Futures Point To A Stronger Open
METALS
GOLD:
While Chinese gold was sharply lower overnight the gold market managed a slight
bounce into the European action and that would certainly seem to be short
covering interest. We see the concentrated slide in gold prices from Tuesday as
a sign that gold was being driven in part by the hope for additional interest
rate cuts and the hope for inflation, that many assumed would accompany
sustained low interest rates. When the Fed Chairman suggested that the
US
could
grow without seeing inflation rise, the gold market failed.
SILVER:
The silver market might have found support just above $4.65 in the September
contract. The deflated price zone in silver begins when prices dip below the
$4.60 level and therefore we should be close enough to solid fundamental support
to consider buying breaks in this market. Fresh longs will have to risk silver
positions to at least $4.50 on a close basis.
PLATINUM:
A big extension into new high ground in the October contract feeds the bull camp
even if there really isn’t a clearly defined bull theme. We suspect that
ongoing Asian recovery is spurring demand and we know that Russian supply flow
remains crimped and that is evidently enough fundamental rational to send prices
even further into historically high ground. The path of least resistance is up
but the risk and reward for fresh longs leaves a lot to be desired. Â
COPPER:
For the time being, the copper market would appear to have a double top just
under 80.00. While Chinese copper price action was mixed overnight, it is
possible that news of increased Chinese copper production in June (+9%) dampened
interest in the long side. While the global economy is generally thought to be
recovering it should be noted that Canadian felt the need to cut rates and the
UK
seemed
to considering a similar move.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE +5Â Â ,HEAT-12Â
,UNGA+27 Â The crude oil market closed just barely into a new high
ground for the move and at the highest close since March 12th for the September
contract. However, it should be noted that unleaded actually closed lower on the
session and that might be because gasoline shipments are not thought to be
impacted as much with the far west hurricane track.
NATURAL
GAS
From the
performance in the natural gas market it would seem that the hurricane support
is long gone and that outright fear of rising supply is beginning to dominate
the daily action. With a
Chicago
weather forecaster calling
for below normal temps and an early fall, we can understand the market washing
out toward the April lows.
INTEREST
RATES
OVERNIGHT
CHANGE to Â
4:15 AM
:BONDS -10 While the
overnight action saw a big probe significantly below the 112-00 level in
September bonds, it would seem that the trade partially rejected the overnight
lows. In fact, the decline in Treasuries Tuesday was the biggest single day drop
since 1996 and that certainly hints at an oversold condition. However, with a
full slate of economic reports scheduled today and overnight earnings reports
helping to lift the equity market, the bear camp would still seem to have
control over prices.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+250 DOW +30Â NIKKEI
-15 FTSE -15Â We think the longs are a little disappointed, as the favorable
flow of earnings reports hasn’t really yielded much in the way of net gains in
stock prices. Maybe the anxiety thrown off by the Fed testimony undermined the
trade as several House members attacked the Chairman and pointed out the
worsening job situation. In other words, investors watching the Fed testimony
yesterday didn’t come away with a good feeling on the economy.
FOREIGN
EXCHANGE
DOLLAR:
Another new high for the move has to really discourage the bears in the Dollar.
In fact, in looking at the overnight comment wire, it would seem that a number
of markets are waiting for the Dollar to fail but that simply isn’t happening.
For instance, the gold market seems to have 70,000 contracts long off the idea
that the Dollar will resume the slide seen for most of the last year. With
Canada and the UK suggesting that their economies are weak enough to consider
additional interest rate cuts, it’s clear that the US is running a little
further ahead on the recovery curve. In June, the market saw the
UK
and
Canadian economies as the strongest in the G7 and that is certainly no longer
the case. We think that that long term short covering interest and the US
economy will continue to push up the Dollar until prices climb back into the
January through early April consolidation. The January through April
consolidation pattern was bound by 98.72 to 103!
EURO:
There would seem to be little to stop the Euro from sliding all the way down to
the top of the January through April consolidation range. Overnight Euro zone
CPI was up 0.1% and was in line with expectations. We also continue to see
European stocks underperforming versus US stocks and that partially justifies
the slide in the Euro. In other words, sentiment that favors US stocks probably
fosters a return to Euro prices below 110.00. Until the Euro settles into a 110
to 107 range the bear camp should prevail.
YEN:
Some suspect that the BOJ intervened against the Yen yesterday, while others
think that the improved view on the economy from the BOJ cleared the way for an
attack of the currency. We have to think that the strength in the Dollar is the
primary force driving the Yen down, but that the BOJ interest in seeing the Yen
slide is certainly aiding in the decline. Near term targeting is seen at the
bottom of the early June consolidation of 84.00.
SWISS:
The Swiss is getting close to a sold out price of 71.46 and therefore more
declines are expected unless the
US
numbers
are much softer than expected. It might take a recovery back above 72.64 to shut
off the downtrend in the Swiss.
POUND:
The payroll and earnings numbers released from the
UK
overnight, seems to have tempered the probe to another new low for the move.
However, with jobless claims rising by 1,700 it is clear that the
UK
economy
isn’t in a sustained recovery posture. The Pound is significantly oversold and
getting close to chart support of 157.60. Fresh longs probably have to risk
positions to at least 157.10.
CANADIAN:
We are not sure that the Canadian can shut off the selling interest with the
current fundamental mix. However, there is a chance that the September Canadian
can respect chart support of 71.30 but a trade below that level could alter the
long term trend pattern.