INTEREST RATES
12/04 OVERNIGHT CHANGE to 04:04 AM:BONDS+2 The
Treasury charts look pretty negative, as if prices are about to break down
to a new lower trading range. However, it should be noted that prices did
not break down Wednesday in the face of the soaring productivity readings
and didn’t even rally in the face of the soft ISM non-manufacturing reading
but only seemed to fade once the competition of corporate supply smashed
into the action. In other words, Treasuries don’t seem to be as tightly
focused on the economic track as they have been in the past.
STOCK INDICES
12/04 OVRNIGHT CHG to 04:04 AM:S&P+290,
DOW33, NIKKEI +72, FTSE-7 The stock market looks to maintain a bullish tilt
into the opening this morning but may need to see favorable readings from
initial claims to extend the recent up trend in prices. In our mind, the
ongoing claims reading is the most important figure of the session, as that
number needs to come down to confirm that the US has turned the corner on
the jobs problem. It would seem that the Dollar is set to start the session
out on a firmer note and that means the stock market will have one less
negative to discount.
DOW
Top of the current up trend channel in the December Dow comes in at 9,952
and we have to think that many in the market would like to see a test of the
10,000 level soon. The NASDAQ managed a run through some even number levels
yesterday but then corrected back below the critical level and we would
expect that same kind of response in the Dow today or Friday at the 10,000
level.
S&P
Top of the up trend channel in the S&P comes in today at 1075.10, but
critical support is seen just below the market at 1064.00. We see no reason
why the market wouldn’t try to carve out more gains today but we must see a
trade above 1069.10 in the first couple hours to feed the bull camp. We see
the initial claims and ongoing claims readings this morning, as a much more
important report to the S&P, than to the Dow!
FOREIGN EXCHANGE
US DOLLAR
We are not sure what the reasoning is but the
market seems to be pushing the Dollar up this morning because the US is
thought to be preparing to lift steel restrictions. While there are many
other trade issues facing the US that could bloom into trade war, the market
seems to be ready to short cover the Dollar. Maybe the trade is beginning to
doubt that the US can keep the Dollar down against growing opposition. In
fact, this morning even OPEC suggested that they might have to send energy
prices higher, to protect their revenue against the negatives of currency
adjustments. In other words, OPEC might become a barrier to consistently
lower US Dollar action! Since the economic numbers haven’t really been a
major issue for interday price action, we doubt that the claims report this
morning will influence the Dollar directly. In conclusion, it would seem
that the Dollar has minor upside capacity but that the downtrend hasn’t
ended. In fact, until the December Dollar rises back above 89.93 we will
assume that the trend is still down. Aggressive traders could look to sell
the Dollar on a bounce to 90.14 today.
EURO
The Euro zone posted jobs readings this morning
that show a progression of recovery and suggest that rate policy can be held
steady. While the Euro zone numbers still pale in comparison to the US
numbers, that really hasn’t been a consideration to the market place.
However, with the technical damage on the charts and the slight and possibly
temporary rise in the Dollar, it is possible that the Euro slides back down
to support of 119.86. Aggressive traders should be buyers of a decline to
119.95 using a tight risk of 119.50.
YEN
The resurgence in the Dollar (more than likely
simple short covering) takes some of the upward potential out of the Yen
today but if the Dollar slides back below 89.67 that could be a signal that
the Yen will continue recent gains and return to the top of the
consolidation. There are also rumors of intervention this morning and that
really truncates the recent rally attempt.
SWISS
The Swiss should find support off its chart
support points of 77.40 and again at 77.09. The up trend looks too
entrenched to end under current conditions, look to buy weakness today.
BRITISH POUND
With the Pound already showing signs of a top
early this week and the Dollar showing some strength today, we have to think
that the Pound is headed down to 171.54 and maybe lower if the outlook on
the US employment condition improves over the coming 36 hours.
CANADIAN DOLLAR
Trend line support comes in close to the early
action today at 76.36 and traders should be prepared to buy the market into
that zone.
METALS
OVERNIGHT
GLD-1.40, SLV-1.70, PLAT+20.20 London
A.M. Gold fix $402.40 -$.90 LME COPPER STKS 458,075 tons -2,950 tons COMEX
Gold stocks 3.058 ml -1,594 oz Comex Silver stocks 124.4 ml oz Unchanged
GOLD
Another day of slightly weaker price action
might be expected considering the Forex setup this morning and the partially
overbought short-term technical condition that was built into prices in the
rally off the late November low. However, we don’t expect the Dollar to
mount much of a rally, as the bounce in the Dollar might be a temporary
result of the US dropping steel restrictions. Therefore, we suspect that
gold will see some minor long liquidation as it continues to consolidate its
position above the critical $400 level.
SILVER
Like gold, silver looks to be in a slight profit
taking tilt mostly because it lacks fresh fundamentals and not because the
rational for being long has deteriorated. Near term chart support in March
silver comes in at $542 and then again down at $5.38. In short, it might be
difficult in a listless market to avoid a slight back and fill in prices.
PLATINUM
The platinum is very clearly demonstrating that
it is not a typical precious metal market with its divergence this morning.
With a strong thrust into new high ground it would seem that January
platinum is headed toward $800 partly because demand continues to expand and
the fact that the trade has no confidence or reason to think that Russian
production is set to rise anytime soon.
COPPER
Yesterday it seemed like US copper prices were
not going to respond to the strong Chinese trade action but in the end, US
funds and small specs rushed into the market with buy orders. Despite the
dramatically overbought condition of the market, LME stocks continue to
decline and the sentiment being thrown off by European economic numbers and
the US stock market would seem to favor the bull camp in copper.
Countervailing the upward tilt in prices are projections that Indian copper
production is on its way to a 15% increase in the fiscal year that ends in
March of 2004.
CRUDE COMPLEX
12/04 OVERNIGHT CHG to 04:04 AM:CRUDE+21,
HEAT+65, UNGAS+33 Surprisingly the energy complex failed to respond
yesterday to what many thought were supportive weekly inventory readings.
Both the API and DOE showed moderately large declines in U.S. crude oil
stocks and that should have provided more upward impetus to prices.
NATURAL GAS
We are a little surprised that natural gas
prices managed to rise to the highest level since October 17th yesterday,
considering that there is some debate over the weather and the market has to
deal with the weekly inventory report this morning. Apparently the market is
no longer concerned about the weekly inventory report showing injections,
but after the strong rally off the recent lows, one would at least expect
the market to be concerned with the inventory report. With February natural
gas prices rising from a low of $4.91 this week, to a high of $5.75, there
has certainly been massive short covering and moderate small spec buying but
we still don’t think that the market is without additional upside capacity.
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