Philly Fed Breakdown, And What It Means To You

Technical Outlook

#BONDS (JUN) 5/21/2004: The market has a bullish
tilt coming into today’s trade with the close above the 2nd swing resistance.
Near-term resistance for bonds is at 105.32 and then again at 106.08, while
swing support hits at 105.01 and below there at 104.10. A positive signal for
trend short-term was given on a close over the 9-bar moving average. Stochastics
are at mid-range, but trending higher which should reinforce a move higher if
resistance levels are taken out. The next upside objective is 106.08.

T-NOTES(JUN) Momentum studies are trending higher
from mid-range which should support a move higher if resistance levels are
penetrated. The near-term upside objective is at 109.24. With the close over the
1st swing resistance number, the market is in a moderately positive position.
Near-term resistance for the T-Notes is at 109.19 and then again at 109.24,
while swing support hits at 109.01 and below there at 108.21. The market’s
short-term trend is positive on a close above the 9-day moving average.

 

STOCK INDICES RECAP

5/20/2004

The stock market managed to discount weak US
economic numbers and in effect performed decently for most of the session. Since
the market didn’t totally come apart on the opening that seemed to down play the
big failure on Wednesday. While the US numbers were really weak it should be
noted that the employment Index within the Philly Fed readings was the strongest
reading since 1973. Therefore, many numbers were bad but there were still some
signs of optimism. Some suggest that the stock market avoided significant
weakness because the energy complex was mostly lower for most of the session.
The energy threat continues to be the main component of the bear case.

Technical Outlook

#S&P500 (JUN) 5/21/2004: It is a slightly
negative indicator that the close was under the swing pivot. The upside daily
closing price reversal gives the market a bullish tilt. Underlying support comes
in at 1086.50 and 1081.50, with overhead resistance at 1094.50 and 1097.50. The
close below the 9-day moving average is a negative short-term indicator for
trend. Stochastics are rising from over sold levels which is bullish and should
support higher prices. The near-term upside objective is at 1097.50.

S&P E-Mini (JUN): The daily closing price
reversal up is positive. Daily stochastics are showing positive momentum from
oversold levels which should reinforce a move higher if near-term resistance is
taken out. The next upside target is 1098.06. It is a slightly negative
indicator that the close was lower than the pivot swing number. Near-term
resistance for the S&P Mini is at 1094.63 and then again at 1098.06, while swing
support hits at 1085.88 and below there at 1080.56. The market’s close below the
9-day moving average is an indication the short-term trend remains negative.

NASDAQ (JUN) The daily closing price reversal up
is a positive indicator that could support higher prices. A positive signal for
trend short-term was given on a close over the 9-bar moving average. The market
tilt is slightly negative with the close under the pivot. The market should run
into resistance at 1412.50 and above there at 1420.25 with support at 1393.50
and 1382.25. Stochastics are at mid-range, but trending higher which should
reinforce a move higher if resistance levels are taken out. The next upside
objective is 1420.25.

MINI DOW (MAR) The upside daily closing price
reversal gives the market a bullish tilt. The close below the 9-day moving
average is a negative short-term indicator for trend. The market should run into
resistance at 9989 and above there at 10019 with support at 9913 and 9867. The
crossover up in the daily stochastics is a bullish signal. The near-term upside
target is at 10019. It is a slightly negative indicator that the close was under
the swing pivot.

 

CURRENCY MARKET RECAP

5/20/2004

We are really surprised that the Dollar stayed
Thursday as the economic readings from the US were soft. In fact, with the
exception of an ultra strong Philly Fed employment Index gain, the numbers were
very disappointing. Therefore, the currency market is not tracking the numbers
as close as we expected. A holiday in parts of Europe and Scandinavia might have
taken the volume down and in turn kept a few sellers from attacking the Dollar.
The Canadian Dollar continues to show signs of a major bottom and is now
beginning to track with the US Dollar and that is a positive sign.

Technical Outlook

#CURRENCIES 5/21/2004: YEN (JUN): A positive
signal for trend short-term was given on a close over the 9-bar moving average.
The market tilt is slightly negative with the close under the pivot. Swing
resistance is targeted at 88.89 and above there at 89.03, with the yen finding
support around 88.42 and below there at 88.09. The market back below the 40-day
moving average suggests the longer-term trend could be turning down. Rising from
over sold levels, daily momentum studies would support higher prices especially
on a close above resistance. The next upside objective is 89.03.

