Why Longs Are Bailing Out Of The Dollar

Technical Outlook

#BONDS (JUN) 5/28/2004: 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 107.20 and then again at 107.31, while
swing support hits at 106.15 and below there at 105.21. A positive indicator was
given with the upside crossover of the 9 & 18 bar moving average. Rising
stochastics at overbought levels warrant some caution for bulls. The next upside
objective is 107.31.

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 110.29. The market’s close
above the 2nd swing resistance number is a bullish indication. Near-term
resistance for the T-Notes is at 110.21 and then again at 110.29, while swing
support hits at 109.29 and below there at 109.13. The upside crossover (9 above
18) of the moving averages suggests a developing short-term uptrend.

 

STOCK INDICES RECAP

5/27/2004

The stock market showed signs of significant
strength but then failed to hold those gains. Certainly seeing energy prices
slide was cause for celebration but for the economy to actually benefit from
lower oil prices more declines will have to be seen and energy prices will have
to maintain lower levels, long enough for the windfall to work through the
system. It seemed like the market was cheered on by the idea that the Fed would
probably leave interest rates on hold, but then some traders expressed concern
over the emerging slow pace of the recovery and that sparked a wholesale profit
taking rush. The fact that the Saudi Oil company was not yet booking tanker
space for the recently promised additional production might have downplayed the
benefit of the energy futures slide and that in a sense could have pulled the
rug out from under the equity market rally.

Technical Outlook

#S&P500 (JUN) 5/28/2004: There could be more
upside follow through since the market closed above the 2nd swing resistance.
Underlying support comes in at 1117.95 and 1111.38, with overhead resistance at
1127.65 and 1130.78. The close above the 9-day moving average is a positive
short-term indicator for trend. The cross over and close above the 40-day moving
average is an indication the longer-term trend is up. Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The near-term upside objective is at 1130.78.

S&P E-Mini (JUN): Studies are showing positive
momentum, but are now in overbought territory so some caution is warranted. The
next upside target is 1131.13. The market has a bullish tilt coming into today’s
trade with the close above the 2nd swing resistance. Near-term resistance for
the S&P Mini is at 1127.75 and then again at 1131.13, while swing support hits
at 1117.75 and below there at 1111.13. The market’s close above the 9-day moving
average suggests the short-term trend remains positive.

NASDAQ (JUN) Rising from over sold levels, daily
momentum studies would support higher prices especially on a close above
resistance. The market setup is supportive for early gains with the close over
the 1st swing resistance. The market should run into resistance at 1476.25 and
above there at 1481.63 with support at 1457.75 and 1444.63. The market is
approaching overbought levels with an RSI over 70. Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
1481.63.

MINI DOW (MAR) The close above the 9-day moving
average is a positive short-term indicator for trend. The market should run into
resistance at 10267 and above there at 10297 with support at 10161 and 10085.
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 10297.
There could be more upside follow through since the market closed above the 2nd
swing resistance.

 

CURRENCY MARKET RECAP

5/27/2004

The Dollar failed on a series of support levels
and is now giving off the impression that it has shifted into a down trend. If
one were to look at the pace of US economic numbers there is certainly reason to
for the Dollar to come under such significant attack. Many traders are
suggesting that a June US rate hike is mostly off the table and that is why
longs are bailing out of the Dollar. Even the Canadian made a moderately
important upside breakout and that shows all currencies are taking advantage of
the current Dollar weakness.

Technical Outlook

#CURRENCIES 5/28/2004: YEN (JUN): A positive
signal for trend short-term was given on a close over the 9-bar moving average.
The market has a bullish tilt coming into today’s trade with the close above the
2nd swing resistance. Swing resistance is targeted at 90.56 and above there at
90.85, with the yen finding support around 89.85 and below there at 89.43. The
market back below the 40-day moving average suggests the longer-term trend could
be turning down. 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 90.85.

