Can Rising Oil Prices Do The Fed’s Job?

Technical Outlook

#BONDS (JUN) 05/13/04: The outside day down and
close below the previous day’s low is a negative signal. The downside closing
price reversal on the daily chart is somewhat negative. The swing indicator gave
a moderately negative reading with the close below the 1st support number.
Near-term resistance for bonds is at 104.16 and then again at 105.03, while
swing support hits at 103.22 and below there at 103.15. The market’s close below
the 9-day moving average is an indication the short-term trend remains negative.
Momentum studies are declining, but have fallen to oversold levels. The next
downside target is 103.15. The 9-day RSI under 20 suggests the market is
extremely oversold.

T-NOTES(JUN) The daily closing price reversal
down puts the market on the defensive. Daily stochastics are trending lower, but
have declined into oversold territory. The next downside objective is now at
108.06. The market’s close below the pivot swing number is a mildly negative
setup. Near-term resistance for the T-Notes is at 108.24 and then again at
109.02, while swing support hits at 108.10 and below there at 108.06. The
market’s short-term trend is negative as the close remains below the 9-day
moving average. With a reading under 30, the 9-day RSI is approaching oversold
levels.

 

STOCK INDICES RECAP

5/12/2004

The stock market continues to look for the dark
lining in the clouds with the latest theme suggesting that higher interest rates
serve to discount future earnings. Other are suggesting that the situation in
Iraq is unsolvable and that the US budget deficit is going to bury the US
economy! We also have to think that the soaring US trade deficit was another
excuse to attack the short side of the equity market. With the new low of the
move the June S&P might be headed the next chart support level of 1069.

Technical Outlook

#S&P500 (JUN) 05/13/04: The market’s close above
the 2nd swing resistance number is a bullish indication. The outside day up is a
positive signal. The upside closing price reversal on the daily chart is
somewhat bullish. Underlying support comes in at 1086.75 and 1068.78, with
overhead resistance at 1111.25 and 1117.78. The market’s short-term trend is
negative as the close remains below the 9-day moving average. The daily
stochastics gave a bullish indicator with a crossover up. The near-term upside
objective is at 1117.78.

S&P E-Mini (JUN): The key reversal up is a
bullish signal. The outside day up is somewhat positive. The market made a new
contract low on the break. The daily closing price reversal up is a positive
indicator that could support higher prices. A bullish signal was given with an
upside crossover of the daily stochastics. The next upside objective is 1117.63.
The market has a slightly positive tilt with the close over the swing pivot.
Near-term resistance for the S&P Mini is at 1111.00 and then again at 1117.63,
while swing support hits at 1086.50 and below there at 1068.63. A negative
signal for trend short-term was given on a close under the 9-bar moving average.

NASDAQ (JUN) The daily closing price reversal up
is positive. The market’s close above the 9-day moving average suggests the
short-term trend remains positive. With the close higher than the pivot swing
number, the market is in a slightly bullish posture. The market should run into
resistance at 1439.50 and above there at 1450.75 with support at 1397.50 and
1366.75. The daily stochastics have crossed over up which is a bullish
indication. The next upside target is 1450.8.

MINI DOW (JUN) The outside day up and close above
the previous day’s high is a positive signal. The daily closing price reversal
up is positive. The market’s close below the 9-day moving average is an
indication the short-term trend remains negative. The market should run into
resistance at 10161 and above there at 10221 with support at 9941 and 9781. The
daily stochastics have crossed over up which is a bullish indication. The next
upside target is 10221. A positive setup occurred with the close over the 1st
swing resistance.

 

CURRENCY MARKET RECAP

5/12/2004

We think the Dollar managed to hold together
pretty well Wednesday considering that the US trade deficit exploded and the US
stock market got hammered. Renewed concerns for inflation off inflation numbers
on Thursday morning might increase the talk of rising interest rates and we
think that will support the Dollar. In other words, the trade is hunting yield
and with the equity markets out of favor a number investors might look to buy
Dollar for the interest rates and macro economic differential. Very impressive
Canadian trade surplus readings might serve to check the downside flow in the
Canadian.

