Futures Point To A Weaker Open

• August 26, 2003
• Brice Wightman

INTEREST
RATES

OVERNIGHT
CHANGE to   4:15 AM :BONDS -10
The bulls were hit with a slightly better than expected set of housing numbers
Monday and that simply knocked the bulls out of control of the market. We have
to think that the existing home sales hurt the Treasuries but the anticipation
of more, better than expected numbers today, added to the downside tilt present
yesterday afternoon. In other words, the market is leaning to the downside as we
come into the reports this morning.

STOCK
INDICES

OVERNIGHT
CHANGE to 4:15 AM:S&P+0  DOW +0 
NIKKEI +55.9 FTSE -15 The action Monday showed a divergence in
opinion between Treasuries and equities. The Treasury market seems to be
accepting of the recovery view, while the equity market remains skeptical. As we
mentioned yesterday, the stock market correction of the last several sessions
has certainly improved the technical look off the charts and that should be
combining with a gradually improving macro economic look.

FOREIGN
EXCHANGE

Dollar:
Regardless of the lack of bullish incentive in the US equity market, the world
is apparently willing to bid up the Dollar off current economic information
patterns. In fact, we don’t see a very high bar for the Dollar today with the
economic report slate. In other words, the Dollar probably manages to extend the
gains with minimal readings. Next upside objective in the September Dollar comes
in at parity. Near term corrective support in the Dollar, comes in at 99.00 and
little looks to stop the rise except for an overextended short-term technical
condition. Some traders don’t see the Dollar rally ending until trend line
resistance of 101.05 is touched! In our opinion, the Dollar will have to meet or
exceed expectations to add to strong overnight gains (+50).

EURO:
The trade has turned on the Euro and it would seem that the market is unleashing
long term stop loss selling and is prepared to send prices down deep into the
March through June consolidation pattern. The bottom of the March through June
consolidation pattern is 105.00. For the euro to remain weak, in the face of a
better than expected Ifo reading, is a real statement that the trend is down and
that the actual pace of the European economy is unimportant in the near term.
The Ifo rose for the 4th month in a row but in reality, the trade is splitting
hairs over the magnitude of the increase in the Index! The trend is down.

YEN:
A big range day has been posted already and without a return to prices above
85.30 we will begin to suspect a near term top in the Yen. However, it is clear
that seeing the Dollar strong, isn’t nearly as limiting on the Yen, as seeing
the Euro strong! In other words, the Dollar has to be ultra strong just to keep
the Yen from forging an upside breakout on the charts.

SWISS:
Even the German Ifo reading failed to provide support for the Swiss and it now
appears to be in an all out liquidation wash. If US numbers are good, that could
send the Swiss spiraling down to weekly chart support of 69.57.

 

POUND:
Like the Swiss, the Pound has failed at critical support and is now headed down
to weekly chart support of 155.00. Just to highlight the preference of a
negative macro economic outlook, the FTSE is tracking lower off favorable
European numbers. CANADIAN DOLLAR: Today is a very critical session for the
Canadian, as it has been showing signs of standing up to the Dollar. However, it
would not be a positive for the Canadian to slide below 71.12 today, as that
would project a slide to 70.47.

METALS

OVERNIGHT
CHANGE to 4:15 AM:GLD-0.10 ,SLV-0.2 ,PLAT+1.80, CP +35 London Gold Fix
$360.75 Unch LME Copper Warehouse stks 628,575 tns -825 tons Comex Gold stocks
2.732 ml oz Unchanged  Comex Silver
stks 106.4 ml Unchanged OVERNIGHT: Slight negative bias in Asia, as the Dollar
is thought to be rising.

GOLD:
As was seen in the Asian trade, there are quadrants of traders that are fearful
of a further rise in the Dollar. In fact, with the Dollar up nearly 50 points in
the early going today, we assume that the gold will start out on a bearish note.
It would seem that the macro economic outlook is improving and that helps the
Dollar and with a series of critical reports due out this morning one might
expect the Dollar up trend to continue.

SILVER:
The coiling in silver continues and as long as gold manages to respect support,
we have to think that silver will avoid steep corrections. In the end, the macro
economic improvement should give silver a slight advantage over gold in the
coming sessions. However, the silver long position is nearly as burdensome as
the one in place in gold.

PLATINUM:
Critical support down at $686 could be tested but we see platinum trading on its
own fundamentals and not necessarily in synch with gold or silver. Considering
the overbought condition of platinum an even larger break down to the early
August consolidation can’t be ruled out.   

In
general, Chinese copper prices were higher and with the macro economic
anticipation calling for good US economic numbers, the COPPER: bias has to be up
in copper. India reported an increase in April through Jul copper output of some
19,000 tons but that increase is spread out over 4-months and is therefore only
a minor increase in supply. The durable goods report today could be very
critical, as that type of report could be a catalyst for a rally on Wall Street
and that would certainly create a better environment for copper.

CRUDE
COMPLEX

OVERNIGHT
CHG to    4:15 AM  
:CRUDE +9   ,HEAT+40 
,UNGA-26 As we suspected the energy complex is looking ahead to the
Wednesday inventory readings and suspecting that the recent blackout will serve
to crimp an already tight gasoline market. Other Press reports suggest that
summer gasoline demand continues to hold strong, despite seasonal patterns that
should begin to show a tapering off.

NATURAL
GAS

As we
feared, the natural gas market was ahead of itself and it would seem that temps
could mitigate later in the week. However, some weather forecasters don’t have
the weather cooling down until early September.