Futures Point To A Weak Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS +21 — The bonds might be re-factoring
the last two weeks
economic information, as the realization that the war in
might extend for months, makes the market reconsider the weakness documented in
past reports. In other words, the trade can no longer discount the weaker than
expected economic evidence, especially if fear and uncertainty over the war is
going to hang in place for another month. We can’t imagine that the
economy will be able to avoid a return to recessionary conditions, if the
current situation maintains its current track into late spring.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
-600, DOW -57,
NIKKEI +16, FTSE -46 — We would
at least wait for the coming 24 hours before assuming that the end of the war
will be delayed for months. As the weather clears today, it might be possible
for coalition forces to re-establish momentum and keep the potential for a quick
end to the war alive. However, if coalition leadership decides to shore up
positions, wait for more troop deployments or turns its attention to
humanitarian efforts in the South of Iraq that could signal a long delay in the
end to the confrontation.
FOREIGN EXCHANGE
DOLLAR: The Dollar could be set to slide all the way down to the
March lows, with the war track hinting at a protracted war. We are sure that the
French and German stance will be to reduce the status of the
by an "I told you so attitude". In fact, the greatest victory for the German and
French block would be to setup a UN resolution to "stop the killing" thus
leaving the
status in shambles and the regime in place in
In other words, the longer the war extends the more opposition will mount
efforts to stop the attacks. In the mean time the
economy is about to fall back into a recession, especially if the war doesn’t
come to an end in the near term. In the near term, we mean four or five days.
Maybe the heat will come off the US Dollar if it is learned that Saddam is no
longer in power but we doubt it. Those that get short the Dollar do run the risk
that coalition forces finally unveil shock and awe and
dash toward
under clearing skies, but if the Iraqi resistance repels such a daring move, the
Dollar will gap toward the March lows. If you want to stay long the Dollar, buy
April calls instead of futures as they have 8 days until expiration and they
could reduce your loss and could still give the coalition a chance to prove it
is a superpower coalition.
EURO: The euro is primed to return to the
March highs even though the ifo
survey yesterday showed the economy staggering into the start of the war. The
trade should be pushed upward by mocking statements from
and
and by the fear that the euro is once again a true flight to quality favorite.
Initial resistance is seen at 108.00 but that will be a target if the coalition
forces don’t surprise the world by the close Friday afternoon.
YEN: Some traders might rush in to buy the
Yen because the war looks to extend and the
status deteriorates but we would in no way rush money to the yen if the war is
going to extend for months. In fact, if the war extends for months, the Japanese
economy is in for a major problem. Therefore we would be looking to buy some
June Yen 82 puts on a rally to 84.00.
SWISS: Because the upcoming situation looks
to be deflationary instead of anxiety ridden, we are not sure that the Swiss is
set to rise sharply. We do think that the Swiss will mount a rally but the
aggressiveness of that rally might be lacking. Near term resistance is seen at
73.15.
POUND: The lack of progress in the war and
the uncertainty on the timing of the end of the war might stall the recent rise
in the Pound. The June Pound should have support at 156.00 but consolidation
looks to be the rule.
CANADIAN: The Canadian currency is the big
winner, if the current situation extends far into the future. In fact, given the
overnight rise in the Canadian, a new contract high is very likely unless a
surprising turn of events is seen. Next upside targeting is 68.70.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +3.10, SLV
+2.2, PLAT +2.10; London
Gold Fix $333.15, +$3.55; LME Copper
Warehouse
stks
817,875 ton, -1,650 tns;
Comex Gold stocks 2.36 ml, -98 oz;
COMEX Silver stks
108.9 ml oz, +792,160 oz; OVERNIGHT: Asian buyers
came into the mkt overnight due to an Indian missile
test.
GOLD: The fact that many senior
military officials now expect the war to last months, means that gold could see
its upside potential extended. While it seems that the coalition has become
bogged down, we might caution that the Press was onto a similar theme in
but then the situation suddenly cleared. However, the Iraqi situation would seem
to be significantly more complicated than the situation in
SILVER: While silver was showing some signs
of breaking out to the upside, we have to think that concerns toward the
recovery will dampen the upside and possibly eliminate the upside. For the
silver market, we would think that the direction of the stock market becomes the
most critical leading indicator. Moderate resistance around $4.43 will probably
contain the market but a temporary rise to $4.45 is not unlikely.
PLATINUM: As the stock market slides off the
disappointment from the war front, we have to think that platinum will also
fail. Near term downside targeting in the April platinum comes in at $630 and
possibly to $621. We have to think that platinum has become almost exclusively a
physical demand market and not flight to quality market. Near term resistance in
April platinum is seen up at $642 but no clear trend is seen.
COPPER: News that the war will possibly be
extended over a period of months, is very negative and those that got long
copper around 75.45 should attempt to exit those positions on a bounce to 75.30,
looking to re-enter the long side at a lower level of 74.00. Since the duration
of the war is extended we suspect that the daily economic figures will now
become important and that should mean additional selling in copper. In fact if
the June S&P manages to slide below 856 that could spark even more aggressive
liquidation in May copper and possibly a failure all the way down to the 73.00
cent level.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +94,
HEAT +267, UNGA
+228 — We are actually surprised that the energy complex managed to hold the
gains posted Wednesday, as several negative supply stories should have weighed
on prices. First of all, Venezuelan oil imports into the
were reported to be back to normal.
NATURAL GAS
Expectations for the weekly inventory report call for a draw of 30 to 40
bcf, but many suspect
that the draw will come in on the lower end of the range of expectations. We
continue to be surprised that the regular energy complex is providing such
support to natural gas but that could change before the end of the week.