Technical Outlook

#CURRENCIES 05/13/04: YEN (JUN): The market’s
close below the 9-day moving average is an indication the short-term trend
remains negative. With the close higher than the pivot swing number, the market
is in a slightly bullish posture. Swing resistance is targeted at 88.66 and
above there at 88.95, with the yen finding support around 88.14 and below there
at 87.91. The close under the 40-day moving average indicates the longer-term
trend could be turning down. Momentum studies are declining, but have fallen to
oversold levels. The next downside target is 87.91. The 9-day RSI under 30
indicates the market is approaching oversold levels.

EURO (JUN): Momentum studies trending lower at
mid-range should accelerate a move lower if support levels are taken out. The
next downside objective is now at 1.1796. The market is in a bearish position
with the close below the 2nd swing support number. Swing support for the Euro
comes in at 1.1796, with overhead resistance at 1.1986. The market’s short-term
trend is negative as the close remains below the 9-day moving average. The major
trend is down with the cross over back below the 40-day moving average. The gap
down on the day session chart is bearish with more selling pressure possible
today.

 

PRECIOUS METALS RECAP

5/12/2004

It seemed like gold and silver prices were poised
for a significant rally Wednesday but the Dollar didn’t add to early losses and
a sharp setback in grain prices might have tempered the inflation outlook. We
still think that the early strength in precious metals was in fact attributed to
inflationary speculation and that isn’t something that has been seen for a long
time in the metals. The fact that the US Trade deficit exploded to another new
record also sparked early buying in gold and silver as that causes some
investors to seek protection against a financial debacle in the US.

Technical Outlook

#P-METALS 05/13/04: SILVER (JUL): It is a
slightly negative indicator that the close was lower than the pivot swing
number. Initial support for silver is at 547.8 and below there at 542.9 with
resistance likely at 562.1 and 565.3. The market’s close below the 9-day moving
average is an indication the short-term trend remains negative. Momentum studies
are declining, but have fallen to oversold levels. The next downside target is
542.9. The 9-day RSI under 30 indicates the market is approaching oversold
levels.

GOLD (JUN): Support for gold today comes in near
372.35, while resistance is pegged at 386.35. Daily stochastics are trending
lower, but have declined into oversold territory. The next downside objective is
now at 372.35. It is a mildly bullish indicator that the market closed over the
pivot swing number. The market’s short-term trend is negative as the close
remains below the 9-day moving average. With a reading under 30, the 9-day RSI
is approaching oversold levels.

 

COPPER MARKET RECAP

5/12/2004

The copper market was somewhat weak during the
session but didn’t really come apart as many might have expected when one
considers the magnitude of losses in the US equity market. We are a little
surprised that copper didn’t come under more aggressive liquidation off the
overnight talk of Chinese credit tightening but with the Dollar weaker some
arbitrage buying seemed to provide support to US copper prices. Reports of
rising Peru copper output could serve to keep copper under pressure in the
coming sessions, especially if US inflation numbers Thursday morning rekindle
interest rate concerns.

 

ENERGY MARKET RECAP

5/12/2004

The energy complex fueled higher in the face of
more confirmation that US gasoline stocks are tightening instead of rebuilding
in the spring rebuilding window. We also think that the market was rushing to
price in more supply concern premium as a result of suggestions that Saudi
Arabia might be the only member of OPEC that is capable of expanding production.
With US crude stocks hardly showing any change it is clear that the OPEC overage
of 2.3 million barrels per day is heading to other destinations than the US.
Supposedly, Saudi Arabia is raising prices to US refiners but is also making
efforts to boost supply flow. Traders should be very watchful of an upcoming
decision on the summer gasoline waiver.