EURO (JUN): Momentum studies are rising from
mid-range which could accelerate a move higher if resistance levels are
penetrated. The near-term upside target is at 1.1973. The defensive setup, with
the close under the 2nd swing support, could cause some early weakness. Swing
support for the Euro comes in at 1.1857, with overhead resistance at 1.1973. The
close below the 9-day moving average is a negative short-term indicator for
trend. The close below the 40-day moving average is an indication the
longer-term trend is down. More selling pressure is likely given yesterday’s gap
lower price action on the day session chart.

 

PRECIOUS METALS RECAP

5/20/2004

The gold market remained under pressure primarily
because of the strong Dollar but we also think that some longs were disappointed
by the soft US economic numbers released during the session. The fact that
growth in the US is coming back into question tempers the hope for inflation.
With all the metals down during the session it was clear that the stronger
Dollar was not the only element providing pressure in the market place. In
conclusion, gold and silver just can’t seem to hold a consistent focus and that
favors the bear camp.

Technical Outlook

#P-METALS 5/21/2004: SILVER (JUL): The close
below the 1st swing support could weigh on the market. Initial support for
silver is at 571.0 and below there at 567.0 with resistance likely at 582.4 and
585.0. A positive signal for trend short-term was given on a close over the
9-bar moving average. Stochastics are at mid-range, but trending higher which
should reinforce a move higher if resistance levels are taken out. The next
upside objective is 582.4.

GOLD (AUG): Support for gold today comes in near
376.40, while resistance is pegged at 384.00. Momentum studies are rising from
mid-range which could accelerate a move higher if resistance levels are
penetrated. The near-term upside target is at 384.00. The market setup is
somewhat negative with the close under the 1st swing support. The close above
the 9-day moving average is a positive short-term indicator for trend.

 

COPPER MARKET RECAP

5/20/2004

Copper prices showed significant weakness during
the session Thursday but managed to reject part of the big losses into the
close. The fact that US economic numbers were soft Thursday, provided the early
slide in prices but since the equity market didn’t come totally apart the copper
market found some buying around the lows. It would seem that Chinese foot and
mouth rumors were circulating and that could be seen a milder economic impact
than a SARS problem. One positive from the economic front is that the Philly Fed
readings showed one of the strongest employment readings since 1973 and that
might make the bulls feel better about copper.

 

ENERGY MARKET RECAP

5/20/2004

The energy complex had a relatively quiet day
compared to recent sessions. Prices were generally softer because the market was
overbought and there weren’t really any fresh supply concerns floated. We also
think that slower US economic numbers have given pause to the bull camp as
energy demand does equate to economic activity. The OPEC President did suggest
that the upper band for oil prices should be $32 to $34 but with the current
OPEC basket price hovering around $37 the band seems to be a useless measure.
The coming OPEC meeting isn’t even going to have a full attendance which means
that little surprise is expected from the meeting and that would seem to favor
the bull camp.

Technical Outlook

#ENERGIES 5/21/2004: CRUDE OIL (JUL): The market
rallied to a new contract high. The daily closing price reversal down is a
negative indicator for prices. It is a slightly negative indicator that the
close was under the swing pivot. Support for crude is keyed on 40.35 and below
there at 40.10, with resistance pegged at 41.25 and 41.90. The close above the
9-day moving average is a positive short-term indicator for trend. Momentum
studies trending lower from overbought levels is a bearish indicator and would
tend to reinforce lower price action. The next downside target is now at 40.10.

UNLEADED GAS (JUL): Stochastics turning bearish
at overbought levels will tend to support lower prices if support levels are
broken. The next downside objective is 133.75. The market tilt is slightly
negative with the close under the pivot. Resistance today is at 138.95, while
support should be found around 133.75. The market made a new contract high on
the rally. The market could take on a defensive posture with the daily closing
price reversal down. A positive signal for trend short-term was given on a close
over the 9-bar moving average.

