Futures Point To A Weak Open

INTEREST RATES

OVERNIGHT CHANGE to 4:15 AM: BONDS -1 -- While we think the bonds will maintain a positive stance in the action today, it would not seem like the economic numbers will directly accentuate the upside. In the first four days of the week the economic numbers were patently supportive to bonds, while the numbers this morning might be a mixed bag. International equity markets are soft, gold is showing more strength and the Dollar is weak and that should keep concerns over the US recovery as the dominating theme.

STOCK INDICES

OVERNIGHT CHANGE to 4:15 AM: S&P -990, NIKKEI -192, FTSE -86 -- The bear camp had almost all the news it could wish for Thursday with war, anthrax, chemical weapons, rising initial claims, corporate accounting problems and a new low for the year, in the US Dollar. We are actually quite surprised that the stock market didn’t get smashed yesterday and will be equally surprised if the market doesn’t get hammered today. It’s possible that two of the four economic numbers to be released this morning, create a little optimism, but we hardly see the reports as something that entrenches sentiment into the bull camp.

FOREIGN EXCHANGE

DOLLAR: Another gap down Dollar trade overnight highlights the international consensus on the US and the US Dollar. The twin issues of war with Iraq and a questionable economy might be joined by a slight inflation risk after the numbers this morning. Some traders might suggest that seeing some inflation would be a positive to the Dollar, but given the extremely negative posture toward the Dollar, we doubt a little higher rate of return potential is going to turn the Dollar back up. In fact, the inventory numbers and the University of Michigan readings this morning might temporarily lift the Dollar but that is probably just a chance to get short at a better level. Maybe the US is willing to see its Dollar fall sharply in hopes that its export markets will be benefited. The overnight action has the weekly Dollar chart equal to the lowest level of the year. As in the US stock market analysis, it might take a significantly positive and significant headline development to alter the course of the Dollar.

EURO: Another new high for the move and the Euro would seem to be in position to gather longer term stop loss buying. Even with an extremely hot Irish inflation reading, the ECB suggests that inflation in the Euro zone is under control. With the US possibly posting an inflationary number this morning we hardly doubt that the Euro will in any way, be held back by an inflation view. In fact, given the entrenchment of sentiment, inflation in the Euro zone might benefit the Euro! Next upside targeting in the Euro comes in at 103.30.

YEN: The Nikkei was down hard and the Yen was firm overnight, simply because of the weakness in the Dollar. However, a continuation of a much weaker Dollar could spell disaster for the Japanese export sector. In the mean time, the Yen rises toward resistance of 82.49 and should eventually be an outstanding short. While Japan showed a mix of good and bad numbers yesterday, with industrial production falling and bankruptcy becoming less prevalent, it would seem like the actual direction of the Japanese economy is a very minor component of the factors driving the Yen. Look for a sale up around 82.49.

SWISS: The Swiss still isn’t getting a large measure of flight to quality buying, but is getting enough to expect a new high for the move in the coming sessions. We suspect that next week the Swiss will be high enough that the July high of 69.85 will become support.

POUND: It would seem to be a safe bet, that the Pound forges a new high for the move, but driving the Pound sharply above 159.28 is rather suspect. Strong sales from John Lewis keeps the UK economy among the most respected recoveries and probably makes buying the Pound at new highs easier than buying the Swiss or Yen at such lofty levels.

CANADIAN: The Canadian stands at a critical junction, as the Dollar is falling away aggressively and the world is seemingly turning a very negative eye toward the US recovery. In other words, the Canadian needs to manage to disconnect with the Dollar and come into favor on its own merits. Certainly economic numbers have been good enough to justify a strong Canadian, but there is a lot of history and chart resistance causing traders to be skeptical. Most traders fear a repeat of last summer’s Canadian rally and failure. This is a classic spot to sell a Mar Canadian and buy 3 Mar Canadian 65 calls which is initial a flat position but gets longer on a rally.

METALS

OVERNIGHT CHANGE to 4:15 AM: GLD +3.80, SLV +1.8, PLAT +4.80; London Gold Fix $333.50, +$7.35; LME Copper Warehouse stks 861,125 tons, -1,725 tns; Comex Gold stocks 2.03 ml, Unchanged; COMEX Silver stocks 106.4 ml oz, Unchanged; OVERNIGHT: Spot gold rose to a 3 year high in Tokyo/TOCOM gold to 10 month high.

GOLD: In addition to gold making a number of key technical breakouts, it is clear that the Dollar is also making some critical technical failures on its chart. In other words, the gold is in effect getting a double lift. Asian gold traders suggested concerns of war, specifically drove buyers into the market, which means that the concern over the economy isn’t that key of a driving factor in the recent gold surge.

SILVER: We grow more impressed with silver every day, as the silver followed gold higher, but surprising hasn’t seen sharply rising volume or open interest rise in the process. In other words, silver is apparently not burning through volume and open interest, in making the gains and that could mean a more orderly and sustained rally. Near term support in March silver comes in at 474 and then again at 465.

PLATINUM: Instead of being defeated by the potentially negative macro economic tilt platinum is falling in step with the precious metals distinction and is forging gains. The top of the channel in the January platinum comes in at $612.40. However, off all the metals the platinum shows the most signs of being overbought as open interest is at the highest levels of the year.

COPPER: Shanghai copper stocks declined by 4,331 tons, to stand at 83,456 tons and that is slightly supportive to copper, given the ongoing doubt toward demand. However, Shanghai copper prices were slightly lower hinting that Chinese buyers interested in copper but are not currently ready to pick a bottom in this market. We seriously doubt that optimism toward the Asian economy is going to overcome the negativeness fostered yesterday, without some major leader saying something that suggests the US, is not moving toward an attack.

CRUDE COMPLEX

OVERNIGHT CHG to 4:15 AM: CRUDE +54, HEAT +156, UNGA +136 -- If one attempts to follow what OPEC says, then one becomes very confused. If one keeps an eye on the amount of total OPEC production, that is free from compliance threats, it is clear that more oil can be expected to flow to the market.

NATURAL GAS

While the weekly inventory buildup in natural gas came in slightly smaller than aggressive expectations, it was none the less supportive. With a 162 bcf draw in stocks and an annual deficit of 444 bcf the supply issue is beginning to get the attention of the commercial and small spec players.