Futures Point To A Stronger Open
INTEREST RATES
01/29 OVERNIGHT CHANGE to 04:29 AM:BONDS+9 While
we think the Treasury market overreacted to the “Change of Statement†from the
US Fed, it is clear that the Fed made the very subtle change in an effort to
have a free hand in the future. In other words, by taking out the statement
“that interest rates would remain on hold for a considerable period†the market
fully embraced that as a sign that the Fed is setting the table for higher
interest rates. Because the Fed said “they could be patient with rates†instead
of holding rates steady for a “considerable period†the market thinks a hike is
coming later in the year! Certainly economic numbers discourage aggressive
selling but the statements yesterday simply sparked a number of long term
players to bank significant profits and move to the sidelines.
STOCK INDICES
01/29 OVRNIGHT CHG to 04:29 AM:S&P+360, DOW45,
NIKKEI -73, FTSE-42 As we feared the Fed was able to undermine sentiment but
given the bulk of the statements, the stock market made too much of the prospect
for higher interest rates. Therefore, a minor profit taking mentality might
exist but we don’t see the bear camp managing to drive prices down sharply. For
most of the session Wednesday, favorable corporate news seemed to countervail
the disappointing regularly scheduled economic information coming from the US
and therefore, one might expect a similar course today.
DOW
The Dow fell right down to critical trend support and appears to have good
support at 10,467. We now suspect that prices will attempt to climb back toward
the mid January consolidation up around 10,555. What the bull camp wants no part
of is a trade or a close back below 10,460.
S&P
Some traders want to see a three day down correction, but there is a good chance
that the lows from yesterday will be able to support prices. However, the S&P
has shown more weakness than the Dow and therefore we need to see the Dow
respect the Wednesday bottom today, so that the S&P can respect the lows that
could be made today. In other words, we see the S&P making a low, one day
following the Dow. Critical pivot point resistance comes in today at 1133.20 to
1134.00. After the break this week, the small spec long might be the smallest
since May/June of last year! Therefore, the market is at, or very near a good
buying zone!
FOREIGN EXCHANGE
US DOLLAR
The Dollar continues to show signs of strength in
the wake of the Fed statement change. Of course the market is assuming that the
Fed’s stance has changed by the mere omission of the phrase “considerable timeâ€.
The Asian trade evidently accepts the US interpretation of the FOMC and is
giving the Dollar more respect. With the Japanese thought to be in the market
with 5 to 10 billion in interventions, the Dollar was certainly helped in its
attempt to bounce. However, in order to make the recent action stick, the US
economy will have to provide some support. In other words, the numbers have to
solidify the prospect of higher US interest rates. Therefore, the economic
numbers released from the US today, might be a little more important to the
currency markets than they have been in the past. We see the Dollar rally
failing if the March Dollar falls back below 87.05 and certainly if there is an
86.38 trade, we could see a wholesale failure in the Dollar. In the mean time
the bull camp has a slight edge.
EURO
As long as the Euro is below 124.94, the bears have
a chance of pushing the Euro quickly back down to 123.57. Euro zone money supply
continues to run sharply above the intended targeting level and that implies a
quasi easing mentality still exists at the ECB and that is an element that
favors the bear camp. Minor gains in some French Production readings overnight
are not enough to spark a buying wave in the Euro, especially since the bias of
the market is pointing down! Aggressive traders might sell the Euro today at
125.10 with a short term objective of 123.70. Risk the position to 125.41.
YEN
The BOJ is intervening according to overnight Press
reports and that combined with the new found strength in the Dollar, gives them
an edge in keeping the Yen from an upside breakout. In short, the bull camp has
just been unlucky, as it has been consistently confronted with a series of
developments that are preventing an upside pulse. The trend is up but artificial
developments are “discouraging†widespread speculative buying. Be long on breaks
to 94.12, but limit objectives to 94.94.
SWISS
The chart continues to be very negative for the
Swiss and if the US can get anything in the way of decent numbers, we suspect
that the Swiss is headed down to 79.00 and maybe even lower.
BRITISH POUND
The chart pattern in the Pound is showing negative
momentum but if any currency can avoid a further slide it will be the Pound. Buy
breaks to 180.97 but keep a tight stop on the position at 180.30.
CANADIAN DOLLAR
Until the Canadian slides down to 74.35, we doubt
that a solid low has been formed. The charts are negative and the US Dollar
looks to have the near term capacity to remain strong. More downside ahead.
^next^
METALS
OVERNIGHT
GLD-3.40, SLV-6.50, PLAT-0.20 London A.M.
Gold Fix $410.15 -$.55 LME COPPER STOCKS 368,875 -3,975 tons COMEX Gold stocks
3.50 ml -585 oz Comex Silver stocks 124.2 ml -622,167 oz
GOLD
The gold market benefited Wednesday from mid day
dialogue that a number of central banks, maybe even European central banks might
consider raising their gold reserves. It apparently didn’t dawn on the gold
market that the German Central was fresh off statements requesting a new gold
agreement for 2004-2009 and therefore they seem to be in a posture to sell gold
instead of buying it. However, the German Central bank is only calling for the
same terms it requested in the 1999 and that is the ability to sell 120 tons of
gold per year.
SILVER
While silver showed little setback overnight off the
gains posted yesterday, it appears to be coming into the session below the two
previous closes. If the silver market is being lifted in some indirect fashion,
off the base metals tide, it should catch a little lift from the overnight
action in copper, as Chinese players showed up as interested buyers. Therefore,
stay with the trend, but realize that silver doesn’t have much in the way of
close-in support on the charts.
PLATINUM
Surprisingly the platinum market isn’t showing much
strength this morning, despite the fact that copper and silver are both
generally showing strength. The trend would still seem to be up, but it appears
to be up without as much momentum as was seen early in the month. Critical
support in the April comes in down at $843, with resistance at $856.
COPPER
The copper market comes into the session right at
the contract highs posted Wednesday and supposedly saw the return of Chinese
arbitrage buying overnight. The economic outlook from the US isn’t exactly
providing a direct lift to copper, but the outlook for the world, the threat of
strikes and evidence of Chinese buying is more than enough to keep prices
grinding higher. Even with India showing higher April through December copper
output (295K tons compared to 289K in the year before) the market doesn’t seem
to be negatively impacted.
CRUDE COMPLEX
The weekly inventory reports were fully bullish
with the exception of the rather sizeable rise in API crude stocks. In fact, the
magnitude of the gasoline stocks declines would ordinarily have been enough to
throw prices sharply higher, but it would seem that market sentiment has turned.
Certainly, the outlook for mild weather was a consideration and maybe the market
is a little concerned about bird flu trimming back world wide energy
consumption, but the market clearly failed to capitalize on a set of figures
that would have ballooned prices two weeks ago.
NATURAL GAS
The natural gas market “needs” a big draw to avoid a
technical and fundamental washout. Even with a moderately large draw, it is
likely that the annual surplus will expand further and with mild temps on the
horizon for early February, the longs have to be very uncomfortable. We are not
sure if March needs to fall significantly below $5.50 but there is the potential
to see the majority of the small specs longs flushed from the market, unless the
draw figure exceeds 260 bcf today.