Futures Point To A Weaker Open
METALS
GOLD:
The gold market posted very dismal performance Wednesday with the Dollar down
and the
US
stock
market also down. However, the most significant failure by gold Wednesday came
when platinum and silver rallied aggressively and gold declined. Chinese gold
prices were slightly weaker and the
London
fix was
lower and that should leave the
US
market
vulnerable to more liquidation.
SILVER:
The silver market is mounting a very impressive rally and apparently won’t see
significant resistance until the May highs are retested at $4.91. Considering
the performance in the metals yesterday, it is clear that silver and gold are on
different wavelengths. In fact, silver even managed to rally with the
US
stock
market soft and
US
economic
numbers sloppy.
PLATINUM:
Like silver, platinum posted some impressive action despite weakness in gold
prices. At times it appears that platinum is getting heavy spread interest
against short gold plays. However, October platinum would not appear to be so
strong that it will rally without first retesting $650.Â
Â
COPPER:
It still seems like the US market is leading the Chinese copper market and that
means that copper will probably not continue to rise in the near term. In our
opinion, for copper to manage a rise all the way back to the 80.60 highs there
will have to be the sense that Chinese buyers are back in force. It should also
be noted that LME copper stocks increased by a large amount overnight and that
could catch this market overbought, especially if that type of action becomes a
trend.
CRUDE
COMPLEX
OVERNIGHT
CHG to  4:15 AM Â
:CRUDE -3Â Â ,HEAT-36Â
,UNGA-34 Â The energy complex managed to rise Wednesday in the face
of obviously bearish crude oil inventory builds, possibly because of a decline
in gasoline stocks. Furthermore, within the weekly stats the trade noted a sharp
2-week average increase in gasoline imports.
NATURAL
GAS
The hot
temperature forecast for July 14th through the 18th wasn’t enough to sustain big
gains in the September contract but the market is keeping an eye on tropical
storm Claudette but it appears to be losing intensity. We also have to think
that the fear of the weekly inventory report this morning is keeping prices
weak.
INTEREST
RATES
OVERNIGHT
CHANGE to  4:15 AM :BONDS +14
As we predicted, the Treasuries managed to bounce off the July 8th low, probably
because the market was getting ahead of itself with such massive declines and
partly because US economic numbers have failed to show consistent improvement.
With more secondary numbers on tap this morning and the stock market possibly
down for the second session in a row, the bulls still have control over prices.
In fact, with a steady diet of soft corporate earnings reports, the September
bonds might be able to return to our sell zone of 116-09.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
:S&P-260
DOW -31 NIKKEI -35 FTSE -13Â The short-term trend in stock prices remains
down but not aggressively so. The fact that corporate earnings readings have
been coming out soft, simply highlights the ongoing sloppy state of the
US
economy.
In fact, given the fundamental and technical setup, we would not be surprised to
see prices carve out a three day down pattern that culminates in a bottoming
Friday afternoon.
FOREIGN
EXCHANGE
DOLLAR:
We continue to be impressed with the action in the Dollar as it has maintained
the push above 96.00 despite slack
US
stock
market action and slightly soft
US
economic information. However, with the BOE and the ECB thought to be poised to
cut interest rates this morning (the BOE cut by 1/4) it is clear that other
economies are having trouble achieving self sustaining recovery status. We do
see the ongoing deaths in
Iraq
and the
rekindling of debate over the Iraqi war, as issues that are limiting the Dollar.
With the
US
economic report slate thin and US stocks showing more signs of weakness today,
we suspect that the Dollar could mount a temporary slide to support of 95.70 but
should in general remain in favor.
EURO:
The Euro zone revised its last GDP reading from unchanged to +0.1% gain and that
should be slightly supportive to the Euro. German June CPI also showed a smart
up tick of +0.3% and that should be seen as a favorable reading on the German
economy, especially after recent concerns of deflation. Therefore, we see the
scope for a rally to 113.62 but nothing more significant than that.
YEN:
The Yen is showing signs of a breaking out to the upside and that has to have
the BOJ poised to act. Apparently the weakness in the Dollar and the consistent
gains in the Nikkei are attracking investment flow toward the Yen. In fact, a
formal breakout takes place this morning, with a trade above 85.43. So far the
BOJ suggests that they are on hold despite the sharp recent rise in long-term
interest rates. The path of least resistance might be up but the Yen seems to
lack follow through capacity. Aggressive traders might be prepared to sell a
rally to 85.50.
SWISS:
The failure yesterday around the trend line resistance really undermines the
Swiss and might make it hard to stem the selling. Near term downside targeting
in the Swiss is at least 71.90, as it is losing ground in a session where the
Dollar was weak!
POUND:
With the BOE rate cut of 1/4 point, the Pound has forged a new low for the move.
Considering the interest rate differential and the apparent need to cut rates,
it would seem likely that the Pound falls to the June lows.
CANADIAN:
The Canadian violated critical chart support levels and would seem to be headed
to the late May lows. With the Dollar managing to hold above 96.00 it would seem
that some position longs in the Canadian have decided to exit and that could
spark a down draft in the C$. Near term targeting could be as much as 70.63 in a
wholesale washout.