Futures Point To A Weaker Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS +22 — Instead of the Dollar slide
being a detriment to long Treasury interest, it would appear that the slide in
the green back is just another issue that fosters concern over the
economy. Considering the posture of the Fixed-Income markets early this morning,
it would seem that bonds and notes could be headed moderately higher. In fact,
traders should be aware of the potential for excessive volatility, as the
necessary price change to alter yield is expanding rapidly.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P -760, DOW
-82, NIKKEI -78,
FTSE -59 — The stock market has lost its patience with the economy.
With the US Dollar sliding, gold prices rising sharply and macro economic
sentiment deteriorating, it would seem that a profit taking mentality is set to
dominate. In fact, considering the Dollar slide and the pervasive negative
attitude toward the recovery, it would not be surprising for the stock market to
encounter more than simple profit taking.
FOREIGN EXCHANGE
DOLLAR: Apparently the trade took comments from the US Treasury
Secretary to mean that the
is no longer willing to support its strong Dollar policy. In other words, the
market was given the green light to attack the Dollar, until the point at which
intervention is drawn out. Without intervention, it might take a strong showing
by the
economy, to alter the down side pattern in the US Dollar. In conclusion, the
odds are tall that little is set to change the direction of the Dollar in the
coming 48 hours. While the world is concerned that the
is exporting deflation to the Euro zone, that apparently isn’t enough to alter
the pattern of trade. In fact, it would seem that the slide in the Dollar is
causing the outlook on the
economy to deteriorate and that in a way propagates the downside in the Dollar.
One has to go to the monthly chart on the Dollar in order to get some support
target. In fact, the next downside target in the Dollar is seen down at 93.16
and then again at 90.74.
EURO: We are not sure what type of target to
put on the Euro because the market is in the midst of a historical explosion. In
fact a very sharp rise in the Euro overnight might now require the ECB to cut
interest rates just to defend against the potential that the
is exporting deflation to the Euro zone. The fact that the US Treasury Secretary
suggested that the Dollar fall against the Euro hasn’t been that severe, means
that the US isn’t anywhere near intervention. In fact, the weekend G8 meeting is
calling for rate cuts and really isn’t posturing toward intervention. The Euro
might be headed to the October 1998 level of 120.00.
YEN: The Yen soared to an overnight high of
86.98 and considering the recoil from that level, it would seem like the market
might have encountered intervention efforts, or simply intervention rumors.
However, it is surprising that the Japanese MOF suggested that Forex discussions
were only a minor topic and that would certainly seem to argue against
coordinated intervention. The Yen could remain strong, with periodic attempts to
forge new highs, but the risk and reward of being long from current levels is
unattractive.
SWISS: A gap up overnight move in the Swiss
highlights the return of the bull market. Since the Swiss corrected technically
for most of May, it would now seem primed to rise right in sync with the Euro.
Given such lofty Euro targets, we have to think that the Swiss is set to rise to
at least the 80.00 cent level.
POUND: Surprisingly the Pound is lagging
behind the pace of gains seen in the Euro but considering the conclusive
negativeness toward the Dollar, the January highs in the Pound of 165.24 look to
be a target. Rising home prices in the
adds into the already bullish bias of the Pound. We do think that Pound gains
will lag those seen in the Euro.
CANADIAN: The Canadian is simply on fire and
because the US Dollar fell through a trap door overnight, the gains in the
Canadian might now become quite stellar. The next target in the Canadian comes
off the monthly chart up above the 75.00-cent level.
METALS
GOLD: The gold market sprinted to the
highest level since February 25th, mostly off the continued slide in the Dollar.
Once again the Dollar slide is quite shocking with a gap and a big range
extension down and that almost creates an anxiety toward the
economy. In other words, too much of a slide in the Dollar could kick up flight
to quality gold buying, in addition to what we think is a pattern of steady
investment buying of gold.
SILVER: The COT report in silver showed a
net spec long of 56,000 contracts, which adjusted to the late action last week,
might now be 60,000 contracts. The historical record for the net spec long in
silver is a little over 80,000 contracts, which was seen in the last two years!
Therefore, silver would also appear to be moderately overbought but still has
additional buying fuel in reserve. PLATINUM: The platinum net spec long position
is only slightly long and certainly not that burdensome.
PLATINUM: The platinum net spec long
position is only slightly long and certainly not that burdensome. It would seem
that platinum isn’t being driven sharply higher like the gold and silver and
that could suggest a correlation to the anticipated weakness in the equity
markets. Near term support in the July platinum is seen down at $642.2.
COPPER: The international economic outlook
should be a limiting issue for copper, unless the arbitrage trade manages to
distract the market from the potential concern over physical demand. Chinese
copper futures were higher again overnight and that gives the market a little
support in the
opening. It is not impossible to see copper prices rise in the face of slack
economic sentiment, but the gains could be hard won.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +17,
HEAT +64, UNGA
+11 — The energy complex managed to shake off an early slide last Friday and
close higher on the charts and that presents a much-improved technical
condition. In fact, the energy complex managed to rally in the face of bearish
news that
was going to try and catch up on production they missed during the recent
strikes.
NATURAL GAS
The
weekly COT report showed the natural gas market to be net spec long 36,000
contracts, with the small specs net long nearly 32,000 contracts. Therefore the
market is certainly in the vicinity of a record long and could become vulnerable
if the bull camp loses faith in the recent trend.