Lined Up At The End
The bulls appear to be lined up in the starting
gate Monday. An improved outlook overall is carrying over from last week and the
returning strength in the U.S. dollar is piggybacking the strength in the
overseas markets.
Monday’s pre-opening outlook:
INTEREST RATES
OVERNIGHT
CHANGE to 4:43 AM :BONDS -12 A higher Dollar and positive international equity
market action overnight, leaves the bonds undermined into the opening today. The
anxiety level appears to have declined toward the
economy, and that indirectly siphons off money that was flowing toward bonds
last week and probably entices some longs to take profits. With the Bonds seeing
a quasi blow off top last week it is possible that a large number of longs got
long in the range of 105-07 to 106-18 and therefore a large number of those
players might be underwater on the opening this morning.
STOCK INDICES
OVERNIGHT
CHANGE to
4:43 AM
+880 NIKKEI +75 FTSE +104Â The stock market is on much better psychological
footing as the trade has basically discounted the last two major accounting
revelations. The trade is apparently emboldened by the corporate governance
legislation and by the aggressive enforcement of laws already on the books. The
fact that European fund managers cited gold price declines as evidence that the
world is happy with new policies in the
is simply another form of improved sentiment.
FOREIGN EXCHANGE
Dollar: All the things that
were negative and the source of US Dollar selling are now being tempered
slightly, and that allows the Dollar a reprieve. The Dollar is already above a
critical technical point, which should serve to spark stop loss buying. The
Dollar could also climb back above the 40 day moving average on a trade above
108-08 today or 108-00 on Tuesday. Supposedly, a confidence poll suggests that
international investors are happy with new
policies and that is distinct change of pace. We doubt that the Dollar will
completely stop the downtrend, but in the near term technical balancing may make
it seem like the trend is dead. There is little in the
economic report slate to change sentiment from its current direction.
EURO:
Critical support points were taken out overnight, leaving the Euro in a slide
toward next support of 97.00 and perhaps 96.86. The Euro zone will now have to
stand on its own economic numbers instead of flight to quality issues. Over the
past month the majority of the gains made in the Euro came off negatives from
the
instead of positives within the Euro zone. Given the lagged time of European
economic reports, we would not expect the worst of the Euro zone stats until the
end of August. Therefore, the path of least resistance is down unless some fresh
accounting scandal breaks in the
YEN:
Decent numbers released from the MITI saves the Yen from the Dollar onslaught.
The MITI projected industrial output for the April and June time frame to have
increased, but the numbers for June alone were a little soft. Therefore, the Yen
falls under the weight of the Dollar, especially since the Japanese want the Yen
lower. Near term targeting in the Yen comes in at 83.15.
SWISS:
Less anxiety means aggressive long liquidation in the Swiss. First downside
target in the Swiss comes in at 67.06 and possibly 65.94 if the sentiment
remains positive overnight.
POUND: A
slight contraction in June
lending patterns simply adds to the liquidative tilt already in play in
the Pound. However, since the Pound has recently released some very solid
numbers the Pound might see the least amount of liquidation of all the
currencies. Near term solid support is seen at 155.02.
CANADIAN:
The Canadian should be a big buy right here. If the cause of the massive decline
in July was solely at the feet of the
then the Canadian should at least see a recovery to 64.00 and possibly even to
64.65. A nice
consolidation sets the stage for a bottom but there must not be another
retest of levels below 62.88 or fresh longs might lose confidence in the upside.
METALS
GOLD: The
gold market is vulnerable with the COT report showing an ongoing overly long
position and the supporters of the market bailing out of longs. The Asian trade
sold gold overnight and that took prices down below $300, which is simply
another negative headline for gold. We suspect that the gold long was pared down
in the washout late last week but the numbers are so large to begin with that
more selling is possible.
SILVER:
Unlike gold, silver saw a sizable moderation of the fund and small spec long in
the COT report. With the long falling by nearly 8,000 contracts and silver down
by $.22 cents since the report was measured, we have to think that the long is
greatly reduced. However, we are not sure if the outlook for the economic
recovery is strong enough for silver to rise and it would not seem like flight
to quality support is to be expected this week, with world equity markets higher
and the Dollar firmer to start the week.
PLATINUM:
The platinum market is really benefited by the slight improvement in macro
economic conditions. In fact, if the
equity market manages to climb this week platinum might try to climb back above
$540. In other words, as long as there are no new fresh headlines from
on the liberalization of the Platinum metals industry, platinum can trade
higher. Â
COPPER:
The copper market is still on the ropes, on the charts, with the steep downtrend
of the last month dominating. There appears to be significantly less outside
pressure on copper but with open interest extremely high and the international
trade negative, any recovery will be an uphill battle. A Japanese company
suggested that sluggish demand for copper would make it very difficult for
prices to recover from the recent drubbing.
CRUDE COMPLEX
OVERNIGHT
CHG to  4:43 AM  :CRUDE -6  ,HEAT+26 ,UNGA+3  The energy complex managed to
hold together last week despite the talk of higher OPEC output and still pretty
slack macro economic forecasts. The weekly COT report showed the crude to have
pared its long significantly but the net long remains 34,000 contracts.
NATURAL GAS
Supposedly, local short covering fueled the rally Friday but we are a little
skeptical. In fact, we think that natural gas is primed to break below the
recent lows unless the weather turns off distinctly hotter than expected.
|
Today’s Program Numbers |
| Buy | Sell | Fair Value |
2.29 |
-1.96 | .76 |
Â
|
Today’s Futures Pivots |
|
S&P |
Nasdaq |
|
R2 |
869.23 |
 |
R2 |
939.50 |
|
R1 |
861.47 |
 |
R1 |
926 |
|
Pivot |
848.233 |
 |
Pivot |
906.50 |
|
S1 |
840.47 |
 |
S1 |
893 |
|
S2 |
827.23 |
 |
S2 |
873.50 |