Futures Point To A Weaker Open
INTEREST RATES
OVERNIGHT
CHANGE to
AM
BONDS
+13 — The bonds gapped up overnight and that would make it seem like the trade
is really concerned about the effects of war on the fragile economy. It would
also seem like the Fed and the ECB might be poised to cut interest rates this
week and that should simply foster the bullish tilt already in place in the bond
market. We have a steady diet of economic information this week but most of that
information will be secondary to the war/no war debate.
STOCK INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P
-550, DOW -18,
NIKKEI -131, FTSE -33 — The fact
that the stock market rallied aggressively last week could mean that the market
is more vulnerable to liquidation this week. We sensed that the rally last week
was a signal that the market wanted the conflict to be decided, but now that
hostilities are about to be launched, a number of weak handed longs are expected
to exit. We would suspect that the chance of avoiding a conflict is small, with
the Allies and the UN antiwar block mired in a power struggle that has little to
do with
FOREIGN EXCHANGE
DOLLAR: This time around the flight to quality thrust looks to be
present in all the currencies against the Dollar (with the exception of the
Pound). In other words, all those countries going to war are being sold. The
fact that the Euro is making such a big run means that the Canadian/Yen strength
against the Dollar is toned down but the overall track is that the Dollar has
significant ground to give. Considering the rally in the Dollar last week, we
could easily see a quick return to the gap areas of 99.26-99.00 and the other
lower gap at 99.31-98.83 in the June Dollar. With the
spearheading the decision to disarm
and the world expected to have a fit in the face of an attack, the selling of
the Dollar could become quite severe. In fact, a concerted effort to damage the
by the UN could take place if the diplomats decide to impose sanctions on the
for attacking. Of course given the track record of the UN the
would have roughly 12 years before a penalty was enforced. We suspect the
following pattern will be seen, two major downward washouts in the Dollar to
just above 98.00 and then if and when an attack is launched, we suspect a major
bottom to be put in place.
EURO: For the time being, the weakness in
the Euro zone economy is discounted and the Euro is granted top flight to
quality status. While some are concerned that the soaring
value of the Euro, will hurt trade, that won’t be a consideration this week.
We expect the June Euro to rise toward resistance at 108.42 and then fail.
YEN: The Yen is getting flight to quality
flow, as the
is once again seen as an insulated economic area. However, we suspect that the
Yen will be unable to rise above 85.82 in the coming rally wave.
SWISS: If there ever were a week in which
flight to quality was at a premium, it would seem to be this week. However, the
Swiss might not be able to take out resistance at 74.59 unless it does so in the
coming 48 hours. We would be long 1 Swiss and long a multiple amount of June
Swiss puts and hope something wild happens.
POUND: The Pound is being lumped into the
same category as the Dollar and that won’t be a good thing for at least three or
four sessions. We suspect that the June Pound will slide to the February low of
156.02 and maybe lower before making a major low.
CANADIAN: The Canadian would look to have a
chance to make fresh contract highs early this week. As long as the backlash
toward the
doesn’t include UN economic sanctions the Canadian should be able to rise
aggressively.
METALS
OVERNIGHT CHANGE to 4:15 AM:
GLD +4.40, SLV
+4.70, PL +11.3, CP
-.05; London Gold Fix $340.50, +$5.00;
LME Copper Warehouse
stks
834,250 ton, -1,050 tns;
Comex Gold stocks 2.31 ml, +21,211 oz;
COMEX Silver stks
108.7 ml oz, -628,312 oz; OVERNIGHT: The drumbeat of
war rekindled the bull spirit in the Asian gold trade
GOLD: Just as the gold had several issues
hindering the bull camp last week, it would appear that the bull camp this week
would find multiple supports. The 24-hour ultimatum delivered by the Allies to
would seem to have little chance of altering opinion at the UN. If
was really concerned about Iraqi lives they would at the last minute agree to a
slight extension in the hopes that
would buckle or some other peaceful solution might be found.
SILVER: Certainly silver will catch some of
the pull from gold but we don’t get the sense that silver will impress with
massive gains. Significant overhead resistance is seen up around $4.60 to $4.73
basis the May contract. We suspect that May silver will trade $4.72 in the
coming 48 hours but we doubt that the market will manage a return to the $4.80
to $4.95 level unless shots are fired.
PLATINUM: The net spec long in platinum was
5,400 contracts long, as of last Tuesday, which is only a moderate long
position. However, it would appear that platinum has solid support around $680,
with resistance coming in up around the level $700 basis the April contract.
COPPER: Early action in copper suggests that
the concern over war is only a slightly negative impact. Surprisingly Asian
copper prices were up overnight despite the war threat and that should give the
bull camp some hope. However, we suspect that in the end, the bear camp will
prevail.
CRUDE COMPLEX
OVERNIGHT
CHG to 4:15 AM: CRUDE +.40,
HEAT +19, UNGA +50,
NG +66 — It would appear that the Atlantic Alliance (UK, US Portugal
and Spain) have decided that diplomacy will only be on the table through
midnight tonight. While the French and Germans are bristling with anger over the
ultimatum stance, one could also expect the Atlantic Alliance to be equally put
off by the apparent stance by many UN diplomats, not to even consider compromise
efforts or anything that in turn pressures Saddam.
NATURAL GAS
The COT
report showed the net spec long position to be 31,000 contracts, but we have to
think that the liquidation late last week, diffused the long significantly. The
liquidation after the COT report comes on top of the 15,000 contract liquidation
that took place in the preceding week.