Futures Point To A Weak Open
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS -2
Now that the funds have exited and the small spec longs have expanded an already
moderate long position, we would have to think that short covering influences
will slow. Furthermore, the US economic report slate is pretty empty for the
rest of the week, leaving the direction of the stock market as a critical force
for Treasuries. With the small specs holding a net long of nearly 14,000
contracts as of August 12th and the market rising since that measurement was
taken, we have to peg the small spec long position to be roughly 19,000
contracts but until the small spec position reaches 40,000 contracts, one should
not expect the market to run out of buying capacity from that sector.
STOCK
INDICES
OVERNIGHT
CHANGE to  4:15 AM:S&P-60Â
DOW -17 NIKKEI +117 FTSE -23Â The stock market is doing a good job of
discounting potentially negative headlines and is certainly performing
impressively under a lackluster flow of scheduled economic information. With the
US report slate almost empty for the rest of the week and bombing incidents
apparently on the rise, we are surprised that prices have managed to maintain
recent gains. However as mentioned before, the Dow was in an outstanding
technical position to rally.
FOREIGN
EXCHANGE
EURO:
While the Euro is lower against the Dollar again this morning, we detect a
significant lessening of downside momentum in the Euro. As mentioned in the
Dollar comment, the US economic report slate is empty and that should serve to
take the pressure off the Euro at least temporarily. It is also possible that a
seeing the Euro zone post a trade surplus for June provides some light bottoming
interest in the Euro. Near term technical chart support in the September Euro
comes in at 110.42 but it must hold that level on a close basis to effectively
halt the recent slide.
YEN:
the Nikkei continues to rise impressively and considering the disappointing
economic readings from the US and the recent failure in the Euro, the Yen has
simply wins by default. We seriously doubt that the Yen is preparing to breakout
above recent resistance of 84.70 especially with the BOJ waiting in the wings
with intervention threats.Â
SWISS:
The Swiss is massively oversold and capable of recoiling off the spike low
posted Tuesday. However, the trend is down in the Swiss and rallies should only
be temporary short covering affairs.
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POUND:
If the Dollar isn’t strong and the Euro isn’t strong, that should easily allow
the Pound to respect recent lows and at the same time firm up the idea that
158.00 is solid support. The recent BOE meeting minutes suggested a rate cut was
discussed but also suggested that downside risks had diminished and that also
helps to firm up the recent lows. Aggressive traders might buy the Pound today
at 158.56 with an objective of 160.90. CANADIAN DOLLAR: Maybe weakness in the US
Dollar will save the Canadian from a slide below critical channel support at
71.10, but a failure at that level would certainly undermine the technical
structure of the Canadian. We are still not ready to call for an end to the bull
market in the Canadian Dollar.
METALS
GOLD:
It was clear that the bombings Tuesday supported gold prices but with the Dollar
maintaining higher price action in the early going today we expect that December
gold will be limited in it’s upside capacity. However, we would not be surprised
to see the December gold rise to $368.8 in the coming session, off fears of more
bombings. With the US economic report slate empty today and thin for the rest of
the week, the US Dollar might not have enough news to hold recent gains and that
could also take away some of the resistance hanging over gold.
SILVER:
The silver outperformed the gold market, possibly because the hope of improved
physical demand in silver is a more sensitive issue for silver. In order to turn
the recent liquidation pattern off in silver, the market will have to alter the
pattern of lower highs in place since the July high of $5.235. We define the
near term trading range in December silver as $5.10 to $4.90.
PLATINUM:
The overnight Press was reporting that platinum is close to forging a 23-year
high and that is a pretty lofty price for a market that is seeing
“tightness” instead of a real shortage. If auto sales were in better
shape and we weren’t seeing softening (from a torrid pace) in the housing
sector, we would be more inclined to believe in the platinum rally.
Unfortunately we are not sure what has to happen to derail the bull track. With
supplies from Russia coming slowly and the world economy recovering it is
possible that platinum continues to grind higher. If there is enough liquidity
traders could buy a January platinum futures and buy 3 Jan 650 platinum puts.Â
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Chinese
copper prices were higher overnight and with the market seeing Chinese copper
concentrate imports up 97% over last year, there COPPER: would seem to be a
bullish bias. The July Chinese copper concentrate import quantity was 297,971
metric tons, which is an impressive tally for a relatively new market share.
Following a gap up move Tuesday, copper certainly has an upward bias but we are
a little concerned about maintaining momentum with an empty US report slate and
a stock market that is having trouble extending recent gains.
CRUDE
COMPLEX
OVERNIGHT
CHG to    4:15 AM Â
:CRUDE -14Â ,HEAT-1Â Â
,UNGA-17Â Surprisingly the energy complex only showed temporary
support from the Baghdad bombing on Tuesday. We are equally surprised that
energy prices didn’t show some support off the comments from OPEC, which raised
2003 and 2004 demand expectations, as that would seem to tighten the supply and
demand outlook even further.
NATURAL
GAS
Apparently,
hot US weather is enough to support natural gas but not the regular energy
complex. However, instead of a seeing a massive heat dome in the Midwest, it
would seem that the most significant high temperature impact will settle into
the Northeast.