Futures Point To A Weak Open
INTEREST RATES
03/11 OVERNIGHT CHANGE to 04:11 AM:BONDS+5 We are
not sure what specifically fueled the Treasuries higher overnight but there are
certainly a number of issues present to justify the gains. Certainly the Madrid
explosions rupture economic confidence and with the world equity market
following the US stock decline from Wednesday, its clear that sentiment toward
the world recovery is in question. The Madrid situation is hopefully a temporary
development and not the beginning of a chain of events but with macro economic
sentiment already damaged almost anything negative looks to foster more Treasury
buying.
STOCK INDICES
03/11 OVRNIGHT CHG to 04:11 AM:S&P-220, DOW-21,
NIKKEI -136, FTSE-79 The stock market remains in trouble but as of yet it would
not seem like panic selling will become an entrenched theme. However, from a
technical perspective the market could certainly see a dumping of sorts, as
intermediate term investors throw in the towel. The general consensus is that
investors are tired of waiting on the recovery and that until evidence of job
growth is seen, attitudes will remain negative.
DOW
We don’t think that panic type selling will unfold, but we do think that more
losses are ahead. As mentioned above, we are having trouble finding a catalyst
that would end the current profit-taking slide. In other words, it usually takes
time to work out from under an economic malaise. Near term targeting is seen at
10,109.
S&P
Near term downside targeting is seen at 1098.50 with prices liquidating
persistently. In fact, until there is something positive to write home about, or
we see the classical “big range down reversal pattern”, we see no reason to
suspect a low is in place. Maybe the June S&P even manages to fill the gap down
at 1098.50 to 1094.50.
FOREIGN EXCHANGE
US DOLLAR
The Dollar seems like it might want to continue
rising but with the US economic outlook deteriorating, it is becoming difficult
for traders to pay up for the Dollar. In fact, we don’t see any currency that
deserves persistent favor. For the Dollar not to get a lift off the Madrid
bombing, highlights its near term overbought status. With some critical US
economic numbers this morning, it might be even more difficult for the Dollar to
hold the persistent gains posted since the February lows. The Dollar should have
critical support down at 89.01 but could easily fall to recent consolidation
lows of 88.75 and not alter the trend pattern. We continue to think that the
currency market is a rudderless boat!
EURO
Supposedly a source close to the ECB indicated this
morning that the Euro might be able to rise to 130 without damaging regional
export interests. Therefore, it would not seem like the ECB is poised to cut
interest rates. However, the Madrid bombing and recently soft economic numbers
might be pushing the ECB a little closer to a cut for reasons other than
exchange rate levels. The net effect of the overnight events and the slackening
economic outlook is that the Euro is roped into a range. Without the threat of a
cut in rates the Euro would have soared two months ago but now it is clear that
something has changed. In fact, if the Euro can’t manage a climb above 122.77
today it is probably headed back to the recent lows.
YEN
Apparently an overnight earthquake in Japan is of
little impact on the currency. The Yen is probably picking up some long interest
because nobody wants the Euro or the Dollar. In other words, maybe the Japanese
economy is a better bet and that is giving the Yen a mild lift. Therefore a rise
to 91.00 wouldn’t be surprising and if the economic outlook for the US sours
even further, maybe the Yen manages an upside breakout.
^next^
SWISS
The pattern of lower highs and the general pattern
of a downtrend on the charts, leave the Swiss with significant overhead
resistance. Until the Swiss manages a climb above 79.05 we will assume that the
trend is down.
BRITISH POUND
The down side breakout on the charts doesn’t appear
to be coming off anything in particular and might be mostly the result of the
over bidding in the Pound from the end of December. In other words, the higher
rate situation in the UK might actually end up costing the UK economy and
therefore the Pound could be set for a slide to 175.00.
CANADIAN DOLLAR
So far, winning by default isn’t doing much for the
Canadian. We do think that the June Canadian will manage to respect support of
75.00 but the risk and reward for the longs isn’t that impressive.
METALS
OVERNIGHT
GLD-2.70, SLV-8.50, PLAT-16.10 London
A.M. Gold Fix 297.40 -$3.40 LME COPPER STOCKS 251,925 -3,775 tons COMEX Gold
stocks 3.52 ml Unchanged Comex Silver stocks 124.0 ml -4,131 oz
GOLD
The gold market will once again be confronted with
firm Dollar pressures and with the April contract sliding below several minor
support levels more downside is possible. We suspect that the technicals will be
leveled and the market will bottom around $391.70 unless of course the Dollar
shows signs of forging a sustained up trend. In the mean time, those that bought
June $390 puts should look to take a profit on the puts at 1,000.
SILVER
The silver market certainly isn’t immune to the
weakness in gold, nor is it immune to the action in the Dollar. However, the
silver market is still pretty much trading on its own fundamentals but will be
impacted significantly by fund action. The bottom of the recent up trend channel
in May silver comes in at $6.922.
PLATINUM
Platinum corrected hard overnight possibly because
the sharp rise in the prior session was overdone. We do think that platinum saw
its net spec and fund long reach a record level this week even if the report on
Friday understates the positioning. In other words, the COT report was compiled
before the big rise on Wednesday and therefore the numbers Friday won’t fully
represent the actual overbought condition.
COPPER
We are really surprised that the Copper market
managed to rally yesterday, as the macro economic outlook continued to
deteriorate and other metals were weak. Overnight the market was probably
supported off strong Aluminum price gains in China, but Chinese copper prices
ended without a strong signal for the US market. We suspect that prices have
bottomed but our outside market sense, suggests that the bull theme has less
sizzle.
CRUDE COMPLEX
We are not surprised that crude oil prices sagged
yesterday as the crude stocks increased and the refinery-operating rose.
However, it is clear from the unleaded reversal Wednesday that a moderately
important low might have been forged. It is our opinion that unleaded prices
managed most of the recent correction off spill over weakness in the crude oil
market and that crude oil has been consistently overbought when compared to the
unleaded market.
NATURAL GAS
The natural gas market was once again impressive in
avoiding a slide, as the regular energy complex showed initial weakness and that
could have pulled down a weak natural gas market. The weekly injection report
today sees a draw range of 20 bcf to 101 bcf, which is evidence that the draw
season is coming to an end, but that the residual of the winter still leaves the
potential for a big draw in place. Considering the physical interest for natural
gas recently, we doubt that prices will see a decline significantly below the
$5.20 level basis the April contract unless there is a major failure in the
regular energy complex.