Futures Point To A Stronger Open
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS +19 There is
apparently enough doubt on the economy that bond traders have at least
temporarily overcome long term technical fears and are stepping back into long
plays. Right now, the market is capable of spinning the economic reports into a
positive, especially if the reports show minimal softness. While the trade
expects the
Chicago
purchasing managers report to
show a minor improvement, it is also clear that the Press is laying the ground
work to discount the
Chicago
report, in favor of the
National Report due out on Friday morning.
STOCK
INDICES
OVERNIGHT
CHANGE to  4:15 AM:S&P+140
DOW +16Â NIKKEI -69 FTSE -5 Â The
stock market remains vulnerable in the near term, partly because the macro
economic outlook is in question and partly because the focus on earnings seems
to be dampened. While some big name companies are going to release earnings in
the coming sessions, the market is simply not poised to react to those earnings.
In the news this morning, Euro zone economic stats showed some weakness and that
melds into the pattern being seen this week from the
US
economy.
FOREIGN
EXCHANGE
Dollar:
Considering the action in the Dollar over the last three sessions, it would seem
that the Dollar is either ignoring the string of weak
US
numbers, or for some reason, are
factoring a surprise rate cut by the Fed. Most traders scoff at the idea of a US
rate cut, but we would think the Fed has very little risk of cutting rates when
the major risk remains deflation and a slowing economy. If the market isn’t
speculating on a rate cut, it must be standing on the idea that the market is
off base on its deteriorating view of the
US
economy. The currency markets must think the
US
economy
is still in a growing posture, but we have to think that the numbers will have
to show strength today to continue that view. Traders should be looking to sell
some Dollar Index calls on a rally to 97.00 over the coming two sessions. We
just don’t see the basis for the US Dollar to overcome the long existing down
trend unless of course the economy bull dogs through the coming two sessions
with much stronger than expected US readings.
EURO:
The Euro zone posted weak economic readings this morning, with economic
sentiment down, Industrial confidence down and consumer confidence improved but
still deep in the contractionary zone. Near term downside support in the
September Euro comes in at 112.26 and possibly even 111.54. If the Euro can’t
manage to rally in the face of weak US numbers, one has to wonder if the bull
camp in the Euro is really defeated in a big picture way.
YEN:
The trade is being made aware of just how much money the BOJ spent in July to
push the Yen down. In other words, the trade sees proof that most of the slide
in the Yen was undertaken after extremely aggressive intervention by the BOJ.
Usually the market likes to take on intervention efforts and that could mean a
bottoming in the Yen. However, as long as the Dollar is showing such surprising
strength, the Yen will find natural resistance to a bounce. If you want to sell
the Dollar, buy the Yen instead as that trade might show less volatility.
SWISS:
Near term downside targeting is seen at 72.73, as the Swiss is simply following
the wake of the US Dollar rally. In other words, the Swiss is simply following
outside influences.
POUND:
Apparently the Pound became overbought technically and is also being caught in
the wake of the Dollar rise. A logical correction point in the Pound is seen at
160.08.
CANADIAN:
The Canadian stands no chance, especially with the Dollar rising off invisible
fundamentals. Therefore it seems like the Canadian is oblivious to the
fundamentals and that the next downside target has become 70.50. In the end, we
have to think that the Canadian is injured from a big picture stance and is
headed below the July lows.
METALS
GOLD:
The gold market has now corrected nearly $12 from the recent high and that could
mean that the net spec and fund long has been reduced by 10,000 contracts and
that puts in the market in a better position to halt the recent slide. However,
in order to turn gold back up one of two things might have to happen. First of
all, most gold bulls would like to see the Dollar fall and a smaller portion of
the bull camp would like to see the outlook for the economy improve.
SILVER:
While the silver market has managed to consolidate the most of the July gains,
it would not be a good thing, to see September silver violate chart support at
$5.035. Considering the magnitude of the overbought condition in silver (a
record small spec and fund long in the COT report) and the sudden backslide in
the economic outlook, we have to think that silver remains vulnerable. Secondary
support is seen down at $5.01 but with outside market influences still pointing
down and gold mostly soft, the bears seem to have control of the market in the
near term.
PLATINUM:
The October platinum appears to have violated trend line support in the
overnight action and once again we have to fear the impact of heavy spread
interest in platinum. In other words, it is possible that gold longs seek
protection against the downside by selling platinum. Also platinum was recently
overly long in the COT report.Â
COPPER:
So far, the copper market hasn’t shown that much vulnerability to the
deterioration in the economic outlook. In fact, the US Fed released a national
activity Index reading yesterday that specifically pointed to softening in the
labor area. In other words, the market has reason to be fearful of slumping
demand.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE -3Â Â ,HEAT-9Â Â
,UNGA+18 Â The energy complex managed to gather some light buying
interest from the bigger than expected gasoline stock declines in the weekly
report. Some traders even suggested that largely unchanged readings in US crude
stocks were also bullish, because steady inventories mean that the tight supply
situation remains in place.
NATURAL
GAS
It would
seem that September natural gas has managed to consolidate above the $4.60 level
despite ongoing bearish fundamentals. Maybe the technical position of the market
is oversold enough that the market is having trouble generating fresh sales,
without seeing fresh incentives.