Futures Point To A Stronger Open
INTEREST RATES
OVERNIGHT
CHANGE to 04:26 AM:BONDS+2 The Treasury market posted some very impressive
action Tuesday, as it absorbed potentially negative news, declined slightly and
then mounted an impressive recovery. While it is possible that the rally
yesterday was simple profit taking, we have to think that the trade remains
generally bullish and moved in to pick up value around the lows Tuesday. On the
other hand, the Treasury market chart setup appears to be coiling and has had
made lower highs since the November 21st high.
STOCK INDICES
OVERNIGHT
CHANGE to
04:26 AM
YEN-4, SF+54, CA+13, EU+52Â
While the
track in prices has been up this week, a large sweep of US numbers today might
have to confirm recent optimism on the economy to leave the bulls in charge.
Initial forecasts for the numbers today do not expect exceptionally strong
readings and that might make it easier for the market to react positively to the
readings. Traders like to think that stock prices generally rise into the
Thanksgiving holiday and therefore, the spec crowd comes into the sessions with
a bullish expectation. The advance/decline stats from the action Tuesday,
confirms that the bulls are in control of prices even if many traders were
disappointed with the magnitude of the gains Tuesday.
DOW:
Initial resistance in the December Dow is seen at 9,813 to 9,884. We doubt that
prices will fall back below 9,720 today but one should expect a massive trading
range to unfold on Friday. In other words, conservative traders might want to
seriously consider picking an upside target in the action today and exiting
longs! Certainly one could end up leaving some money on the table but risk and
reward to longs increases significantly into the action Friday. Risk and reward
also increases toward the shorts but getting short on a rally today at least has
the advantage of selling a slightly overbought short term condition.
S&P 500:
A critical pivot point is encountered at 1059.30 and then again up at 1063.50.
We assume an upside bias for most of the session today, but would consider
buying the S&P on a decline to 1054 and then looking to sell a call and buy a
put against the long before the close today. On a rally today we suspect that
the adjusted small spec long position in the S&P will reach 82,000 contracts,
which qualifies as a moderately overbought condition. However, the market has
seen a small spec long in excess of 100,000 contracts, on a number of occasions
since early 2002. In order to build a massive small spec long position, the
market will have to get a conclusive bullish kick-off to the holiday sales
period. Be long, but prepared to button up longs with option wings before the
close.
FOREIGN EXCHANGE
Dollar: The Dollar action had
to disappoint the trade this week, as
numbers and
equity market action should have been able to keep the Dollar firm. Furthermore,
the Dollar shows no sign of responding positively to comments from the OECD that
a rising Euro could derail the European recovery. In other words, even when the
trade sees official dialogue that could support the Dollar, the Dollar remains
weak. We have to think that the US Administration is keeping pressure on the
Dollar, as part of a strategy to get the Chinese to change policies. While most
of the
numbers today are expected to some minor growth, it would not seem like the
numbers have the capacity to alter the initial downward direction in the Dollar
this morning. Naturally a headline number or a massive
equity market rally could alter the direction of the Dollar but it will take
something significant to scare Dollar shorts.
EURO:
This morning the Euro zone GDP numbers were positive but were no where near the
impressive readings posted from the
Therefore, it is clear that the direction of the Euro is not being primarily
determined by the economic differential. The OECD suggested that the Euro zone
needed to leave rate low until the recovery is entrenched and that seems to have
given the Euro another lift. As mentioned in the
Dollar comment, the OECD also worried that the soaring Euro could eventually
derail the recovery but so far the trade is ignoring that development. A minor
upward track is expected with prices accelerating in the event that US numbers
or the
equity market are weak.
YEN: The
Yen chart continues to be bearish, with a series of lower highs and almost no
inclination that chart support levels are going to be respected. Adding to the
downside tilt in the Yen were revelations overnight that the Japanese trade
surplus for the first 10 days of November was 43% below year ago levels. In
other words, the relative level of the Yen exchange rate is hurting export
activity! We are a little surprised that the Yen is down this morning in the
face of a weak Dollar and that could mean a slide to even lower support of 90.77
before a consolidation unfolds.
SWISS:
The Swiss has apparently bottomed and could be set to bounce to at least 76.74.
Given the action in the Yen, on a down Dollar day, it’s clear that the Swiss is
coming into favor. More upside expected in the session ahead.
POUND:
GDP readings came in above expectations but again no where near the growth
levels posted in the
However, the
economy is apparently strong enough that the OECD suggested that even higher
interest rates are needed in the
to contain the rise in home prices. A minor upward bias is seen with a near term
targeting of 170.43.
CANADIAN
DOLLAR: The Canadian showed very impressive action yesterday and could be the
odds on favorite to gain against the Dollar. In fact, we now see the Canadian
rising toward near term consolidation resistance of 76.90.
METALS
OVERNIGHT CHANGE to 04:26
AM:GLD+1.40, SLV+1.70, PLAT+4.80Â London A.M. Gold fix $392.00 +$.50 LME COPPER
STKS 470,025 tons -1,525 tons COMEX Gold stocks 3.06 ml +1,386 oz
Comex
Silver stocks 124.5 ml oz Unchanged OVERNIGHT: Minor upward gains were forged on
thin vol and tight trading ranges
GOLD: The
gold market would seem to start the session out on a positive note and that is
partly the result of a weaker Dollar and the gold markets ability to avoid
pressure Tuesday off US numbers. Therefore, one might expect gold to be able to
skirt the potentially damaging
report slate today. However, with the
seeing 7 critical economic reports today one should expect an impact.
SILVER:
Since the March silver market managed to repel the steep correction early this
week and managed to show some positive divergence with the gold market our
attitude is improved toward the market. In fact, it almost appeared as if silver
was tracking the stock market during the action Tuesday. We see a critical
upside pivot point today at $5.35 but unfortunately support isn’t that close at
$5.26.
PLATINUM:
While platinum seems to be flirting with a downside breakout on the charts and
recently saw some bearish information (A
based mining company suggested that its production of platinum rose 23% on the
year) we are not sure the bull camp is prepared to throw in the towel. However,
given the closely held nature of the production in platinum one should not
expect to see any advance notice that the supply shortage is mitigating. We
would suggest that would-be shorts consider rolling long January put positions
in the April Plat 710 puts.Â
COPPER:
By most fundamental measures there would not seem to be a change in conditions
but from a technical perspective one can hardly discount the breakdown of the
charts. The March copper would seem to have initial resistance up at 91.45 and
with Chinese buyers showing up lightly overnight, we suspect that prices will
have an upward bias today. In fact, most traders expect the
numbers this morning to be fairly supportive to copper but few expect a big
range up in prices as a result of the numbers this morning.
CRUDE COMPLEX
OVERNIGHT
CHG to
04:26 AM
HEAT+89, UNGAS+50Â The market tried to bounce Tuesday but the higher price action
simply prompted another layer of fund longs to liquidate. With the trade
expecting to see a build of crude oil stocks in the coming inventory reports and
the market basically accepting that OPEC production is running above its
ceiling, there is little to stop the slide in prices.
NATURAL GAS
We think
that the funds decided to take profits on shorts. Certainly the chance of more
seasonal temps played a role in the short covering action but once the large
fund short is leveled we are not sure that the fundamentals will support much in
the way of aggressive upside action.