Futures Point To A Stronger Open
INTEREST RATES
12/29 OVERNIGHT CHANGE to 04:29 AM:BONDS-10 The
Treasury market managed to end last week within striking distance of the recent
highs, despite the persistent gains posted in the US equity market. In total,
the economic information released last week, seems to justify the recent gains
in the Treasury market and if the normal post holiday let down takes place, at
the same time that terrorism threats weigh on sentiment, it would not be
surprising for the March bonds to run to levels above 112-00. In fact, bond
prices might have already risen to levels above 112-00 if equity prices hadn’t
managed to make consumers and investors feel good with persistent price gains.
STOCK INDICES
12/29 OVRNIGHT CHG to 04:29 AM:S&P+350, DOW23,
NIKKEI +83, FTSE+12 International stock market action was supportive overnight
and with the US market pointing to a strong opening, it is possible that prices
open in new high ground. Just as the bond market is weakened off a downgrade of
the mad cow situation, the US stock market might be cheered. While the mad cow
issue is by no means ended, the weekend developments would seem to offer a less
disastrous outcome for many US companies.
DOW
Given the strength seen in the S&P overnight, we would expect the Dow to make an
attempt to post a new high early in the session. Initially we see 10,326 as
resistance but that level should fall early, especially if the Conference Board
readings are supportive to the bull case. Near term support today is seen at
10,279 in the March Dow futures but “close-in” upside targeting is seen up at
10,401.
S&P
Initial resistance is seen at 1097.50 and then again at even numbered 1100. Just
like the Dow initially balking at the 10,000 level, the S&P might encounter a
little resistance at the 1100 level. We are actually a little surprised at the
magnitude of the opening bid in the S&P and with trading conditions potentially
thin, we probably need to see the pit trade confirm the bullish tilt, before
expecting prices to hold up into new high ground. It almost seems like the S&P
is perfectly content to climb a persistent wall of worry on a number of
fundamental issues. We do think that some of the gains are short covering off
the mad cow situation but we doubt that US beef bans will be dropped today!
Initial support today is pegged at 1095.70 and then again down at 1093.
FOREIGN EXCHANGE
US DOLLAR
The Dollar managed trade to a new low this morning
despite the positive tilt being registered from the US equity market indicators.
We would have expected the Dollar to find some support off the potential
mitigation of the mad cow situation but all is not said and done on the issue.
We would also think that US economic readings today will be slightly supportive
of the Dollar but that the trend in the Dollar is down and that issues that
manage to support the Dollar will be unable to turn the tide. In order to turn
the tide in the Dollar up, the March contract will have to manage a rise back
above 88.18 and perhaps even a close back above 88.60.
EURO
The Euro is showing no signs of exhaustion on the
opening this morning and therefore looks to be primed to rise well into new high
ground. Some traders are projecting a rise to 130 but we have to think that a
quick pulse up to that level could bring a warning of intervention from the ECB.
In fact, a Financial Times story suggests that the ECB is already concerned that
the Euro is in the process of hurting the European economy. Keep in mind, to
turn the Euro down, might require a coordinated intervention by several central
banks and right now that doesn’t seem to be in the cards. In the near term we
see very solid support in the Euro coming in at 124.04 and little resistance
until 125.10.
YEN
Considering the weakness in the US Dollar and the
Yen positioning on the charts, it would seem that a breakout decision will be
seen this week. However, if the ECB were to intervene against the Euro (and come
out in favor of the Dollar) that could derail the Yen’s chance at an upside
breakout. Many think that the information to be released Tuesday morning could
be extremely critical in determining many central banks stance in the near term.
Therefore, longs might hold out for a breakout but position traders might
consider being long 3 June Yen 96.50 calls and short a Yen futures for the
coming weeks.
SWISS
We are actually a little surprised that the Swiss
isn’t sitting closer to an upside breakout on the charts this morning and
therefore it would seem that less anxiety is driving the Swiss. In other words,
the market is favoring the Euro over the Swiss but we suspect that the Swiss
will still rise to the recent highs before encountering resistance.
BRITISH POUND
The Pound sits just under contract highs this
morning and poised for another pulse up. However, some traders are suggesting
that the 176.57 level might be a little more resistance than many expect.
CANADIAN DOLLAR
We are not sure if the change of events on the mad
cow situation are a critical issue to the Canadian Dollar, but the market might
pause in its recent favor toward the Canadian just to make sure. The Canadian is
significantly overbought and potentially vulnerable to profit taking. Near term
support is pegged at 76.04 and then again down at 75.88.
METALS
OVERNIGHT
GLD+2.30, SLV+4.20, PLAT-4.00 London A.M.
Gold fix $413.50 +$2.70 LME COPPER STKS 435,875 tons -1,675 tons COMEX Gold
stocks 3.06 ml -643 oz Comex Silver stocks 123.0 ml oz -1.204 ml oz
GOLD
The gold market seemed to end the holiday shortened
week in a little more favor than it started the week and with the Dollar
managing to slide down into another new low, it would seem that gold will
continue to garner support from the FOREX action. We are impressed that the gold
market took the renewed terrorism threats last week as a positive, as the market
could have become concerned about deflation in the event of another economic
debacle. It is possible that the mad cow situation migrates to the background,
which for gold is probably a positive development.
SILVER
According to the overnight trade action, silver
comes into the session at new highs for the move and nearly 5 cents above the
prior close. With strong gold leadership there should be little to keep the
market from posting more gains. Near term resistance comes in at $5.90 while
close in support comes in down at $5.805.
PLATINUM
The platinum market is also feeling the lift off the
precious metals boom but is also confident in its supply and demand setup.
Therefore, one should not be surprised to see platinum rise to fresh contract
highs this week, especially if world equity markets continue to send off
favorable signals. Initial resistance is seen coming in today up at $821.7 basis
the April contract.
COPPER
The March copper comes into the session today ultra
strong, with prices exploding into new high ground. Apparently Chinese buying
was seen overnight and that is all it took to chase prices into a big range up
in the early US action. Exchange stocks in Shanghai increased by +11,881 tons
while LME stocks declined, which means the bulls are mostly focused on demand
and not supply.
CRUDE COMPLEX
12/29 OVERNIGHT CHG to 04:29 AM:CRUDE-56,
HEAT-117, UNGAS-144 The energy complex comes into the action this week after an
extended closure and it is unclear whether or not the bulls will continue to
control prices after the holiday, as they did into the holiday. With ongoing
mild temps present in the US, economic information turning soft and the
terrorist still focusing on airline attacks, we would understand some hesitancy
on the part of buyers. The inventory numbers last week seemed to be mostly
mixed, but even with the US crude oil inventories actually increasing moderately
and US crude stocks rising to 275 million barrels, the stocks are still close to
precarious levels.
NATURAL GAS
We have to think that the inventory readings last
week were very supportive, with a draw of 151 bcf probably enough to scare the
bear camp. However, some might point out that US natural gas in storage is still
running at a surplus of 159 bcf. Furthermore, it would also appear as if the
near term weather is negative to natural gas prices, as mild temperatures are
projected for most of the coming week.