Futures Point To A Weaker Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS +2 — There continues to be more than
enough evidence to drive bonds higher. US economic numbers Tuesday were very
weak and with the problems in the airline industry and on Wall Street it would
seem likely that the Fed will cut interest rates in the next FOMC meeting. At
current price levels, a 25 basis point rate cut would translate into a 3 1/2
point rally in bond prices.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P -750,
DOW -60, NIKKEI
+80, FTSE -99 — Around 2:00 cst this
morning the S&P began to lose ground aggressively and that could be because of
the fears of an American Airlines bankruptcy or maybe the world suddenly
realized that seeing 45 days of geopolitical "limbo" might be enough to throw
the US and Euro zone economies back into a recession. Even the new US Treasury
Secretary suggested that "at best the
economy remains in a slow recovery" and that highlights the lack of confidence
at the highest levels of the government. If there weren’t so many other problems
for the Bush Administration, Snow might have been reprimanded for his dialogue,
as he certainly fostered anxiety toward the economy.
FOREIGN EXCHANGE
DOLLAR: About the best thing going for the Dollar is that the rest of
the world is slowly recognizing the precarious nature of the world economy and
therefore the
economy doesn’t look as bad. The Dollar continues to show some minor strength
because the world thinks a significant delay in the war prevents the
from hurting itself politically and economically. Considering that US numbers
are turning down and that even the Fed is concerned about the
economy, we doubt that the Dollar has far to go on the upside. In fact, if the
rejects significant delays in the war being offered by 6 critical UN members,
the Dollar could quickly come under aggressive attack. If the war is effectively
delayed beyond two weeks it is possible that the June Dollar rises to 98.75. A
Dollar rise to 98.75 is certainly a sell in our book.
EURO: The Euro continues to consolidate just
under the recent highs, as the technicals are dominating the action. The euro is
really in a tough spot as a significant war delay could prompt some profit
taking and a failure to hold support around 108.85. In the end, we see the Euro
falling because the war is delayed and because the
policy toward
is stalemated.
YEN: The Nikkei was down hard and then
managed to recover from 20 year lows, when the BOJ suggested that they might buy
more stock than was previously indicated. However, the fact that the BOJ also
suggested they might sell the Yen to protect their export markets, means that
gains in the Yen could be harder to come by. Because Japanese machinery orders
actually increased the bull camp would seem to maintain a slight control over
the bears. In other words, the overnight low is probably solid support.
SWISS: We think the Swiss is primed to
correct, as the track of war is delayed and the economic uncertainty doesn’t
seem to be providing the same benefit to the Swiss as the threat of war. Because
the Swiss is overbought and the war is delayed at least a couple weeks we expect
to see a slide to 74.61.
POUND: Apparently seeing the
become a chief negotiator in the Iraqi scenario is giving the Pound a lift. Near
term targeting in the June Pound becomes 162.10.
CANADIAN: Like the Swiss, the Canadian sees
the delay in the war as a reason to bank some profits. We also have to think
that the dire macro economic condition in the
is beginning to deteriorate and that is discounting the Canadian. We continue to
think that the 67.00 level is a justifiable correction point in the near term.
METALS
GOLD: While the gold market reacted to the
delay in the vote on
we do not think that the liquidation has run its course. With the gold market
holding a 80,000 contract net spec long position a week ago and the June gold
only $4 below the level where the position was measured we have not leveled the
spec long position by much. Using a rough rule, we suspect that it takes $10 of
price liquidation, to reduce the net spec long by 10,000 contracts.
SILVER: Trend line support in the May silver
comes in at $462.7 but a slide to $4.60 is easily accomplished given the
direction of gold and the high probability that the war has been delayed by at
least a couple weeks. Considering that deflation and recession will be whispered
about it in the coming sessions, it might be possible for silver to slide all
the way down to $4.55. Current longs are defensive and would be longs see no
urgency to get long! PLATINUM: The platinum market looks even more vulnerable
than it did at the start of the week.
PLATINUM: The platinum market looks even
more vulnerable than it did at the start of the week. Sagging world equity
prices and fairly significant concern being voiced by Japanese officials
suggests that platinum primed to slide. Initial support on the charts for the
April contact comes in at $680 and $665. With Stillwater Mining selling 51% of
its ownership to Russian Norilsk,
might firm up its financial position but one also has to wonder if that joint
venture won’t serve to facilitate exports from
COPPER: The copper market once again
confirmed that it remains a bull market, even if the macro economic outlook in
the US is falling apart. However, the optimism seen Tuesday in the copper market
was tempered overnight by disconcerting dialogue from
Overnight the BOJ suggested they might have to buy back more stock than
previously thought and they might have to sell the Yen to protect the Japanese
export market.
CRUDE COMPLEX
OVERNIGHT
CHG to
4:15 AM
CRUDE -37, HEAT
+8, UNGA -67 — The energy complex was lucky
to avoid even more declines on Tuesday, as the threat of war is temporarily
reduced and there was plenty of talk about adequate supply flow from the OPEC
meeting. In fact, the
would seem to be relegated to mitigating the "loss of face" by opposing any
extended delay extra time allocated to
NATURAL GAS
If the
regular energy complex is going to fail or temporarily correct the natural gas
market will also continue to slide. While we would be concerned about being
short Thursday morning into the inventory readings we would not be concerned
about being short for the coming 20 hours.