What’s Behind The Volatility In Bonds
BOND MARKET RECAP
10/16/2003
Extremely volatile action was seen in bonds with
the market clearly reacting directly off each new set of US economic
information. The first two numbers were weak and therefore supportive to bonds
but later in the session favorable US equity market action and a strong Philly
Fed survey hammered bonds away from their highs. Some bond longs hoped that Fed
dialogue on the threat of jobs would stand up against the numbers but in the end
that wasn’t going to be the case.
Technical Outlook
BONDS (DEC) 10/17/2003: The market tilt is
slightly negative with the close under the pivot. Near-term resistance for bonds
is at 106.19 and then again at 107.19, while swing support hits at 105.05 and
below there at 104.23. 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 104.23.
T-NOTES(DEC) Daily stochastics are trending
lower, but have declined into oversold territory. The next downside objective is
now at 109.20. The market’s close below the 1st swing support number suggests a
moderately negative setup for today. Near-term resistance for the T-Notes is at
111.05 and then again at 112.00, while swing support hits at 109.31 and below
there at 109.20. The market’s short-term trend is negative as the close remains
below the 9-day moving average.
STOCK INDICES RECAP
10/16/2003
Maybe the stock market was lifted by the passage
of a UN Security Council resolution on Iraq, but more than likely the
improvement in the Philly Fed numbers provided the lift to prices. In looking
back at the economic information released Thursday the bull camp has to feel
good especially since the Philly Fed showed a smart increase in employment. The
Fed noted that one of the remaining risks to the recovery was the jobless threat
and therefore one should not underestimate the importance of favorable jobs
information.
Technical Outlook
S&P500 (DEC) 10/17/2003: The close over the pivot
swing is a somewhat positive setup. Underlying support comes in at 1044.30 and
1037.85, with overhead resistance at 1054.70 and 1058.65. 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 objective is at 1058.65.
S&P E-Mini (DEC): A new contract high was made on
the rally. The daily closing price reversal up is positive. Studies are showing
positive momentum, but are now in overbought territory so some caution is
warranted. The next upside target is 1059.00. With the close higher than the
pivot swing number, the market is in a slightly bullish posture. Near-term
resistance for the S&P Mini is at 1054.75 and then again at 1059.00, while swing
support hits at 1043.75 and below there at 1037.00. The market’s close above the
9-day moving average suggests the short-term trend remains positive.
NASDAQ (DEC) A positive signal for trend
short-term was given on a close over the 9-bar moving average. The market has a
slightly positive tilt with the close over the swing pivot. The market should
run into resistance at 1436.50 and above there at 1442.25 with support at
1418.50 and 1406.25. Rising stochastics at overbought levels warrant some
caution for bulls. The next upside objective is 1442.25.
CURRENCY MARKET
RECAP
10/16/2003
The Dollar couldn’t maintain the upside breakout
Thursday, despite extremely supportive US equity market action and mostly
supportive macro economic information. It should be noted that the Pound and
Canadian made extremely impressive rallies and did so without much weakness in
the Dollar. The gains in the Canadian and the Pound were so large that one has
to suspect something significant is underway. Therefore, it would seem that the
Euro is falling from favor and the currency trade is mostly uncertain on the
current direction of the US Dollar.
Technical Outlook
YEN (DEC): A negative signal for trend short-term
was given on a close under the 9-bar moving average. The outside day down is
somewhat negative. The market could take on a defensive posture with the daily
closing price reversal down. The close below the 1st swing support could weigh
on the market. Swing resistance is targeted at 91.50 and above there at 91.95,
with the yen finding support around 90.85 and below there at 90.65. Stochastics
turning bearish at overbought levels will tend to support lower prices if
support levels are broken. The next downside objective is 90.65. Bearish daily
studies indicate selling minor rallies this session.
EURO (DEC): 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 1.1496. The defensive setup, with
the close under the 2nd swing support, could cause some early weakness. Swing
support for the Euro comes in at 1.1496, with overhead resistance at 1.1712. The
close below the 9-day moving average is a negative short-term indicator for
trend. More selling pressure is likely given yesterday’s gap lower price action
on the day session chart.
