Futures Point To A Weaker Open
INTEREST RATES
The Treasury market has been mostly listless this
week and that is probably because of the overdone status of the market off the
last payroll report and it is partly because the economic report slate has
offered little in the way of salient information. It is clear that Treasury
prices are slightly weak and with the market seeing a Fed member predict a
decline in US productivity in the future, it is possible that the road to higher
interest rates is being cleared, even if the Fed isn’t prepared to accelerate
the progress toward higher rates. From the corporate earnings sweep of the last
24 hours it is possible that some in the trade are beginning to embrace the idea
suggest that growth patterns in the US are tapering off and that seems to be
providing some support to both bonds and notes.
STOCK INDICES
Yahoo met earnings expectations, but failed to
exceed trade expectations and that disappointed the equity market. It should
also be noted that the market was also discouraged by the Alcoa earnings.
Therefore, the net result of the earnings flow is a concern that the ultra
strong pace of corporate earnings seen early in the year is unsustainable.
DOW
Unless the earnings flow turns around sharply, we suspect more minor downside
action ahead. Near term downside targeting in the September Dow comes in at
10,150 but a move below that critical pivot point can’t be ruled out given the
lackluster state of sentiment in the marketplace.
S&P
While the September S&P has already managed to slide to and recoil from critical
pivot point support of 1110, we are not ready to suggest that the downside
effort has run its course. In fact, one can’t rule out a slide to the late April
low of 1104. On a slide to 1104 we would become an interested buyer but longs
might have to risk the position to 1094.90.
FOREIGN EXCHANGE
US DOLLAR
The Dollar has managed to recoil away from the prior
sessions low without making a new low and that is an accomplishment. With US
corporate earnings failing to inspire optimism toward the US economy and the
report flow equally lacking, we have to think that the Dollar bears retain
control. However, it does seem like the Dollar will get at least temporary
support off the vicinity of the April lows. Overnight economic numbers from the
Euro zone would seem to keep the pressure on the US Dollar, especially after US
Fed officials yesterday indicated that they expect productivity in the US to
decline in the future. In short, the Dollar continues to see negative
fundamental news flow, while the technicals are only a minor discouragement to
fresh selling. We would still like to buy the September Dollar at 87.70, using a
risk down at 87.35.
EURO
One has to be somewhat impressed with the action in
the Euro and with the sudden improvement in Euro zone economic stats the recent
upward trend seems to be justified. Overnight Germany posted a 1.1% increase in
May industrial output and that continues the recent pattern of improving growth
seen in the Euro zone. However, the readings were for May and that Euro zone ebb
and flow is known to lag behind the US, which has showed signs of slowing in
June. Therefore, the Euro might be benefiting from old numbers and may have to
reconcile the lag next month. However, the trend in the Euro is up in the near
term but the market has reached an overbought level.
YEN
We think the Yen action of the last couple sessions
is very damaging to the near term outlook. We also think that disappointment in
the US growth outlook is also serving to undermine an economy that feeds off the
US. Therefore, the yen would seem to be vulnerable and a decline below
consolidation support of 91.53 would be a very negative development. More minor
declines expected ahead, as the yen has the added pressure of elections this
weekend and that could facilitate even more declines in the coming two sessions.
^next^
SWISS
Like the Euro, the Swiss is short term overbought
and vulnerable but the currency should still be considered a bull trend.
Critical support that might be bought by aggressive traders, comes in down at
81.32.
BRITISH POUND
The BOE left rates unchanged as was expected and
that should only be a minor undermine of the currency. Near term support should
be respected at 183.63 and the trend is still pointing upward.
CANADIAN DOLLAR
The trend in the Canadian appears to be secure. Near
term channel line support comes in at 74.90 and the upside objective continues
to be 76.40. The top of the channel today comes in at 76.03 and then at 76.20 on
Friday.
METALS
OVERNIGHT
London A.M. Gold Fix $402.20 +$4.85 LME
COPPER STOCKS 99,150 mt tons -475 tons COMEX Gold stocks 4.398 ml -482 Comex
Silver stocks 118.29 ml -21,472 oz.
GOLD
It would seem that the gold market is still pretty
much a slave to the direction of the Dollar even though the gold market showed
stellar performance yesterday. We have to think that part of the rally in gold
yesterday was a pent up reaction to the recent declines in the Dollar, but it is
also possible that hope for improved or ongoing Asian demand also gave the gold
a lift, as all the metals were notably higher yesterday even the industrial
metals. We suspect that gold was getting some indirect support from the
uncertainty created by the Yukos situation, but since the gold has showed little
upside action this morning, following the news that Yukos missed its tax
deadline, the link between gold and flight to quality issue isn’t that direct.
SILVER
With the overnight gains, the September silver
market comes closer to a critical upside breakout around the $6.22 pivot point.
Unfortunately both volume and open interest have declined in silver since June
28th, which suggests that the trade interest isn’t rising along with prices. It
did appear as if all the metals benefited from a broad based buying wave
yesterday, but if the silver is poised to breakout to the upside, after a three
months consolidation we don’t see a concentrated theme to justify a breakout.
PLATINUM
Renewed long interest in platinum was present
yesterday and with the market seeing only minimal selling against the upward
thrust, more gains are expected. Initial resistance today comes in at $809.5 but
we can’t rule out a rise to the $825 consolidation. At least part of the rise in
platinum is due to expectations of ongoing Asian jewelry demand.
COPPER
The pattern in the charts is positive but the
fundamental news flow in copper seems to be a countervailing force. For
instance, Chinese copper prices were up slightly but in no way did that market
mirror the action in the US. Yesterday Peru reported May copper exports to have
risen sharply and that could dampen the enthusiasm for the tight stocks theme.
CRUDE COMPLEX
The energy complex was partially deflated by news
that the Russian central bank stepped in to ease the potential for a Banking
crisis in that country and some might assume that the Russian government is now
pro-active enough that they would not allow Yukos to totally shut down
production. It is also possible that the market was calmed by the fact that the
head of Yukos offered to surrender personal stock holdings in an effort to
satisfy creditors. Overnight it seems that Yukos failed to meet the tax payment
deadline and that could be why the overnight price action has firmed.
NATURAL GAS
The September natural gas continued to hover right
around the moving average line on Wednesday and with the market unsure how long
the upcoming warm weather is expected to last, neither the bulls, nor the bears
seem to have full control over prices. With the bias in the regular energy
complex softening Wednesday, it could be difficult for natural gas to manage a
rise to the mid June highs. However, if the energy market gets something
supportive from the weekly inventory readings in gasoline, that could be just
enough to give the bulls in natural gas a minor edge.