Futures Point To A Stronger Open
INTEREST RATES
02/13 OVERNIGHT CHANGE to 04:13 AM:BONDS+10 The
Treasury market seems to be back into a bullish posture today, after acting
poorly Thursday. Certainly the economic numbers Thursday fostered bullish
sentiment and with the Dollar hovering around contract lows, one might expect a
greater than average intervention potential ahead. Maybe the refunding
anticipation undermined Treasuries and maybe the market was simply overdone from
the February run and overdone off the Greenspan reaction.
STOCK INDICES
02/13 OVRNIGHT CHG to 04:13 AM:S&P+290, DOW26,
NIKKEI +98, FTSE+29 While the overnight tilt would seem to favor the bull camp,
we are a little surprised at the source of the optimism. With the market touting
high tech issues, it would seem that the NASDAQ is poised to play some catch up
to the Dow and S&P. We get the feeling that the market is in danger of losing
some speculative fervor, unless some key technical areas are taken out early,
which in turn fosters a revitalization of the trade.
DOW
The Dow has really coiled into a tight range over the past 3 1/2 sessions. Maybe
the Dow over reacted to the Greenspan comments and now needs some favorable
economic guidance to solidify the move to higher levels. The trend is up but we
are concerned about the tightness of the recent range, as that same type of
action led to a series of minor declines in the January 28th through February
5th time frame. In short, if the bear camp prevails, the decline will probably
be minimal. Even if the bull camp prevails, one can hardly expect more than a
series of hard fought gains. Critical support comes in at 10,688 in the March
Dow.
S&P
Unlike the Dow, the S&P has managed a slight correction off the recent high and
might not be as vulnerable to technical chart failure. However, fresh longs
might have to risk positions to at least 1143.20. While the bias might be up
early, the bull camp will need some help from the numbers, or some other
development just to get back above the critical pivot point of 1154.30. Pushed
into the market, we are a buyer of minor weakness but the risk and reward of a
buy around the highs this morning doesn’t appear to be that stellar.
FOREIGN EXCHANGE
US DOLLAR
The bears could be disappointed by the failure to
poke through the recent low and forge an even lower trading range. However, the
factors seem to be with the bear camp, as US numbers have continued to under
perform and the Dollar seems to prefer the bottom of the recent range. We also
don’t detect a chorus of complaints from G7 members regarding the Dollar slide
in the month of February. It goes without saying that the March Dollar makes a
major failure with a slide below 85.20, but the longer the market holds above
that level, the more likely it is that some shorts will stand aside. However, so
many things are going the bear’s way, that they should have patience. If the
bears were being hammered by stronger than expected US numbers and daily
complaints from the ECB, we would have a different opinion. Stay with the bear
tilt until the March Dollar manages a close above 85.70.
EURO
The Euro zone growth forecast is predicted at a less
than stellar +0.3% in the 1st quarter and a blazing +0.4% in the second quarter.
In other words, traders that are long the Euro, shouldn’t look at the numbers
too long because they will begin to wonder why they are long the Euro. We think
the trend in the Euro is up mostly because of existing sentiment but from a
classic fundamental approach, there is no justification for the Euro to hammer
to the upside on the back of a weak Dollar. The Euro up trend won’t stop until
the market thinks the US is prepared to hike rates and the recent numbers don’t
facilitate that kind of thinking. More gains but we would not be long the Euro
this high in the last months range.
YEN
The yen coiling continues with even tighter ranges
over the last week. The Nikkei seems like it is ready to roll over down and that
could preclude an upside breakout in the Yen. However, specs must look to enter
the long side of the Yen below 94.82, because the market could slide to 94.20
without breaking support.
^next^
SWISS
A pattern of lower highs in the Swiss, shows that
the currency isn’t prepared to make an upside breakout with significant follow
through. In fact, the near term track in the Swiss might allow a correction down
to 80.92.
BRITISH POUND
The Pound is significantly overbought but really has
no reason to forge a major top. However, the Pound could certainly correct back
to 188.18, without violating chart support. A trend this strong wouldn’t be
expected to end, without some type of major shift in fundamentals.
CANADIAN DOLLAR
The Canadian Dollar couldn’t seem to get about the
recent breakout point and with Canadian economic concerns flowing this week, we
would not be surprised to see the Canadian fall back toward support of 75.00.
METALS
OVERNIGHT
GLD-1.30, SLV-2.50, PLAT+4.70 London A.M.
Gold Fix $412.10 +$.70 LME COPPER STOCKS 323,225 -3,950 tons COMEX Gold stocks
3.366 ml Unchanged Comex Silver stocks 123.9 ml +3,842 oz
GOLD
With the Dollar coiling above the contract lows for
at least part of the last three sessions, it is clear that the trade is having
trouble getting into a new lower trading range. In our opinion the gold market
needs a clear-cut downside track in the Dollar to pull in a fresh wave of gold
buyers. Overnight the market was made aware of a 300,000-ounce production
shortfall from Barrick and that would be slightly supportive for gold if the
market were tracking physical supply and demand factors.
SILVER
While silver remains close to an upside breakout
point on the charts, it seems just a little vulnerable but until the March
slides below $6.558 we doubt that the funds will be forced from position. We do
think that the silver is primed to post another all time record high spec long
position in the COT report tonight and those readings are sure to be
understated. One can’t argue with the trend but the longs certainly seem to have
a little more risk coming into the session today than they did earlier this
week.
PLATINUM
Another new high for the move would seem to leave
the bias up in platinum. So far the platinum doesn’t seem to be bothered by the
evidence of poor auto sales and that is probably because many users were forward
bought. However, as the production slows and automakers attempt to use up left
over supplies that could result in less aggressive future buying.
COPPER
Chinese copper prices finished higher but were not
as strong as the action seen in the prior session. The Asian trade was a little
concerned about high premium values but that did not keep them from invoking
fresh buy orders. Shanghai copper stocks rose by +5,578 tons on the week, in a
slightly negative development but that is easily offset by a consistent decline
in LME stocks all week long.
CRUDE COMPLEX
The energy complex showed a little exhaustion
Thursday but still managed to leave the market with a positive tilt. The fact
that the Algerian Oil Minister indicated a possible review of the April
production cut promise, if prices soared into that date, seemed to undermine the
bull camp. Seeing any OPEC member hint that the cartel might not go through with
the proposed cuts, really tempers the bullish landscape and puts the market in a
position to trade off other fundamentals.
NATURAL GAS
The natural gas market certainly responded
favorably, to an as expected weekly inventory report but the market might have
been given some support by a slightly colder 6 to 10 day forecast. The 224 bcf
draw in natural gas inventories, was certainly up in the expected range but
unless the trade really doubted the prospect of a large draw ahead of the
report, the news Thursday should not have been cause for the big rally. While
the Press is suggesting that the market was looking for a 200 bcf draw, the
actual draw was in fact below the prior week which should have dampened bullish
sentiment.