Futures Show A Slight Positive Bias
INTEREST RATES
03/26 OVERNIGHT CHANGE to 04:26 AM:BONDS+0 There
is a minor change in the air with the attitude toward the US economy coming in a
little better than the bulls in the Treasury market expected. In fact, with that
manufacturing survey yesterday suggesting that a majority of employers plan to
hire in 2004, one of the givens, in the bull market is called into question.
Furthermore, with Fed comments yesterday suggesting that big job gains are due
ahead (but the timing was uncertain) we have to think that some weak handed
longs were forced to the sidelines.
STOCK INDICES
03/26 OVRNIGHT CHG to 04:26 AM:S&P-120, DOW-18,
NIKKEI +239, FTSE-4 One has to wonder what the stock market will do for an
encore, as prices surprised the professional trade in the action Thursday. We do
think that the outlook on the US economy was becoming overly negative but it
still seems a little risky to predict that the US is turning the corner on the
jobs front. In our opinion, there is a distinct chance that the April 2nd
unemployment report will show an improvement over the prior month and that could
serve to lift speculative spirits.
DOW
While we think that the lows early this week are an outstanding place to be
long, we are not as confident that traders can buy the opening levels and
weather potential setbacks. However, a decline to 10,175 in the coming sessions
might be a reasonable long entry, looking to risk the position to fresh contract
lows. In order to turn the trend back up, the June Dow will have to manage a
trade above 10,394 today and 10,381 on Monday.
S&P
The big range up in stocks yesterday, at least sends a message to the bears that
they won’t have an easy path when they decide to pressure prices. As mentioned
before, the Fed and some economists are now beginning to hint at jobs growth and
that has to make the shorts uncomfortable. In fact, we would not be surprised if
a large measure of the buying Thursday, was fund short covering, instead of
fresh bargain hunting. In order for the market to begin a wave of higher prices,
the improvement in the economic condition will have to be fostered by the
numbers and by more official dialogue. Maybe 1100 is a critical cyclical low,
but longs that get in for the March payroll report next week, will probably be
confronted with big rewards and potentially bigger risks! Buy corrections to
1102 looking to risk to contract lows, but position traders should consider
buying close to expiration April calls and hoping that they catch the
fundamentals in a key shift!
FOREIGN EXCHANGE
US DOLLAR
The Dollar really isn’t acting that well considering
that the view toward the US economy seems to be improving, at the same time that
more calls for lower rates are being seen from the Euro zone. Maybe the
international trade is concerned about the renewed terrorism threats lodged
specifically against the US and maybe the world doesn’t think that the US
economy is set to improve. In the short term, there would seem to be good
arguments for strength and weakness in the Dollar but if the US economy is set
to improve, that could make a big case for a major low in the Dollar. Certainly
the technical traders have to give the Dollar some credit for the protracted
consolidation in 2004, as that alone argues for a change of the entrenched
trend. However, we can’t predict consistently higher action without a good
economy to back up the currency. We do think that the market is now receptive to
an improvement in the US economy but there will have to be solid proof in the
numbers to fully accept such a view. Therefore traders should look to buy near
to expiration May 89 Dollar calls for 117 points on a correction in the coming
three sessions!
EURO
With the Ifo suggesting that the time for lower
interest rates in the Euro zone is now, it would make sense for the Euro to
weaken. However, the Ifo suggested that the Madrid attacks had no significant
impact but expectations in general are falling. Even the ECB is suggesting that
the Economic outlook is now uncertain and that seems to point to a rate cut. We
have been saying that the Euro numbers would progressively weaken and with the
prospect of a slight improvement in the US outlook, the Euro is very vulnerable.
In fact, with the overnight bounce the euro might be sold on a rally to 121.87
looking for a new low for the move next week.
YEN
Since the Dollar doesn’t seem ready to take
advantage of the Euro weakness and the Nikkei continues to soar, it would seem
that the Yen wins by default and wins because of general optimism toward the
region! We still aren’t sure if the Yen will continue to benefit after their
year-end and if the BOJ will resume intervention but until the currency hits a
fresh contract high, we expect more gains.
^next^
SWISS
A major downside thrust was rejected and that is the
only thing that prevents us from maintaining a very negative outlook on the
Swiss. Maybe traders need to sell a rally to 78.74 to weather near term noise,
but we think the trend is down!
BRITISH POUND
A slight downward revision of 2003 UK GDP growth,
doesn’t seem to have discouraged the buyers in the Pound overnight. In fact,
with the GDP for the 4th quarter pulled down significantly, it is a little
surprising that the Pound is higher this morning. What the action shows, is that
the market was concerned about the BOE raising rates and killing the recovery
and with the weaker numbers many think the BOE will be less likely to act. Near
term upside targeting comes in at 181.92.
CANADIAN DOLLAR
The Canadian rejected selling interest convincingly
and with the prospects for the US economy turning up a little, maybe the
Canadian is set to get a little speculative long interest. Near term resistance
is targeted at 75.80.
METALS
OVERNIGHT
GLD+0.80, SLV+0.30, PLAT+3.30 London A.M.
Gold Fix $417.50 +$.90 LME COPPER STOCKS 201,975 -4,275 tons COMEX Gold stocks
3.596 ml +31,993 oz Comex Silver stocks 122.7 ml +576,916 oz
GOLD
While Asian and Australian gold prices were a little
softer overnight, we would think that a moderate decline in the US Dollar would
provide the gold with a little fresh long interest. However, in order to shift
the Dollar action into a direct positive, the June Dollar might have to fall
back below 88.75. Chinese gold was higher overnight but it is clear that the
Bundesbank gold sales action put the rest of the international trade in a less
optimistic posture.
SILVER
The longs in silver should be a little concerned, as
a number of fund longs have decided to take profits this week in a number of
unrelated markets. While gold seems to be finding support off economic
uncertainty, we are not sure that the silver market is following that same type
of focus. We do think that both gold and silver could stand to benefit from
inflation rumblings, which would seem to be coming from the Fed! Trend line
support in May silver comes in at $7.512 and an upside pivot point takes place
with a trade above $7.72.
PLATINUM
Trend line support in the April platinum comes in at
$902.6 and there would seem to be little reason to think that the up trend in
platinum is set to end. However, we are not sure if the spec trade is preparing
to sell platinum against long gold positions, as that type of action has served
to upend prices in the recent past.
COPPER
The coiling pattern in copper almost seems to be
pointing down ward, as buyers are simply not willing to chase prices higher. We
may not have a major top but the personality of the market has changed and is no
longer as bullish. India showed an increase in April 2003 to February 2004
copper production, with a rise of nearly 17,000 metric tons.
CRUDE COMPLEX
As we expected the energy complex showed the
first sign of significant weakness Thursday and did so as a result of the recent
rise in US crude stocks posted early in the week. We doubt that the fear of
slowing economic growth was specifically behind the slide in prices, as the US
stock market was strong Thursday and the US economic numbers were mostly
favorable. However, it is possible that gains posted early in the week were
overdone and that fueling prices higher in the face of the escalating violence
in the Middle East was a misplaced argument.
NATURAL GAS
The weekly natural gas inventory report showed a
draw of 65 bcf, which is higher than the prior week and did result in a
narrowing of the annual surplus. With the regular energy complex in the first
meaningful correction since the late January slide we suspect that natural gas
prices will see some consistent selling pressure. Versus the June contract, we
see a long entry point coming in down at the $5.35 to $5.39 range.