HEATING OIL (JUL): It is a slightly negative
indicator that the close was under the swing pivot. Heating oil should encounter
support around 100.67, with resistance is at 105.47. The close above the 9-day
moving average is a positive short-term indicator for trend. Momentum studies
trending lower from overbought levels is a bearish indicator and would tend to
reinforce lower price action. The next downside target is now at 100.67.

 

CORN MARKET RECAP

5/20/2004

Weakness in the other grains, a strong US dollar
and a bearish forecast are seen as bearish forces with the weather outlook as
the primary bearish fundamental. The crop is 2-3 weeks ahead of a normal pace
and more good rain and warm weather in the 10-day forecast has set the stage for
a bumper yield this season. While weather could shift on a dime, as long as the
weather looks bearish, new buyers, both speculative and commercial, have a
tendency to move to the sidelines and speculators are prone to continue to
liquidate long positions. Weekly export sales came in at 786,700 tons as
compared with trade expectations of 600,000-900,000 tons. Old crop sales were
734,200 tons as compared with 543,100 tons necessary each week to reach the USDA
projection. Cumulative sales have reached 83.6% of the USDA forecast for the
season as compared with 81.1% on average for this time of the year. Traders are
still optimistic for the June 3rd Philippines tender for 350,000 tons of corn
but other export news seems routine as buyers seem to lack a reason to extend
coverage at the present time. December corn support comes in at 280 1/4 and 274
3/4 with 285 1/2 and 290 1/2 as short-term resistance.

Technical Outlook

#CORN (JUL) 5/21/2004: The daily stochastic’s
gave a bearish indicator with a crossover down. The next downside target is now
at 284 2/4. The market setup is somewhat negative with the close under the 1st
swing support. Market resistance comes in at 301 today, with support at 284 2/4.
The close below the 9-day moving average is a negative short-term indicator for
trend. Short-term indicators on the defensive. Consider selling an intraday
bounce.

 

SOY COMPLEX RECAP

5/20/2004

The move in July soybeans to the lowest level
since February 20th and the steep drop in open interest could attract additional
long liquidation selling ahead. Continued concerns with demand from China and
perfect weather in the forecast for the next 10 days has kept the market in a
long liquidation mode. The market found some support on news from the Brazil
Vegetable Oils Industry Association (Abiove) that Brazil crop production should
be near 50.3 million tons as compared with their previous forecast of 52.8
million in April and 53.5 million tons from the last USDA world Supply/demand
report. Many areas of the western cornbelt are expected to receive 1-3 inches of
rain through the end of the weekend before a drier spell into the middle of next
week. The moisture along with period of higher than normal temperatures and sun
set the stage for a fast start to the growing season. International suppliers
have agreed to suspend soybean sales to China temporarily due to the financial
crises for crushers in China. Weekly export sales came in at 57,900 tons as
compared with trade expectations of 0-200,000 tons. Old crop sales were just
18,300 tons as compared with 30,300 tons necessary each week to reach the USDA
projection. Cumulative sales have reached 98.1% of the USDA forecast for the
season as compared with 94% on average for this time of the year. Meal sales
were 46,600 tons which brought cumulative sales to 90.8% of the USDA forecast
for the season as compared with 79.9% on average for this time of the year. Oil
sales were just 500 tons as compared with 10,100 tons necessary each week to
reach the USDA projection. The bearish weather outlook has triggered more long
liquidation selling from speculators. July Soybean resistance points move down
to 871 and 879 with next good support at 856. November soybeans filled part of
the gap from February 23rd with 677 1/2 and 661 1/2 as next support.

Technical Outlook

#SOYBEANS (JUL) 05/21/04 The close below the 1st
swing support could weigh on the market. The next area of resistance is around
886 2/4 and 909 3/4, while 1st support hits today at 851 2/4 and below there at
839 3/4. A negative signal for trend short-term was given on a close under the
9-bar moving average. Daily stochastics declining into oversold territory
suggest the selling may be drying up soon. The next downside objective is 839
3/4. Bearish daily studies indicate selling minor rallies this session.

MEAL (JUL): Momentum studies are still bearish,
but are now at oversold levels and will tend to support reversal action if it
occurs. The next downside target is now at 272.2. First resistance comes in at
288.3, with support at 276.3. The close below the 9-day moving average is a
negative short-term indicator for trend. The market setup is somewhat negative
with the close under the 1st swing support. Short-term indicators on the
defensive. Consider selling an intraday bounce.