PRECIOUS METALS
RECAP
10/16/2003
The gold market tried to rally off the setback in
the Dollar but simply couldn’t muster consistent long interest. While the Dollar
didn’t hold the highs of the day, it also didn’t stray very far from the high
levels and that leaves the overly long gold contingent nervous. Even the silver
market faded which suggests that favorable macro economic information and higher
equity prices mean nothing to the bull camp in silver. The metals simply can’t
seem to garner a consistent theme and therefore the bear camp has an edge.
Technical Outlook
SILVER (DEC): The market tilt is slightly
negative with the close under the pivot. Initial support for silver is at 488.0
and below there at 484.2 with resistance likely at 493.6 and 496.5. 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 493.6.
The market could take on a defensive posture with the daily closing price
reversal down.
GOLD (DEC): Support for gold today comes in near
368.83, while resistance is pegged at 377.83. 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 368.83. It is a slightly
negative indicator that the close was under the swing pivot. The close below the
9-day moving average is a negative short-term indicator for trend. The upside
daily closing price reversal gives the market a bullish tilt.
COPPER MARKET RECAP
10/16/2003
The copper market finished the session lower and
once again rejected the 90-cent level basis the December contract. With the
favorable stock market action Thursday and the favorable macro economic
information floated during the session we have to think that the bull camp will
eventually be able to charge through resistance on the charts. The market is
extensively overbought technically and its unclear if the Chinese will continue
to pay up for copper at higher and higher prices. The fact that the market is
noting some trade selling indicates that some producers are interested in
locking profits and that could indicate a near term top in prices.
ENERGY MARKET RECAP
10/16/2003
The weekly inventory reports were patently
bearish with US crude stocks rising by nearly 7 million barrels at the API.
Countervailing the negative impact of rising crude stocks were signs that US
product stocks continued to contract. However, seeing additional crude supplies
inside the country is a development that reduces anxiety from supply issues and
could result in prices weakening. However, the market is soon to be looking
forward to the November 1st production cut implementation and saw comments from
Kuwait that OPEC should look into the higher banding mechanism. In conclusion,
crude prices didn’t break much following what could have been pretty bearish
numbers.
Technical Outlook
CRUDE OIL (DEC): It is a slightly negative
indicator that the close was under the swing pivot. Support for crude is keyed
on 31.31 and below there at 31.01, with resistance pegged at 32.01 and 32.41.
The market’s close on the 9-day moving average is neutral. .
UNLEADED GAS (DEC): Stochastics turning bearish
at overbought levels will tend to support lower prices if support levels are
broken. The next downside objective is 83.28. The close below the 1st swing
support could weigh on the market. Resistance today is at 87.88, while support
should be found around 83.28. A positive signal for trend short-term was given
on a close over the 9-bar moving average.
HEATING OIL (DEC): The market setup is somewhat
negative with the close under the 1st swing support. Heating oil should
encounter support around 85.86, with resistance is at 88.86. 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 85.86.
CORN MARKET RECAP
10/16/2003
The corn market failed at critical chart support
levels and would seem to have very little in the way of fundamental news to
discourage even more losses. While some rain might stall remaining harvest in
Northern regions there is very little potential to halt the downside off the
weather. Expectations for the weekly export sales called for 700,000 to 900,000
tons compared to the prior weeks tally of 956,000. Maybe the corn market will
get some support from the soon to be passed Energy Bill as it is expected to
contain provisions that expand ethanol use.
Technical Outlook
CORN (DEC) 10/17/2003: 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 212 1/4. The defensive setup,
with the close under the 2nd swing support, could cause some early weakness.
Market resistance comes in at 218 1/4 today, with support at 212 1/4. The close
below the 9-day moving average is a negative short-term indicator for trend.
SOY COMPLEX RECAP
10/16/2003
Spread action seems to be dominating action but
it would seem like the trade is deciding to bank some profits in the front month
contracts. China is still thought to be in the market for more beans and
possibly even soybean oil and that allowed some strength to manifest during the
session. The trade does seem to be concerned about lost momentum considering
that many think the market is extensively overbought technically. There were
rumors that Canada was cutting some deals to sell canola to Asian destinations.