EURO (JUN): Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 1.2368. The defensive setup, with the close
under the 2nd swing support, could cause some early weakness. Swing support for
the Euro comes in at 1.2122, with overhead resistance at 1.2368. The close above
the 9-day moving average is a positive short-term indicator for trend. The
market is becoming somewhat overbought now that the RSI is over 70. More selling
pressure is likely given yesterday’s gap lower price action on the day session
chart.

 

PRECIOUS METALS RECAP

5/27/2004

The gold market managed another impressive rally
and pulled silver along for the ride. It certainly helped to see the Dollar fall
through a series of support levels and in the process create the impression that
the Dollar was back into a downtrend pattern. The fact that China showed up as a
buyer in copper overnight seemed to give the precious metals markets hope that
Chinese demand was going to remain strong. In other words, the Dollar helped,
the Chinese helped and lastly lower energy prices seemed to send a message that
the world economic recovery might continue and that improves the outlook for
physical and industrial demand.

Technical Outlook

#P-METALS 5/28/2004: SILVER (JUL): The market
setup is supportive for early gains with the close over the 1st swing
resistance. Initial support for silver is at 612.8 and below there at 603.9 with
resistance likely at 618.7 and 626.3. A positive signal for trend short-term was
given on a close over the 9-bar moving average. Rising stochastics at overbought
levels warrant some caution for bulls. The next upside objective is 618.7. Daily
studies suggest buying dips today.

GOLD (AUG): Support for gold today comes in near
391.63, while resistance is pegged at 399.43. Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 399.43. There could be more upside follow
through since the market closed above the 2nd swing resistance. The upside
crossover of the 9 & 18 bar moving average is a positive signal. The cross over
and close above the 40-day moving average is an indication the longer-term trend
is up.

 

COPPER MARKET RECAP

5/27/2004

July copper exploded after the Chinese showed up
as buyers in the overnight action. The fact that US equity prices were also
strong and energy prices were sharply lower gave the macro outlook a much
improved look and that seemed to bring all the bull issues to critical mass.
Seeing the Chinese buy some copper apparently puts the slow down threat to an
even lower level and that was the main reason behind the March and April break
in copper. Even with Chile posting an 11% increase in April monthly copper
production over last year the copper market simply wasn’t going to be deterred
from making upside gains.

 

ENERGY MARKET RECAP

5/27/2004

The energy complex broke below several critical
support levels on the charts and seemed to be in the process of pricking the
speculative bubble. Nothing significant has changed in the fundamental picture
except that OPEC is showing signs of stepping up to the task of supplying more
oil to the market. In fact, during the session Thursday a private Group
suggested that OPEC output in May increased by 1.7% and that shows increased
flow is already being seen. While we doubt that the consumer will see lower
energy costs off the current wash the lower price action should benefit consumer
sentiment.

Technical Outlook

#ENERGIES 5/28/2004: CRUDE OIL (JUL): More
selling pressure is likely given yesterday’s gap lower price action on the day
session chart. The defensive setup, with the close under the 2nd swing support,
could cause some early weakness. Support for crude is keyed on 38.95 and below
there at 38.48, with resistance pegged at 39.94 and 40.46. 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 38.48.

UNLEADED GAS (JUL): Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
The next downside objective is 123.41. There could be some early pressure today
given the market’s negative setup with the close below the 2nd swing support.
Resistance today is at 132.41, while support should be found around 123.41. The
gap lower on the day session chart is bearish and puts the market on the
defensive. A negative signal for trend short-term was given on a close under the
9-bar moving average.

HEATING OIL (JUL): The defensive setup, with the
close under the 2nd swing support, could cause some early weakness. Heating oil
should encounter support around 96.30, with resistance is at 102.30. 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
96.30. More selling pressure is likely given yesterday’s gap lower price action
on the day session chart.

