Futures Point To A Slightly Weaker Open
METALS
OVERNIGHT
CHANGE to 4:15 AM:GLD-2.80,SLV-3.8 ,PLAT-6.50,CP Â London Gold Fix $345.25
-$4.95 LME Copper Warehouse stks
651,700 tns -2,750 tns Comex
Gold stoc 2.676 -129 COMEX Silver stocks 107.7 ml oz
-5,059 oz  OVERNIGHT: Lack of direction in Asia leaves gold vulnerable to
equities & the
GOLD:
The gold market faded under the weight of the rise in the Dollar and equities,
while the silver and copper markets rose and that highlights a distinction
within the metals markets. In other words, the gold market doesn’t look to
benefit from the hope of improved physical demand. Therefore the gold market
continues to be without a clear theme or catalyst.
SILVER:
The Shanghai Exchange began trading spot silver today and that could be a
supportive development for silver, if the Chinese follow the recent COMEX price
action with active buying. Since the June lows September silver has gained 36
cents and that is pretty impressive given the thin slate of fundamental news
seen in that time frame. Given the action yesterday, it is clear that silver is
choosing to behave like a physical demand driven commodity instead of a
financial asset.
PLATINUM:
We are a little put off by the lack of favorable action in platinum Monday. With
the stock market rising sharply and silver and copper rising, we would have
expected platinum to have risen sharply. However, we would be a little patient
with the long side because the stock market looks to remain strong and that
leaves the bias in platinum to the upside. The only problem with a fresh long in
platinum is that support is a long way down at $650 and prices remain
historically high! Â
COPPER:
Higher Shanghai copper prices overnight is probably a simple reaction to the US
gains Monday. Therefore, the
US
market
will start the coming session with a clean slate. The weekly COT report showed
the copper to be net spec long almost 14,000 contracts, which is a very minor
long position.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE -44Â
,HEAT-69Â ,UNGA-120 Â The
energy complex continues to be locked in the middle of opposing market forces.
Just as the trade saw signs Monday that the Nigerian oil strike might come to an
end, the trade also saw signs that OPEC-10 production in June declined slightly.
NATURAL
GAS
We think
that the natural gas market is finally responding to the weather, as the trade
thinks that high heat index readings are already serving to boost cooling
demand. We don’t think at this time that the next tropical storm is capable of
driving prices sharply higher but if domestic weather has the bulls inspired,
that could mean that more traders are poised to get long natural gas.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS
-7 There would seem to be no respite against the liquidation pattern in
Treasuries. Not only are world equity markets strong again this morning, but the
European trade continues to suggest that the
US
economy is poised to recover.
While the latest COT report shows the funds and small specs to be net short
21,000 contracts, the small trader category has generally been on the right side
of big trend action.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
:S&P+20Â
DOW -1 NIKKEI +103 FTSE +1Â World equity prices continued to rise
overnight with the Nikkei posting a very impressive string of gains over the
last 30 days. While the market seems to be poised to continue to rise sharply,
earnings reports this morning were mixed. Pepsi reporting EPS above expectations
(they also suggested that sales remained soft) while International Flavors
missed 2nd quarter forecasts.
FOREIGN
EXCHANGE
DOLLAR:
The European trade is suggesting that the
US
economy
is poised to recover and that simply fosters more Dollar gains. In looking back
to recent macro economic numbers, one has to wonder why the European trade is so
convinced that the
US
economy
is poised to recover, but in the near term the market apparently doesn’t need
a steady diet of real numbers to push the Dollar higher. As it stands, the US
Dollar has managed to rise above a psychologically important 96.00 level.
Therefore, we have to expect some long term short covering activity in the
Dollar. The Dollar has been down consistently since July of 2001 and that is a
long period of time. In other words, one should not be surprised to see
sustained short covering! From the economic report slate today, the Dollar
probably gets some additional buying support, with near term resistance coming
in at 96.44 and then again at 97.06.
EURO:
Even with the Euro zone seeing a favorable German unemployment report and the UK
Prime Minister suggesting that the
UK
has
made “significant progress†toward the Euro, the Euro is weak against the
Dollar. Maybe the weak German Industrial production
readings countervailed the bullish potential in the Euro but one also has to
consider the potential that long term traders are now being forced to bank long
profits in the Euro. With the Euro in a sustained rally for the last two years
and the Euro violating a number of critical technical chart levels, it would
appear that even more declines will be seen in the Euro. Near term targeting in
the Euro is seen down at 111.78.Â
YEN:
The Nikkei continues to rise and that joins favorable macro economic readings
from
Japan
.
However, the US Dollar has become strong enough that some Japanese money is
moving toward US stocks and away from the Yen. Therefore, the Yen looks to
respect recent chart resistance, even with machinery orders rising sharply and
that is a very telling sign about the trend in the Yen. If the Yen can’t rally
on favorable numbers, then the recent bullish control is waning.
SWISS:
The Swiss would appear to be headed down to the March and April consolidation
lows below 72.00 but initial support is pegged at 72.55.
POUND:
A major failure overnight undermines the Pound and exposes it to additional
liquidation. In fact, the Pound could easily fall down to the late May
consolidation around 162.00. An even lower target for the Pound is seen at
161.52. Current action is apparently more technical than fundamental.
CANADIAN:
As we expected, the Canadian was due to washout as the strength in the Dollar is
simply too much for the currency. Certainly the livestock export ban is damaging
in the Canadian economy, but the current washout in the currency is mostly tied
to the long term short covering efforts in the Dollar. Therefore, we expect to
see the Canadian fall to at least 72.66 but it might fall as far as 72.08.