Expectations for the weekly export sales report call for 400,000 to 600,000 tons
compared to 473,000 tons the prior week. The trade might have been partially
undermined by reports that soybean planting is picking up pace because of dry
weather.
Technical Outlook
SOYBEANS (JAN) 10/17/03 The market tilt is
slightly negative with the close under the pivot. The next area of resistance is
around 731 and 737 1/4, while 1st support hits today at 719 and below there at
713 1/4. The market’s close on the 9-day moving average is neutral. A bearish
signal was triggered on a crossover down in the daily stochastics. Stochastics
turning bearish at overbought levels will tend to support lower prices if
support levels are broken. The next downside objective is 713 1/4. The market is
approaching overbought levels with an RSI over 70.
MEAL (DEC): Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 220.6. First resistance comes in at 219.4,
with support at 216.5. The close above the 9-day moving average is a positive
short-term indicator for trend. It is a slightly negative indicator that the
close was under the swing pivot. The market is becoming somewhat overbought now
that the RSI is over 70.
BEAN OIL (DEC): A positive signal for trend
short-term was given on a close over the 9-bar moving average. Stochastics
turning bearish at overbought levels will tend to support lower prices if
support levels are broken. The next downside objective is 25.86. It is a
slightly negative indicator that the close was lower than the pivot swing
number. The daily closing price reversal up is a positive indicator that could
support higher prices. Daily swing resistance is found at 26.57 and above there
at 26.86. Support should be encountered at 26.07 and 25.86. The market is
approaching overbought levels with an RSI over 70.
WHEAT MARKET RECAP
10/16/2003
The wheat market is showing favorable technical
signs on the charts and the talk is that demand is set to provide support to
prices. There are also fears that western growing regions are drying up and need
rain. There was also talk about improving demand in Europe and that could have
something to do with exchange rates. Expectations for the weekly export sales
report call for 350,000 to 450,000 tons and that compares to 348,900 tons the
prior week.
Technical Outlook
WHEAT (DEC) 10/17/2003: The market has a slightly
positive tilt with the close over the swing pivot. Expect near-term support
around 333 1/2 and below there at 329 3/4, with resistance levels at 338 3/4 and
340 1/4. A positive signal for trend short-term was given on a close over the
9-bar moving average. A bullish signal was given with an upside crossover of the
daily stochastics. The next upside objective is 340 1/4.
LIVE CATTLE RECAP
10/16/2003
October cattle closed down the 300 point limit
and down back under 100 which help trigger another round of active long
liquidation selling and a sharply lower close for December cattle and limit-down
for November feeders. Slaughter was only 125,000 head which brought weekly
slaughter to 486,000 head which is down 7.8% from last year. Boxed-beef prices
were up $3.03 at mid-session to $201.19 which is a new all-time high. Beef
values this high have been unheard of in the past. In fact, boxed-beef cut-out
values ranged from near 92.00 to near 133.00 from 1987 until this spring when
prices rallied to near $150.00. After a pull-back to around $130.00 this summer,
the market resumed the uptrend in the past few weeks. Positioning ahead of
Friday’s USDA report and ideas that cash will not stay above $100 for long
helped pressure.
Technical Outlook
CATTLE (DEC) 10/17/2003: Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. The next downside objective is 87.10. The close below the 1st swing
support could weigh on the market. Bearish daily studies indicate selling minor
rallies this session. Support should be encountered at 87.90 and below there at
87.10. Market resistance is at 90.35 and then again at 92.00. A negative signal
for trend short-term was given on a close under the 9-bar moving average.
LEAN HOGS RECAP
10/16/2003
December hogs closed limit-down just one day
after a limit-up move to new contract highs. Cash hogs were .50-$1.00 higher in
the west and steady in the east but the focus of attention recently has been on
the ability of the pork market to move higher in the face of hefty supplies due
to higher beef prices. The sharp drop was triggered by weakness in the cattle
market and an active long liquidation mode. The stiff premium of futures to the
cash market and news of even higher weights helped pressure the market. In
addition, the recent jump in packer margins has supported talk of a very large
kill on Saturday which could trigger large pork production for the week and
weaker pork product prices next week.