 

CORN MARKET RECAP

5/27/2004

Strong export sales news and weather helped
support the early gains. Talk that recent rain events, and the forecast for more
heavy rains into early next week, are likely to trim both planted acreage and
yield forecasts helped to support speculative buying and higher trade. However,
given the extremely weak close in soybean beans the corn market was probably
under more pressure than the fundamentals released during the session would have
suggested. The fact that the EU granted 131,000 metric tons in corn import
licenses could mean that they anticipate some corn import need but that also
didn’t save corn from under the soybean washout. Reports that Southern Iowa
farms were getting hammered by more severe storms could mean that some corn will
get washed out. Weakness in the other grains and a forecast for dry weather in
early June certainly limited buying support for corn. Weekly export sales came
in at 1.377 million tons as compared with trade expectations at 700,000-900,000
tons. Old crop sales were 1.262 million tons as compared with 494,200 tons
necessary each week to reach the USDA projection. Cumulative sales have reached
86% of the USDA forecast for the season as compared with 82.8% on average for
this time of the year. On top of the weekly sales, the USDA announced a sale
165,000 tons of US corn to unknown destination. News that the Philippines
cancelled their scheduled tender for next week for 340,000 tons of corn for
prompt delivery helped limit gains as well. December corn support comes in at
289 ¼, with 293 1/2 and 295 3/4 as resistance. A 50% correction of the April to
May break leaves key resistance at 309 3/4.

Technical Outlook

#CORN (JUL) 5/28/2004: 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 306 3/4. It is a slightly
negative indicator that the close was under the swing pivot. Market resistance
comes in at 306 3/4 today, with support at 292 1/4. The close above the 9-day
moving average is a positive short-term indicator for trend.

 

SOY COMPLEX RECAP

5/27/2004

Continued concerns with weak demand from China,
rumors that China is in the process of canceling more Brazil soybean cargoes and
weak weekly sales news helped trigger another round of heavy long liquidation
selling from speculators and a move to the lowest level since February 17th.
There were rumors that China and Brazil were renegotiating China purchases on
near 26 cargoes which were purchased at higher prices and sharply higher freight
rates. Meal collapsed on talk of increased meal imports to the US into the
summer. Weekly export sales for soybeans came in at -9200 tons as compared with
trade expectations at 0-125,000 tons. Old crop sales were -12,400 tons as
compared with 33,100 tons necessary each week to reach the USDA projection.
Cumulative sales have reached 98% of the USDA forecast for the season as
compared with 94.9% on average for this time of the year. Meal sales were higher
than expected at 89,000 tons which brought cumulative sales to 92.1% of the USDA
forecast for the season as compared with 81.7% on average for this time of the
year. The Census crush report was mostly neutral with April crush pegged at
112.5 million bushels vs. trade expectations at 112.3 million. Traders believe
that more heavy rain early next week could cause some acres to shift to
soybeans. Fund and speculative long liquidation selling seemed to be the primary
force leading the sell-off. Short-term resistance for July soybeans comes in at
852 and 858 with 792 1/2 as next key support on the downside. The move under 678
1/2 for November soybeans (now resistance) leaves 663 1/2 as next downside swing
count.

Technical Outlook

#SOYBEANS (JUL) 05/28/04 The gap lower on the day
session chart is bearish and puts the market on the defensive. There could be
some early pressure today given the market’s negative setup with the close below
the 2nd swing support. The next area of resistance is around 842 2/4 and 873
1/4, while 1st support hits today at 801 2/4 and below there at 791 1/4. 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 791 1/4. The market is
approaching over sold levels on an RSI reading under 30.

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 245.2. More selling pressure is
likely given yesterday’s gap lower price action on the day session chart. First
resistance comes in at 265.4, with support at 249.2. The close below the 9-day
moving average is a negative short-term indicator for trend. The defensive
setup, with the close under the 2nd swing support, could cause some early
weakness. Some caution in pressing the downside is warranted with the RSI under
30.

