Futures Point To A Stronger Open
INTEREST RATES
02/27 OVERNIGHT CHANGE to 04:27 AM:BONDS+8 The
Treasury market was certainly damaged technically Thursday, but most of the
damage seemed to come as a result of the rising Dollar and not because US
economic prospects are improving. In fact, we have to think that US economic
prospects are worsening, especially when one considers the pace of recent
numbers. However it is also clear that the Fed is standing behind their view
that the US jobs situation is set to improve.
STOCK INDICES
02/27 OVRNIGHT CHG to 04:27 AM:S&P+440, DOW35,
NIKKEI +226, FTSE+40 With the Nikkei posting very strong performance overnight
and the European stocks showing some upside momentum, it would seem that
interest in the equity market is improving. It did appear as if prices Thursday
reached a level that prompted bargain hunting and with the European Central Bank
talking about cutting interest rates, the market must have taken comfort in the
idea that central bankers are keen on insuring a full recovery. The stock market
might also be taking Fed comments to heart, as the Fed continues to stand by the
assertion that a jobs recovery is on the way.
DOW
The Dow looks set to climb above near term resistance of 10,615 early in the
session, but as mentioned before, we don’t get the sense that the market has
significant upside capacity. However, one might expect the March Dow to fill the
gap up at 10,630 and continue on to more significant resistance up at 10,656.
Maybe the recent corrective slide cleaned up the overbought status enough, that
a return to the February consolidation high of 10,716 is ahead.
S&P
The S&P is showing a much stronger opening bid than the Dow and a GDP reading
above expectations of +3.6%, could be just the ticket to promote short covering
by the funds and fresh buying by the small spec traders. We didn’t have a
classic bottom early this week, but that should not prevent the market from
trying to regain the mid February consolidation zone of 1145.50 to 1158.60.
FOREIGN EXCHANGE
US DOLLAR
The Dollar rise looks set to continue, as the Euro
zone numbers this morning depict a struggling recovery. However, the Dollar
might not officially be considered in an upside breakout, until it manages to
rise above 88.38. The economic numbers today from the US might actually favor
the bull camp in the Dollar but we would be surprised if the numbers manage more
than what has been projected by recent surveys. We continue to think that
official comments are going to be the main driving force in the markets and that
means the numbers will be mostly discounted. We can’t argue against additional
gains in the Dollar but it still seems like the US economy lacks the
fundamentals to push the Dollar into a long term climb. From a technical
perspective, the Dollar is very close to major technical levels and when one
considers the duration of the down trend in the Dollar, it is possible that
reversal action on the charts, provides a bigger reaction than many might
expect. Those that are holding 3 June 92 Dollar calls, after picking up 100
points in a short futures play, need the current breakout to continue. In our
mind it’s easier to hold a series of cheap calls, than to attempt holding
futures in the current environment.
EURO
The Euro zone Consumer Confidence readings improved
but still stands at a significantly weak level of -14 and Industrial confidence
was unchanged, so there continues to be little progress toward full recovery.
However, we are still a little surprised that ECB officials are so interested in
dampening the Euro, with the Euro consistently lower for the second half of
February. Maybe the ECB is simply being pre-emptive. We just don’t see them
cutting rates unless the numbers worsen, or the Euro returns to the February
highs. Critical support and a downside target today comes in at 123.15. Those
that bought June futures at 128.30 are out 450 points but the 3 long 125.50 puts
are up 520 points and the position is beginning to get much shorter. More
downside ahead.
YEN
The Nikkei leaped higher and it could be that
investment interest for Japanese assets manages to turn the Yen away from the
recent battering. Certainly the BOJ promises to step up against any attempt to
rally, but we have to think that market forces now want the Yen to bounce
slightly. Near term resistance and a critical pivot point is seen at 92.12, with
even higher resistance at 92.60, an area where one might expect the BOJ to turn
up their intervention efforts. Minor gains are possible but the near term trend
is still pointing down. Sell a rally to 92.30.
^next^
SWISS
A new low for the move and a damaged chart would
seem to project a slide to 77.80. The fundamentals don’t suggest a sustained
downtrend but the technicals are certainly pointing in that direction.
BRITISH POUND
The Pound has critical support today at 184.29 and a
major moving average signal turns negative with a slide below 183.60 today. Even
with favorable UK equity market action this morning, the Pound seems content to
fade.
CANADIAN DOLLAR
The rising Dollar has the Canadian under pressure
and headed at least to the February low. In fact, we have to think that a new
low for the move is ahead in the coming sessions. We would not be surprised to
see the Canadian fall all the way down to the 72.50 level in the coming weeks!
METALS
OVERNIGHT
GLD-2.80, SLV-10.00, PLAT+7.60 London
A.M. Gold Fix $392.25 +$2.80 LME COPPER STOCKS 285,100 -3,700 tons COMEX Gold
stocks 3.47 ml Unchanged Comex Silver stocks 123.6 ml -220,822 oz
GOLD
The action Thursday was certainly damaging to the
structure in the gold market but one has to be a little impressed with the
ability to reject the lows and attempt to climb back toward the old formation.
However, the one-dimensional nature of the Gold market leaves it hostage to the
ebb and flow of the Dollar and the ebb and flow is currently keeping the
pressure on gold. Reports that Placer Dome has continued to reduce its hedge
book is a positive, especially since they projected a 2.4 million ounce lifting
in 2004.
SILVER
It is a rare occasion that the silver market mounts
a 45 cent range and manages to close 40 cents above its low for the session. In
other words, the silver was on the rocks and the market managed to find
significant buying! Therefore, the silver market is certainly not the weak
market many might think! In fact, we have been skeptical toward silver but the
action Thursday was no fluke! It would seem that the funds are the primary
driving force behind the silver and from most measures the funds are probably
holding a record position but it also seems like even more fund money is
available to push prices up. Look for silver to find critical support around
$6.51 and for the market to maintain a positive tilt.
PLATINUM
The platinum market continues to be in favor,
especially in the Asian markets where buyers are very keen on a market with
restricted supply and apparently rising demand. Therefore, more gains are
expected probably until there are tangible signs that supply is in fact rising
to meet ongoing demand. We also think that players interested in playing the
Chinese demand story in metals, are moving into the platinum market.
COPPER
The copper market certainly showed impressive action
after starting out sharply higher, setting back and then rising into the close
Thursday. Therefore, even with the market attempting to correct, the bull camp
was able to control the action. Yesterday afternoon the Press released a report
suggesting that copper stock draws are set to continue but that the draws might
slow slightly and that could take some of the steam out of the market.
CRUDE COMPLEX
While the energy complex didn’t add markedly to
the recent gains, prices did manage to stay within striking distance of the
recent highs. It would seem that the energy complex is intensely focused on
future supply problems and that should keep the bull camp ready to buy minor
dips. The US Energy Secretary suggested that the US would not beg for more oil
from OPEC, but the Secretary also suggested that soaring energy prices are
putting the global recovery at risk.
NATURAL GAS
The natural gas market managed to close above a
critical moving average and is expected to get a continued lift from the ultra
strong action in the crude oil market. The weekly inventory reading showed a
moderate draw of 164 bcf and many saw that as supportive. However, the annual
deficit remains rather large at 253 bcf.