Futures Point To A Slightly Weaker Open
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS +7
The Treasury market daily action seems to be flowing contrary to typical
fundamental analysis. Yesterday in the face of nondescript, as expected
readings, prices sagged. This morning Treasuries are higher again with
expectations for mixed to slightly weak economic readings.
STOCK
INDICES
OVERNIGHT
CHANGE to  4:15 AM:S&P-310
DOW -19Â NIKKEI -10 FTSE +9Â A
high tech warning after the close Monday mostly erases the surprisingly bullish
performance by the market yesterday. With end of quarter looming today we still
think that a breakout system is the best approach to the action today. In the
event that the market starts to dive, we suspect that fund managers will be
quick to pull the plug and protect profits.
FOREIGN
EXCHANGE
EURO:
The euro got the lion’s share of the weakness in the Dollar Monday and looks to
do the same today. In fact, we see the Euro rising directly to the weekly
consolidation highs around 118.08 to 118.50. With Euro zone inflation readings
coming in above the target zone this morning, we can only see additional
interest in the Euro, as that might simply call for an earlier rate hike and
increased yields in Europe.
YEN:
With the Yen streaking to new highs for the move and the BOJ certainly poised to
respond, traders should expect significant volatility ahead. However, the
current run seems to be so entrenched that the BOJ might be powerless to stop
the rise. As we suggested before, intervention can’t stop the run in the Yen,
unless there is “coordinated” intervention by several countries.Â
SWISS:
It doesn’t even matter that flight to quality issues are muted because the Swiss
is seen as a less overbought alternative to the Euro. In the near term we expect
the Swiss to rise toward the May highs of 78.10.
POUND:
The only problem in chasing the Pound, is that retail sales readings for 2003
are seen as weaker than expected and the Pound has already moved within striking
distance of the June highs. In other words, the majority of the rally might have
already taken place in the Pound. Longs should consider selling calls and buying
puts against long futures positions.
CANADIAN
DOLLAR: This is an extremely critical junction for the Canadian, as severe
Dollar declines have had a way of undermining sentiment toward the Canadian.
Even though the Canadian showed a strong upward bid in the overnight action, it
currently sits at the mid point of a wide overnight range as if deciding which
way to go. We are concerned that the Canadian is going to be undermined. A trade
below 73.34 is now seen as a very big negative.
METALS
GOLD:
With the December Dollar reaching a new contract low overnight and the Dollar
Index streaking toward the 2003 weekly lows of 92.16, gold should have a chance
to regain some recently lost ground. Trend line support today in December gold
comes in at $381, whereas the top of the up trend channel comes in up at $392.
Chinese gold was higher but apparently that price action is simply following
action in other markets.
SILVER:
The silver market has wasted no time playing catch up to gold, which is a little
surprising given that silver appeared to be de-linking with gold. Apparently the
view is that the Japanese economy is recovering and that US numbers today will
show the same for the US economy and that must be combining to support silver.
Like gold, silver has seen a moderate open interest decline since the September
17th high and that could put the market on slightly better technical footing.
PLATINUM:
Some very large volume days have accompanied platinum action over the last week
and with that increased volume has come a decline in open interest and that
typically isn’t a supportive development. In other words, under heavy activity
the market liquidated players and saw lower prices. Strict technical traders
might put a different spin on the recent action suggesting that the trade had
declining interest in pressing the recent downside probe. The trend is up in
platinum until something significant changes in the fundamental setup.Â
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COPPER:
Despite choppy action, the copper looks to remain in an up trend pattern.
Chinese copper prices were up by a minor amount giving the US action a slightly
positive tilt. BHP suggested that given the progression toward world recovery,
the outlook for copper demand should improve in 2004.
CRUDE
COMPLEX
OVERNIGHT
CHG to    4:15 AM Â
:CRUDE +3Â Â ,HEAT+1Â Â
,UNGAS+61Â The energy complex seemed to be propagating the bullish
influence of the latest OPEC production cut. At least a couple of times during
the session Monday the trade saw stories indicating that Non OPEC producers
would be pressured to contribute some production cuts and that OPEC would not
take the loss of market share lightly.
NATURAL
GAS
The cold
winter bulls stormed into the long side of the market Monday and in doing so, at
least part of an all time record fund short in natural gas decided to run for
the exits. With frost expected deep into the Midwest Wednesday night and
Thursday morning, it is difficult to argue against those predicting a colder
than normal winter (at least for the next two sessions).