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 26.65. The close below the 2nd swing
support number puts the market on the defensive. The gap lower on the day
session chart is bearish and puts the market on the defensive. Daily swing
resistance is found at 28.17 and above there at 28.99. Support should be
encountered at 27.00 and 26.65. The market is approaching over sold levels on an
RSI reading under 30.

 

WHEAT MARKET RECAP

5/27/2004

The strong export sales news and continued poor
weather for both the western areas of the winter wheat belt and for the eastern
cornbelt soft red crop helped support ideas of a rally before the opening but
weakness in soybeans and fears of increased harvest selling pressures ahead
helped to push the market sharply lower on the session. Weekly export sales came
in at 629,500 tons as compared with trade expectations at 150,000-350,000 tons.
Cumulative sales for the new crop season which begins June 1st have reached
15.7% of the USDA forecast for the season as compared with 5.4% on average for
this time of the year. At their weekly tender, Japan bought 126,000 tons, 81,000
from the US. The European Union awarded export licenses for 238,000 tons of
wheat. Reports from the northwestern Kansas region suggests significant freeze
damage occurred in many fields with some fields considered too poor to harvest
with producers calling insurance adjusters for review. This may show up in the
weekly crop progress report as deteriorating crop conditions in Kansas for the
Tuesday afternoon report. Wet weather in the past few days has slowed harvest
progress in northern Texas and Oklahoma. July wheat support comes in at 366 1/2
with resistance at 374 and 377 1/2.

Technical Outlook

#WHEAT (JUL) 5/28/2004: There could be some early
pressure today given the market’s negative setup with the close below the 2nd
swing support. Expect near-term support around 363 and below there at 359 3/4,
with resistance levels at 375 2/4 and 384 3/4. A negative signal for trend
short-term was given on a close under 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 384 3/4.

 

LIVE CATTLE RECAP

5/27/2004

The cattle surged to a new contract high with
several months hitting limit up as there were rumors of cash trade at $86.00, up
$1.00 from yesterday and up $2.00 from expectations on the week. Ideas that
there will be no Canadian cattle until September and that Japan imports might
resume by the summer helped support the summer month contracts. Boxed-beef
cut-out values were 96 cents lower to $148.84 as compared with $153.08 last week
at this time. The technical action remains bullish with futures at contract
highs fueled by heavy buy-stops above the market due to the discount of futures
to the cash market. The next technical objective on the upside for August cattle
comes in at 89.67.

Technical Outlook

#CATTLE (AUG) 5/28/2004: A bullish signal was
given with an upside crossover of the daily stochastics. The next upside
objective is 90.02. The market has a bullish tilt coming into today’s trade with
the close above the 2nd swing resistance. Support should be encountered at 86.82
and below there at 85.47. Market resistance is at 89.10 and then again at 90.02.
The market made a new contract high on the rally. If yesterday’s gap higher on
the day session chart holds, additional buying could develop this session. A
positive indicator was given with the upside crossover of the 9 & 18 bar moving
average. The market is approaching overbought levels with an RSI over 70.

 

LEAN HOGS RECAP

5/27/2004

July hogs pushed sharply higher on the session in
spite of calls for a lower opening and cash trade at $1.00-$2.00 lower on the
session. A lack of new selling interest above the market contributed to the
sharp gains as traders viewed the surge in cattle and ideas that the recent
break was overdone as reason to buy. In addition, the futures are at a discount
to the cash market which may have contributed to the buying support along with
new contract highs for cattle. The 2-day lean index was down for the 4th session
in a row, down 63 cents to 81.41 as compared with 83.81 last week at this time.

Technical Outlook

#HOGS (JUL) 5/28/2004: There could be more upside
follow through since the market closed above the 2nd swing resistance.
Resistance levels comes in at 75.30 and 76.00 today, while support is around
73.32 and then 72.05. The close above the 9-day moving average is a positive
short-term indicator for trend. The cross over and close above the 40-day moving
average is an indication the longer-term trend is up. 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 72.05.