Technical Outlook

#ENERGIES 05/13/04: CRUDE OIL (JUL): The rally
brought the market to a new contract high. With the close over the 1st swing
resistance number, the market is in a moderately positive position. Support for
crude is keyed on 40.11 and below there at 39.38, with resistance pegged at
41.21 and 41.58. The market’s short-term trend is positive on a close above the
9-day moving average. Momentum studies are trending higher, but have entered
overbought levels. The near-term upside objective is at 41.58. With a reading
over 70, the 9-day RSI is approaching overbought levels.

UNLEADED GAS (JUL): Studies are showing positive
momentum, but are now in overbought territory so some caution is warranted. The
next upside target is 136.96. Since the close was above the 2nd swing resistance
number, the market’s posture is bullish and could see more upside follow-through
early in the session. Resistance today is at 136.96, while support should be
found around 126.46. A new contract high was made on the rally. The market’s
close above the 9-day moving average suggests the short-term trend remains
positive. The 9-day RSI over 70 indicates the market is approaching overbought
levels.

HEATING OIL (JUL): With the close over the 1st
swing resistance number, the market is in a moderately positive position.
Heating oil should encounter support around 99.87, with resistance is at 105.77.
The market’s short-term trend is positive on a close above the 9-day moving
average. Momentum studies are trending higher, but have entered overbought
levels. The near-term upside objective is at 105.77. With a reading over 70, the
9-day RSI is approaching overbought levels. The rally brought the market to a
new contract high.

 

CORN MARKET RECAP

5/12/2004

The USDA report was considered friendly which
helped support the higher opening but funds were noted sellers of near 10,000
contracts by mid-session. The USDA pegged ending stocks for the 2003/2004 season
at 806 million bushels as compared with trade expectations at 840-860 million
and last months estimate of 856 million bushels. For the new crop season, the
USDA used a planted acreage number of 79 million acres even though traders
believe that the actual plantings will be between 80-82 million acres. With a
record yield forecast, production was pegged at a record high 10.425 billion
bushels; however, usage is also a record at 10.505 billion. As a result, ending
stocks were pegged at 741 million bushels as compared with trade expectations at
727 million bushels (range 650-850). World ending stocks were pegged at just
66.8 million tons vs. 86.96 million this year, 122.15 last year and 147.97
million tons two years ago. The 2003/2004 ending stocks were adjusted higher to
86.96 million tons from 67.63 million posted last month due to revisions in
China stocks. Ethanol production is expected to use 1.3 billion bushels for the
2004/2005 season, up from 1.195 billion this season and 996 million bushels for
the 2002/2003 marketing year. Weekly export sales, released before the opening,
are expected to come in near 550,000-750,000 tons as compared with 1.165 million
tons last week. December corn support comes in at 289 1/2 and 287 1/2 with 294
and 297 1/2 as short-term resistance.

Technical Outlook

#CORN (JUL) 05/13/04: Daily stochastics are
trending lower, but have declined into oversold territory. The next downside
objective is now at 286 3/4. The market’s close below the 1st swing support
number suggests a moderately negative setup for today. Market resistance comes
in at 308 3/4 today, with support at 286 3/4. The market’s short-term trend is
negative as the close remains below the 9-day moving average. With a reading
under 30, the 9-day RSI is approaching oversold levels. The daily closing price
reversal down puts the market on the defensive.

