Futures Point To A Weaker Open
INTEREST RATES
03/30 OVERNIGHT CHANGE to 04:30 AM:BONDS+7 The
Treasury market reached our downside target of 113-07 yesterday and has
apparently bounced up and away from that critical level in the overnight action.
Surprisingly the June bonds managed to reverse the selling interest, despite the
lack of salient support from the economic report slate. Today the market expects
a minor decline in the Conference Board Consumer Confidence readings but some
economists are expecting a significant contraction in the numbers.
STOCK INDICES
03/30 OVRNIGHT CHG to 04:30 AM:S&P-330, DOW-27,
NIKKEI -24, FTSE-10 The recent string of gains might come to a halt today, as
short-term technicals are overbought and the fundamental report slate might not
favor the bull camp. In fact, with the Conference Board expected to post a
moderate decline in consumer confidence readings and the market all but
accepting an OPEC output cut of 1 million barrels per day, it would seem like
some of the recent supportive issues will turn temporarily negative toward
equity prices. We do think that the employment numbers Friday will end up being
supportive to equity prices, but we doubt that the numbers will be fantastic,
which is what the market was working toward around the highs yesterday.
DOW
Critical resistance in the June Dow comes in today at 10,311, while a shift back
into a long-term bull trend doesn’t take place until the June Dow manages a
climb above the moving average at 10,418. Since the Dow failed to make a higher
high (by taking out the March 19th high of 10,327) it would seem that a minor
profit taking setback is in order. However, we would become a buyer of a break
to 10,230. Those that plan to hold longs into the monthly payroll report should
demand a long entry price below 10,195.
S&P
In order to turn the trend up in the S&P, the June contract must make it back
above the moving average at 1130.70. However, we think that a trade above 1126
prior to the non-farm payroll report is overdone. On the other hand, seeing
surprising news from the terrorism front, could be enough to dump the corrective
view and prompt a resumption of the recent bull swing. Near term corrective
targeting comes in at 1114 basis the June contract. Those looking to get long
for the payroll report should wait for a decline down to 1105.00.
FOREIGN EXCHANGE
US DOLLAR
A gap down trade overnight seems to be coming
despite what appears to be a rotation out of the Dollar. In other words, just as
areas outside of the US are posting some very soft economic numbers and the US
is posting mostly favorable economic numbers, the trade appears to be moving out
of the Dollar. We think that the view toward US Treasuries is changing and that
intervention holdings are being dumped. In other words, the Dollar is suffering
a backlash from the artificial support it has garnered over the prior months. It
is our opinion that the economic differential is about to shift solidly in favor
of the US Dollar but that short-term ramifications are simply undermining the
Dollar. In the near term, the June Dollar appears to have failed on the charts
and is now headed to consolidation support below 88.00. In fact, we would not be
surprised to see the June Dollar trade 87.80 ahead of the payrolls.
EURO
Political and economic troubles in France, don’t
seem to be holding the Euro back from a short covering burst. However, the
current rise in prices would seem to be temporary short covering, as the trade
is merely factoring a delay in the ECB decision to cut interest rates. Many
expect that the ECB will wait to see if the US payroll readings are strong
before acting. Therefore, one can’t argue against a return to the underside of
the recent consolidation around 122.25.
YEN
The yen has probably missed the chance to go to new
contract highs, with the reversal overnight. In fact, with the year-end action
tonight, we suspect that the repatriation effort has just about run its course
and that a major top might be in place in the Yen. However, given the explosive
potential in the Yen, we can only suggest the purchase of June Yen puts.
^next^
SWISS
Near term short covering potential could send the
Swiss up to 78.91 and that would appear to be the extent of the rally potential.
However, a Dollar slide below 87.80 on a close basis would be cause to revise
the bearish tilt toward the Swiss.
BRITISH POUND
Reports that UK consumer confidence declined off the
Madrid bombings, doesn’t seem to have undermined the Pound this morning,
especially with the Pound apparently into an upside breakout mode. Near term
pivot point resistance and targeting is 182.66.
CANADIAN DOLLAR
As suggested yesterday, the Canadian has newfound
favor and seems to be primed for a return to the early January high up around
78.00.
METALS
OVERNIGHT
GLD+2.20, SLV+2.00, PLAT+4.40 London A.M.
Gold Fix $419.50 -$1.40 LME COPPER STOCKS 191,750 -4,800 tons COMEX Gold stocks
3.595 ml Unchanged Comex Silver stocks 122.2 ml Unchanged
GOLD
Apparently it took two days of weak Euro action to
get the bulls to gain control over the gold market. However, in order to really
kick up aggressive gold buying interest, it might take a June Dollar trade back
below 87.80. Yesterday the gold seemed to be buffeted by strength in the US
equity market, which in turn seemed to reduce macro economic flight to quality
interest.
SILVER
The silver market might have just the right
combination of gold favor and favorable macro economic optimism to spark another
upward pulse in prices. However, we are a little concerned that the funds
decided to bank profit so aggressively at the end of the first quarter in a
number of other commodity markets and that is why it is important for silver to
show renewed bullish interest once the second quarter begins. However, before
the launch of the second quarter, the silver market will have to weather the end
of the first quarter and since silver hasn’t really seen an aggressive leveling
of the fund long position, one might be a little defensive with silver over the
coming two sessions.
PLATINUM
Technical action continues to be weak and with the
market sliding toward critical moving average support of $875 and the end of the
quarter looming it would not be surprising to see a slide to 869. In a longer
term negative, the platinum market saw signs of future platinum supply expansion
with a Canadian firm starting development of a mine that might bring supply into
the equation sometime in the 3rd quarter of 2005. End of quarter liquidation
potential could dominate the trade in coming two sessions!
COPPER
More Chinese buying overnight combined with
persistent declines in LME copper stocks, leaves the bulls in charge of copper.
Most analysts expect the tightness situation to carry prices into new high
ground and with the recent improvement in the macro economic outlook, the bulls
have even more capacity. Reports of Chinese buying overnight should be just
enough to keep the bullish tilt in place.
CRUDE COMPLEX
The energy complex continues to exhibit what
appears to be corrective action. While only a few traders think that OPEC might
decide to delay the production cut by one month or could decide to reduce the
promised cut the market isn’t as bullishly sensitive as it has been in the
recent past. For instance, even after the Saudi Oil Minister suggested that it
was too late to delay the production cut, the market showed almost no short
covering interest or fresh buying interest.
NATURAL GAS
The natural gas market will continue to be impacted
significantly by the crude oil market, which might continue to see slightly
negative action over the coming sessions. We also think that natural gas is
vulnerable from a broad based technical standing and that a failure to hold
above $5.44 today could quickly send prices down to $5.35. However, from a big
picture view, the June natural gas market remains in an up trend unless it falls
below the trend line down at $5.30.