Futures Point To A Weak Open
METALS
GOLD:
A more positive tilt is seen in gold today as the reversal in the Euro Wednesday
took the heat off gold. With reports of soldiers exchanging fire across the
demilitarized zone in
Korea
, the
Pacific
Rim
bid up
gold prices overnight. Considering the weakness in the
US
stock
market and the tensions in
Korea
, it
might be possible for December gold to rise toward down trend channel resistance
lines up around $353.4, with closer in resistance seen at $350.
SILVER:
As mentioned in the gold comment, the silver market seems to have garnered some
long interest in the face of stock market weakness. However, we have to think
that the currency impact is a more salient influence than equity market
weakness. Considering the massive correction off the July high, it’s natural
for silver to manage a decent bounce but we are not sure that silver has a
strong force pulling in buyers and setting the market up for a return to the
$4.75 to $4.85 topping zone.
PLATINUM:
While the platinum market showed some correlation to the recent weakness in
global equity markets, we would expect that relationship to be short lived. In
fact, the platinum market has already managed to recoil $12 off the Wednesday
low. Initially platinum and copper were behaving like industrial demand driven
markets, but overnight platinum pulled itself out of that group. In other words,
platinum is trading its own fundamentals and apparently isn’t that concerned
with the disappointing pace of recovery. Â Â
COPPER:
The copper market is certainly deflated by the reversal of attitude toward the
economic recovery. Furthermore, copper prices were overbought off the strong
July run that eventually pushed copper prices up by 535 points. Chinese copper
prices were down and that adds to the negative tilt this morning.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE +22Â ,HEAT+23Â
,UNGA+28 Â The energy complex managed a significant reversal after
nearly moving into new high ground for the move Wednesday. However, the weekly
inventory report and the price reaction following the report, was potentially
quite significant.
NATURAL
GAS
Expectations
for the weekly natural gas injection report call for a 80 to 110 bcf build and
that certainly dovetails with the bearish price action Wednesday. Some traders
suggested that weakness in the regular energy complex contributed to the
weakness in natural gas.
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS +12
Call it what ever you want, a technical correction, a bounce, or a retracement
but you have to concede that Treasuries were getting a little ahead of
economics, with the slide to this weeks lows. Certainly long term position
liquidation caused a large portion of the massive slide off the July highs, but
with the overnight earnings reports disappointments, the totality of the Fed
testimony and the recent macro economic numbers, the Treasury markets deserve a
slight recovery. In fact, given the hard down action in Stock Index futures this
morning and the disappointment in IBM earnings, bonds and notes should be able
to claw out some additional gains.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
:S&P-910
DOW -88 NIKKEI -237 FTSE -45Â From the poor action yesterday afternoon it
was clear that sentiment toward the economy was exposed as overly optimistic.
With a series of sloppy to disappointing earnings reports overnight, it is clear
that the selling will extend in the near term. We have to think that certain
members of Congress contributed to the reversal of economic sentiment, as they
attacked Greenspan and were very vocal about the jobless recovery.
FOREIGN
EXCHANGE
DOLLAR:
Like the
US
stock
and bond markets, the US Dollar rally was a little ahead of reality with its
recent action. With the
US
equity
market contributing to the recent gains in the Dollar, it’s natural to expect
significant
US
equity
market weakness to cause a setback in the Dollar. In fact, US economic reports
due out today could be expected to support the Dollar, but the market might not
give those reports much consideration. Some traders think that the September
Dollar might see a setback to 96.61. Since a number of US corporate earnings
reports have turned off soft, there is certainly a reduction in the optimism for
the Dollar and that should allow for more minor downside action. If 96.61 fails
to hold, lower support of 96.13 should manage to hold.
EURO:
With Euro zone Industrial production declining by 0.9% overnight, it is clear
that their economy is soft and that money should not leave the Dollar for the
Euro. In fact, the Euro zone Industrial production readings were down 1.3% on
the year and that is hardly the type of information that serves to attract
global investment. However, because of Dollar weakness it is possible that the
September Euro climbs toward chart resistance of 112.74. In short, there is no
clear cut winner in the economic recovery derby and the Euro only gets a minor
reprieve against the selling pattern established around the June high.
YEN:
The Nikkei was down sharply and the Yen comes into the session close to
consolidation support of 84.50. With the BOJ suggested that the Japanese economy
will be in recovery by “autumn†there is certainly the chance that the Yen
could violate chart support around 84.50. The BOJ would simply not give an
indication for the end of their easing posture, possibly because there have been
a number of failed recovery attempts in the last 4 years. If the Dollar
weren’t so weak in the current action, the Yen could easily have managed a
downside breakout off the current mix of news. As it stands, money is looking
for a home and the Yen finds support off that issue.
SWISS:
The Swiss is making some surprising upside gains in the overnight action and the
trade might see it as a good investment considering the disappointment in the
US
and the
weak Industrial production numbers in the Euro zone. Near term downtrend chart
resistance comes in up at 73.50 and that could be an easy target for the Swiss.
POUND:
Like the Swiss, the Pound seems to be winning by default. With both the Euro and
Dollar lacking a bullish tilt, the market sees a corrective bounce in the Pound.
We seriously doubt that the Pound will be able to mount a rise to the 160.00
level given recent economic readings and statements from the BOE.
CANADIAN:
The Canadian, Pound and Swiss are all set to get a technical lift from recent
oversold action. However, with the downgrade of the
US
outlook, some of the fundamental pressure is taken off the Canadian. In the end,
we are not sure that the Canadian economy is strong enough to justify much of a
bounce in the Canadian. In fact, we see significant overhead resistance on the
charts up around the 72.06 level. Aggressive traders might sell a Sept Canadian
today at 71.80 and buy an Aug 72.50 call for 45 as protection against the short
play.