Futures Point To A Weaker Open
INTEREST RATES
The Treasury market looks to be in a weakened
posture, with prices sliding toward the bottom of the recent consolidation
pattern. Fortunately for the bulls, the PPI report last week was delayed
indefinitely or we suspect that rate hike fears would have been a little more
prevalent today in the Treasury market. We suspect that the retail sales report
this morning will be a mostly muted report, with expectations calling for a
minor expansion.
STOCK INDICES
International equity markets were a little weaker
overnight, as the trade is a little concerned about rising interest rates and
ongoing tensions inside Saudi Arabia. Weakness in some key bellwether stocks
like Altria also seemed to foster a slightly negative attitude, but the market
doesn’t seem to be in an ultra sensitive state. While energy prices in the
overnight trade were moderately weaker, we have to think that developments
inside Saudi Arabia and talk that OPEC might roll back recently expanded
production in August should keep energy prices poised to rally on the slightest
bull development.
DOW
Near term critical support for the September Dow comes in at 10,300, but that
area is a critical gap area and the failure to hold there, might mean a slide
down to 10,246. On a break to 10,240 we would suspect that the rate hike issue
would be mostly factored into prices and therefore conservative traders could
probably look to move into fresh long plays.
S&P
The September S&P made a fresh low for the move overnight and looks poised to
extend the downside probe. However, at this hour, we don’t get the sense that
the market has a strong desire to press prices sharply lower. However,
considering the weekend attacks in Saudi Arabia and the potential anxiety over
the CPI report tomorrow, we suspect that the September contract could see a
slide down to the 1120 level. With Triple witching expiration this week, a minor
downside slide could be exaggerated!
FOREIGN EXCHANGE
US DOLLAR
The Dollar seems to be in favor again and as a
result has managed to forge an upside breakout on the charts. In fact, the
September Dollar has managed to temporarily climb above the 40 day moving
average in the early action and that might spark some longer term technical
short covering. The 40 day average comes in at 90.74 and that could be
considered near term resistance. The fact that the UK hiked interest rates last
week, leaves the market expecting the same from the US. Seeing the expectation
for higher rates leaves the bulls interested in the Dollar but at current
levels, we have to think that Dollar bulls have significantly more risk than
reward. We doubt that retail sales will have that much impact on the Dollar,
unless the numbers are much softer than expected and then the Dollar might slide
back toward a gap left last week down at 90.27 to 90.17.
EURO
While the Euro has managed to reject most of the big
range down action from overnight, a negative bias continues. It would seem that
political conditions inside the Euro zone are giving the Euro a little pressure
and that is not something the currency is used to seeing. We suspect that the
120.00 level holds some measure of support for the market, but that a move back
below the 40 day moving average at 119.89 could spark some increased selling
interest. In the end, the US numbers will control the direction of the Euro and
the slightest indication of rising US rates should cause the Euro to slide
toward the mid May consolidation lows of 119.08.
YEN
It is a little surprising that the Yen has failed as
recent economic numbers from Japan could have pulled in significant investment,
especially since the BOJ recently reiterated a desire to maintain easy money
conditions. However, the Yen has failed at critical trend line support levels
and looks to be headed to support down at 89.60.
^next^
SWISS
A major gap down overnight trade leaves the Swiss
under pressure. Near term downside targeting comes in at 78.89. In fact, unless
the US economic numbers come in much weaker than expected we have to think that
the Swiss is headed down to even lower support at 77.88.
BRITISH POUND
Even after UK PPI readings showed a normal set of
readings, the Pound has managed a downside breakout on the charts. Certainly
there is some residual pressure being heaped upon the currency from the
political sector but it is pretty damaging that higher rates haven’t left the
Pound in good standing. Therefore, the path of least resistance is pointing
down, with a near term target of 177.60 expected, if the September can’t manage
to hold above 179.26 early today.
CANADIAN DOLLAR
The path of least resistance is down and unless the
US Dollar stumbles, we have to think that the Canadian is headed down to 72.70.
Those that bought a September Canadian, bought a July 73 put and sold a July 75
call, should hold the short side protection until later this week as the bias
looks to remain down.
METALS
OVERNIGHT
London A.M. Gold Fix $382.90 -$1.35 LME
COPPER STOCKS 119,800 mt tons -1,150 tns COMEX Gold stocks 4.387 ml -3,858 oz
Comex Silver stocks 117.7 ml -391,818 oz
GOLD
Apparently the gold market is more concerned with
the direction of the Dollar than the tensions in the Middle East, as prices are
lower this morning. Therefore, the main focus of the gold market will continue
to emanate from the currency markets and that could be a major negative for
gold, as the Dollar has managed to climb back above a number of key technical
points and could be headed to levels above 91.00. With a pretty full slate of
economic information due out this week the gold market will probably see some
expanded volatility.
SILVER
While the silver market has double bottom support
from last week of $5.63, we doubt that technical support will hold the market
up, if the gold market slides to a lower trading range. Near term downside
targeting in September silver comes in at $5.60 and then again down at $5.50. We
suspect that the silver market will find its net spec position a little
vulnerable in the delayed COT report tonight and that could facilitate some
additional selling in silver.
PLATINUM
A new low for the move overnight was partially
rejected which takes away some of the technical damage on the charts. However,
it is difficult not to suggest that the short term trend is down in the
platinum. In fact, we see little support in July platinum until the 780 level.
COPPER
We are little surprised that early US copper action
has managed to hold up in the face of softer international copper action.
However, with the Chinese copper market soft and world equity prices mostly
weaker, we have to give the edge to the bear camp today. Critical support in
September copper comes in down at 115 with even more significant support coming
in at 112.60, off the consolidation low formation of early May.
CRUDE COMPLEX
The energy complex managed an aggressive downside
follow through last week off the hope for additional OPEC supply. However, while
the market was feeling the pressure of extra supply and under the influence
technical stop loss selling, we have to think that the correction has run its
course. In fact, during the early June slide little concern was given to the
ongoing threat against Iraqi supply but with the pipeline explosion last week
and the looming June 30th hand over, the hear camp probably has to re-evaluate.
NATURAL GAS
If the regular energy complex liquidation is
complete, we suspect that natural gas will also find support. In fact, with the
recovery last Friday afternoon, the August natural gas managed to regain the
long term up trend channel support line. In the near term, critical pivot point
support in August Natural gas comes in at $6.169.