Futures Point To A Weaker Open
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM
BONDS
-11 — With the idea that the ECB might cut interest rates, we detect a little
less economic anxiety and that might have contributed to slide off the high
posted Wednesday, in the bonds. We also have to think that the economic numbers
released Wednesday weren’t as weak as the market was anticipating and we also
think that the tone of the Fed comments in the Beige book were a little more
upbeat than the market was expecting. When one combines the slightly overbought
status of the bond market, with the anticipation that initial claims will
decline and factory orders will rise by at least 1.5%, we can understand the
profit taking incentive.
STOCK INDICES
OVERNIGHT
CHANGE to 4:15 AM: S&P -200,
DOW -18, NIKKEI
-103, FTSE +22 — The stock market might be
prepared to rally but not for sustainable reasons. It is our opinion that the
has been effectively deterred from attacking and might be forced to save face by
pushing for a compromise at the UN. It would seem that the
is working behind the scenes to orchestrate a “time limit†for
to disarm (perhaps 4-5 weeks) after which a second vote for the use of force
would be undertaken.
FOREIGN EXCHANGE
DOLLAR: Like the stock market, the US Dollar might rally but for the
wrong reasons. Instead of the Dollar rising because the
offers the best rate of return, we see the Dollar rising in the next 48 hours
because a number of shorts have decided to take profits. We also see the Dollar
bouncing because the war timing is effectively pushed back by as much as 4-5
weeks. We also see the Dollar rising today, if the ECB cuts rates by 25 basis
points. However, all the aforementioned issues appear to be temporary and the
selling in the Dollar could easily resume in earnest, if the
barges forward with war over the weekend. There is a sector of the market that
expects the
to attack before there are even more formal UN restrictions against such an
attack. We seriously doubt that the
will attack as the US Administration is already back pedaling with the
attempting to broker a formal delay and the
Secretary of Defense suggesting that the decision to attack hasn’t been made!
The Dollar is partially expecting factory orders to rise by more than +1.5% and
the initial claims to be down by at least 15,000. Temporary rally in the March
Dollar should be limited to 98.90.
EURO: Near term corrective action is seen
with the flight to quality buying drying up temporarily and the anticipation of
an ECB rate cut undermining the Euro. In fact, the ECB wants the rate cut to
slow the rise in the Euro because they say the high Euro is undercutting their
export markets. Overnight the German unemployment number jumped a surprising
67,000 and that would seem to justify a rate cut and at the same time slow the
rise in the Euro. Near term support in the March Euro is seen at the top of the
February consolidation around 109.00.
YEN: A slight rise in Japanese auto imports
in February, hints at a better economy as that is the 3rd straight monthly rise.
Since the Dollar looks to bounce temporarily that could see the Yen slide to
support of 84.80. Unless the war track is thrown off significantly, we hardly
expect to see the Yen fall toward lower support of 84.53.
SWISS: The Swiss is vulnerable as the flight
to quality interest is temporarily waning and the Swiss is significantly
overbought. Near term corrective action could send the Swiss down to 74.79.
POUND: The BOE left interest rates unchanged
and that could provide support to the Pound. We also have think that
efforts to affect a UN compromise could also lend buying interest to the Pound.
Since war threats caused selling in the Pound, a delay in the war brokered by
the
UK
could result in buying and a return to the vicinity of the 162 level, in the
March Pound.
CANADIAN: If you think that the buying in
the Canadian over the past month was mostly off flight to quality, then you have
to be concerned about a correction to 67.56 and possibly even 67.38, if there is
a formal delay in the war until sometime in April.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +1.10, SLV +0.3,
PLAT +0.40, CP
+25; London Gold Fix $353.25, -$1.25;
LME Copper Warehouse
stks
847,825 ton, +25,850 tns;
Comex Gold stocks 2.32 ml, +78,607 oz;
COMEX Silver stks
110.4 ml oz, +100,793 oz; OVERNIGHT: Only minor gains in Asia overnight but gold
failed to hold the gains
GOLD: While
and
gold tried to move higher overnight the markets were unimpressive. It would seem
that Asian gold buyers are not that fired up off the theme that gold will be
driven higher off the most recent slide in the US Dollar. We are fearful of a
setback in gold, as the
is getting painted into a corner on the attack issue.
SILVER: It is possible that factory orders
figures released today will be strong enough to mitigate the negative impact on
silver off the economy. However, we don’t get the sense that gold will provide
much leadership to silver today. Fresh buyers of silver might want to wait for a
correction to $4.59 basis the May contract before getting long into the weekend.
PLATINUM: The platinum market sits poised on
the verge of a breakout to the upside and we are sure that the market is a
little on edge because the
warning to
that a veto of the UN resolution on
will strain relations. While we doubt that the exports of platinum to the
would be impacted, the platinum market is already extremely sensitive to war and
maintains the best fundamentals of the metals complex. Therefore, if aggressive
traders want to speculate on a near term start to the war, the platinum market
might be the best metal to be long for the weekend. We personally don’t think an
attack is coming but some traders are making the bet.
COPPER: The copper market finally woke up to
reality in the action Wednesday, as the weakness of the economy and the ongoing
weakness in the equity market pulled the plug on the bull camp. We detect that
the Asian copper trade is covered for near term needs and with a massive
increase in LME copper stocks overnight we could see the selling pressure
continue to dominate copper. In fact, overnight we once again see international
copper markets falling below critical chart support levels and that should leave
the
copper market weakened.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +28,
HEAT +36, UNGA
+26 — Overnight prices have firmed possibly because Saudi Arabia put a limit on
how much oil they would produce in the event of a war and possibly because some
segment of the trade thinks there is a chance of war this weekend. The war
mongers argue that the window for an attack is closing diplomatically and that
the
might have to attack before there is formal opposition to an attack! Therefore,
it is already clear that the
is waging a losing battle to secure a second UN resolution on
NATURAL GAS
With the
weather moderating into the coming weekend and a seasonal warm up predicted next
week, the bulls need to see a moderate decline in the weekly inventory readings
this morning to rekindle the bull case. In fact, if the regular energy complex
can’t show some positive leadership, the natural gas might have to see a draw in
excess of 170 bcf, just to prevent the April
contract from violating near term chart support at $6.95.