Futures Point To A Stronger Open
INTEREST RATES
02/09 OVERNIGHT CHANGE to 04:09 AM:BONDS+4 It
usually takes a couple sessions for the Treasury market to factor in a surprise
payroll report and the report last Friday certainly qualifies as a surprise.
While the decline in the unemployment rate partially offsets the less than
projected non farm payroll gain, the tilt in Treasury prices remains up.
However, the market has less upside capacity than was seen prior to the report,
as the US numbers are in the right direction and some in the trade think that
there will be less intervention buying of US Treasuries.
STOCK INDICES
02/09 OVRNIGHT CHG to 04:09 AM:S&P+290, DOW20,
NIKKEI -58, FTSE+23 We think the stock market responded to the unemployment
figures correctly, as the US economy continues to head in the right direction.
However, a new low in the Dollar in the coming sessions might rob the US equity
market of a source of long interest that has been present since the Dollar
bottomed in early January. The market viewed the events Friday as supportive to
the near term trend, as the Fed looks to remain on hold, which in turn allows
the status quo of growth and profitability to continue.
DOW
A near term pivot point in the March Dow comes in at 10,588, with near term
support pegged at 10,556. One can see from the latest COT report reading that
the market was moderately short as of early last week and therefore some of the
initial buying in February has been simple short covering. We do see the current
uptrend as less than stellar, but we do accept that the trend is up. Therefore,
without some anxiety event, one should assume the market has the ability to
crawl higher.
S&P
A critical pivot point in the March S&P comes in at 1142.60 today. As can be
seen from the most recent COT report, the net spec long position was almost flat
last week, which is an unusual condition for the past 4 years. In other words,
prices continue to climb, but sentiment in the futures markets is anything but
overly optimistic. Near term resistance is pegged at 1148 and the bias is up,
but getting long from current levels carries a moderate amount of risk. In fact,
unless the corporate news can provide a favorable backdrop, we would be long but
running rather tight stops on long positions.
FOREIGN EXCHANGE
US DOLLAR
The G7 statement seems to discourage Dollar
weakness, but yet the Dollar comes out of the box this morning under pressure.
Apparently the G7 thinks that the Dollar has declined too much versus the Euro
but not enough against some Asian currencies. In other words, the Chinese and
the Japanese are probably less than thrilled with the weekend results of the G7
meeting. As it stands, the market comes away from the closely watched meeting
with the idea that coordinated intervention is unlikely from the ECB but at the
same time, the markets are not acting like the BOJ is going to throw in the
towel. Therefore, the Dollar might slide but we are not sure that it is primed
to take out the January lows. Near term targeting in the March Dollar comes in
down at 85.76 and unless US numbers become much stronger we would not be
surprised to see the Dollar trade in an 86.00 to 85.27 range in the coming
sessions. In the near term, the Dollar is set to slide.
EURO
The Euro might be slightly restrained in it’s upside
tilt this morning but not prevented from making more gains. The ECB dialogue
expressed concern over the relative steep gain of the Euro versus the Dollar,
but again stopped short of threatening to do anything about the mismatch.
Therefore, more gains are expected ahead, with a breakout to the upside possible
in the early action today. Critical pivot point resistance in the Euro comes in
at 127.58.
YEN
So far, the Yen is showing little impact from the G7
meeting, which is surprising given the periodic isolation of the Japanese
currency in the G7 discussions. It is also possible that the bird flu issue in
Asia, is keeping the Yen a little off balance, as the disease does have the
capacity to undermine the Asian economy but so far in a slightly less intense
fashion as the SARS virus. We would think that the G7 outcome would eventually
put the Yen into an upside breakout, but for some reason the market isn’t firing
as one would expect. In other words, the markets are doing exactly the opposite
of what the G7 said should be happening. We suspect massive Japanese
intervention is underway, as they see the near term battlefield as more
important than the long run. In other words, the BOJ wants to fight to give its
economy all the help it can.
^next^
SWISS
The upside breakout overnight puts the Swiss through
some of the massive and formidable overhead resistance that limited the market
last week. With the impetus toward a lower Dollar and little to alter the upward
track, more gains are expected. Near term targeting is seen at 81.56.
BRITISH POUND
Despite some disappointing UK economic numbers this
morning, the Pound is seen as the most logical investment outside of the US.
Even after a very disappointing manufacturing release this morning, the trade is
still enamored with the Pound. Near term upside targeting is seen at 188.66.
CANADIAN DOLLAR
Renewed Dollar weakness bailed out the Canadian and
gives it a good chance of respecting last weeks lows. A critical upside pivot
point in the March Canadian comes in up at 75.46 today.
METALS
OVERNIGHT
GLD+3.60, SLV+7.20, PLAT+7.80 London A.M.
Gold Fix $406.70 +$10.30 LME COPPER STOCKS 341,300 -3,875 tons COMEX Gold stocks
3.367 ml -397 oz Comex Silver stocks 124.3 ml +34,996 oz
GOLD
The gold market continues to show new life and even
if it lacks the old momentum seen in the October through December time frame, it
could have the capacity to return to the mid January consolidation. The mid
January consolidation is defined by $416 on the upside and $408.5 on the
downside. The weekly COT report showed the net spec long in gold to be 130,000
contracts, which is probably slightly understated due to the rally posted since
the report was measured.
SILVER
The net spec long in silver was 85,000 contracts as
of last Tuesday, which is understated due to the rally that has unfolded since
the report was measured. However, the near term trend in silver is down, even if
the market has shown periodic upside thrusts of surprising magnitude. The funds
continue to be the main driving force behind silver gains but they are seemingly
coming and going with high frequency.
PLATINUM
The platinum market has managed to discourage the
recent downside breakout and from the COT report it’s clear that the spec long
was leveled significantly. Therefore, we suspect that critical support of $810
will hold and that the market will attempt a weak upside breakout above $830.
COPPER
The market gapped up overnight suggesting that
neither the US payroll disappointment nor the bird flu issue is undermining near
term interest in the long side of copper. With LME and Shanghai stocks in a
downward trend and Chinese copper prices firmer overnight, the market remains in
an uptrend. While the Cerro Colorado Mine workers returned to work in Chile, the
Falconbridge mediator adjourned the talks late Sunday.
CRUDE COMPLEX
Over the weekend OPEC dialogue seemed to harden
its focus toward the potential upcoming supply threat, with some Ministers
fearing that prices might fall more than expected if the second quarter period
isn’t dealt with aggressively. In other words, OPEC might be circling the wagons
but the market might see some longs forced to the sidelines because of the OPEC
concerns. However, with the OPEC meeting looming ahead the stance of OPEC seems
to be that a low Dollar and speculation is causing the lofty price of crude oil.
NATURAL GAS
With the severe cold winding down and isolating in
tighter geographical areas, we have to wonder if natural gas doesn’t have more
downside potential. Certainly the lows last week promise to be initial support,
but with milder temps in the East and the regular energy complex under slight
liquidation pressure, there is little impetus to get long natural gas so far
above the December lows. In fact, fresh longs need to wait for the April
contract to slide down to $4.96 to get long.