Futures Point To A Slightly Weaker Open
INTEREST RATES
01/26 OVERNIGHT CHANGE to 04:26 AM:BONDS+10
Surprisingly the Treasury market comes into the week with a slightly weakened
technical setup. It would seem that the sharp Dollar rise last week sparked
concerns that central bank buying of US Treasuries might slow. So far, the trade
doesn’t seem to be concerned that the BOJ will actually be able to dump US
Treasuries purchased in their defense of the exchange rate situation, as that
would take a major slide in the Yen to signal a change in BOJ policy.
STOCK INDICES
01/26 OVRNIGHT CHG to 04:26 AM:S&P-30, DOW-2,
NIKKEI -96, FTSE-9 The stock market seems to be in a minor profit taking mode.
It would seem that favorable corporate earnings are not sparking as much
interest in the long side as was the case prior to last weeks high. However, we
really don’t see a specific anxiety issue that would cause a sharp escalation of
the selling.
DOW
The Dow correction off the January 9th high was 170 points and so far the
current break has only resulted in a 95 point break. With American Express
reporting earnings the market might get a temporary countervailing force, to
discourage the slightly negative tilt that seems to be present to start the
week. Therefore, until prices cheapen up a little, we would not be in a hurry to
re-enter the long side of the market. Critical support in the March Dow comes in
at 10,510 but a 170 point break off the recent high, would project a low down at
10,459.
S&P
Trend line support in the S&P comes in at 1135.10 but a correction equaling the
January 9th break would project a slide to 1132.10. In fact, unless the earnings
reports specifically manage to turn sentiment, “would-be longs†should let the
market slide further before considering fresh buys. However, with the COT report
showing the S&P to be “net spec short†the market really doesn’t need too much
in the way of aggressive technical balancing to forge a solid low!
FOREIGN EXCHANGE
US DOLLAR
The Dollar comes into the week holding significantly
above its recent lows and apparently poised for a major decision of sorts. With
some diplomatic dialogue from the Euro zone, hinting at the potential to cut
interest rates, to stem the rise in the Euro and Trichet mentioning a possible
stabilization pact, it is clear that the Dollar slide is raising concerns.
Overnight George Soros suggested that the Dollar will continue to slide, that
the currencies moves tend to escalate and that there is the danger that the
Dollar slide could get out of hand and that dialogue certainly tempers near term
bullish sentiment toward the Dollar. With the US Fed set to meet and could
potentially talk about the need for lower interest rates, it is possible that
the Dollars recent rise could be ended quickly. In short, it would appear that
market sentiment is against a Dollar slide, but the fundamentals are conducive
to more Dollar declines! However, if the G7 decides to do something about the
Dollar, then the fundamentals could be temporarily ignored. In our mind, the
only thing that bottoms the Dollar permanently is an ultra strong US economy!
EURO
The ECB is now openly talking about calming currency
swings, which is another way of saying that they don’t want the Euro to continue
rising. However, the ECB has been pretty clear that they won’t cut interest
rates unless there are signs that the Euro is hurting growth. Therefore, traders
need to watch the EU stats closely. The Euro has critical support down at 124.89
and that might be considered a fresh long entry point on the charts.
YEN
We think the Yen is primed to break out up, as the
Dollar strength last week, hardly took anything away from the Yen. In fact, if
the Dollar gives back some ground this week the Yen should breakout up. Traders
should buy the Yen at the market and buy 2 February Yen 94 puts for 50 ticks
each, looking to liquidate 1 put for a profit on a break to 93.86 and then
holding the remaining combination into the expiration of the options next week.
SWISS
Critical support in the March Swiss comes in at
80.06 but fresh longs might have to risk positions to at least 79.50. Minor
weakness to continue before a key bottom is formed.
BRITISH POUND
We think the Pound found critical support at 180.99
and is set to resume the upside track later this week. In our mind the Pound
trend continues upward unless there is a major coordinated intervention against
the Dollar.
CANADIAN DOLLAR
We are not sure that the Canadian has bottomed, as
the outside factors seem to leave pressure on the currency and the market is
simply not confident enough in the Canadian economy to go against the weak chart
setup. The failure to see a specific correlation to the Dollar, leaves us
negative toward the Canadian. Near term support is seen down at 75.78.
^next^
METALS
OVERNIGHT
GLD-1.70, SLV-5.50, PLAT-3.00 London A.M.
Gold fix $406.20 -$5.20 LME COPPER STOCKS 381,075 tons -3,825 tons COMEX Gold
stocks 3.44 ml -100 oz Comex Silver stocks 124.7 ml -604,703 oz
GOLD
The gold market enters the week vulnerable, as the
Dollar rise last week has many longs preparing to exit positions. The weekly COT
report showed gold to have a net spec long of 163,000 contracts, which is down
at least 30,000 contracts from the high reading seen around the January highs.
Therefore, the market is a lot less vulnerable to stop loss selling from a
technical perspective but unless the market gets its fundamental leadership
back, the bears look to have an edge.
SILVER
Considering the weakness in gold, we suspect that
silver will be under pressure. However, at times it seems like players are
selling gold and buying silver on spreads, thus giving silver support in the
wake of overall metals selling. The March silver has critical support down at
$6.21 and then $619.
PLATINUM
The platinum market gapped down and looks to be
under pressure as a result of the Asian holidays and because of the weakness in
gold and silver. While the trend remains up, the near term might bring about a
slide to $836 support. COMMITMENT OF TRADERS ANALYSIS – FUTURES & OPTIONS Jan 13
– 20, 2004 LARGE SPEC COMMERCIAL NON-REPORTABLE NET NET NET POSITION NET CH
POSITION NET CH POSITION NET CH SILVER 52403 -5917 -83395 6001 30992 -84 COPPER
31440 -124 -45667 -539 14226 662 GOLD 114265 -23629 -163580 29499 49314 -5871
PLATINUM 3936 146 -5562 327 1626 -473
COPPER
The trend remains up but recent ranges have been
tight enough to hint at a loss of momentum. Trend line support in the March
copper comes in at 110.00 and the top of the channel comes in up at 115.20!
However, with talk about Asian copper premiums rising, it would seem that the
Chinese New Year holiday isn’t completely shutting down the positive benefits
from demand in the Pacific Rim. Therefore a minor break to chart support of
111.00 might be considered a buying opportunity for the aggressive traders.
CRUDE COMPLEX
The energy market sits poised at contract highs
with solid US heating demand providing underlying support. While OPEC continues
to suggest that high oil prices are a temporary situation prompted mostly by
speculation, some OPEC Ministers are hinting at a production cut in the next
meeting because of lower second quarter demand. Since the close Friday, the EIA
predicted that US November oil demand declined, with that decline the first year
to year decline since June.
NATURAL GAS
If the regular energy complex were not so strong,
the natural gas market would probably have mounted a downside breakout last
week. As it stands, the natural gas market remains vulnerable with extremely
critical pivot point support seen down at $5.80. Considering the recent weather
we have to think that upcoming weekly inventory readings will be supportive but
with the annual surplus extending over for the month of January, the weather has
to be very cold just to keep the bear camp from gaining even more confidence.