Futures Point To A Stronger Open
INTEREST RATES
OVERNIGHT CHANGE to
04:24 AM
While the Treasury market seemed to finish last week on a very firm note, it
would seem that prices this morning are coming in weak! While the holiday week
might serve to narrow trading ranges and diffuse volume, the economic report
slate is pretty heavy later in the week. It would seem that the general bias
remains up in prices, as fears of additional terrorism and disappointing views
from Wall Street have given Treasury bulls’ consistent support for most of
November. However, the trade will be looking ahead to the coming weekend
shopping season kick off.
STOCK INDICES
OVERNIGHT CHANGE to
04:24 AM
S&P+450, DOW42, NIKKEI Closed, FTSE+48
The
stock market seems to be in a better posture. Certainly the market reached
oversold status last week around the lows, but it would seem that the improved
attitude is something more than a technical improvement. We suspect that the
shorts are a little concerned about being short the market, into the usual
holiday euphoria and that could be responsible for the early indications of a
higher opening. Apparently European stocks were lifted by merger and buyout
talks and by comments from an EU official that the Euro zone recovery is
gaining momentum and stands on a par with international recovery patterns.
DOW: It
goes without saying that the December Dow has critical chart support at 9,604
but in order to pressure recent shorts, the Dow will have to climb above
9,720. We sense an upward bias but the bull tilt isn’t strong enough to exert
itself without perfect conditions. In other words, the bull position probably
can’t tolerate any disappointment from the numbers and certainly can’t over
come a negative like an upward revision in the terrorism threat level. In
short, the stock market needs everything to go smoothly in order to mount a
minor short covering pre-Thanksgiving rally.
S&P
500: While we are a little surprised at the size of the small spec long
position in the COT report that should not prevent the market from extending
the recent short covering bounce. As suggested in the Dow comments, the S&P
also needs a perfect storm of minor bullish fundamentals developments to post
consistent gains this week. Critical support is pegged at 1031.20 and an
upside breakout is in effect with a rise above 1048.30. We favor an early
long, in hopes that the rumor of the holiday kickoff, ends up being more
supportive than the reality of holiday sales. We see the 1048 level as an
extremely critical pivot point and a close above that level suggests a trading
range of 1048 to 1059 for the early part of the week. However, if the S&P
can’t get above 1048 today, that could mean a range of 1031 to 1048 for the
week.
FOREIGN
EXCHANGE
OVERNIGHT CHANGE to
04:24 AM
YEN-14, SF-95, CA-21, EU-111
Dollar:
Surprisingly the Dollar has mounted a significant overnight up side breakout
on the charts. We are a little surprised that the Dollar is strong,
considering that the European equity markets are higher off some bank merger
talk. We also think that the bottom last week in the Dollar, is solid and that
the lead up to the
retailing season is something that few Dollar shorts want to test. It is also
possible that the reaction to protectionism and the trade issues with
have brought enough awareness to the recent Dollar slide that more and more
shorts are reconsidering their positions. It makes sense not to bet against
the
economy, especially since the US Thanksgiving sales period has a pretty strong
history. Therefore, traders should be standing back and waiting for the Dollar
to correct its oversold status. In fact, we would not be surprised to see the
Dollar rise to 91.90. A normal retracement off the November Dollar slide,
would allow a bounce to 91.87. In any regard, fresh shorts might have to wait
until Friday morning to get short the Dollar. We would continue to advise that
those looking to get short the Dollar consider using puts instead of futures.
EURO:
With the ECB talking against the big Dollar slide last week and officials this
morning talking up the Euro zone recovery pace, the Euro is being cushioned
against its current technical washout. The Euro was extensively overbought and
those longs probably don’t want to hold positions into the
news this week. Just a normal correction off the November rally would seem to
allow a slide to 117.38. Optimistic merger talk from
would seem to diffuse the downside tilt but not prevent it from unfolding. If
117.38 fails to hold, then the December Euro might slide to 116.20.
YEN: A
holiday in
leaves the Yen to track other currencies and that should provide a slight
undermine to the Yen. In fact, considering the Dollar rise overnight, the Yen
looks to track down to consolidation support of 91.48. Fresh longs in the Yen
now need to wait for a correction to 91.20 and risk the fresh position to at
least 90.60.
SWISS:
A major technical failure in the Swiss seems to project a slide down to 75.41.
If
holiday euphoria gathers significant momentum, the Swiss could slide all the
way down to 75.14.
POUND:
So far, the Pound hasn’t violated critical support of 169.07 but the bias
would seem to be down to start the week. Some CBI readings showed some
improvement overnight but most of the readings remain in negative territory.
In the end, the CBI readings do point to continued growth, but also show that
the
economy is coming back from very slow levels. More downside but only if the US
Dollar remains very strong.
CANADIAN DOLLAR: With the Dollar showing signs of an upside breakout and the
prospect of holiday euphoria, it would seem that the Canadian is at risk of a
near term decline. In fact, the Canadian could easily slide down to critical
chart support of 76.00. A lower support point of 75.80 is sure to be tested if
euphoria gathers momentum.
METALS
OVERNIGHT CHANGE to
04:24 AM
SLV-2.50, PLAT-1.30 London A.M. Gold fix $394.25 +$.40 LME COPPER STKS 482,950
tons -2,850 tons COMEX Gold stocks 3.06 ml +98,897 oz Comex Silver stocks
124.5 ml oz +2.86 ml oz OVERNIGHT: A minor upward bias but the Japanese market
was closed for holida
GOLD:
Gold seems to be coming into the holiday week with a slight upward bias from
but will need weakness in the Dollar to get above consolidation resistance of
$399.4 in the Feb contract. The COT report showed about 15,000 fund and small
spec longs added into the market in the most recent reporting period. While
the net spec long remains below the record level posted in Sept, it should be
noted that gold burned through 15,000 contracts on a gain of only $9.60 in the
futures.
SILVER:
With COMEX silver stocks rising by 2.86 ml oz and currently standing at 124.5
ml oz the bulls have to be a little put off toward silver. With gold possibly
in some trouble with the higher overnight $ action silver might not get much
support from outside markets. Seeing March silver fall back below $5.26 could
be labeled a critical failure and could spark some selling.
PLATINUM: While platinum prices look pretty weak on the charts, news that
Impala might close a mine in
due to unprofitable operations, has to be supportive to prices. We might note
that platinum has had three significant corrections since the end of October
and that shows a breaking up of a consistent uptrend pattern. However, it
would seem that supply is tight enough and demand is consistent enough to
discourage traders from attacking this market without significant cause.
COPPER:
The copper market enters the week in a damaged technical condition but with a
fundamental outlook that would usually support a strong rally in prices. With
the trade reporting a strong Chinese market, lower LME stocks and reports of
production problems at an Australian facility, the bias should be pointing up.
In fact, following the massive downside action last week, the technicals
should favor at least a moderate short covering rally.
CRUDE COMPLEX
OVERNIGHT CHG to
04:24 AM
HEAT-137, UNGAS-102 For the past two weeks the energy complex has primarily
favored the bull case. However, after last week’s set-back in prices, it is
clear that prices got a little ahead of the fundamental condition and that
prices can’t currently sustain above $32.
NATURAL GAS
We continue to feel that natural gas has forged a significant cyclical bottom.
However in order to prove that the market has bottomed, the large fund short
position must be threatened by colder weather or by continued draws in the
weekly inventory figures.