Technical Outlook
HOGS (DEC) 10/17/2003: The market setup is
somewhat negative with the close under the 1st swing support. Resistance levels
comes in at 59.77 and 60.87 today, while support is around 58.30 and then 57.92.
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 60.87.
COCOA MARKET RECAP
10/16/2003
Cocoa prices slide back below critical support
suggesting that long interest is extremely low. We are a little surprised that
cocoa prices were weak considering that Ivory Coast farmers are considering
suspending sales for 1 week because they think farm gate prices are too cheap.
Cocoa prices should also have been supported by ideas that the US cocoa grind
could be from +2% to +20% higher for the 3rd quarter. Once again, the buying
seen during the session Thursday was attributed to industry buying and that
means they are extending forward coverage but only at cheap prices.
Technical Outlook
COCOA (DEC)10/17/03 The close below the 1st swing
support could weigh on the market. Cocoa should run into resistance at 1474 and
above there at 1491 with support at 1443 and 1429. Momentum studies are
declining, but have fallen to oversold levels. The next downside target is
1428.75. Short-term indicators on the defensive. Consider selling an intraday
bounce.
COFFEE MARKET RECAP
10/16/2003
Coffee prices managed to finish slightly higher
on the session with the potential for a bullish weather forecast in Brazil.
Maybe many buyers are not buying into the 6 days of hot and dry but that should
at least help the market respect recent chart support. The export pace from
Brazil continues to tail off and that could be supportive but that pattern is
mostly expected. The real issue is, whether or not dry weather returns creating
some uncertainty toward the crop.
Technical Outlook
COFFEE (DEC)10/17/03 The daily closing price
reversal up is positive. The market has a slightly positive tilt with the close
over the swing pivot. Momentum studies are declining, but have fallen to
oversold levels. The next downside objective is now at 60.25.The Coffee contract
should run into resistance at 61.90 and above there at 62.25 with support at
60.9 and 60.25. The market’s short-term trend is negative as the close remains
below the 9-day moving average.
SUGAR MARKET RECAP
10/16/2003
The bounce off of Monday’s reversal bottom low
totaled just 27 points before trade house selling emerged to knock March sugar
down 13 on the session. While the market remains in a technical oversold
condition, there is still no good sign that recent low prices have helped boost
demand from routine buyers or that the low price is enough to shut-off export
supply. Europe, Thailand and Brazil still have ample supply to export after the
world production surplus for the 2002/2003 season was near 6 million tons. As a
result, the lower world production for the 2003/2004 season has failed to
support as the market is still trying to absorb burdensome beginning stocks. In
addition, the trade believes that production this season will still come in near
1-2 million tons above consumption.
Technical Outlook
SUGAR (MAR) 10/17/2003: The daily closing price
reversal down is a negative indicator for prices. The market setup is somewhat
negative with the close under the 1st swing support. Swing resistance comes in
at 6.22, with support found at 5.78. The close below the 9-day moving average is
a negative short-term indicator for trend. 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 5.78. Short-term indicators on the
defensive. Consider selling an intraday bounce.
COTTON MARKET RECAP
10/16/2003
December cotton pushed lower on fears of an
eventual slowdown in demand from China and fears that the recent high price has
already reduced demand from mills in the US. A floor trader speech on the floor
indicated that China yarn prices are not keeping up with the rally in cotton
prices and there was concern that buying from China would be just temporary. The
trend in copper, soybeans and other key commodities when China turns into a
major importer would argue that China buyers are likely to remain active if
supplies are needed. Weekly export sales, released before the opening, are
expected to come in near 140,000-160,000 bales as compared with 104,800 bales
last week at this time.
Technical Outlook
COTTON (DEC) 10/17/2003: A positive signal for
trend short-term was given on a close over 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 74.81 and then again at 75.74, while support is
targeted at 73.38 and 72.88. Rising stochastics at overbought levels warrant
some caution for bulls. The next upside objective is 75.74. The market is
approaching overbought levels with an RSI over 70. 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.