BEAN OIL (JUL): A negative signal for trend
short-term was given on a close under the 9-bar moving average. Daily
stochastics declining into oversold territory suggest the selling may be drying
up soon. The next downside objective is 27.75. The close below the 2nd swing
support number puts the market on the defensive. Daily swing resistance is found
at 29.20 and above there at 29.95. Support should be encountered at 28.10 and
27.75. The market is approaching over sold levels on an RSI reading under 30.

 

WHEAT MARKET RECAP

5/20/2004

A stronger US dollar and a lack of official
confirmation of export news to China or Pakistan helped to pressure the market
early in the session and speculative long liquidation due to the technical
failure to hold minor support contributed to the increased selling. The collapse
in the other grain markets and a decent start to the spring wheat crop with more
rains in the forecast for the northern plains added to the more negative tone on
the floor. Weekly export sales came in at 329,300 tons as compared with trade
expectations of 250,000-400,000 tons. Old crop sales were a net negative 50,400
tons as compared with 418,800 tons necessary each week to reach the USDA
projection. Cumulative sales have reached 96.6% of the USDA forecast for the
season as compared with 92.3% on average for this time of the year. In overnight
sales, Japan bought a total of 125,000 tons of wheat at their weekly tender with
60,000 from the US and Taiwan bought 43,000 tons of US wheat. Traders are
hopeful that the US will receive a portion of the 1 million tons to Pakistan and
the 150,000 tons to Jordan as both countries have unused GSM credits. July wheat
support comes in at 365 and 361 with resistance at 370 1/2 and then 375.

Technical Outlook

#WHEAT (JUL) 5/21/2004: The close below the 1st
swing support could weigh on the market. Expect near-term support around 364 and
below there at 358 2/4, with resistance levels at 376 and 382 2/4. A negative
signal for trend short-term was given on a close under the 9-bar moving average.
Rising from over sold levels, daily momentum studies would support higher prices
especially on a close above resistance. The next upside objective is 382 2/4.

 

LIVE CATTLE RECAP

5/20/2004

June cattle closed 12 higher on the session and
up 82 from the day’s low. News that cash cattle was actively trading at $86.00,
down $1.00 from last week helped to firm the market up late in the session with
futures holding a stiff discount to the cash market. Boxed-beef cut-out values
were down $.65 to $153.38 as compared with $158.52 last week at this time.
Slaughter came in at 130,000 head as compared with trade expectations of
124,000-131,000 head. Positioning ahead of Friday’s Cattle-on-Feed report added
to the more positive tone with October cattle surging to new contract highs on
expectations of light placements.

Technical Outlook

#CATTLE (AUG) 5/21/2004: Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The next downside objective is 83.80. The market has a slightly positive
tilt with the close over the swing pivot. Support should be encountered at 84.50
and below there at 83.80. Market resistance is at 85.75 and then again at 86.30.
A positive signal for trend short-term was given on a close over the 9-bar
moving average.

 

LEAN HOGS RECAP

5/20/2004

The market closed moderately lower with some
weakness noted in the cash market and further weakness in pork prices helping to
trigger additional long liquidation selling. The market is also nervous that
record high pork values will slow demand and that the US may need to absorb
increased market-ready hogs for slaughter if Maple Leaf Foods experiences a
workers strike. Volume was thought to be slow ahead of the Monthly Cold storage
report, released after the close. Slaughter came in at 375,000 head as compared
with trade expectations at 375,000-380,000 head.

Technical Outlook

#HOGS (JUL) 5/21/2004: The market setup is
somewhat negative with the close under the 1st swing support. Resistance levels
comes in at 74.62 and 75.55 today, while support is around 73.25 and then 72.80.
The daily closing price reversal down is a negative indicator for prices.
Short-term indicators on the defensive. Consider selling an intraday bounce. The
close below the 9-day moving average is a negative short-term indicator for
trend. Stochastics trending lower at midrange will tend to reinforce a move
lower especially if support levels are taken out. The next downside target is
now at 72.80.

