recently, especially since
the equity market can’t seem to chain together a series of daily gains.
PLATINUM:
As we expected, the news of increased platinum production from Impala had almost
no impact on the market and that shows traders simply don’t think African
production can replace Russian production. However, platinum is significantly
overbought with the October contract up $16 an ounce this week and up $35 an
ounce in the month of August.Â
COPPER:
Shanghai copper stocks posted another decline of 7,578 and that is supportive to
prices but Chinese prices were mostly unchanged on the session. Apparently
Chinese traders were buying copper overnight due to a new rule that goes into
effect next week. Since the copper corrected this week, the technical
vulnerability of the market is tempered but we still don’t see the macro
economic view pushing prices into a strong rally.
CRUDE
COMPLEX
OVERNIGHT
CHG to    4:15 AM Â
:CRUDE +7Â Â ,HEAT+32Â
,UNGA+56Â The feature of the day today might be the expiration of the
September gasoline contract, especially considering the massive cash over
futures premium of the last two weeks. While the energy markets might show some
additional corrective action due to the expiration, we have to think that the
market will remain underpinned by bullish fundamentals.
NATURAL
GAS
Apparently
the trade took the 53 bcf injection to inventories as a supportive issue,
especially since the market was also bidding prices up off tropical storm
concerns. The annual deficit expanded by roughly 6 bcf and that might be
considered a little supportive considering that the deficit has been mitigating
recently.