Futures Point Towards A Stronger Open
INTEREST RATES
OVERNIGHT
CHANGE to 04:25 AM:BONDS-2 The Treasury market continues to be on the ropes into
the action today and that is mostly because the trade is fixed on the theme that
economic numbers will once again be strong. If the GDP reading comes out almost
twice the growth level of the second quarter, that could set the stage for a
slide in December bonds to 109-22. If the second set of numbers today also
manage to come out strong and the equity market catches a euphoria lift that
could serve to send Treasuries to the lowest level since November 13th.
STOCK INDICES
Overnight
action started out weaker and then gained momentum as we progressed toward the
US opening. With the Wall Street Journal suggesting that investors are now
convinced that the economy is headed toward recovery, it is simply amazing how
the sentiment has shifted in the marketplace in just a few sessions. In fact,
later this week it might pay to remember that a large portion of the market was
pretty negative on the US outlook before sentiment shifted Monday morning.
FOREIGN EXCHANGE
EURO: As
mentioned above the German Ifo survey showed an impressive growth and that has
given the Euro a reason to hold above support of 117.50. While the Dollar might
keep the pressure on the Euro in the coming 14 hours, we think that aggressive
traders should be picking out buy points in the Euro. Our initial estimate for a
coming low in the Euro is 117.20.
YEN:
Surprisingly the Japanese reported gains in both supermarket sales and
Department store sales. In fact, the rise in department store sales was
apparently the first rise in almost 20 months. However, the yen doesn’t appear
to be in a position to get out from under the Dollar pressure without some
additional minor losses. We see the Yen weak for another 12 hours, with a new
support target of 90.66. The Yen turns when the Dollar tops out on Wednesday or
Friday?
SWISS:
Failing at 76.00 support now targets a downside thrust to 75.41. However, it is
possible that the Swiss manages to respect closer support of 75.72 but some of
the US numbers will have to be weak to see the higher support hold.
POUND:
Economic numbers seem to conflict the outlook on the Pound today, as Business
investment rose in the 3rd quarter and manufacturing investment declined rather
aggressively. Therefore, the Pound is left with a partially vulnerable technical
condition. The Pound would seem to be able to bottom easier than either the
Swiss or Euro, as it has solid chart support just under current prices. However,
a trade below 169.04 could undermine the chance of a near term bottoming.
CANADIAN
DOLLAR: As expected the Canadian Dollar mounted a significant correction but
that was primarily fostered by the surprise rise in the US Dollar and not
because the fundamental case is breaking down in the Canadian. Therefore, we
suspect that the low posted on Monday will be the low for the current
correction.
METALS
GOLD: The
gold market is trying to turn off the liquidation tilt present in the market
Monday, but from a technical perspective it remains on the rope. The Dollar is
showing little direction in the early going but the economic report slate today
is expected to show strong growth and that might give the Dollar another lift.
Therefore, with the chances good that the Dollar will rise, the gold market will
probably have the fundamental tilt to apply some pressure to prices.
SILVER:
Like gold, the silver market is on the technical rocks into the opening this
morning. Near term support is garnered off Monday’s lows of $5.22 and then again
down at $5.17. We might note that silver volume has also picked up significantly
since November 12th but in silver, increased volume has signaled a rally instead
of weakness like the gold market.
PLATINUM:
The platinum market could see some pressure off news of increased Russian
Platinum group metals production. The Russian company who reported the increase
in production, showed a 264% increase in platinum production and a 56% increase
in palladium. Unfortunately Russian companies don’t release actual production
figures but if one company can increase output then others are probably in the
same position. Traders that bought Jan 650 puts on our suggestion should hold on
there are 17 days until exp Â
COPPER:
While copper prices appeared to get some fresh buying yesterday the mkt will
need to see direct outside help today to extend the recovery. The 3rd largest
copper producer in Russia reported a 4.2% increase in copper production, in the
Jan through Oct period and that is somewhat limiting to prices. However, LME
stocks fell rather aggressively and have continued to mount persistent declines
right through the recent correction and therefore supply isn’t behind the recent
correction.
CRUDE COMPLEX
OVERNIGHT
CHG to 04:25 AM:CRUDE+24, HEAT+74, UNGAS+77Â Energy prices declined aggressively
Monday with long fund positions in crude oil seeing the heaviest liquidation.Â
The 6 to 10 day weather forecast called for cold weather in the West but warm
weather in eastern half of the US into December 8th.
NATURAL GAS
As we
suspected, the regular energy complex turned up the liquidation pressure on
natural gas in the action Monday. With cool temps in the west countervailed by
warm temps in the East out to December 8th, the outlook off the weather simply
doesn’t provide any incentive for the short funds to exit natural gas.