Futures Point To A Weak Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
+18 — The Treasury market should continue to see supportive conditions. Not
only is the war expected to enter a dangerous phase but we also get the sense
that global economic readings are really beginning to show evidence of a slide
back toward recession. As long as the US Dollar doesn’t come under massive
attack, we assume that the Treasuries will be able to feed consistently higher.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
-1220, DOW -105,
Nikkei -307, FTSE -75 — The
question for the stock market this week is whether or not the trade will panic,
or if traders will move to the sidelines in an orderly fashion? With the COT
reports showing both the Dow and S&P to be "net short" in the spec position, we
have to think that the threat of panic liquidation is mitigated. However, if the
war situation throws off extremely disconcerting developments (because of
massive casualties or the use of Chemical weapons) one shouldn’t rule out the
potential for a punishing sell-off. Considering the negative impact of extending
the war for an indefinite period of time, we expect to see disappointment
manifest itself in persistent selling.
FOREIGN EXCHANGE
DOLLAR: The Dollar looks to be under aggressively pressure for at
least the first three days of this week and could possibly be under pressure all
week long.
War protests, a weak economy
and the talk that the coming days of battle will be very bloody, leaves the
Dollar in an aggressive slide.
While anti war protests will certainly leave the pressure on the Dollar, the
Dollar is sliding because the world thinks that the
underestimated the Iraqis and that the Iraqis are going to deal a blow to
coalition forces. In the mean time, it might even seem like the coalition forces
are expected to lose, with the magnitude of the losses in the Dollar. Therefore,
expect the Dollar to slide but also expect the market to get caught short the
Dollar, when the ultimate outcome is known. There is an old gap area down at
99.26 to 99.02 that could easily be filled this week. If economic numbers from
the
are ultra weak and coalition forces are initially rebuffed at the gates of
then the Dollar might slide all the way down to the March lows just above 98.00.
EURO: Even with extremely weak confidence
numbers from the Euro zone, the Euro is in position to garner underserved flight
to quality long interest. Certainly their stance against the war bolsters their
standing when the battle enters the tough stage and for now we have to expect
that the Euro will rise without resistance. The first upside target for the June
Euro is 109.44 and then again at 110.20.
YEN: With the Yen streaking higher
overnight, it would seem that the Yen is in fact back into the flight to quality
role. Furthermore, with Japanese housing figures overnight continuing to show
contraction it is clear that economic differentials are taking a back seat to
anxiety investing. It seems that investors want to be as far away from the
(maybe even
and the Yen is seen as a port in a storm. Near term upside targeting and a nice
sell point later in the week is seen at 85.14.
SWISS: This should be the classic flight to
quality period for the Swiss. Therefore, we see no reason why the Swiss couldn’t
make a new contract high before the end of the coming week. In fact, until the
Swiss falls back below 73.62 we assume that the trend is aggressively higher.
POUND: Surprisingly the Pound isn’t being
lumped into the same political and economic mess that the Dollar is in, or the
Pound would not have been able to breakout to the upside overnight. We think the
most likely reason for Pound strength in the face of Dollar weakness, is that
Tony Blair is attempting to bring all sides together and has shown the desire to
compromise for a solution. Near term resistance is seen in the Pound up at
158.02.
CANADIAN: For some reason the Canadian isn’t
behaving as one would have expected. Is the SARS threat cause to be concerned
about the Canadian, or is the Canadian economy simply too closely tied to the
economy? In any regard, something seems to have changed against the bull camp.
Traders should stay long but seek the comfort of long put/short call option
protection.
METALS
OVERNIGHT CHANGE to
4:15 AM
GLD
+3.80,
SLV +3.2, PLAT +6.80;
Gold Fix $335.50, +$5.40; LME Copper
Warehouse stks 814,700 ton, -1,000
tns;
Comex Gold stocks 2.360 ml, +2,015 oz;
COMEX Silver stks 109.0 ml oz,
+211,665 oz; OVERNIGHT: Upward bias in Asian gold prices because of increased
war activity.
GOLD: The net spec long in the gold market
coming into this week might be close to 60,000 net long, considering that gold
has rallied about $3 since the report was measured. Therefore, we are not
totally convinced that the gold market is going to be able to mount a sharp
rally without some really hot headlines. We are not even sure if the use of
chemical weapons against coalition forces will be enough to spark widespread
speculative interest in gold but there should be enough initial interest in gold
to fuel some gains.
SILVER: The net spec long in silver comes
into this week at only 19,000 to 20,000 contracts, which is only a moderately
long position. However from the overnight action, it would seem that silver will
trade in lockstep with gold and could be headed to back to the $4.50 to $4.60
trading range. Silver will continue to be held back by the deflationary threat,
especially with the Euro zone confidence readings overnight coming in markedly
weaker.
PLATINUM: With net spec long position last
Tuesday only 2,200 contracts and platinum now trading
several Dollars below the level seen into the COT report, we suspect that the
net spec position is mostly leveled. Considering the slide and reversal in
platinum Friday, maybe a near term low was forged around $6.20. We still think
that a fear of deflation rules the platinum market and could cause more losses,
especially if equities fall hard. We continue to get a sense that platinum is
not a flight to quality metal.
COPPER: While copper prices managed to
bounce off the lows last Friday, we have to think that the path of least
resistance is down in copper for at least the early part of this week. With
consumer confidence showing a massive decline in the Euro zone this morning,
equities weak and Chinese copper prices weaker, the bears should control the US
copper market. With military action in
expected to reach a violent stage this week, we assume that equity prices will
fall hard and that in turn should undermine global sentiment and leave copper
prices under pressure in the near term.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +5,
HEAT +76, UNGA
+35 — We doubt that energy prices will be able to mount the type of gains they
managed last week unless there is some significant backslide in the coalition
control of Iraqi oil regions. In fact, overnight some energy market sources
suggested that some Iraqi exports might resume from the South by the end of the
coming week! MEES (Middle East Economic Survey) has confirmed that Iraqi oil
works suffered only minimal damage in the attack to date and they also expect to
have all well fires out by the end of the coming week.
NATURAL GAS
The
weekly COT report showed the small traders to still be long nearly 27,000
contracts and since then the market has mounted only minor upside action.
Therefore the Natural gas is vulnerable to long liquidation but only if chart
support is violated at last weeks lows, or if the regular energy complex begins
to show a resumption of the weakness seen in early March.