Futures Point To A Weaker Open

INTEREST RATES

02/24 OVERNIGHT CHANGE to 04:24 AM:BONDS+7 The
bonds would appear to be peaking out above the recent highs in the action early
today and that might be because of the comments from Greenspan Monday and it
might be simple anticipation of soft US numbers today. While the initial
response to Greenspan dialogue deflated the Treasuries, it would seem that the
market got over the perceived hawkish stance rather easily. In our opinion,
suggestions from the Fed Chairman that the Fed is seeing encouraging signs of
late and that the labor market is improving certainly sent the market down
temporarily but other from the Chairman seemed to express doubt on other sectors
of the US economy.

STOCK INDICES

02/24 OVRNIGHT CHG to 04:24 AM:S&P-150, DOW-59,
NIKKEI -224, FTSE-6 The stock market remains in a liquidation mode as the
fundamental information just doesn’t seem to foster optimism. Even after the
Chairman of the Federal Reserve hinted at an improvement in the US jobs
situation, the stock market decided to conclude that the leader of the Fed was
“hawkish”. Therefore, the bias is negative and profit taking seems to be the
rule of thumb.

DOW

As mentioned already, the Dow futures have gapped lower overnight and that puts
the market in a position to slide to the 10,549 level and possibly to the even
numbered 10,500 level, if the bearish thinking becomes fully entrenched. For
position traders, one must be patient and unhurried because there is currently
little reason to pick a quick bottom. In fact, even if the Dow were to slide all
the way down to 10,471, the big picture trend would still be pointing up. In
other words, the market probably needs to correct further to fully balance the
technicals.

S&P

While the S&P appeared to make a classical bottom last week, we thought that the
downside thrust lacked the hallmark of an exhaustion sell off, which is usually
seen around a critical low. Therefore, we expect more declines but for the
declines to come gradually and without fanfare. A near term bottom is projected
around 1133.60 in the March S&P and that low might not come for several
sessions.

FOREIGN EXCHANGE

US DOLLAR

The technicals would seem to be pointing down in the
Dollar and the fundamental case pretty much fosters the downside trek. While
some in the marketplace took Greenspan comments Monday as “hawkish”, we think
the real message was that the US economy lacks momentum and that interest rates
hikes could still be far off into the future. In fact, when one looks at the
balance of the US numbers released over the last two weeks, it is not surprising
that the recent Dollar rally failed to hold. However, tempering the potential
downside in the Dollar are equally weak numbers coming from the Euro zone. In
the mean time, we suspect that the March Dollar is capable of sliding down to
the 86.00 level and even lower, if US numbers come in weaker than expected. The
weakness in the US equity market can sometimes serve to deflate macro economic
sentiment even further and that in turn could put the March Dollar down to
85.69.

EURO

While the Euro zone posted some positive industrial
activity for the month of December, the slightly weaker than expected Ifo
readings overnight take away some of the upside momentum that is expected to be
present in the Euro trade this morning. However, because of the recent expansion
in trade surplus figures for the Euro zone, we don’t expect to see a chorus of
concern once the euro returns to the vicinity of the February highs. Therefore,
the path of least resistance is up and the next upside targeting in the March
Euro is 126.39. We haven’t totally discarded the topping potential in the Euro,
but right now the bulls have control.

YEN

The Nikkei fell hard overnight and that might
discourage the yen slightly. However, with the January increase in Japanese
exports we have to think that the BOJ could be a little less intense in holding
the Yen down. With an upcoming US note offering it is possible that the BOJ
steps in tomorrow and limits the Yen and that could mean more consolidation
action within a range of 91.91 and 92.57. We do have to think that the next big
move in the Yen will be a recovery bounce, but that might take several more
sessions to get underway.

^next^

SWISS

One has to like the technical action in the Swiss.
In fact, we suspect that the Swiss is primed to return to the mid February
consolidation bound by 80.51 and 81.63.

BRITISH POUND

The correction should be complete and the recently
overbought Pound should now be in prime condition to make a run back to the
January highs. However, in order to keep the market firmly entrenched in the
upside thrust, the Pound might have to hold above 185.94.

CANADIAN DOLLAR

Apparently the Canadian has managed to respect
consolidation support just above the recent spike low probe and now has the
capacity to grind higher. However, the Canadian needs a persistently lower US
Dollar, in order to manage consistent upside gains. We suspect that the Canadian
will run out of momentum once prices reach 75.38.

METALS

OVERNIGHT

GLD+1.80, SLV+2.00, PLAT+17.00 London
A.M. Gold Fix $400.45 +$1.60 LME COPPER STOCKS 294,725 -3,675 tons COMEX Gold
stocks 3.47 ml Unchanged Comex Silver stocks 123.9 ml -6,862 oz

GOLD

From the Dollar action in the first two sessions of
the week, it would seem that a minor slide is underway in the Dollar and that
provides support to gold. Chinese spot gold action was slightly higher, as was
other foreign gold market action, but the buying doesn’t appear to be that
concentrated. However, given the concentrated liquidation tilt seen since the
February highs, it would not be that surprising for prices to rebound.

SILVER

While the silver market showed much weaker action
than gold on Monday, it would not seem like silver will remain weak today. In
fact, it would appear that silver effectively rejected the downside thrust
yesterday and is already into a minor short covering run this morning. However,
in order to turn the tide of sentiment squarely back up, the silver market will
have to regain $6.65 today and maybe get some stronger leadership from the
copper market.

PLATINUM

Like silver, the platinum market has hooked back up
following the four day corrective slide. While we don’t see excessive momentum
coming in the platinum market we would expect a return to the February highs.
However, volume and open interest continue to slide in platinum, suggesting that
the bull market case might be getting a little stale and therefore it might be
imperative that the bull case shore up sentiment by taking out the January high
soon.

COPPER

We saw a two sided and sloppy trade in copper
Monday, despite the fact that the market managed to close generally higher.
Therefore copper is still pointing up but has lost some momentum. Overnight
another mining company executive projected higher copper prices ahead in 2004
and suggested that demand will in fact outpace supply.

CRUDE COMPLEX

After seeing OPEC January production increase by
1.7% in the action Monday, one might have expected the market to continue to
weaken but it would seem that prices have shrugged off the liquidative tilt and
have found decent support on the charts. It would not have been surprising if
the energy complex continued to weaken further until the overly long position
was balanced. However, the market just isn’t prepared to make it that easy on
would-be bulls, as the basic bull fundamentals for crude and unleaded remain in
place.

NATURAL GAS

April natural gas saw follow through selling Monday
and with weather conditions on a slight warming trend in to the weekend, the
path of least resistance remains down. In fact, with April gas sitting on the
verge of a downside breakout on the charts, the $5.00 level looks to be an easy
objective. While April natural gas has near-term weak support at $5.08, a break
below that level could put the next downside target at $4.96.