Futures Point To A Stronger Open
INTEREST RATES
03/17 OVERNIGHT CHANGE to 04:17 AM:BONDS+2 As we
expected, the Treasury market dipped ahead of the FOMC meeting and then resumed
the upward march. It is clear to us that the Fed was slightly less optimistic in
its description of the US recovery and even if some think that the market is
splitting hairs over the Fed word use, one doesn’t have to look far to find
justification for the upward bias in Treasuries. In fact, two companies are
making headlines in the Wall Street Journal this morning with layoffs totally
19,000.
STOCK INDICES
03/17 OVRNIGHT CHG to 04:17 AM:S&P+370, DOW32,
NIKKEI +194, FTSE+12 We continue to be impressed with the action in the stock
market, as stocks could have been disappointed by the Fed dialogue yesterday but
instead the market found the silver lining in the statements. Furthermore,
instead of obsessing over the lack of supportive dialogue toward the recovery
yesterday, the stock market latched onto the idea that interest rates were going
to remain low and that shows a bullish tilt. So far, the Japanese stock market
seems to be benefiting from a strange flight to quality pattern.
DOW
While the Dow might be able to carve out a rise to 10,259, we are not overly
impressed with the current bull case. In fact, on a rise to 10,240, we will
become an interested seller of the market. However, one can’t fight the near
term short covering tilt, right out of the gates this morning.
S&P
There would seem to be little to stop the June S&P from climbing to the 1120
level in the coming sessions. Traders should be aware of the multiple expiration
window ahead, as that could serve to exaggerate short term trading patterns and
in effect, result in prices rising further than what the fundamental conditions
might seem to allow. Therefore, a temporary rise to 1125.20 might not be ruled
out in the coming two sessions in the June S&P. Once the dust from the
expiration begins to settle, we will begin looking for a place to re-enter short
plays. For now, the bulls have minor control over prices.
FOREIGN EXCHANGE
US DOLLAR
The Dollar seems to be getting the breaks, as the
FOMC meeting dialogue could have been construed as a negative for the Dollar,
but instead the meeting was considered a push by some and a supportive
development by others. Providing the Dollar with additional support is the fact
that numbers from the Euro zone this morning we soft and the Wall Street Journal
is suggesting that recent terrorism incidents are probably going to result in
lower European interest rates. Therefore, the Dollar is getting minimal support
off a situation where prices could easily have sagged. We still think that the
Dollar wants to go lower but that the trade will wait for the US CPI readings
before attempting to push the Dollar down. However, if the CPI report shows
anything above +0.3%, that could suggest that the Fed might hot have as much
patience as they might want to have with respect to US interest rates. If and
when the potential support from inflation passes, that could open the Dollar up
to a slide to this weeks lows. In short, there still isn’t a burning trend in
the Dollar or the Euro.
EURO
With Euro zone January Industrial production down
0.4%, we have to think that the Euro zone is in a much weaker position than the
US economy and with the additional weight of the terrorism threat, even more
slowing is ahead. We have to think that the Euro is primed for a downside
breakout and traders need to get short before the February and March numbers
confirm the slowing situation. Therefore, look to buy June Euro 118 puts for 95
or better, looking for an objective of 220. Risk the position to 40.
Countervailing the weak industrial production readings were slightly hot Euro
zone inflation readings and that is why we prefer to buy puts instead of getting
short futures.
YEN
While some in the trade suggest that the Yen is
rising because the trade thinks the BOJ is out of intervention powder, it is
also clear that money is moving toward Japan because of solid investment reasons
and because neither the US nor Euro zone economies are throwing off attractive
potentials. We also have to think that year-end money flows are serving to boost
the Yen! As we suggested Monday, it would seem like the Yen is primed to rise to
the 92.90 level and may actually manage a trade to 93.36.
^next^
SWISS
The Swiss is mired and might succumb to the same
weakness that might begin to plague the Euro. In fact, a rise to 79.00 in the
Swiss would represent a good selling point.
BRITISH POUND
So far the Pound has just not been able to evoke a
trend signal. While it appears that the market has forged a solid low, even some
favorable jobs data failed to inspire long interest in the action this morning.
Therefore, the Pound might try to climb, but the bull camp doesn’t appear to
have much potential. Therefore, aggressive traders might look to sell a rally in
the Pound to 180.57.
CANADIAN DOLLAR
It just doesn’t seem like the Canadian can sustain
long interest and with massive overhead resistance on the charts and the
Canadian price pattern pointing down, the bear camp would seem to have control.
In short, expect a minor slide in the Canadian to 74.46.
METALS
OVERNIGHT
GLD+0.00, SLV+0.30, PLAT+5.10 London A.M.
Gold Fix $402.00 +$2.40 LME COPPER STOCKS 235,050 -5,500 tons COMEX Gold stocks
3.57 ml Unchanged Comex Silver stocks 122.4 ml -300,635 oz
GOLD
Apparently the FOMC meeting really didn’t result in
a significant impact on the US Dollar, but with the Dollar almost back to the
vicinity of the prior days high, it is possible that gold sees a minor limit to
the recent upward tilt in prices. The $406 level in June gold continues to be a
critical pivot point, with the $408.5 level today and the $408 level on Thursday
becoming extremely critical down trend channel resistance line pivot points. We
are not sure if the CPI report is a big issue for gold but the traders in Sydney
mentioned the US report in their analysis this morning and therefore it might be
important for the report to come in at or above the +0.3% target level.
SILVER
The up trend pattern in the silver market appears to
be capable of extending in the near term, especially if gold can manage to get
above some critical chart resistance. Kodak suggested that a rebound in cell
phone demand and other industrial use has increased demand for silver and caused
the significant rally in silver prices over the last 7 months, but we also know
that persistent fund buying interest has been the driving force in silver since
late January. Near term trend line support in May silver comes in at $7.083 and
the top of the channel in the May silver comes in at $7.364.
PLATINUM
The platinum market correction could have run its
course with the $900 level seemingly holding up prices in the April contract.
With the Chinese gold market supposedly seeing some flight to quality interest
off the terrorism threat, it is possible that platinum continues to garner
spillover speculative buying interest. While we suspect that platinum will
continue to see strong industrial demand, with prices above $900, the
speculative component has to remain as interested in the long side as the
physical buyers, for the market to continue rising.
COPPER
One has to be impressed with the continued follow
through in the copper despite periodic concern for the US and European
recoveries. The Wall Street Journal this morning is voicing concern that the
recent terrorism incident might stall the European recovery and might be cause
for a rate cut. Therefore, the copper market is certainly seeing the macro
economic case soften and with nearby copper prices at 1.36, there is an
expensive tone to prices.
CRUDE COMPLEX
The trade generally expects the weekly inventory
numbers this morning to show a minor to moderate build in crude oil stocks and a
minor build in gasoline stocks and that might have fostered some profit taking
Tuesday. While the bias in the market remains up, we would not be surprised to
see prices fade into and possibly after the weekly inventory reports this
morning. Reports that January US crude oil imports rose 10.9% versus a year ago,
probably adds to the near term liquidative tilt but given the entrenched bullish
view toward prices, we doubt that the bulls will stand back and allow prices to
fall very far.
NATURAL GAS
The market appears to have run out of direct upside
momentum. Weather has stayed mostly supportive but the 6 to 10 day forecast has
already begun to register a warm up and demand should begin to taper off
consistently. If the regular energy complex does manage to forge another day of
corrective action, we suspect that may Natural gas could slide down to support
of $5.65.