Futures Pointing To A Slightly Stronger Open
INTEREST RATES
02/12 OVERNIGHT CHANGE to 04:12 AM:BONDS-6 While
the numbers this morning are not expected to be that significant, it would seem
like the bonds are a little overbought off the recent run. In fact, a clean
sweep of decent numbers this morning could foster some profit taking, as the
economists generally expect retail sales to rise and for initial claims to
decline. The business inventories report probably offers the bear camp the only
potential benefit from the regularly scheduled numbers.
STOCK INDICES
02/12 OVRNIGHT CHG to 04:12 AM:S&P+10, DOW2,
NIKKEI +93, FTSE+18 There would seem to be little to discourage the market from
making more gains. So far, the Disney/Comcast situation is a positive, as that
fosters merger and buyout talk among a number of media issues and serves to
boost the potential fees for firms involved in the maneuverings. Seeing
merger/buyout talk is a lot like having a favorable dose of inflation, as
traders and investors look at many issues with rose colored glasses on.
DOW
The Dow is already showing indications of a new high thrust today, with the only
disappointment being slightly lower volume than one would expect given the
circumstances. Support comes in off the old 10,684 high and near term upside
targeting is seen up at 10,825.
S&P
Apparently the S&P isn’t as enamored with the M & A potential as the Dow stocks,
but we have to think that even the S&P will eventually be swept higher in the
coming sessions. However, the S&P does seem to need everything to be lined up
positively, to forge more gains. Overnight the S&P actually fell back from the
Wednesday highs and that should make it easier for fresh longs to step into
positions. Corrective support is seen at 1154 basis the March S&P and it would
be disappointing for the market to close below 1154.30 today.
FOREIGN EXCHANGE
US DOLLAR
This morning the Dollar has forged new lows and
would seem to be poised for downside follow through. However, the pace of
declines doesn’t look to be that significant. While the Dollar was sold off on
the idea that the US isn’t ready to hike interest rates, the US economy is
hardly soft enough to smash the Dollar down consistently. Comments from the ECB
this morning seem to allow more Dollar declines, as they suggested there was no
reason to change the exchange rate stability pact. In other words, the central
banks want the market to know that they have a formal plan to control
volatility. However, the plan apparently doesn’t prevent the Dollar from making
new lows. In short, we expect the Dollar to work lower but the US numbers might
cause a temporary bounce, before prices resume their slide. Critical downside
targeting in the Dollar comes in at 84.70.
EURO
The ECB is apparently not ready to stand in against
the Euro rise and is suggesting this morning, that foreign demand will continue
to support the Euro zone growth trend. As mentioned before, the ECB also
indicated no need to change the existing stability pact. Therefore, the path of
least resistance is up and the Euro looks to rise. Near term upside targeting
comes in at 129.20. Hindering the upside in the Euro this morning were slightly
weaker than expected French GDP readings. At +0.5% the French GDP reading is
really anemic when compared to the US, but in the near term the currency markets
have no interest in confusing the situation with the facts. It would not be a
positive to see the Euro fall back below 127.9 today.
YEN
After a national holiday the Nikkei had to play
catch up to the US equity market and that puts a favorable glow on the Japanese
economy. As the Dollar slides and the hype off the recent US Fed testimony
passes, we suspect that the need for intervention will subside. However, on a
break to 94.80 we would suggest that short term traders get long the Yen.
^next^
SWISS
We are not impressed with the action in the Swiss,
as it doesn’t appear to have significant upside potential in the wake of some
very supportive developments. The path of least resistance is up but we are
skeptical.
BRITISH POUND
The weakness in the Dollar looks to be mostly
manifest in a rising Pound. In fact, until the BOE stands up to complain, we
suspect that the Pound is set to soar.
CANADIAN DOLLAR
The US Dollar has become weak enough that the
Canadian managed an upside breakout on the charts. We expect more gains ahead,
but risk and reward is only partially attractive for fresh longs. Traders buying
the Canadian should carry puts.
METALS
OVERNIGHT
GLD+2.00, SLV+0.70, PLAT+2.80 London A.M.
Gold Fix $411.40 +$5.00 LME COPPER STOCKS 327,175 -5,000 tons COMEX Gold stocks
3.366 ml Unchanged Comex Silver stocks 123.9 ml +382,105 oz
GOLD
With the Chairman of the Federal Reserve suggesting
that the Dollar decline has taken some of the pressure off the soaring US trade
and current account deficits, which in turn gives the lower Dollar action, the
blessing of the US Federal Reserve. The fact that the US Fed will be patient
with hiking rates also means that the interest rate differential is going to
remain steady, which in turn leaves the Dollar in its weakened state. With the
US Dollar making a minor new low this morning, the gold market will maintain a
bullish bias.
SILVER
The series of spike highs in silver leave the market
pointing upward. Certainly the silver is garnering support from the gold action
but it also seems like silver is manufacturing its own long interest, as silver
started the current up trend on February 6th, well in advance of the gold
turnaround. Therefore, we suspect that the funds are the driving force behind
the silver rally.
PLATINUM
The upward bias in platinum continues and the market
probably won’t even see a slight negative impact off the news that Impala (the
2nd largest producer of platinum) will only manage to meet its 2003 production
target for the year. Apparently the platinum market needs African producers to
expand and surpass their production targets, just to make up for the Russian
shortfall. The trend remains up, until supply rises or demand contracts.
COPPER
The copper market is right back into fresh contract
highs this morning despite the massive upward thrust seen in the prior session.
The Chinese market was limit up and all the market sees in terms of
fundamentals, is supportive information. For instance, exchange stocks continue
to decline and Russia forecasts that their 2003 copper exports to actually fall
from the prior year.
CRUDE COMPLEX
We are surprised that energy prices didn’t rise
sharply off the weekly inventory readings, as all the measures showed declines.
The refinery operating rates increased and that might be considered the only
negative in the report. The fresh wrinkle in play after the OPEC announcement,
was whether or not Mexico and Russia are planning to cooperate with the Oil
cartel.
NATURAL GAS
The trade is expecting a 150 to 265 bcf draw today
but considering the cold weather that was entrenched over the past two weeks, it
would be surprising to see the draw come in bigger than expected. However, a
bigger than expected draw could be ignored, or viewed as the last massive draw
of the season. Certainly the bears could be caught pressing the short side, in
the event that another deep freeze is seen, but in order to eat through the
annual stocks surplus, we would have to see two weeks of single digit temps over
a large portion of the US