Futures Point To A Stronger Open
INTEREST RATES
We are actually a little surprised that
Treasuries are showing weakness into the opening this morning, as the
international equity markets are taking the US payroll data for May as a sign
that the US Fed is not ready to act on interest rates! However, persistently
lower energy prices, rising equity prices and generally optimistic global
conditions, should make the bull camp in bonds and notes a little uneasy. While
we think the fundamental picture is conducive to persistent declines in Treasury
prices, the bear camp doesn’t have all its ducks in order. In other words, the
US payroll report was certainly negative, but without the back month revisions,
the reaction to the report might have been almost nothing.
STOCK INDICES
With the not too hot and not too cold May US
payroll report and weaker energy prices it is tough to argue against the bull
case. In fact, the two most dominating issues for the bear camp since the March
highs, has been soaring energy prices and concern for the pace of the US
recovery. While the economy is still somewhat a question mark, seeing persistent
job growth and lower energy prices should lower the risk to the bull camp and
facilitate even higher equity prices.
DOW
With the Dow managing to rise above critical moving averages and gapping higher
this morning, it would seem like the bull have full control. It has been a long
time since heavy volume accentuated the upside motion, but the current condition
might surprise the trade with some follow through volume buying. In fact, with a
moment of silence for former President Reagan scheduled for the opening this
morning, the market might remember his famous statement “let the bulls runâ€!
Near term upside targeting is seen at 10,470, while a failure is seen on a slide
back below 10,272 in the June contract.
S&P
The S&P doesn’t have as impressive of an upside thrust in the overnight action,
as the Dow but it remains positive biased. Furthermore, the S&P really doesn’t
have much in the way of overhead resistance until the 1135 level is encountered.
A failure takes place today with a slide back below the 1128 level.
FOREIGN EXCHANGE
US DOLLAR
A gap down trade leaves the Dollar pointing straight
down. It is a little surprising that optimism toward the US payroll condition
hasn’t deflected some of the bearishness toward the Dollar, but apparently the
trade is convinced that the US is not about to hike interest rates. We doubt
that economic numbers following the payroll report of June 4th will serve to
counter the downward slide in the Dollar and that the initial downside targeting
in the September Dollar will be 88.00. In fact, considering that the Euro zone
and Canada posted some decent economic readings recently there would seem to be
very little to avert more losses in the Dollar. Even the idea that soaring
energy prices were set to hurt the US economy, worse than other areas, seems to
be discarded for a patently bearish outlook for the Greenback. In fact, until
something significant changes, the control of this market sits with the bear
camp.
EURO
With the September Euro rising above near term
resistance and seemingly headed to the March consolidation highs of 123.60 to
123.80, little looks to upset the current track. While the Euro zone lacks the
credibility of ultra strong scheduled economic readings, that isn’t a stumbling
block for the bulls. In other to turn off the upward tilt, the September Euro
would have to fall back below 122.46.
YEN
A massive rise of 311 points in the Nikkei to start
the first full week of June leaves optimism toward the Yen high. Furthermore,
with the Yen managing to regain long term moving averages, we have to think that
even more gains are ahead. In order to break a longer term downtrend channel
resistance line, the September Yen will need to climb above 91.11.
^next^
SWISS
The Swiss is in the midst of a steep uptrend
pattern, with near term resistance not seen until 81.72. We also have to think
that the Swiss will see some resistance once the January high of 90.92 is
encountered.
BRITISH POUND
It is clear that the Pound is lagging behind the
Euro and the Swiss, in the rise against the Dollar. In fact, we are not sure
that the Pound is going to rise above recent consolidation resistance of 184.69.
In fact, a trade back below 182.50 in the Pound could be very damaging to the
near term setup in the currency.
CANADIAN DOLLAR
Strong payroll numbers and very impressive technical
action in the Canadian, leave the bulls in charge. We would suspect that the
Canadian is headed back up into the massive consolidation pattern that was bound
by 74.00 and 75.50.
METALS
OVERNIGHT
London A.M. Gold Fix $393.45 +$5.25 LME
COPPER STOCKS 126,075 mt tons -2,125 tns COMEX Gold stocks 4.391 ml -100 oz
Comex Silver stocks 118.1 ml +197,190 oz
GOLD
With strong gains in Asian equity prices, a weaker
Dollar and ongoing weakness in energy prices, the macro economic impact on gold
should be somewhat supportive. With the Dollar gapping into even lower ground
and apparently headed to the March consolidation lows of 88.00, we suspect that
gold will maintain a favorable bias in the near term. In fact, if the opinion
toward the Dollar remains decidedly bearish, that could serve to lift August
gold toward the $400 level and beyond.
SILVER
The silver market is showing some recovery capacity
but it is lagging behind gold and platinum on a daily basis. The weekly COT
report showed silver to have a net spec long of 67,000 contracts and probably
comes into the week with a net spec long of 72,000 contracts. The bias is up but
this market looks to remain choppy.
PLATINUM
The platinum market comes into the early June action
with a nearly flat spec and fund long and with the market down since the COT
report was measured, one might even suggest that platinum is virtually flat to
net short! Therefore, the technicals in platinum are supportive and with
favorable macro economic conditions present and positive leadership from gold
being seen even more gains are expected in platinum. Near term targeting is seen
at $854.
COPPER
With a sharp rally in Chinese copper recently, the
US action for early June should be strong or at least positively biased. With
the Nikkei running sharply higher and the trade for the time being, convinced
that US interest and Chinese rates are on hold, its possible that July copper
runs back to the 130 level. In fact, unless Chinese slowing threats surface,this
market might be able to rise all the way to 135 in the wake of persistently
lower energy prices and generally rising world equity prices.
CRUDE COMPLEX
The energy market certainly reacted aggressively
to the increased oil flow promised by OPEC their last meeting. Furthermore, the
market continues to be weak even though the promised oil will come onto the
market at the time and place discretion of the producer. From looking at the
recent COT reports, it is clear that the energy complex is still coming down
from an overly long position (in the small spec and fund categories) and
therefore the massive break in energy prices, off the contract high was
justified by both the fundamentals and the technicals.
NATURAL GAS
Trend line support has been broken and crude oil
looks to remain weak and that should leave natural gas in a downward motion.
July natural gas targeting on the downside comes in at $5.85, as it was living
by the sword (crude oil gains) and now it will partially die by the sword. Maybe
the presence of hotter temps in the US this week, will attempt to countervail
the down trend pattern, but with the COT report recently showing a 55,000
contract spec and fund long (as of June 1st) there appears to be more spec longs
to liquidate.