Futures Point To A Weaker Open
INTEREST RATES
12/08 OVERNIGHT CHANGE to 04:08 AM:BONDS-9 While
the Treasury market rally was stellar and somewhat surprising last week, it
would not seem like the market is going to hold all the gains. Certainly, the
payrolls create some doubt and with the weekend winter storm in the East
impacting retail activity, it is possible that conditions early this week favor
the bulls. However, many in the trade noted thin conditions on the rally Friday,
possibly because of the coming holiday and possibly because position traders
simply don’t buy into the failed recovery theme.
STOCK INDICES
12/08 OVRNIGHT CHG to 04:08 AM:S&P-280, DOW-14,
NIKKEI-328, FTSE-29 The stock market has to be disappointed with the numbers and
the initial performance in the holiday shopping season and that should result in
prices tailing off to the late November lows. It is a stroke of bad luck that
the winter storm paralyzed retail activity in the Eastern US, especially after
the market had to digest the much weaker than anticipated monthly payroll
readings last week. However, tThe market is a little overly pessimistic, as the
unemployment rate declined and the prior months payroll level was revised
upward.
DOW
The late November consolidation zone comes in at 9,792 to 9,700 in the December
Dow contract but with the COT report showing a net spec short position (in the
fund and small spec categories) this market should not have significant ground
to give, unless something fresh and significantly more bearish is seen in the
headlines.
S&P
The late November consolidation of 1057.70 to 1047.50, becomes a near term
target but with the small spec long position, pretty “average” at 67,973
contracts this market should not fall aggressively. In fact, with the S&P coming
into the session today, moderately below the level where the COT report was
measured, we think there is a good chance that prices will find solid support
above 1047.50.
FOREIGN EXCHANGE
US DOLLAR
The Dollar appears to have found some support off
the idea that the US dropped steel restrictions and that in turn could reduce
the chance of a trade war with China. Some traders might have been pressing the
Dollar on the short side because they expected to see a trade war and therefore
the pressure on the Dollar might subside. However, seeing the December Dollar
Index slide back below 89.63 could signal a resumption of the downside. In our
opinion, the only way the US payroll numbers directly impact the Dollar today,
is for the numbers to be shockingly strong or shockingly weak. We have to
continue to favor the downside, as that is the trend but if the US payrolls come
in with a gain in excess of 150,000 that could combine with the reduced trade
war threat, for a bigger short covering bounce in the Dollar. Until something
more significant surfaces we have to conclude that rallies in the Dollar are
still rallies in a bear market.
EURO
Apparently EU officials are suggesting that the rise
in the Euro is going to dampen price and inflation pressures and that would seem
to suggest that the ECB is going to tolerate even more gains in the Euro. Maybe
the Europeans are happy with the fact that the Euro is capable of deflecting
some of the higher energy costs that are facing some regions. We suspect that
the current correction in the Euro will run its course soon and that prices will
remain above 120.37 unless the US numbers are simply out of this world. Recently
the Dollar and the Euro haven’t track directly off scheduled numbers!
YEN
The Japanese stock market was slightly weaker
overnight and Japanese household spending declined but as a countervailing
force, Japanese jobs readings improved. Therefore, from internal fundamentals
the Yen is given a minor boost in the action today. However, the overriding
factor in the trend decision will be whether or not the Dollar resumes its
recent downside track. In order for the Yen to rise to the top of the uptrend
channel, the Dollar has to fall back below 89.54. The Yen comes into the action
today within the upper quarter of the expected trading range and could rally to
93.05 and remain in the consolidation pattern. If the Dollar comes out of the
numbers today, with a rise above 90.00 that could mean pressure on the Yen.
SWISS
The Swiss is vulnerable today and a trade under
77.37 could be very damaging to the trend. The trend is still up but risk and
reward for the longs is unattractive at current levels.
BRITISH POUND
The Pound has been rounding off a top type pattern
for the past week and it would seem that today is a major pivot point. In fact,
a trade below 171.62 today could spark a more significant liquidation. Expect
the bull trend to hold unless 171.62 fails.
CANADIAN DOLLAR
The 76.00 level should be solid support and the
Canadian enters the session today in good technical condition. In fact, unless
the US manages to post a very impressive number today, the Canadian looks to be
a buy. Be long but become concerned if the US payroll gain is in excess of
150,000 jobs.
METALS
OVERNIGHT
GLD+2.20, SLV+3.30, PLAT+5.30 London A.M.
Gold fix $408.75 +$6.35 LME COPPER STKS 461,850 tons +6,000 tons COMEX Gold
stocks 3.058 ml -258 oz Comex Silver stocks 123.8 ml oz -39,937 oz
GOLD
The bull camp maintains control into the opening
today, with the Dollar sitting in new low ground and expected to go lower. As we
forecasted, the COT report showed gold to have a net spec long of 184,000
contracts, which is significantly long but doesn’t limit the market from making
additional upside. In fact, the gold market has done well to limit gains in its
net spec long over the last $13 flat price gain.
SILVER
The silver market added in about 6,000 longs in the
latest COT report, while the small specs actually pared their long position down
slightly. However, silver remains aggressively net spec long 75,000 contracts,
which is still below the record net spec long of close to 90,000 contracts seen
early this year. Barron’s suggested that investor should look to buy physical
precious metals and not the stocks and that should foster some follow through
buying in gold and silver.
PLATINUM
Late last week the market was made aware of the fact
that a proposed Angloplats expansion was pared down and that simply gave an
existing bull market added fuel to rally. Few expected production outside of
Russia to make up for the current short fall and the news last week should
easily result in nearby platinum prices rising above the psychologically
important $800 price level. COMMITMENT OF TRADERS ANALYSIS – FUTURES & OPTIONS
Nov 25 – Dec 2, 2003 LARGE SPEC COMMERCIAL NON-REPORTABLE NET NET NET POSITION
NET CH POSITION NET CH POSITION NET CH SILVER 47771 5888 -74955 -4791 27185
-1096 COPPER 28781 2465 -39199 -4382 10418 1916 GOLD 132028 5987 -183965 -9886
51938 3900 PLATINUM 5307 218 -6889 -350 1582 132
COPPER
Surprisingly the net spec long in copper is only
39,000 contracts, in a market where the small specs and funds have combined for
a long in excess of 60,000 contracts. Therefore, the November correction really
balanced copper and might have given the market the capacity to extend on the
upside. Asian interest and pricing remained firm early but then closed weak and
that could limit US pricing.
CRUDE COMPLEX
12/08 OVERNIGHT CHG to 04:08 AM:CRUDE+29,
HEAT+106, UNGAS+15 It is clear that OPEC is happy with recent prices that have
periodically managed to bounce around in the $30.00 to $32.00 range. Last week
OPEC agreed to an emergency meeting on February 10th, which many think will
result in a pre-emptive production cut. Since crude prices enter the week at
almost the same level that the COT report was measured, we suspect that the COT
report is pretty accurate in its 66,793 contract fund long reading.
NATURAL GAS
The natural gas market is extensively overbought and
with the COT report certainly understating the small spec long position of
28,549 contracts, prices could be vulnerable this week. The EIA is attempting to
diffuse the upside potential in natural gas with suggestions that the US has
enough supplies to satisfy winter demand. With current storage levels running
above the year ago totals and the 9 year average total, it would seem that the
EIA has evidence to back up their claim that supplies are adequate.