Futures Point To A Stronger Open
INTEREST RATES
03/01 OVERNIGHT CHANGE to 04:01 AM:BONDS-1 Month
end portfolio adjustment and a weaker dollar fueled sharp gains in Bonds on
Friday, but we doubt whether this pace can continue in the face of a slow report
week and the key employment data out this Friday. The economic reports last week
were another mixed bag and with bond sentiment having a positive tilt, the
numbers were weak enough to raise some doubt about the recovery this year.
Consumer sentiment took a nosedive in February which puts into question whether
consumer spending, the linchpin behind US economic growth, will be able to stay
strong enough to lead the recovery.
STOCK INDICES
03/01 OVRNIGHT CHG to 04:01 AM:S&P+440, DOW42,
NIKKEI +2.08% , FTSE+28 Strong over night gains in Japanese & London stock
markets will help maintain the positive tone in US Stocks this morning, although
the data last Friday was a mixed bag and keeps the outlook for the economy
murky. Until the market gets a clearer picture on the economic front, stocks may
only grind higher rather than see an explosive move, especially given the age of
the bull market. Friday’s employment report will be critical in forming
near-term market sentiment and an improvement in the jobs sector could take the
S&P back to the February highs.
DOW
While making a higher low, the March Dow failed to hold above 10,600, which
suggest the market is still trying to find a bottom. The COT report with options
showed funds reducing their net short position, which is a positive development.
We still think the bias is up especially if the Dow can continue to close over
its 40-day moving average.
S&P
The COT report with options showed the funds only reducing their net short
position slightly which may prevent the March S&P from making a solid push
through 1150 unless the market gets some bullish economic news. However, a close
over 1150 would put the market in a more positive technical position. The trend
remains your friend, but the upside reward may be disappointing. + COMMITMENT OF
TRADERS ANALYSIS – FUTURES & OPTIONS Feb 17 – Feb 24, 2004 LARGE SPEC COMMERCIAL
NON-REPORTABLE NET NET NET POSITION NET CH POSITION NET CH POSITION NET CH DOW
-4639 -1834 12984 1318 -8345 517 S&P -57093 593 -1669 -949 58762 356
FOREIGN EXCHANGE
US DOLLAR
The Dollar was relatively stable over night, but
given the market’s performance Friday, it would appear that the Dollar at best
is taking a pause from its recent rally or at worst is seeing its upside
momentum slip away. The economic numbers were not shocking enough to give any
clear idea on the status of the US economic recovery and so the numbers were not
enough to get the March Dollar back over 88.38. The ISM manufacturing survey
today will have if any, the most impact on the Dollar until the Employment
report is released Friday. Last week the European political talk centered around
a call for the European Central Bank to cut rates. Although the Euro-zone’s
inflation numbers came in low, we still think it is rather a long short that the
ECB will make a rate move when the Euro is off its highs and the trade balance
numbers are still showing a surplus. The ECB is very slow to make policy changes
and would not want to be seen crumbling under political pressure. Therefore, no
rate cut could be somewhat disappointing to Dollar bulls and the market may then
need to see strong employment growth to keep the Dollar supported. Continue to
hold the position play for a possible upside Dollar breakout, long 3 June 92
Dollar calls and short the June Dollar Index from 88.67. The employment data and
or an ECB rate move could be the catalyst this week for a break out move in the
Dollar.
EURO
While the Euro-zone inflation numbers came in under
the ECB target, it does not automatically translate into a rate cut. With the
market correcting off the highs, there could be a relief rally if the ECB does
nothing. However, the March Euro should run in to solid resistance around
1.2604. Since we think the US economic number will begin to pick up while the
Euro-zone stays weak, the Euro currency’s down trend will continue. With market
action likely to become volatile this week, continue to hold the long June
futures at 128.30 and long 3 June 125.50 puts position.
YEN
The price action in the Yen Friday suggests the
market may have found a temporary bottom above 91. If the economic numbers are
weak, the March yen could recover to 92.60 or higher. Near term resistance and a
critical pivot point is seen at 92.12. However, we do not think the downtrend
will be reversed so trader should consider selling a rally to 92.30. The BOJ
seems committed to FOREX intervention to control the Yen, which seems to be
working and should limit any recovery bounce.
^next^
SWISS
The trend remains down, but the market has become
lightly over sold. A rally back up to the resistance zone between 79.80 and
80.24 could be sold. Shorts will have to risk to a move above 80.50.
BRITISH POUND
After a sell off from the Feb highs, the Pound may
see some consolidation as the March contracts appears to be holding above
support at 184.29. If the US Employment data comes in soft, the Pound could
quickly rally back towards 191.
CANADIAN DOLLAR
The March Canadian Dollar held another test of 74
and the market may have priced in an expected rate cut this week. The market
could see a period of consolidation between 74 and 75.60. However, economic
weakness and a narrowing interest rate differential with the US are negatives
that should maintain the down trend with an eventual test of 72.50 level in the
coming weeks.
METALS
OVERNIGHT
GLD+2.20, SLV+4.00, PLAT+3.60 London A.M.
Gold Fix 398.50 +$6.25 LME COPPER STOCKS 281,500 -3,600 tons COMEX Gold stocks
3.47 ml -201 Comex Silver stocks 123.1 ml -502,972 oz
GOLD
The recovery off of last week’s lows seems to be
from a classic oversold level. India official posted demand for gold in 2003 in
India at 568.7 tonnes, up 4% from the previous year in spite of the 20% rise in
prices. This is impressive demand and India is the world’s largest consumer.
SILVER
The positive action last week leaves the market in a
position to push through the February highs. However, it may take more fund
buying from an already record net long position to see further gains. The way
funds have flocked to the metals, we can not rule this out.
PLATINUM
The market continues to follow the positive usage
pace and improving world economy for autos and for information technology with
prices moving to the highest level since 1980 this morning. The traders report
did not show much change. The swing count from the recent upside break-out comes
in at 890.10 so the move above this level leaves futures vulnerable to a
set-back.
COPPER
The market shook off the high deliveries and
continues to respond to the tightening stocks situation and the strong world
economies. The upward revision in GDP helped to offset sentiment readings on
Friday to keep the market stable. However, further declines in stocks over the
weekend triggered the upside break-out over the weekend.
CRUDE COMPLEX
Escalating concerns over tightening supplies will
keep energy prices tracking higher, while limiting declines on profit taking
breaks. The energy complex continued to trade firmer over night getting little
relief from Saudi Arabia’s oil minister who said OPEC will keep the world well
supplied with oil. The bulls would seem to have complete control as the market
becomes increasingly sensitive to news headlines that could even remotely cause
supply problems while discounting negative news.
NATURAL GAS
The near-term fundamentals for the natural gas
market are pulling against the strength in the rest of the energy complex and
grudgingly pulling April gas higher. The market closed back over its 40-day
moving average, but we are surprised that the April contract could not close
back over the 5.500 level given the surge in the other energy markets. The low
spring demand period ahead combined with high stocks would suggest lower prices,
but the market appears to be looking further out for the possibility of strong
demand this summer.