Futures Point To A Strong Open
INTEREST RATES
12/01 OVERNIGHT CHANGE to 04:01 AM:BONDS-3 While
the bond market certainly had clause to break last week, it remains evident that
many longs are willing to try and support this market, despite what appears to
be a growing fundamental pressure on prices. While many agree that the
fundamental numbers rationalized the downside work in the Treasury’s last week,
it is possible that thin holiday conditions allowed a bigger break than would
have taken place otherwise. However, with the monthly unemployment report
looming at the end of the week and recent statistics pointing to a strong
monthly reading, it is possible that the bears maintain control over the market.
STOCK INDICES
12/01 OVRNIGHT CHG to 04:01 AM:S&P+450, DOW39,
NIKKEI +302, FTSE+32 The Nikkei was up over 300 points overnight and the
overnight US Index opening projections are some of the strongest readings we
have seen in several weeks. It is clear that the holiday sales euphoria is
behind the lift but one should not discount the fact that the numbers last week
were very strong and supportive of the bull case. We wish the market would get
over feeling guilty about improving economic conditions and respond in the way,
that the market used to respond to favorable conditions, in the days prior to
September 11th.
DOW
Critical resistance points in the December Dow today are 9,860 and then again up
at the old high of 9,884. Under the current fundamental setup the Dow should not
fall back below 9,792. Upside targeting this week is pegged at 9,941.
S&P
It is fortunate that the COT report is delayed until after the close today, as
that removes the one negative we see for the Index today. In other words, seeing
a moderately long small spec position is about the only discouraging issue we
see for the S&P today. In fact, it should be an easy track for the S&P to forge
a new high for the year today! The S&P should not fall back below 1060.10 today
if it is really solid and therefore it could have an upside target of 1069.50
this week!
FOREIGN EXCHANGE
US DOLLAR
It is amazing that the US stock market could be so
strong and the US Dollar so weak but that appears to be the set up for the
action today. In fact, it would seem that the US economy is going to become very
strong in the coming two weeks and that doesn’t even seem to make the radar in
the Dollar action. Some even suspect that the US will drop steel protectionism
later this week (to avoid WTO sanctions) and that could be considered a change
in recent fundamentals. However, it would not seem like the market is willing to
alter its view toward the Dollar. Given the price reaction to current
fundamentals, it is becoming pretty evident that the US is forcing the Dollar
down and that “interest rate and economic differentials” are not even being
considered by the trade. What is even more surprising is that the trade is
unwilling to buck the established trend even in the face of a sizzling US
economic report flow! Projected targeting in the December Dollar is 88.80.
EURO
We think the Euro is going to soar until the ECB
becomes hot under the collar and is forced to react. As mentioned in the US
Dollar comment, economic developments and interest rate differentials have very
little to do with current price action because it is clear that the US growth
rate is many times greater than the growth being generated in the Euro zone.
Some might suggest that the US is no-where near hiking rates and that is why the
Euro continues to get favor. We just think that the trend is the trend and as
long as a good US economy doesn’t attract capital, and that means the Euro wins.
The artificial high in the Euro of 123.04 is looking more like a possible target
with each passing session.
YEN
The Dollar is so weak and the BOJ intervention
threat so significant, that the Yen has been locked in a wide consolidation for
nearly 2 1/2 months. The BOJ has in effect been doing a good job of keeping the
Yen from exploding to new highs. With the Nikkei up over 300 points overnight
and the Dollar into new contract lows, we have to think that the Yen has a
slight upward bias. As it stands, the Yen is not a primary speculative market
right now, the Dollar, Euro and Pound have center stage and that helps the BOJ
keep the Yen in a locked down range.
SWISS
We are actually surprised that the Swiss has shown
only moderate upside extension overnight but expect the upward bias to remain in
place. However, the Swiss must remain above critical support of 77.43 to keep
the bias up.
BRITISH POUND
There should be little to keep the Pound from
surging higher this week. In fact with the calls for even higher interest rates
last week and the UK economy showing more strength than the Euro zone, the only
thing holding back the Pound could be the extensive overbought condition that
resulted off the opening gap up move overnight.
CANADIAN DOLLAR
The start and stop nature of the Canadian has reared
its head again and it would appear that a near term corrective setback is ahead.
However, after a correction to 76.63 traders should get long.
METALS
OVERNIGHT
GLD+2.20, SLV+2.30, PLAT+1.10 London A.M.
Gold fix $398.75 +$6.75 LME COPPER STKS 466,850 tons -50 tons COMEX Gold stocks
3.06 ml -196 oz Comex Silver stocks 124.5 ml oz Unchanged
GOLD
With the gold market coming into the session right
on the even numbered $400 level and the Dollar pointing down it is possible that
the gold market manages to make a run today. Fortunately, for the bull camp the
COT report is delayed until after the close today and that prevents the market
from being confronted with the ongoing overbought condition of the market. We
suspect that gold comes into the session today net spec long 186,000 contracts,
which is a moderate long but again is not a “bought out” condition.
SILVER
The gold market will probably serve to drag silver
higher today and with the stock market also showing signs of strength today that
could give silver an additional boost. Critical support is seen around $538.8,
with a near term upside targeting of $5.49. Since the silver market has seen a
significant increase in volume and open interest since the big November spike
up, it is clear that investors and traders are still bullish toward silver,
despite seeing its prices climb sharply up away from the $5.00 level to a higher
consolidation zone just under $5.40.
PLATINUM
The outlook for the world economy is being upgraded
and that simply makes platinum supply look even tighter. While platinum hasn’t
typically followed gold and silver price action, we suspect that upside action
in those markets lends support and speculative interest to the platinum market.
We see no reason why January platinum would not return to the recent highs of
$776.
COPPER
From the price action this morning, it is clear that
China has made its presence known again in the copper market. With Chinese
copper hitting limit up and LME prices soaring to the highest level since mid
November, it is clear that the bull market is back on. One has to concede that
US economic aspirations have improved over the last 6 sessions and that a
positive track in world equity prices simply contributes to the optimism in
copper.
CRUDE COMPLEX
12/01 OVERNIGHT CHG to 04:01 AM:CRUDE-34,
HEAT-87, UNGAS-24 While prices are weak coming into the session this morning it
would appear that the energy complex did forge a notable low last week. While
the combination of a significant decline in U.S. crude oil inventories, more
seasonal weather and exceptionally strong economic numbers helped forge a low in
prices last week those lows might have to be retested this week.
NATURAL GAS
The natural gas market reacted sharply to a largely
unchanged weekly inventory report last week but remained within the recent
trading range. It would appear that the market is in a transition phase but
lacks a fundamental punch to climb above chart resistance. Without the benefit
of the weekly COT report, we suspect that the large short fund position has been
reduced slightly but is still pretty significant.