Futures Point To A Weak Open
INTEREST RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS +20 With the world equity market falling in earnest
overnight, it would seem that the outlook for the economy is made worse.
Therefore, the bonds and notes are in position to benefit from the combination
of events that have come together this week. While we doubt that poor earnings
reports have been the cause of the sharp bond market rally, we do think that an
unusually thin slate of economic reports on the week, allowed the bull theme to
dominate, more than it would have otherwise.
STOCK INDICES
OVERNIGHT
CHANGE to  4:15 AM:S&P-850 DOW -73 NIKKEI -554 FTSE -62 While the overnight
losses don’t seem to be driven by a specific event, the magnitude of the
overnight declines are similar to those that would occur in the face of an
anxiety event. In other words, the losses are big enough to create downward
momentum unless the bear tilt is shut off quickly. It would certainly not seem
like the earnings news is capable of turning the trend and the economic report
slate is simply not active enough to provide a countervailing force to the
selling.
FOREIGN EXCHANGE
EURO:
Euro longs have to be disappointed with the action in the Euro in the last 12
hours. Instead of rising into new high ground the Euro seems to have fallen back
into the October consolidation. Therefore, we have to assume that the Euro is
fighting the urge to rally. Forced into the market, we would buy the Euro but
only if the fresh long could be put in place down around 117.34.
YEN: A
massive decline in the Japanese stock market and very poor earnings from Sony
would seem to put the Yen in a position to fail. With short-term technicals in
the Yen, in strong sell modes and the BOJ interested in forcing the Yen lower,
we have to think that a move lower is now possible. In fact, seeing the December
Yen decline below 91.05 might open the floodgates on the selling.
SWISS: By
default the Swiss gets some long interest. However, like the Euro the Swiss
didn’t manage to hold the brunt of the big gains posted in the wake of the
Dollar failure Wednesday. Therefore, the Swiss pattern might be up but it would
appear to be a “follower” of the Pound action instead of a leading indicator.
POUND:
The Pound looks to have the mantle of the strongest economy and the economy with
the most likely chance to see higher interest rates. Therefore, we expect the
Pound to maintain a bullish stance and rise into new high ground, until the rate
hike is manifest.
CANADIAN
DOLLAR: The Canadian rally apparently isn’t going to be unseated by the prospect
of extreme volatility in the Dollar. In fact, with the world economic outlook
being revised downward, it seems that the market is raising the “stock” of
Canadian investments! Buy corrections today down to 76.05 in the December
contract. +
METALS
GOLD: The
gold market would seem to be in a wave higher, with the market potentially able
to reach the even number benchmark of $400 in the week ahead. The fact that the
Dollar fell to a new contract low yesterday, rekindled buying off the currency
theme and that benefit was absent for most of October, with the Dollar
attempting to rally until last week’s high. It is possible that significant
equity market losses generate a slight deflationary drag for gold but if the
Dollar resumes the downside track the deflationary drag will be ignored.
SILVER:
The silver market is showing almost no reaction to the overnight equity market
washout. In fact, by the overnight action it is clear that silver is trading its
own fundamentals and isn’t even closely tied to gold market fundamentals. If the
funds were responsible for the upward track in prices, the recent COT report
would suggest that prices could easily return to the September highs without
putting the market into an extremely overbought condition.
PLATINUM:
Like silver, platinum is showing no impact off the capitulation in the equity
market. However, short-term technicals in platinum are registering moderately
overbought conditions. Trend line resistance in the January platinum comes in
just above the current market at $740.7. Â
Following
overnight earnings news from BHP Billiton, where the company cited extremely
strong business to China and an increase in 1st quarter production of 16%, the
copper market isn’t taking the news of a return to full production at the
Escondida mine very well. It was only a matter of time before the main producers
in copper moved back to full COPPER: production, especially since shortages were
being noted and prices seemed to be strong enough to withstand an increase in
production. However, seeing the prospect of full production means that the near
term edge is taken off the bull market.
CRUDE COMPLEX
OVERNIGHT
CHG to    4:15 AM  :CRUDE -7  ,HEAT-20 ,UNGAS+22 The energy complex deserved
to trade lower after the weekly inventory reports showed a surprising crude
stock decline, but the report also showed an equally surprising (and possibly
more important) build in the product stocks. The swing factor in leaving prices
lower on the session Wednesday, was the fact that the refinery operating rate
increased sharply and that would seem to reduce the threat of tight product
stocks in the near term.
NATURAL GAS
Expectations for the weekly storage report call for a 60 to 80 bcf injection and
anything above 50 bcf will serve to narrow the annual deficit. Seeing an above
average build will also push the inventory readings toward the bull/bear line of
3 trillion cubic feet.