 

COCOA MARKET RECAP

5/27/2004

The cocoa market exploded after taking direction
from the London market. Initially prices were sloppy but then the shorts decided
to cover and that market sprang to life. Apparently the funds were buyers of the
New York cocoa probably because cocoa prices on the lows today were very
attractive on the arbitrage market. Reports of spec buying were seen once the
July contract rose above the 1405 level. With Nigerian farmers suggesting they
would hoard cocoa beans in the event that prices don’t rise might have given the
market an added lift Thursday. A critical trend line resistance line comes in up
at 1461.

Technical Outlook

COCOA (JUL) 05/28/04 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 1475 with support at
1413 and 1377. Studies are showing positive momentum, but are now in overbought
territory so some caution is warranted. The next upside target is 1474.75.

 

COFFEE MARKET RECAP

5/27/2004

The coffee market settled lower after possibly
getting a little carried away with the weather issue. Apparently origin sales
stepped in front of the market early in the session and that promoted a profit
taking posture. With the Brazilian weather forecast calling for warming temps
and less frost risk the speculative bull bubble is temporarily being deflated.
It was also reported that some funds were banking profits after the recent move
and that also contributed to the lower price action. An extensive overbought
status is probably in place as July coffee rallied from 71.15 on May 21st to
yesterdays high of 82.15 in just four sessions!

Technical Outlook

COFFEE (JUN) 5/28/04 The market tilt is slightly
negative with the close under the pivot. The 9-day RSI over 70 indicates the
market is approaching overbought levels. Studies are showing positive momentum,
but are now in overbought territory so some caution is warranted. The near-term
upside objective is at 80.95. The Coffee contract should run into resistance at
80.60 and above there at 80.95 with support at 79.3 and 78.35. The market’s
short-term trend is positive on a close above the 9-day moving average.

 

SUGAR MARKET RECAP

5/27/2004

July sugar managed to open weaker, forge a new
high for the move but then ended up closing lower. The August contract managed
to close higher on the session as traders were looking at spreads and picking up
supply that was relatively cheap. Some traders were surprised that July sugar
managed to forge the rally because of the proximity to roll over timing. Reduced
European sugar export licenses gave the market a physical lift but since the
trade showed no signs of interest with prices above 699 it is clear that a near
term top might have been forged around the high Thursday.

Technical Outlook

#SUGAR (JUL) 5/28/2004: The daily closing price
reversal down is a negative indicator for prices. The swing indicator gave a
neutral reading since the market’s close was equal to the pivot number. Swing
resistance comes in at 7.07, with support found at 6.77. The close above the
9-day moving average is a positive short-term indicator for trend. Daily
stochastics have risen into overbought territory which will tend to support
reversal action if it occurs. The near-term upside target is at 7.07.

 

COTTON MARKET RECAP

5/27/2004

The cotton market saw a limit down thrust in the
July contract and a sharply lower probe in the December contract. Weekly export
sales, released Thursday morning, came in at 243,400 bales as compared with
trade expectations between 80,000 and 150,000 bales. Old crop sales were 108,600
bales as compared with 12,600 bales necessary each week to reach the USDA
projection. Shipments, however, came in at 249,900 bales as compared with trade
expectations between 300,000 and 400,000 bales. Traders were hopeful that
government incentives will help boost the shipment pace. Rain in Lubbock was
also a contributing factor to the slide in prices but apparently the market
thinks that the new crop outlook is generally without risk.

Technical Outlook

#COTTON (JUL) 5/28/2004: A negative indicator was
given with the downside crossover of the 9 & 18 bar moving average. Bearish
daily studies indicate selling minor rallies this session. The close below the
1st swing support could weigh on the market. Next resistance area comes in at
62.40 and then again at 63.38, while support is targeted at 59.90 and 58.38.
Momentum studies trending lower at mid-range could accelerate a price break if
support levels are broken. The next downside objective is 58.38. The gap lower
on the day session chart is bearish and puts the market on the defensive.