Futures Point To A Stronger Open
INTEREST RATES
The market comes into the action today slightly
weaker, despite talk in the Wall Street Journal about the intense interest being
paid to the bond market on Wall Street. However, in the near term the Treasury
market is seeing a slight negative tilt from the macro economic outlook. In
fact, a number of economists are suggesting that the world’s major economies are
all in an upswing and that combination of events hasn’t been seen for nearly 2
1/2 decades! In other words, the Asian, US and European economies all seem to be
growing and that could eventually present a major negative to Treasuries.
STOCK INDICES
The stock market would seem to have a positive
bias, but the bull camp doesn’t seem to have full control over sentiment.
However, the Nikkei managed another impressively strong close and it would feel
like the market is just missing out on a broad based aggressive bullish tilt.
Over the weekend, a number of economists are suggesting that many of the world’s
economies are all growing in sync and that is something that hasn’t been seen in
over 2 1/2 decades.
DOW
The Dow comes into the session in a slightly weak bias, with near term support
seen at 10,400 and the June contract needing to hold above 10,388 to avoid
turning the short-term trend downward. With a number of Dow issues reporting
earnings in the coming week, we certainly wouldn’t want to see the June Dow
violate the 10,388 to 10,377 pivot level, as that would be extremely
disappointing. In the near term, assume the trend is up unless the pivot point
is violated.
S&P
The charts are not that impressive in the S&P and all the bull camp can hope for
is that the fundamental track pulls the market out of a weaken posture. However,
the weekly COT report showed a net spec and fund long of only 13,000 contracts,
which means that the market is nearly balanced and is still holding within
relative proximity to the highs of the year. Be long, but don’t tolerate a slide
back below 1131.40 this week!
FOREIGN EXCHANGE
US DOLLAR
The Dollar Index seems to have a positive bias off
its relatively strong economic condition, but at the same time the Dollar is
being undermined by the ongoing troubles in Iraq. We would expect the
9/11-commission impact on the Dollar to be less significant this week but in
order for the Dollar to manage an upside breakout, it could take a solid set of
US economic readings and at least several favorable corporate earnings reports.
In other words, the Dollar might be pointing up but it will take a perfect storm
of information to propel the Dollar above resistance off the March highs. In
short, the fundamental news seems to be in place for the Dollar to rise but the
sentiment against the Dollar is broad based and entrenched. In short, if one
can’t conclude that the US economy is really strong and the place to be, then
the market won’t effectively alter the sideways consolidation that has been seen
in the Dollar since late December.
EURO
The euro looks pretty negative on the charts and
could be poised to breakout to the downside. Recent economic numbers have
fostered a negative attitude toward the Euro and we would assume that sentiment
would continue to deteriorate this week. However, in order to throw the Euro
into a whole new lower trading range, it could take a clean sweep of negative
economic reports to put the Euro below critical pivot point support at 119.59.
YEN
The yen is sitting comfortably above critical
support of 94.00 but would seem to have a negative tilt to start the week.
However, even lower support in the June Yen comes in at 93.89 and we are not
sure that the market is prepared to put the Yen down consistently unless the
Dollar manages an upside breakout. Thus far, the Japanese hostage situation is
only providing minimal pressure to the Yen.
^next^
SWISS
The pattern in the Swiss is pointing down and we
doubt that the Swiss is going to get as much flight to quality support as it has
seen over the last three weeks. Therefore, we see a slide to near term support
of 77.63.
BRITISH POUND
A pattern of higher lows suggests that the Pound is
still poised to forge some gains but with lingering holiday influences the Pound
might not show that much follow through on the upside today. Next upside target
in the Pound comes in up at 185.30.
CANADIAN DOLLAR
Following the payroll disappointment last week, the
Canadian is injured and could see prices drift around the 75.00 level, with
periodic action down to support of 74.82.
METALS
OVERNIGHT
London A.M. Gold Fix $419.25 N.A. LME
COPPER STOCKS 173,550 N.A. holiday COMEX Gold stocks 3.81 ml +31,961 oz Comex
Silver stocks 122.1 ml -995 oz
GOLD
The gold market has managed to come into the session
today slightly higher mostly off Japanese buying, as the holiday action seems to
have left the market without direction. Therefore, gold is trading higher
without early direction from the Dollar Index. The weekly COT report showed gold
to have a net spec long of 225,000 contracts and that is probably understated
considering that gold comes into the session today nearly $3 above the level
where the COT report was measured.
SILVER
The silver market comes into the session net spec
long 94,000 contracts, which again is much less overbought than we would have
expected. In fact, since the COT report was measured the market has slipped back
and that should leave silver in relatively better shape than the gold market.
Trend line support in silver comes in down at $8.096.
PLATINUM
GM has fired a shot at the bull market in platinum,
with suggestions that they would consider using palladium instead of platinum.
However, the platinum market has managed to spike higher overnight in what
appears to be a bid at the old contract highs up at $924. The weekly COT report
showed the net spec long to be under 5,000 contracts, which means that the
market isn’t as overbought as it was around the recent highs.
COPPER
This morning copper prices are showing some
weakness, with Chinese copper prices posting sideways to lower action. Shanghai
copper stocks increased by a minimal 799 tons on the week, but LME stocks have
continued to decline, which keeps the bull market theme intact. We suspect that
the macro economic outlook will continue to be supportive to copper prices,
especially as several economists are talking up the fact that the world’s major
economies are all in an upswing at the same time and that is something the world
hasn’t seen for over two decades.
CRUDE COMPLEX
With the last weekly inventory report sparking a
return to bull market status and the expectations for even tighter future
conditions, we suspect that the bull camp will have the ability to run prices
higher in the coming sessions. The IEA is apparently soliciting OPEC to hold off
on recent production cuts, partly because they don’t see the second quarter
supply rebuilding to be as significant as earlier expectations. In fact, the IEA
raised the 2nd quarter call on OPEC by 300,000 barrels per day and suggested
that Non-OPEC production growth would be limited to 1.3 million barrels per day
or a net reduction of 180,000 barrels per day.
NATURAL GAS
Since natural gas prices hardly showed any weakness
during the recent crude and unleaded correction, it would seem like natural gas
has a strong positioning. The weekly COT report showed the funds to be net short
and the small specs moderately long and that continues to be a battle between
the speculative forces. We have to think that aggressive traders might consider
a long June natural gas put, in conjunction with a long June unleaded call,
looking to get roughly the same delta on the options.