Futures Point To A Stronger Open

November 03, 2003

INTEREST RATES

OVERNIGHT CHANGE to   4:15 AM :BONDS -8 The Treasury market is showing
significant resolve, especially when one considers the numbers being thrown
off by the economy. Maybe the trade is thinking that the monthly payroll
reports will bail out the bull camp, with some soft numbers at the end of the
week. With prices holding just under the highs posted Friday, into the ISM
readings this morning, we have to think that a minor slide in prices will be
seen early today, with a test of the 108-00 level possible in December bonds.

STOCK INDICES

OVERNIGHT CHANGE to 4:15 AM:S&P+210 DOW +37  NIKKEI CLOSED FTSE +31 In our
mind, the most disappointing development of the last two weeks is the markets
underperformance off very impressive US economic information. One might also
suggest that prices have under performed off the recent earnings sweep but we
have to think that the October rally was really an earnings rally and that
November should bring about a rally off a stronger economy. If the stronger
economy theme is joined or accentuated by the idea that the upcoming holiday
season will be strong, we should see an even bigger rally in November than
what unfolded in October.

FOREIGN
EXCHANGE

Dollar: The Dollar would
seem to be poised to make more upside gains, as the early US numbers are
expected to be positive and the track of the US equity market is also
supportive. However, there is talk this morning that the BOE might be poised
to hike interest rates and that is a slight detraction for the Dollar bulls.
However, we are not sure that the Dollar will be able to get above significant
chart resistance, especially since additional gains might begin to alter some
longer-term technical signals on the charts. In fact, with a rise above 93.10
the December Dollar would climb above a critical pivot point. Given the rise
in the Dollar last week, we suspect that the market will need to see favorable
numbers from the ISM in order to continue the recent pattern of gains. We
still think the trend is down but traders might be advised to buy puts instead
of holding short futures because the market is at a critical junction.

EURO:
The Euro would appear to be poised to make a downside breakout on the charts
and we would have to think that the numbers this morning are going to foster
that type of action. However, the Euro might find support quickly after a
downside breakout off the October low of 115.10. There is talk of significant
recovery potential in the EU from an ECB official and that should discourage
aggressive selling of the Euro in the near term.

YEN:
The yen has forged a failure on the charts overnight and it would appear as if
the BOJ is operating behind the scenes. We really don’t see too much in the
way of macro economic information because of the Japanese holiday today and
that might allow for more of a slide in the Yen early this week. If the US
numbers this morning are strong that could send the Yen down toward chart
support of 90.58 but a slide to 90.00 probably only takes place with a very
strong US number on Friday.

SWISS:
It would seem like the Swiss is primed to punch below chart support early this
week, with a downside target coming in at 74.45 and then again down at 74.09.

POUND:
With the market fostering talk that the BOE is going to be the first G7
country to hike interest rates, it is clear that the Pound will generally
remain in vogue. In fact, on a correction to 168.46 traders should consider
getting long the Pound for a run to new contract highs. Furthermore, with the
CBI posting the strongest retail sales readings in 11 months it is clear that
the UK economy has enough momentum to withstand a rate hike.

CANADIAN DOLLAR: Unfortunately the combination of a rising Dollar and a
soaring Pound has undermined the Canadian and fostered the biggest correction
since July. Considering the technical damage, the December Canadian might be
primed for a slide all the way down to 74.89.

METALS

OVERNIGHT CHANGE to4:15
AM:GLD-0.60 ,SLV+0.5,PLAT-1.80, CP +60 London A.M. Gold fix $383.25 -$1.35 LME
COPPER STKS 516,350 tons -2,950 tons COMEX Gold stocks 2.91 ml -1,918 oz Comex
Silver stocks 115.4 ml oz +1,000 oz  OVERNIGHT: Quiet session due to holiday
in Japan but $ strength is limitin

GOLD:
The fund long in gold reached 117,496 contracts early last week, while the
small spec long declined by a minimal amount. Therefore the net spec long in
gold (as of last Tuesday) stood at 162,000 contracts, a figure that confirms
an overbought status but isn’t nearly as long as one might have expected. In
other words, the gold market seems to be consolidating its spec long position.

SILVER:
The net spec long in silver is 59,000 contracts, which is a net long addition
of 5,300 contracts. Like gold, the silver market is vulnerable from a chart
perspective and isn’t exhibiting a clear-cut fundamental track. In fact, over
the last 5 sessions, with the US economy throwing off impressive economic
readings, the silver market has shown weakness.

PLATINUM: A major gap down move would seem to undermine platinum but in the
past the market has rejected negative chart action and recovered. With last
week’s information that supply isn’t expanding as it was expected, it would
seem that the gains off the September lows are justified. It should also be
noted that a two month old trend line was violated with the overnight slide in
platinum and that would seem to project a slide to 732. The small spec & fund
long reached 6,300 contracts creating the potential for stop loss selling
today.  

COMMITMENT OF TRADERS ANALYSIS – FUTURES & OPTIONS  Oct 21 – Oct 28, 2003

               LARGE SPEC          COMMERCIAL           NON-REPORTABLE

                 NET                  NET                   NET

            POSITION   NET CH    POSITION    NET CH    POSITION   NET CH

SILVER          32935     6479      -59698     -5299       26763    -1180

COPPER          45125    -2750      -57129      2728       12003       21

GOLD           117496    10183     -162327     -9154       44831    -1029

PLATINUM         5183        5       -6376        39        1193      -45

 

The
copper market discounted the recharge in Shanghai inventories seen last Friday
morning, suggesting that the supply COPPER: simply came from government
stockpiles and does nothing to remedy the ongoing shortage. Chinese copper
prices were higher overnight with follow through in the early New York action.
Therefore a positive bias is expected today, especially with the US expected
to post some good numbers on the economy.

CRUDE COMPLEX

OVERNIGHT CHG to    4:15 AM   :CRUDE +24  ,HEAT+66  ,UNGAS+69 We have to think
that the correction last week was mostly inspired by the combination of an
anticipation of higher OPEC supply flow and to a lesser degree slackened
seasonal demand. The idea that Iraqi export flow is rising is mostly offset by
ideas that OPEC is attempting to offset that production with internal
reductions.

NATURAL GAS

Not
only did the natural gas market reject the lows last week around the
$4.92-$4.91 level but the size of the fund short is quite revealing. One would
have to think that the funds are overly short providing support to prices but
unfortunately the small spec long remained so large that the chance of
additional stop loss selling remains quite high.