 

SOY COMPLEX RECAP

5/12/2004

After the USDA report, November soybeans pushed
20 cents higher on the session to as high as 775 1/2 before experiencing a
collapse to trade as low as 712 on the session. Rumors that a major US soybean
processor may import soybeans and meal helped to trigger aggressive selling from
speculators. In addition, May soybeans came to just 1 sent from the contract
high at 1064 before collapsing at least 80 cents from the highs. Traders expect
imports of meal due to the lack of available soybean supply to meet domestic
needs but soybean imports could bring the risk of Asian rust and US producers
have been fighting to establish some measures to avoid imports. The extreme
volatile trade is likely to continue. The USDA Supply/demand report was
considered supportive but the focus of attention quickly shifted back to good
weather, continued concerns with the demand from China and import rumors. The
USDA pegged 2003/2004 ending stocks at 115 million bushels which was unchanged
from last months forecast and in line with trade expectations. For the new crop
2004/2005 period, the USDA pegged ending stocks at 190 million bushels as
compared with the average trade estimate of 212 million bushels with a range of
forecasts at 150-300 million bushels. For the World ending stocks were down to
31.72 million tons from 39.81 million tons last year. There was not enough new
news for the market to absorb to support new speculative buying in soybeans but
the market may need to see continued good weather in order to support a
significant recovery in US stock levels. If we assume that planted acreage for
soybeans comes in near 1 million acres below the USDA forecast, (switched to
corn), a look at possible production for the coming year could be helpful. At a
new record high yield of 42 bushels/acre, and assuming planted acreage down,
soybean production would come in near 3.058 billion bushels as compared with
usage thought to be near 2.895 billion bushels. This would leave ending stocks
at 283 million bushels which might be considered the worst case scenario. At 40
yield, ending stocks would come in near 138 million bushels and if yields come
in at 38 bushels per acre, (last year was 33.4 and 2002/2003 yield was 38) total
supply for soybeans would come in 8 million bushels below projected total usage.
The exercise above illustrates the “need” to see weather which would produce a
record yield or the market could be in a serious shortage in short order for the
2004/2005 crop season. Weekly export sales, released before the opening, are
expected to come in near 50,000-200,000 tons for soybeans, 20,000-60,000 tons
for meal and 0-5000 tons for oil. July soybean support points are now at 963 and
957 3/4 with resistance at 975 1/2 and 989. Next support for November soybeans
comes in at 716 and 710.

Technical Outlook

#SOYBEANS (JUL) 05/13/04: The outside day down
and close below the previous day’s low is a negative signal. The downside
closing price reversal on the daily chart is somewhat negative. The close below
the 2nd swing support number puts the market on the defensive. The next area of
resistance is around 1004 1/4 and 1052 1/2, while 1st support hits today at 940
and below there at 924. The market’s close below the 9-day moving average is an
indication the short-term trend remains negative. The close under the 40-day
moving average indicates the longer-term trend could be turning down. The daily
stochastics have crossed over down which is a bearish indication. The next
downside target is 924.

MEAL (JUL): The daily stochastic’s gave a bearish
indicator with a crossover down. The next downside objective is now at 289.4.
The outside day down is a negative signal. The daily closing price reversal down
puts the market on the defensive. First resistance comes in at 321.8, with
support at 296.3. The market’s short-term trend is negative as the close remains
below the 9-day moving average. The market is in a bearish position with the
close below the 2nd swing support number. The major trend is down with the cross
over back below the 40-day moving average.

BEAN OIL (JUL): The market’s close below the
9-day moving average is an indication the short-term trend remains negative.
Negative momentum studies in the neutral zone will tend to reinforce lower price
action. The next downside target is 29.24. The close below the 2nd swing support
number puts the market on the defensive. Daily swing resistance is found at
32.18 and above there at 33.44. Support should be encountered at 30.08 and
29.24.

 

