Futures Point To A Stronger Open
INTEREST RATES
01/16 OVERNIGHT CHANGE to 04:16 AM:BONDS+0 The
Treasury market doesn’t seem to be any worse for the wear, after economic
information Thursday morning showed some improvement and the stock market
climbed to new highs. Even more surprising, the Treasuries continued to mount
gains despite what would have appeared to be less central bank intervention
buying. It is possible that the Bank of Japan is still intervening aggressively,
because they think that market forces could enhance their efforts.
STOCK INDICES
01/16 OVRNIGHT CHG to 04:16 AM:S&P+60, DOW8,
NIKKEI +192, FTSE+19 The bull camp continues to surprise the Street. In fact,
many bears are suggesting that recent favorable earnings reports are the net
result of the action in the Dollar and not because of favorable economic
conditions. In other words, the market continues to have detractors as it plows
into new high ground.
DOW
Surprisingly the Dow lags behind the S&P this week but we suspect that the Dow
will manage a new high today. However, momentum continues to be very low and an
inability to get into new high ground by the late afternoon trade, could prove
to be somewhat painful for the bull camp. In fact, the March Dow needs to hold
above 10,530, to avoid prompting a minor profit taking setback.
S&P
The S&P continues to outperform the Dow, which is quite impressive. However, it
would not be positive for the March to slide back below 1131.30. On the other
hand, if the US numbers before the opening, provide even the slightest positive
leadership, we expect more new highs. However, one should not forget that the
January effect supposedly ends with the close today (according to strict
statistical rules) and that could rob the market of buying fuel next week. In
conclusion, the trend is still up.
FOREIGN EXCHANGE
US DOLLAR
The rising Dollar is apparently a factor that is
capable of prompting foreign buying in the US stock market and that is something
that could foster more optimism toward the Dollar. With the US stock market
periodically posting new highs and the pace of the US recovery still running
ahead of the Euro zone, it is not ridiculous to think that the Dollar should
offer some attraction over the Euro. We have to think that the Bush
Administration would do what ever is in their power to temporarily strengthen
the Dollar, as if seems to be boosting sentiment in the US. Furthermore, we have
to think that the US would like to see the Dollar strengthen into the coming
OPEC meeting, just to avoid a full court press on the desire to price oil in
Euros. We suspect that US economic numbers this morning will provide minimal
support to the Dollar and that the Dollar might continue to see long term short
covering buying. Another critical pivot point in the Dollar comes in at 87.26.
EURO
The next critical downside pivot point in the Euro
comes in at 124.53. The best the ECB could muster in the way of positive
economic dialogue, is that 4th quarter Euro zone GDP would be at least as good
as the 3rd quarter. But the Euro zone grew at only +0.4% in the third quarter,
which is a small fraction of the growth posted in the US! The ECB does seem to
have tempered its dialogue toward intervention and that could slow the declines
in the euro. For instance, Issing suggested this morning, that the ECB isn’t
indifferent toward the strength in the Euro and that comes after actually
threatening to do something last week. More down, but maybe the pace of losses
will slow.
YEN
With the IEA noting significant Japanese crude stock
declines in November, the Japanese economy would seem to be as vulnerable as the
US to energy problems and that could mean that the BOJ continues to fight
aggressively against the Yen rise. However, with the overnight rise in the Yen
we have to think that the BOJ has already or will intervene. The question
becomes, how much longer can the BOJ can prevail against market forces?
SWISS
Major chart damage in the Swiss, would seem to open
up the door for extensive stop loss selling. In fact, the next downside support
seems to come in down at 79.48.
BRITISH POUND
Because the Pound trend was thoroughly entrenched,
we would expect the market to fall in an orderly fashion. However, we suspect
that the Pound might be headed to 179.54.
CANADIAN DOLLAR
We continue to fear a wholesale washout in the
Canadian. In fact, if the US Dollar continues to rise, it would not be
surprising to see the Canadian fall all the way back to the Oct-December
consolidation that was bound by 76.85 to 74.90.
METALS
OVERNIGHT
GLD+0.80, SLV-1.80, PLAT-2.90 London A.M.
Gold fix $410.30 -$5.20 LME COPPER STOCKS 402,225 tons -3,275 tons COMEX Gold
stocks 3.2 ml +29,921 oz oz Comex Silver stocks 125.3 ml Unchanged
GOLD
The capital liquidation wasn’t surprising
considering that both technicals and fundamentals turned against the bull camp
Wednesday afternoon and into Thursdays action. However, with the Dollar higher
again overnight and making significant headway on the charts, it certainly
appears like a trend change is possible. Therefore, the key bull fundamental (a
lower Dollar) is no longer in the bull’s camp.
SILVER
As we expected, silver managed to avoid step wise
losses with gold, probably because silver didn’t track the Dollar tightly on the
way up. However, we still think that silver is vulnerable and that a trade below
$6.16 might spark some stop loss selling by the funds and small spec position.
Unfortunately trend line support in March silver is all the way down at $5.93.
PLATINUM
Trend line support comes in at $837.3 but it appears
that the gold and silver washout is undermining some long interest in platinum.
In the end, platinum should have different fundamentals from gold and silver,
but it will hardly avoid additional weakness, if the broad based appeal of gold
deteriorates. However, the small spec long position in platinum was relatively
small and the market really hasn’t seen any change in the supply and demand
fundamentals, unless the higher Canadian mine output released earlier this week,
is taken into consideration.
COPPER
The copper market comes into the session today just
above critical support on the charts and still somewhat overextended
technically. However, the fundamentals in copper have been so strong, that the
technicals have taken a back seat. Shanghai copper stocks declined by 10,161
tons and LME stocks continue to decline and that is supportive when one
considers that prices softened early in the week because the market feared a
demand hit off the bird flu issue.
CRUDE COMPLEX
Despite lingering cold weather in the Northeast,
the energy complex failed significantly on the charts Thursday afternoon. We
have to think that the massively overbought crude oil fund long was responsible
for the washout Thursday afternoon and like the gold market, excessively
overbought markets can fall further than what the fundamentals would seem to
allow. However, with US crude stocks remaining extremely tight, we doubt that a
wholesale washout will be seen.
NATURAL GAS
The weekly inventory reading came in with a draw of
only 153 bcf after expectations of a 140 to 190 bcf draw and that disappointed
the market. With the regular energy complex under pressure and the January 22nd
to January 28th forecast bringing in some mild temps, we are not surprised that
the market failed. We once again think that the March contract could slide below
$6.00, to a near term oversold low of $5.80 and that might be a place to get
long for a final winter bounce.