Futures Point To A Stronger Open
INTEREST RATES
12/09 OVERNIGHT CHANGE to 04:09 AM:BONDS+9 The
Treasury market is really fickle, as prices failed to hold the highs posted off
the soft monthly payroll report last Friday and then seemed to accelerate
downward in the face of a soft K.C. Fed manufacturing reading during the action
Monday. It is clear that the stock market applied some pressure to Treasuries
late in the session Monday and that rally seemed to come compliments of the idea
that high tech and computer companies were set to see increased demand for their
products.
STOCK INDICES
12/09 OVRNIGHT CHG to 04:09 AM:S&P+250, DOW20,
NIKKEI +78, FTSE+41 One has to give the bull camp respect for the ability to
shut off the selling tilt following the dismal monthly payroll readings last
week. In fact, with the stock market flatly rejecting the weak K.C. Fed
manufacturing readings Monday morning, its clear that regularly scheduled
economic information is less important than a favorable sector outlook for
computers or high tech issues.
DOW
The Dow has already posted a new high for the year overnight and would seem to
be poised for a return to the 10,000 level. Some think that the market will
touch the 10,000 mark and stall and that might happen if the 10,000 print comes
ahead of the FOMC meeting decision. However, if the 10,000 Dow probe takes place
after the market has cleared the FOMC statement, then the rally is likely to
extend into the close.
S&P
Since the S&P flatly rejected the downside thrust yesterday and the market has
seen an upgrade for several sectors, we suspect that the S&P will be pulled
higher by the Dow. Top of the up trend channel in the S&P is 1076.60 basis the
December S&P, with near term support targeted at the early lows today of
1068.80. Keep in mind, that the S&P was mostly balanced technically, coming into
this week and therefore the break Monday might have put the S&P into a slightly
oversold tech condition. In other words, one should not discount the bullish
potential of this market from a technical perspective.
FOREIGN EXCHANGE
US DOLLAR
The Euro zone trade surplus continues to show no
signs of evaporating, while the UK deficit is showing no signs of expanding and
that suggests to us, that few key players are having a big problem with the ever
sliding value of the US Dollar. Certainly the Japanese have a problem with the
US Dollar action but as long as the Japanese economy continues to progress
toward recovery, even the BOJ will keep their complaints to a minimum. In fact,
the US Administration went on the offensive Monday suggesting that the Chinese
would like to see a floating exchange rate. With the Chinese Premier ringing the
opening bell at the NYSE Monday it would not seem like the US and China are
about to launch into a trade war and change the setup in the currency markets.
Therefore, unless the Fed surprises everyone with a change in policy, we expect
the down trend in the Dollar to continue. Next downside targeting in the Dollar
is seen at 88.00.
EURO
As mentioned already, the Euro zone continues to see
trade surplus data and progression in its recovery and that would seem to keep
the ECB from taking action against the rising Euro. In fact, overnight the
German ZEW Index remained strong and that gave ECB officials confidence that the
Euro isn’t hurting the economy yet! More gains ahead until some major headline
change takes place!
YEN
The San Francisco Fed suggested overnight that the
BOJ intervention efforts are having only a temporary impact on exchange rates
and that statement probably serves to remove some overhead resistance in the
Yen. In fact, with Japanese machine orders showing the fastest growth since late
2000, the Yen should not be able to discourage an upside breakout. In fact,
unless the Fed alters the course of the Dollar with its meeting today, the Yen
is primed for new high ground. Keep in mind, that today could be a critical
pivot point for policy and the Yen is already into critical technical areas on
the charts. The consolidation pattern is probably set to end.
SWISS
Like the Euro, there doesn’t seem to be an official
move to countervail the upside in the Swiss and the fundamentals would seem to
foster even more gains. Next upside targeting is seen at 80.10.
BRITISH POUND
While the UK is seeing an ongoing trade deficit, the
UK seems to think that the deficit is being fostered mostly by energy market
developments and therefore, the BOE might not be as concerned about the soaring
Pound, as it would normally be. With the Pound rising above monthly chart
resistance, it would seem that the Pound is headed to 175.56.
CANADIAN DOLLAR
The Canadian Dollar has the growth and the technical
setup on the charts to rise to a new range of 77.50 and 80.70 on the monthly
chart. The Canadian rally is partly built on its own economy but it is also
built on the persistent decline in the US Dollar and longs need to make sure
that the US Fed doesn’t change the equation later today.
METALS
OVERNIGHT
GLD+2.30, SLV+2.50, PLAT+0.10 London A.M.
Gold fix $408.25 -$.50 LME COPPER STKS 458,725 tons -3,125 tons COMEX Gold
stocks 3.058 ml Unchanged Comex Silver stocks 123.9 ml oz +73,930 oz
GOLD
The gold market saw moderate long interest overnight
and that has resulted in US gold returning to the vicinity of the Monday highs.
Certainly the new low move in the Dollar is the primary driving force behind the
thrust but it is possible that the weekend Barron’s article is having a minor
residual benefit to gold. We are not sure if the resiliency of the US stock
market contributed to the strength in gold, as the gold market hasn’t shown a
consistent track to many outside factors.
SILVER
The silver market has finally confirmed the bull
trend in gold with a new high overnight. As we mentioned yesterday, the silver
market still appears to have buying capacity, even when one takes the net spec
and fund long from the last COT report and adjusts it for the action since the
report was measured. In fact, March silver could rally to 579 without taking its
net spec long above 90,000 contracts.
PLATINUM
Even the $800 level doesn’t appear to be a level
that will contain platinum prices. With platinum seeing very limited physical
movement, the steady flow of speculative buying is simply capable of fueling
prices persistently higher. In fact, it would seem that the market is fixed on
the idea that supply flow is holding at low levels and that demand is growing
off the economy and from a speculative standing.
COPPER
Chinese copper futures went higher overnight, which
in turn fostered gains in the LME market. Therefore, the US market starts the
session out on firm note. In fact, given the magnitude of the opening salvo it
would seem that US copper prices are primed to make a new contract high.
CRUDE COMPLEX
12/09 OVERNIGHT CHG to 04:09 AM:CRUDE-15,
HEAT-30, UNGAS-49 While the headlines might have propelled spec buying off the
prospect of cold weather in the Eastern US, we think that most of the buying
Monday was prompted off a combination of stronger EIA demand forecasts and the
weather. With the EIA raising world 4th quarter demand by 1.3 million barrels
per day and suggesting that OPEC November production was down 400,000 barrels
from the prior month, its understandable that the bulls rushed into the market.
Perhaps the most significant demand talk came from the EIA regarding Chinese
energy demand growth.
NATURAL GAS
The natural gas market soared on the prospect that
cold temps will linger in the East and that more cold might be on the way in
another winter storm. Even after the EIA suggested that US gas production rose
by 2.4% in 2003 and that demand declined 2.3% because of high prices the bull
contingent was undaunted. We suspect that more of the short funds were stopped
out of the market in the action Monday and we now suspect that the small spec
long position has exploded into a modern day record long.