Futures Point To A Weaker Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
+9 — The Treasuries think that war is still a high probability and with the
stock market entrenched in a nose down pattern, the bulls should easily maintain
control of prices. With the economic report slate today devoid of critical
scheduled reports, the political headlines could dominate and that also supports
bonds, as Saddam has flatly rejected an exile offering. It would appear that HP
sales totals in their earnings report were very soft and that has pressured the
stock market, which in turn should serve to lift bonds.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
-650, DOW -69, FTSE
+10 — In our opinion, the attempt to bounce off the lows Tuesday simply sets
the stock market up for a sell. In fact, with the
technicals balanced by the bounce Tuesday and the fundamentals still
lousy, the market might be offering a much improve risk and reward pattern for
fresh shorts. The fact that US consumer sentiment fell off the table in the
reports Tuesday, combines with lower than expected HP sales figures overnight,
to keep the concern for the US economy at a fever pitch.
FOREIGN EXCHANGE
DOLLAR: The Dollar managed to forge some impressive action Tuesday,
as the initial weakness in the
stock market and the exceptionally weak
consumer confidence readings didn’t result in a hammering of the Dollar. This
morning the Dollar is higher again but that is the result of comments about the
Yen becoming too expensive and possibly because the BOE is considering cutting
interest rates. We also think that some Dollar shorts, who have been hammering
the Dollar because of the war threat, might consider banking some profits ahead
of the coming weekend, as there is a slight chance that the
could attack. Those that have been aggressively short the Dollar, have to fear
that a war could start over the weekend and that the
could be in partial control by the opening Monday. While it might take the
longer to gain control, we do think that the Dollar is massively sold on the
rumor of war and seeing a war start might change the
playing field. We also think that the UN comments of increased Iraqi cooperation
might also be responsible for the minor Dollar bounce overnight. The bias is
down in the Dollar but unless there is a major headline development, we don’t
see the Dollar taking out the February low.
EURO: The Euro zone is admitting that
sagging confidence off the threat of war is dragging their economy down and that
reduces the wild bull interest in the euro. German inflation readings were
unchanged which should leave the ECB capable of cutting rates, which means that
the Euro zone is either seeing less inflation than the US, or it might also
suggest that the Euro zone economy is slower than the US economy. The pattern of
lower highs and a consolidation since the beginning of the month doesn’t end the
uptrend, but it does call it into question.
YEN: Japanese officials finally stepped up
to discourage the sharp rise in the Yen and the at least creates the talk about
intervention. In the overnight news the Press is making a big deal out of the
fact that Japanese January retail sales dropped by a massive 2.2% which means
that retail sales declines are getting close to being down for 2 full years! In
conclusion, recent longs see a potential corrective environment. Near term
support is targeted at 84.88.
SWISS: The flight to quality story isn’t
that significant today and therefore the Swiss should continue to languish
around resistance of 73.82. In order to buy the Swiss, we think traders need to
see a correction to 73.49.
POUND: The UK GDP apparently disappointed
the
stock market and is increasing the talk about a rate cut. We continue to think
that the Pound is under the same constant pressure as the Dollar, considering
the political situation. Therefore, too much weakening in the
economy could result in a double negative for the Pound and a return to levels
below 156.00.
CANADIAN: We think the weaker action in the
Canadian is mostly a function of profit taking, especially considering the
torrid gains in the Canadian since mid month. We don’t see conditions in the
being so bad that the Canadian is pulled off its perch, but that is something
that should not be ignored. Critical support in the March Canadian is seen down
at 66.55.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +1.00, SLV
+0.3, PLAT -1.10, CP +105;
London Gold Fix $352.55, -$7.55;
LME Copper Warehouse
stks
823,175 ton, -425 tns;
Comex Gold stocks 2.263 ml, Unchanged;
COMEX Silver stks
108.0 ml oz, Unchanged; OVERNIGHT: Asian gold higher as North Korea asked
citizens to prepare for war.
GOLD: The gold market failed to hold most of
the gains Tuesday, partly because of the delay in the Turkish base deal and
partly because talk of last weeks European Central Bank gold sales surfaced. The
Central Bank sales were apparently part of the normal sales pattern agreed to in
the Washington accord, but seeing 30 tons of gold come onto the market alerts
the large spec long position to the realities of supply and demand. We also have
to think that the US President somewhat left the door open for diplomacy, as he
suggested that Iraq can still avoid war if it fully disarms.
SILVER: The action in silver this week is
very disappointing but considering the background noise of deflation and the
partially choppy action in gold, silver can hardly be expected to perform
impressively. In order for silver to climb above the $4.75 level in the May
contract, it will have to see April gold make a bid to trade above $355. Fresh
longs in silver probably have to risk positions to at least $4.59.
PLATINUM: For some reason the platinum has
lost its momentum. Critical support in April platinum is seen at $660 and we
suspect that the market will test that area in the coming 48 hours, as war talk
might offer little fresh incentive to the bull camp.
COPPER: The Chinese were buyers again
overnight but the Press reports the action as arbitrage and not fresh physical
buying. One has to respect the consistent upside action in copper, especially
since it comes in the face of such dismal macro economic developments. Some
traders suggested that the
housing figures Tuesday were responsible for the interest in the long side but
we won’t buy into that theme.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +27,
HEAT +94, UNGA
+7 — The energy complex faded off early highs Tuesday, when it appeared that
the Turkish base deal was once again having trouble being passed by the Turkish
government. Seeing the
blocked from
would mean a massive re-deployment and at least a week or two of delay in having
optimal attack posture.
NATURAL GAS
Profit
taking was probably due in the gas market considering the recent explosion in
prices, especially since the net spec long position probably reached 6 digits
around the highs Tuesday. With some sections of the
warming up a little in the 6 to 10 day forecasts and the potential to see a
minor delay in the war track, we suspect that more profit taking is in order.