Futures Point To A Weaker Open
METALS
OVERNIGHT
CHANGE to 4:15 AM :GLD-0.40 ,SLV-0.2Â ,PLAT+2.90
 London Gold Fix $341.40 -$1.60 LME Copper Warehouse stks
792,400 tns -3,950 tns Comex
Gold stocks 2.46Â -200 ozÂ
COMEX Silver stocks 108.7 ml oz Unchanged OVERNIGHT: Minor downside
interest seen in Asian gold off New York weakness.
GOLD:
As we have said a number of times over the last few weeks the gold market does
appear to tracking off a number of stories but we have to think that some long
interest has been built on the fear of the SARS disease. Therefore, comments
from
Hong Kong
that the
SARS spread might be coming under control could spark some light long
liquidation. We seriously doubt
that gold will encounter significant long liquidation in the event that the SARS
issue is downgraded to regional problem.
SILVER:
If the gold is in a choppy position, then silver will remain in a choppy
posture. Considering that July silver has rallied aggressively from the April
low of $4.36 to a recent high of $4.835 in about 1 month, the silver market
would appear to be more vulnerable to a correction than the gold market. Just
using a normal retracement off the late April low to
the May high, traders might assume that a correction to $4.72 doesn’t damage the
bull pattern.
PLATINUM:
The platinum market continues to trade counter to the economic outlook and
apparently to the direction of gold and silver. In other words, platinum might
be seeing a significant spread interest, instead of outright trading action.
However, it is possible that platinum is tracking the stock market, as the
action since the April highs seems to correlate rather tightly with the equity
market. If that is the case we suspect that platinum might fall back toward
critical chart support in the July contract of $610 in the coming sessions.Â
Â
COPPER:
With
Hong Kong
officials suggesting that SARS might be coming under control, the copper market
is already poised to forge an upside breakout. In fact, a trade above 74.55
would be the highest trade since March 27th and that could put some recent fund
shorts under water and ready to liquidate. With Asian copper prices higher
overnight, all that is missing from a solid bull package is the somewhat
concerning outlook toward the world economy.
CRUDE
COMPLEX
OVERNIGHT
CHG to Â
4:15 AM
 Â
:CRUDE -7Â Â
,HEAT+10Â ,UNGA+11 Â In
our opinion, both the bull and the bear camp can be disappointed with the action
Wednesday. The bulls are disappointed because an obviously supportive crude
stock report failed to do anything but send prices back up to close-in
consolidation resistance.
NATURAL
GAS
With
natural gas hanging near an upside breakout on the charts and the market
expecting a moderately negative inventory reading, we would be surprised to see
the market forge another probe to $5.75. The bull/bear line of the weekly
inventory report is a 90 bcf injection, with
anything markedly above that level considered a bear shock and anything below a
60 bcf injection should be considered supportive.
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS +13
Using yield tables a 25 basis point rate cut by the Fed in June, could feasibly
add 3 1/2 to 4 points to the price of bond,s but we
have to assume that the bond market began factoring a rate cut somewhere under
113-00. While it is certainly clear that the world economy is slowing, we do
have to point out that the SARS issue seems to be coming under control in Hong
Kong and that we are already seeing signs that the US Deficit is beginning to
garner some headlines. Especially with Congress debating tax cuts, one would
think that soaring deficits would serve to check further gains in bonds, but it
would appear that the speculative long appetite for bonds and notes is high
enough to carry the market through the longer-term fears of deficits.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
:S&P-240
DOW -28Â NIKKEI +11.8 FTSE -40Â Since
the March lows, we have been saying that economic conditions were improving, but
it would also appear that the outlook for continued improvement has taken a blow
and it has taken a blow on a worldwide basis. In fact, it would seem that the
market is now beginning to embrace the fear of deflation, following the
digestion of the Fed statements early in the week. The SARS issue is better and
worse all at the same time.
FOREIGN
EXCHANGE
DOLLAR:
We have to consider the bounce in the Dollar a technical move and not some sign
that international traders are finding favor with the Dollar. Even after the US
Administration reconfirmed that the
US
maintains a strong Dollar policy the trade wondered what they meant. It seems
like the
US
wants a
strong Dollar policy but at the same time there is almost nothing being done to
enforce that policy. In fact, we are not sure what can be done, as intervention
against such a massive downtrend would appear to be folly. About the only thing
taking pressure off the Dollar is the fact that the rest of the world is slowing
and that nobody knows which area is due to slow the most. While it is possible
that the interest rate differential might be set to shift more in favor of the
Dollar, that might only be a temporary issue if the US Fed is thought to be
cutting in June. In fact, given the downtrend in the Dollar, it is possible that
interest rate cuts have no impact on the currency markets. We think a rally to
96.40 in the June Dollar would be very impressive and unlikely to hold.
EURO:
Maybe the ECB will be able to cut, after a number of other banks lead the way.
With the French being warned about their budget deficit, it is possible that the
French decide to throw their weight behind an easing decision. With
Germany
not
expecting its job market to improve until next year, there should be a basis to
cut rates. Right now, not seeing the EU cut rates might take away some of the
dominance in the Euro. However, since the
US
economy
isn’t expected to show itself, we doubt that the Euro is set to do anything but
forge temporary technical correction against the trend. Extremely critical
support is seen down at 112.11 but it might be hard
to see a trade below 112.52.
YEN:
The Yen is pretty expensive in the range and we suspect that any rise above the
March high of 86.45, will bring about intervention or threats of intervention
from the BOJ. Already the MOF is calling recent Forex
moves excessive. Longs should consider taking profits/ or protecting longs with
short call/long put combinations.
SWISS:
The Swiss is also overbought technically and is vulnerable to a mixed
fundamental view. A moderate correction to 74.84 is possible but unlikely.
POUND:
The Pound is mired in a five-month range and is not a primary currency. In other
words, the Dollar and the Euro are the primary currencies (with respect to the
recent trend). Therefore, one could expect to see the Pound waffle in a range of
157 to 162 until the series of rate decisions are played out on the world stage.
CANADIAN:
Like other currencies, the Canadian is significantly over extended technically
even if the fundamental trend remains firmly in place. Corrective action could
easily see the Canadian slide down to 70.26 but that would be a very nice place
to add in some fresh longs.