WHEAT MARKET RECAP

5/12/2004

The downside break-out in spite of what was
considered a supportive USDA report suggests that weather, export demand fears
and fund long liquidation selling were more dominate factors for the market. The
downside reversal after a higher opening along with the penetration of the April
26th lows are seen as bearish technical developments for the wheat market. The
USDA reports were considered bullish but the focus of attention quickly shifted
back to bearish weather forecasts which triggered another round of long
liquidation selling from speculators. The USDA pegged winter wheat production at
1.550 billion bushels as compared with the average trade estimate at 1.556
billion bushels (range 1.510-1.665). Last years crop was 1.707 billion bushels.
All wheat production was pegged at 2.080 billion bushels as compared with the
average trade estimate at 2.106 billion bushels (range 2.055-2.252). Last years
crop was at 2.337 billion bushels. For the supply/demand report, the USDA pegged
2004/2005 ending stocks at 499 million bushels as compared with expectations at
514 million bushels (range 460-550). Old crop ending stocks were revised lower
to 526 million bushels as compared with 531 million last month. For the world
report, ending stocks were pegged at 123.26 million tons for the 2004/2005
season as compared with 128.75 million this year and 167.07 last year. South
Korea is tendering for 42,000 tons of US wheat. Weekly export sales, released
before the opening, are expected to come in near 200,000-400,000 tons as
compared with 402,700 tons last week. While snow in the Canadian Prairies helped
recharge dry soils, the cold front into the plains this weekend could generate a
frost scare. July wheat resistance comes in at 375 with 366 1/2 and 359 1/4 as
next support levels.

Technical Outlook

#WHEAT (JUL) 05/13/04: The close below the 2nd
swing support number puts the market on the defensive. Look for near-term
support at 361 and below there at 354 1/2, with resistance levels at 378 and 388
1/2. The market’s close below the 9-day moving average is an indication the
short-term trend remains negative. Momentum studies are declining, but have
fallen to oversold levels. The next downside target is 354 1/2. The 9-day RSI
under 30 indicates the market is approaching oversold levels.

 

LIVE CATTLE RECAP

5/12/2004

June cattle closed 107 lower on the session and
to a 7-session low with active long liquidation selling helping to pressure.
Ideas that the near-term bullish cash fundamentals have peaked helped trigger
the selling. Weakness in the beef market, ideas that retailers have already book
Memorial Day specials and continued long liquidation selling pressured the
market. Cattle slaughter came in at 130,000 head as compared with trade
expectations at 125,000-131,000 head. Boxed-beef cut-out values were down 91
cents to $159.46 as compared with $160.55 last week at this time.

Technical Outlook

#CATTLE (JUN) 05/13/04: Daily stochastics turning
lower from overbought levels is bearish and will tend to reinforce a downside
break especially if near-term support is penetrated. The next downside target is
82.07. The close below the 2nd swing support number puts the market on the
defensive. Support should be encountered at 82.32 and below there at 82.07.
Market resistance is at 83.22 and then again at 83.87. The gap lower price
action on the day session chart is a bearish indicator for trend. The market’s
close below the 9-day moving average is an indication the short-term trend
remains negative.

 

LEAN HOGS RECAP

5/12/2004

June hogs closed 132 lower on the session and the
sweeping reversal from a contract high could attract more long liquidation
selling on Thursday. The market has been well supported by surging pork prices
but initial profit-taking turned into an aggressive sell-off when stops were
activated. The 2-day lean index for the period ending May 10th came in at 77.73,
up 97 cents from the previous session and up from 71.62 at the end of April. Hog
slaughter came in at 371,000 head as compared with trade expectations at
368,000-375,000 head.

Technical Outlook

#HOGS (JUN) 05/13/04: The market’s close below
the 1st swing support number suggests a moderately negative setup for today.
Resistance levels comes in at 76.35 and 78.05 today, while support is around
74.00 and then 73.35. The market’s key reversal down is a bearish signal. The
outside day down is a negative signal. The rally brought the market to a new
contract high. The daily closing price reversal down puts the market on the
defensive. The market’s short-term trend is positive on a close above the 9-day
moving average. Momentum studies are trending higher, but have entered
overbought levels. The near-term upside objective is at 78.05.

 

COCOA MARKET RECAP

5/12/2004

The cocoa market finished unchanged on the
session but seemed to favor the upside for most of the session. Origin selling
pressure seemed to keep the market under wraps but we also don’t see much in the
way of fresh fundamental information. It is possible that a weak US Dollar
provided some support to US cocoa and that a resumption of the Dollar rise could
end up putting the pressure back on the US cocoa market.

