Futures Point To A Stronger Open
INTEREST RATES
03/25 OVERNIGHT CHANGE to 04:25 AM:BONDS-2 While
an upward bias continues in Treasury prices, it would seem that the market is
having trouble extending gains above the 116-00 level in the June contract.
However, the geopolitical headwinds look to remain strong and recent US economic
stats haven’t been overly impressive. In fact, one might suggest that economic
reports are inconclusive at best, as every good number seems to have some
countervailing element.
STOCK INDICES
03/25 OVRNIGHT CHG to 04:25 AM:S&P+440, DOW39,
NIKKEI +165, FTSE+35 On Wednesday the stock market did an impressive job of
temporarily shutting off negative sentiment. It certainly helped the stock
market to get some minor assistance from US economic numbers, as both durable
goods and housing numbers managed to come in slightly above the headline
expectations. Comments from the US Fed yesterday afternoon also provided a
slight bit of support to sentiment, as the Fed suggested that growth patterns
looked to remain in place.
DOW
We can’t argue against more near term gains, as short covering lifts prices.
There might also be some value hunting but getting the June Dow back above
10,097 would seem to require a more specific bullish development, than has been
seen in the recent trade.
S&P
While the June S&P did manage a big range Wednesday and then close slightly
above the mid point, we are not ready to call the action Wednesday, a classical
reversal. In other words, since the bottoming action yesterday didn’t coincide
with some notable improvement in the macro economic condition, we are skeptical
that the market has forged a major bottom. In other words, we would have
preferred to see a total exhaustion reversal, instead of an extremely quiet
bottoming. In the near term, one can’t argue against a bounce to 1101.20 but
getting above that level should require a surprisingly positive headline. In our
estimation, the only probable surprise headlines, look to favor the bear camp.
However, traders do need to take a close look at the US claims report before the
opening today as that report hits right at the heart of investor sentiment.
FOREIGN EXCHANGE
US DOLLAR
The technical action in the Dollar is pretty
impressive with the Dollar managing a strong pulse up off the recent
consolidation low. However, in order for the Dollar to break out to the upside
we think the economy will have to hold some favorable prospects. Therefore, to
propagate the recent rise in the Dollar, the claims or GDP readings must come in
better than expectations. Certainly the Dollar is getting some spillover support
from the idea that the ECB might be moving to cut rates soon, but with a
confidence poll in Europe showing stabile readings in the wake of the Madrid
bombings, we wouldn’t expect the ECB to move quickly. In conclusion, the path of
least resistance might be up but the fundamental look doesn’t look to support a
breakout run in the Dollar!
EURO
The charts in the Euro look vulnerable and with the
market thinking the ECB is poised to cut rates, the fundamental tilt could allow
a failure in the Euro. Critical chart support comes in at 120.73 and then again
down at 120.20. The Euro will begin to get February numbers soon and that could
foster a slide in the Euro, as we think the European economy will follow in the
same pattern as the US economy. Therefore, the path of least resistance is down
and traders might want to sell 20-30 tick rallies in the Euro.
YEN
The Yen seems to be slightly overbought but the
trend is still pointing upward. The Nikkei posted another big gain overnight and
that should facilitate more gains in the Yen. If the US Dollar gets soft numbers
this morning that could simply propel the Yen back to the contract highs. The
Yen does have extremely critical pivot point support at 93.89.
^next^
SWISS
Like the Euro, the Swiss is bordering on a technical
failure and would not appear to have the upcoming economic numbers to avert a
further slide. A critical failure takes place in the Swiss at 78.13 and a
downside target of 77.50 is likely in the coming sessions.
BRITISH POUND
It is clear from the charts that the Pound is in a
technical failure. Near term downside targeting is projected at the March low of
177.65. The BOE continues to suggest that higher rates are possible and that has
some traders concerned about UK growth. The path of least resistance is down!
CANADIAN DOLLAR
The coiling in the Canadian has taken on a negative
tilt, with prices crushed by heavy overhead resistance. We suspect that the
Canadian is due for another spike down probe to the 74.10 level.
METALS
OVERNIGHT
GLD-0.70, SLV-4.50, PLAT-10.10 London
A.M. Gold Fix $416.60 -$1.00 LME COPPER STOCKS 206,250 -3,575 tons COMEX Gold
stocks 3.56 ml Unchanged Comex Silver stocks 122.1 ml Unchanged
GOLD
The Gold market has certainly fallen back from the
recent highs and the continued strength in the US Dollar is prompting some longs
to stand back from the market. However, with Hamas vowing to kill Sharon in
retaliation for the death of its founder, it would seem like flight to quality
interest in gold will provide some countervailing support. Chinese gold was
lower overnight, while other Asian market took their cue from weak US pricing
late Wednesday.
SILVER
Like gold, silver has also pulled back from the
recent highs but silver also seems to have solid support just under the market.
Critical support in the May contract comes in at $7.565, with a critical pivot
point coming in today up at $7.65. With a number of commodity funds deciding to
bank profits in other markets, we have to wonder if fund longs in silver will
remain in position.
PLATINUM
After a quasi double top the platinum market seems
to be overbought and vulnerable. The Asian trade noted excessive volatility in
platinum and that might be a sign that prices are due for a correction. Near
term corrective support in April platinum comes in down at even numbered $900,
but trend line support in April platinum comes in down at $881, which is a long
way down on the charts.
COPPER
The copper market continues to show a lack of upside
momentum and the longer the market tracks sideways, the more likely there will
be fund liquidation. Chinese copper prices were down moderately overnight and
since the US market was generally higher on Wednesday that suggests the Chinese
market is trading off its own volition. Furthermore, with reports that Chinese
February copper production was up 22% on the prior month and 11% on the prior
year, one might conclude that some of the Chinese import demand could be
curtailed.
CRUDE COMPLEX
We are surprised that the energy complex held
together as well as they did Wednesday especially when one considers the large
increases in U.S. crude stocks. However it is possible that a short-term rise in
US crude oil stocks will end up being a supportive issue to prices, as that
could effectively push OPEC into the upcoming production cut.
NATURAL GAS
With the crude oil market weak and near term
fundamentals projecting even more weakness in the coming sessions, the natural
gas market was due to come under liquidation pressure. In fact, a series of
declines in crude oil prices, could severely damage natural gas on the charts
and send the May contract down to a $5.32 price level. Near term weather adds to
the potential selling pressure but traders will have to be constantly aware of
any renewed strength in crude oil prices.