Futures Point To A Strong Open
INTEREST RATES
The Treasury market comes into the action this
morning with a minor upward tilt. Economic information this week really hasn’t
been that telling, but with the casualty rate in Iraq skyrocketing and the US
equity market remaining weak, it is clear that the bulls have a slight edge. The
initial claims report isn’t really expected to show anything significant, with
expectations calling for a 2,000 decline.
STOCK INDICES
The stock market just isn’t acting like a market
poised to rally aggressively but at the same time prices don’t seem to want to
fall sharply. The economic report front has produced confusing information this
week and thus far the earnings sweep is providing offsetting readings. After the
market was partially disappointed by the Alcoa earnings, it seems like the Yahoo
earnings were uplifting.
DOW
The June Dow would seem to have solid support at 10,488 with critical resistance
up at 10,532. Just looking at the charts, it would seem like the near term trend
is down and therefore the bull camp needs to manage a new high for the week
early today, just to alter the existing bearish tone. In other words, if the Dow
can’t manage a rise above 10,532, in the first hour of trade, the bulls could
slowly lose control.
S&P
The S&P did have a moderately aggressive break this week and that puts the S&P
in relatively stronger technical shape than the Dow. Trend line support in the
June S&P is pegged at 1142, but that level must hold early. In other words, it
wouldn’t hurt the bull camp to see a first hour probe above 1148.30. We think
the bias is up, but the setup isn’t really that impressive.
FOREIGN EXCHANGE
US DOLLAR
Given the Dollar action this week we have to think
that the overnight action in the Dollar is simply short covering. However, in
looking at German Industrial output and Construction output we could see where
traders might begin to favor the US Dollar. After all, the US numbers over the
past week have been either very good or as expected, while the Euro zone numbers
have mostly been below expectations. However, the Iraqi situation seems to be
undermining the Dollar from a geopolitical standing and that has seemingly
carried the day in the Dollar. In other words, economically the US seems to be
doing just fine but trade sentiment and political considerations have kept the
market from focusing on the positives. Therefore, the Dollar might be caught in
a range bound by 88.40 and 89.00 basis the June contract. We even doubt a
favorable initial claims reading will do much to lift the Dollar consistently.
About the only thing that lifts the Dollar significantly would be a significant
toning down of developments in Iraq, a soaring US equity market or an ECB rate
cut.
EURO
German February numbers were very weak overnight,
with the manufacturing output down 1.1% Consumer/Durable goods output down 1.7%
and industrial output down 0.7%. However, as suggested in the Dollar comment, it
doesn’t seem like the economic differential is a consideration in the
marketplace. In order to turn the trend in the Euro up it could take a close in
the June above 123.11 and that seems unlikely. In fact on a rally to 122.90 we
would consider getting short the Euro.
YEN
The Nikkei made a 32-month high overnight and that
would seem to leave macro economic sentiment running strong. However, the Yen
seems to have stalled and would seem to be poised to give more ground. The only
problem with predicting a lower Yen, is that the Dollar just doesn’t seem to
have the strength to facilitate a significant lower Yen. The BOJ is out
rationalizing their intervention efforts of the last year and is suggesting that
intervention took some the excessive volatility out of the equation. More minor
downside is seen, with support pegged at 94.40.
^next^
SWISS
The Swiss surprisingly made a positive technical
trade on the charts overnight before sliding back toward the session lows. In
order to turn the trend up in the Swiss it will need to manage a close above
79.18.
BRITISH POUND
The Pound continues to waffle within a consolidation
pattern. The BOE left interest rates unchanged overnight and that leaves the
Pound without a driving direction in the trade today. Like the Yen, the Pound
can hardly fall sharply because the Dollar is lacking strength. Therefore, we
suspect that the Pound will see only minor declines in the action today.
CANADIAN DOLLAR
Negative payroll readings from Canada undermine the
Canadian and potentially put the currency down to lower support of 75.00. With
the unemployment rate rising and the payrolls falling, the outlook for the
Canadian economy is much weaker than that of the US. Therefore, the trade has
every right to pressure the Canadian. Given the weak numbers, the June Canadian
might fall to even lower support of 74.82 in the coming sessions.
METALS
OVERNIGHT
London A.M. Gold Fix $419.25 +$2.75 LME
COPPER STOCKS 173,550 -3,050 tons COMEX Gold stocks 3.78 ml Unchanged Comex
Silver stocks 122.1 ml +5,997 oz
GOLD
With the positive bias in gold for the week, it
would seem that the market is prepared to go home long for the extended holiday
weekend. Dollar weakness provided gold with support for most of the week, but a
little strength in the dollar this morning has dampened sentiment. In order for
gold to see another buying frenzy, the dollar might have to fall below 88.00.
SILVER
It is clear from the action in the last two sessions
that silver is tracking other fundamentals than the dollar. The funds continue
to move in and out of the market without a sense of purpose, but the overall
trend in silver from a technical perspective remains up. The pattern of higher
lows seems to suggest that silver is also working to forge a higher trading
range.
PLATINUM
After a breakout down overnight the platinum market
has managed to climb back into the old consolidation. However, failing to manage
a close above $888.2 could be pretty negative for the markets structure. We
might also add that July Platinum will close below a critical trend line unless
it rallies $3 into the close.
COPPER
The copper market enters the action poised just
above critical support. The macro economic outlook has been somewhat injured
over the last several sessions, as US equity market weakness and concerns about
Iraq have undermined sentiment. However, with a US group soliciting the US
government to restrict copper and copper scrap exports to China, the market
might see some buying support.
CRUDE COMPLEX
The energy market left no doubt about its
intentions Wednesday, as the market was surprised by the failure to see US crude
stocks build. In fact, when one considers the entire inventory report sweep, it
is clear that all critical supply levels contracted. In short, the market might
have already seen the rebuilding window and no more rebuilding will be seen and
that would be considered an ultra bullish setup.
NATURAL GAS
The natural gas market got support from the regular
energy complex but will be watching the weekly inventory reports closely today.
Supposedly, the natural gas market comes to the end of the injection season with
the report today, so the market will really take to heart the annual surplus
tally following the report this morning. The wide range of expectations for the
weekly inventory report highlight the end of the injection season, with
forecasts of a 20 bcf draw and a 25 bcf injection.