Technical Outlook

COCOA (JUL) 05/13/04 The market tilt is slightly
negative with the close under the pivot. Cocoa should run into resistance at
1372 and above there at 1390 with support at 1345 and 1336. Negative momentum
studies in the neutral zone will tend to reinforce lower price action. The next
downside target is 1336.25.

 

COFFEE MARKET RECAP

5/12/2004

July coffee rallied early in the session and
moved to the highest level since April 20th before turning lower near the 40-day
moving average and closing 95 points lower on the session and down 180 points
from the highs. Traders indicated that Brazil and Colombian commercial traders
were active sellers on the bounce. Technical bounces seem to attract new selling
from key producing countries but cash business seems to slow on breaks. A lack
of threatening weather and increasing exchange stocks helped pressure. CSCE
stocks were up 13,802 bags to 4.854 million bales with 167,420 bags pending
review.

Technical Outlook

COFFEE (JUN) 5/13/04 The outside day down and
close below the previous day’s low is a negative signal. The downside closing
price reversal on the daily chart is somewhat negative. The close below the 1st
swing support could weigh on the market. Daily stochastics are showing positive
momentum from oversold levels which should reinforce a move higher if near-term
resistance is taken out. The near-term upside objective is at 74.25. The Coffee
contract should run into resistance at 72.70 and above there at 74.25 with
support at 70.15 and 69.15. The upside crossover (9 above 18) of the moving
averages suggests a developing short-term uptrend.

 

SUGAR MARKET RECAP

5/12/2004

July sugar gapped lower on the opening to the
lowest level since March 11th before finding support and closing 10 higher on
the session. Short-covering seemed to be one of the key supportive factors. A
lack of commercial selling may have also helped support as many of the key sugar
traders are headed to New York for the annual sugar dinner and industry
meetings. Ideas in cash circles that the sharp break in the past week could
attract strong buying from end users helped to support.

Technical Outlook

#SUGAR (JUL) 05/13/04: The upside closing price
reversal on the daily chart is somewhat bullish. It is a mildly bullish
indicator that the market closed over the pivot swing number. Swing resistance
comes in at 6.58, with support found at 6.16. The market’s short-term trend is
negative as the close remains below the 9-day moving average. Daily stochastics
are trending lower, but have declined into oversold territory. The next downside
objective is now at 6.16.

 

COTTON MARKET RECAP

5/12/2004

December cotton closed sharply lower on the
session in spite of what appeared to be neutral news from the USDA. A collapse
in soybean values and ideas that exports could slow helped to pressure the
market. The initial look at the new crop season had the USDA peg production at
17.6 million bales as compared with the average trade estimate of 17.8 million
bales and 18.26 million last year. Ending stocks were pegged at 3.90 million
bales from 3.6 million this season and 5.38 million last year. A sharp recovery
in world production (102.5 million bales this year vs. 93.49 last year) added to
the bearish tone. World ending stocks are projected to increase to 36.46 million
bales for the 2004/2005 season from 32.66 million this year and 36.49 million
bales last year. Weekly export sales, released before the opening, are expected
to come in near 100,000-150,000 bales vs. 156,700 bales last week. Shipments are
expected to come in near 250,000-300,000 bales vs. 281,000 bales last week.

Technical Outlook

#COTTON (JUL) 05/13/04: The moving average
crossover up (9 above 18) indicates a possible developing short-term uptrend. It
is a slightly negative indicator that the close was lower than the pivot swing
number. Next resistance area comes in at 64.23 and then again at 65.31, while
support is targeted at 62.08 and 61.01. The close under the 40-day moving
average indicates the longer-term trend could be turning down. Studies are
showing positive momentum, but are now in overbought territory so some caution
is warranted. The next upside target is 65.31.