 

COCOA MARKET RECAP

5/20/2004

The cocoa market supposedly flashed higher off
news that the Funds were buying back short positions. London even went as far as
saying that the buying wasn’t off the political developments at the Ivory Coast
but we have to argue with that point. With the Prime Minister resigning because
the Ivory Coast President fired three Ministers it is clear that some anxiety is
driving longs into the market. With the Prime Minister of the Ivory Coast the
rebel leader that means that a line has been drawn again between the two
factions. If there were extensive physical supply flows taking place right now
at the Ivory Coast there would be even more upside price action.

Technical Outlook

COCOA (JUL) 05/21/04 The market has a bullish
tilt coming into today’s trade with the close above the 2nd swing resistance.
Cocoa should run into resistance at 1462 and above there at 1491 with support at
1371 and 1309. The daily stochastics have crossed over up which is a bullish
indication. The next upside target is 1491.25.

 

COFFEE MARKET RECAP

5/20/2004

September coffee closed 145 lower on the session
and back into the 1-month trading range as light long liquidation selling from
speculators and a lack of new buying interest from fund players helped to
pressure the market. Commercial traders seem to be noticeably absent. There does
not appear to be any threatening weather on the horizon for Brazil. Cash trading
was steady but buyers are slow to advance coverage with seasonally weak demand
period ahead.

Technical Outlook

COFFEE (JUN) 5/21/04 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 74.15. The Coffee
contract should run into resistance at 72.70 and above there at 74.15 with
support at 70.4 and 69.55. 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.

 

SUGAR MARKET RECAP

5/20/2004

The market pushed slightly lower in quiet trade
with low volume noted in London and New York. The weak Brazilian real against
the dollar (near 13-month lows) has encouraged more offers on the cash market
but cash dealers also noted a jump in interest from importers. Talk that China
bought Australia and Guatemalan sugars and increased interest from Egypt,
Tunisia and Syria this week was seen as a positive factor as buyers seem to be
taking advantage of the recent lower freight rates. Cuba harvest is about
complete with a production forecast of just 2.4 million tons from 2.6 million
expected early in the season and 2.2 million tons last year. Last years
production was near a 70 year low. While the production forecast in India is
about 4 million tons less than consumption, London cash traders believe that
India is unlikely to reduce the import duty anytime soon due to the shift in
power after the election. Russia refined 1.098 million tons of white sugar from
imported raw sugar from the start of the marketing year through May 19th as
compared with 1.543 million by this date last year.

Technical Outlook

#SUGAR (JUL) 5/21/2004: It is a slightly negative
indicator that the close was under the swing pivot. Swing resistance comes in at
6.63, with support found at 6.37. The close above the 9-day moving average is a
positive short-term indicator for trend. Stochastics are rising from over sold
levels which is bullish and should support higher prices. The near-term upside
target is at 6.63.

 

COTTON MARKET RECAP

5/20/2004

December cotton rallied early in the session of
follow-through technical buying from the Thursday reversal but another collapse
in grain markets helped to turn the trend down into the mid-session. Weekly
export sales came in at 152,900 bales as compared with trade expectations of
130,000-200,000 bales. Old crop sales were a net 67,800 bales as compared with
20,600 bales necessary each week to reach the USDA projection. Cumulative sales
have reached 98.1% of the USDA forecast for the season as compared with 102.6%
on average for this time of the year. A lack of weather problems for the
planting season and a general bearish tone for the world fundamentals for the
coming year added to the negative tone. Shipments came in at 188,700 bales as
compared with expectations at 280,000-350,000 bales which was also a negative
surprise. Certified Cotton stocks deliverable to the exchange (as of May 18th)
totaled 353,101 bales, down from 354,142 bales the previous session with 1686
decertifications.

Technical Outlook

#COTTON (JUL) 5/21/2004: A negative signal for
trend short-term was given on a close under the 9-bar moving average. The market
has a slightly positive tilt with the close over the swing pivot. Next
resistance area comes in at 64.19 and then again at 65.00, while support is
targeted at 62.89 and 62.40. Stochastics turning bearish at overbought levels
will tend to support lower prices if support levels are broken. The next
downside objective is 62.40. The market could take on a defensive posture with
the daily closing price reversal down.