Futures Point To A Stronger Open
INTEREST RATES
03/31 OVERNIGHT CHANGE to 04:31 AM:BONDS+9 The
Treasury market didn’t show much of an upside bounce off slightly weak
Conference Board consumer confidence readings Tuesday and that is because the
numbers were not as weak as early expectations predicted. We are not sure what
to make of the series of Fed comments yesterday as they seem to favor the bear
camp, but also seem to throw some water on the prospect of a really strong
payroll gain on Friday. In conclusion, the Fed telegraphed the idea that
eventually, unusually low historical interest rates would have to raised and
also warned the market not to “get all hung up on the next job reportâ€.
STOCK INDICES
03/31 OVRNIGHT CHG to 04:31 AM:S&P+30, DOW+10,
NIKKEI +21, FTSE+17 The stock market was in a position to correct yesterday, but
instead investors took the high road. Even in the face of sharply higher energy
prices and soaring gold prices, investors were undeterred, which is a sign that
sentiment is improving. Apparently investors are expecting an improvement in 1st
quarter corporate earnings, which will begin to flow in the coming weeks.
DOW
Despite recent gains, the June Dow probably doesn’t run into heavy overhead
resistance until the 10,388 level is encountered. However, once the 10,388 level
is regained, that could mean that a new higher trading range of 10,388 to 10,663
has been achieved. In short, the Dow would appear to be in the process of a buy
the rumor rally, with the sell the fact leg, only coming into vogue in the event
that US payrolls fail to grow by more than 70,000 on Friday morning. One caveat
to the bull tilt, would be a realization that the Texas refinery fire overnight
was in fact a terrorist act!
S&P
It would seem like the S&P has managed a climb back above a critical pivot point
of 1125 and could now be poised for even more gains ahead. We initially thought
that a rise above 1126, ahead of the payroll report, would be an overdone
condition, but with the favorable GM news and investors upbeat on coming
earnings, we wouldn’t be surprised to see the rally extend to 1132.30. In short,
the trend is up and the market is discounting negatives like soaring oil prices
and intense fighting inside Iraq. The bull camp isn’t undermined unless the June
S&P fails to hold above 1122.50.
FOREIGN EXCHANGE
US DOLLAR
As expected the Dollar continues to lose ground and
fall toward the 88.00 support level on the charts. It is a little surprising
that the expectation for an improvement in the US economy is managing to drive
US Treasuries down and US stocks higher, but is not yet benefiting the Dollar.
It would seem that significant gains in the Yen are undermining the Dollar and
the Euro strength is not a major influence on the Dollar. Certainly the market
is concerned that the upcoming US payroll report will fail to live up to
expectations and it’s also possible that overnight terrorism rumors undermined
the Dollar. In the end, we think that the Japanese are pulling investments out
of US Treasuries and that is having a temporary and pronounced impact on the
Dollar. Therefore, we expect more minor declines in the Dollar but for the
market to have a major bottoming potential late this week!
EURO
Just because the trade thinks the ECB will reserve
its rate cut decision until next week, the Euro saw short covering. In fact,
some recent shorts think that the ECB might avoid a rate cut, if the US numbers
on Friday are strong. In other words, if the US numbers are strong, the ECB can
afford to wait and see what happens in their economy. Overnight numbers from the
Euro zone were weak, to unimpressive, with Business Climate readings contracting
and March Consumer Confidence coming in unchanged. Therefore, the Euro doesn’t
have the news to come out of a 122.45 to 121.00 range. We still favor selling
into strength in the June Euro.
YEN
Sharp gains in the Yen might be the result of the
BOJ halting intervention efforts and it might simply be the reverse action off
the Year end accounting game in Japan. In any regard, it would seem like the
Japanese economy has obtained a level of growth that fosters respect. Next
upside resistance in the Yen is seen off the weekly chart above the 97.50 level.
^next^
SWISS
While the trend might be pointing up, the magnitude
of the expected gains is limited. There is too much overhead resistance in the
Swiss to see a big run unless US economic numbers really come in disappointing.
BRITISH POUND
Despite slack retail sales readings from the UK’s
CBI, the market is unwilling to attack the Pound and therefore the short term
trend is up. We expect more minor, hard won gains ahead, with resistance seen at
183.00.
CANADIAN DOLLAR
A major upside spike overnight would seem to hint at
an overdone status in the Canadian but we have to think that the breakout above
76.00 wasn’t completely phony. Apparently the focus is shifting away from
aggressive rate cuts in Canada, as the trade was hopeful that the ECB would cut
and take away the focus on Canadian policy. In the near term, we would be
interested in buying a correction to 76.00.
METALS
OVERNIGHT
GLD+1.20, SLV+4.50, PLAT+7.60 London A.M.
Gold Fix $423.00 +$3.50 LME COPPER STOCKS 189,125 -2,625 tons COMEX Gold stocks
3.67 ml +81,645 oz Comex Silver stocks 122.1 ml -97,772 oz
GOLD
The gold market forged some impressive action
Tuesday, as the Dollar wasn’t weak enough to justify all the gains seen in gold.
We continue to get the sense that broad based investment interest is flowing
toward gold and silver. It would also seem like there is a growing inflation
sense and a flight to quality interests coming alive at the same time.
SILVER
The silver market has managed another upside
breakout overnight and with leadership from gold, talk of inflation and
lingering concerns of terrorism, the bulls should be able to maintain control
over prices. Unlike gold, silver could see prices gather momentum if the macro
economic outlook improves off the coming jobs report, as the prospect of
increased physical use is given some credence. The problem with selling into the
silver rally, is that one doesn’t get the sense that the current small spec and
fund position is done expanding.
PLATINUM
Given all the action in gold and silver, we are
really surprised that platinum isn’t getting more gains but we just can’t
suggest that traders attack this trend, as there is the potential that US growth
is improving and we have to think that a minor inflation threat is supportive to
platinum. However, platinum has forged a pattern of lower highs and lower lows
since the March high and isn’t correlating right along with gold and silver.
Maybe the market is suffering from an overbought status and certainly the recent
reports that Chinese jewelry demand for platinum is falling takes some of the
upside steam out of platinum prices.
COPPER
The US copper market showed surprising
disappointment and profit taking Tuesday off a slight decline in US consumer
confidence readings. In fact, given early expectations Tuesday, that expected
much weaker confidence readings, the response in copper hints at a weakening of
the copper bull trend. It is possible that some bulls are getting cold feet
ahead of the coming payroll report and are deciding to move to the sidelines,
rather than risk significant volatility into the action Friday morning.
CRUDE COMPLEX
After several sessions of weak action, the energy
complex managed to climb back on the bullish bandwagon. In the overnight action
a fire at a BP refinery in Texas sparked a follow through rally as the trade
rushed to factor in a terrorist act, considering that there were warnings
released 5 days ago on the Texas refinery facilities. So far, it would seem that
officials have discounted terrorism as the cause of the mishap! Given the action
Tuesday and the follow through overnight we have to think that the upside action
in the energy complex enters the trade today partially overdone.
NATURAL GAS
The natural gas market would seem to be even more
puffed up than the crude oil market, as it stands in relative proximity to
contract highs. In fact, natural gas would seem to be close to leading the
entire energy complex higher, instead of simply following the crude oil market.
While some regions of the country are expected to see below normal temps and
some snow, we doubt that natural gas is seeing strength off its own internal
fundamentals.