Futures Point To A Stronger Open
INTEREST RATES
12/12 OVERNIGHT CHANGE to 04:12 AM:BONDS-8 The
fickle nature of the Treasury market continues, as the market managed a bounce
yesterday in the face of a potentially negative retail sales readings, talk of
increased inflation and rising competitive corporate supply. However, it is
clear that Fed dialogue ruled the day, as the prior meeting minutes, from the
FOMC clearly cast the impression that the Fed would be on hold, even in the face
of accelerating US growth. Even more supportive for prices were suggestions from
the Fed that the US jobs situation might not fully recover until mid 2005!
Therefore, traders were a little more capable of discounting the prospect of
expanding retail sales and a rising US equity market.
STOCK INDICES
12/12 OVRNIGHT CHG to 04:12 AM:S&P+0, DOW3,
NIKKEI +94, FTSE+19 The stock market continues to surprise the trade with
persistent buying and a bullish attitude toward the future. Supposedly,
investors flocked into the market yesterday, following the release of the FOMC
meeting minutes, as the Fed gave the market confidence that rates were going to
remain on hold, longer than many expected. In fact, the Fed seemed to suggest
that rates would remain on hold, even if the economy began to pick up pace.
DOW
It goes without saying that the 10,000 level is an important support point and
therefore an early upward probe might serve to entrench prices at these higher
levels. Considering the correction early this week, this market should have
plenty of additional buying capacity but probably needs to get off on the right
foot to really pull in buying volume. We think the market can shake off an early
slide below 10,010 but an early retest of levels below 10,000, might rob the
market of a big session on the upside.
S&P
We have to think that herd mentality will foster more gains today, especially if
the early numbers don’t provide bullish fodder. In other words, assume the bulls
control unless something surfaces to alter that track of thinking. Volume and
open interest are rising in the normal expiration unwinding but the totals
didn’t come anywhere near the two prior quarterly expirations. That could mean
that the rally thus far, hasn’t been well attended, or it could mean that volume
is still on the sidelines capable of coming into play. March S&P support today
is 1070.30, targeting is 1079.70.
FOREIGN EXCHANGE
US DOLLAR
After a massive volume and open interest spike the
Dollar appears to be settling back into a down trend pattern. With the US Fed
suggesting that US rates are going to be on hold for an extended period of time,
it would not seem like the interest rate differential is set to change.
Furthermore, the Fed also suggested that the US job problem could remain an
issue well into 2005. Therefore, neither the interest rate, or economic
differential looks to alter the course of the Dollar. We really think that
massive and persistent intervention by the BOJ provided the Dollar with most of
its recent strength and now the market is set to return to its old pattern. In
fact, we think the net shake from the action this week, is that the Chinese will
move toward a floating rate and that the Dollar might fall even further.
However, in order to reconfirm that the trend is still down, the March Dollar
needs to get back below 88.96 today. Aggressive traders might sell the Dollar
using a tight stop at 89.45.
EURO
After the correction this week, the March Euro
should have significantly improved its technical capacity. Apparently news that
the French trade deficit expanded with the Euro zone has little impact, probably
because France maintains a trade surplus with the US. We see no reason why the
Euro would not make a new contract high today, or in the action Monday.
YEN
It would seem that the BOJ has temporarily backed
away from intervention efforts and that the Yen is prepared to bounce. However,
with the BOJ recently reloading their intervention arsenal, we suspect that the
trade will be a little cautious in pressing the Yen sharply higher. Certainly
one might expect the March Yen to return to the vicinity of the top of the
consolidation pattern of 93.19 but that area will resurrect fears of
intervention. In other words, the longs might have a free pass until 93.19 but
then the going might get difficult.
SWISS
Critical support is now 78.90 and the market is
probably looking for fresh contract highs in the coming sessions. Initial
resistance is seen at 79.37 in the March contract.
BRITISH POUND
The only rub against the bull camp in the Pound, is
that the market didn’t correct its technicals like other markets. However, we
see the Pound trend to be much more solid and defined. With a Dollar slide below
88.95 the Pound should be well into a new high for the move.
CANADIAN DOLLAR
We thought that the Canadian would hold around the
75.00 level and with the US Dollar weaker and the BOJ possibly resting, that
could open up the Canadian for a return to the old consolidation zone of 75.84
to 76.88. Canada did produce some negative economic readings but we have to
think that recent weakness was mostly US Dollar strength and not a change in the
Canadian setup.
METALS
OVERNIGHT
GLD+2.50, SLV+2.80, PLAT+9.00 London A.M.
Gold fix $406.60 +$2.60 LME COPPER STKS 460,425 tons -2,500 tons COMEX Gold
stocks 3.059 ml Unchanged Comex Silver stocks 123.9 ml oz Unchanged
GOLD
Seeing the rise in the gold market in the Asian
action, off a minor decline in the US Dollar appears to take gold off the rocks.
However, the overnight slide in the Dollar might simply be a temporary
corrective move, after a sharp 106 point rally in the Dollar early in the week.
Seeing the December Dollar Index slide back below 88.69 could prompt an even
greater interest in gold, which had its attention on the Dollar intensified by
overnight comments from NM Rothschild and Sons Australia that seemed to suggest
the gold rally is almost exclusively dependant on a lower Dollar.
SILVER
Like gold, silver has managed what appears to be a
healthy correction and should have a much better technical setup. Silver also
looks to have a positive lift from overnight action in gold and therefore a
return to the middle of the up trend channel at 565 could be seen in the short
term. Silver has to have outside assistance, because it would not appear that
its internal fundamentals are primarily responsible for the uptrend in prices
since the October low.
PLATINUM
A very sharp rise in platinum prices overnight
probably comes because of the overall improvement in the outlook for precious
metals prices but might also be the result of demand talk. Some might suggest
that a Coca-Cola order for delivery trucks with “Platinum Plus Purifier†systems
installed, isn’t that significant of a pull on platinum supplies but the
development is simply a headline story that fosters the idea that platinum
supplies are tight, will remain tight and that demand is growing enough to
accentuate the shortage in platinum supplies. Therefore, more gains for platinum
with nothing to suggest that the rally is ready to exhaust.
COPPER
Chinese copper prices were slightly higher overnight
and with suggestions that a strike at a Codelco facility will continue, we have
to think that prices will have a minor upward bias today. However, the Chinese
players didn’t exactly show strong interest in the market, as it appeared that
prices were a little expensive for the Chinese today. With a Chinese analyst
predicting that coming Chinese demand will have a bigger impact on natural
resources than the reconstruction of Europe after the war, one would think that
copper prices will remain underpinned.
CRUDE COMPLEX
12/12 OVERNIGHT CHG to 04:12 AM:CRUDE+28,
HEAT+91, UNGAS+51 The energy market continued to show signs of profit taking
late Thursday afternoon, as bullish inventory readings this week for crude and
natural gas failed to inspire energy prices to higher levels. It would seem that
the market was ready to settle into a back and fill process but with early
rumors swelling from the Arab OPEC members meeting in Cairo the liquidation tilt
is thwarted. Before the renewed talk of 2004 production cuts it appeared that
prices would slide.
NATURAL GAS
After seeing a surprise 111 bcf draw, the natural
gas market showed no signs of strength and that could be because of the presence
of an annual surplus and it could be because the market is normalizing the
weather impact on prices. Certainly the natural gas market was significantly
overbought and vulnerable to a correction. In fact, considering where the small
spec long position was around the highs this week, the market probably needed to
see a correction before it could effectively forge more gains.