This Slide Seems To Have A Head Of Steam

The market managed to match the October highs but
there was a lack of new buying interest which sparked some selling. Speculators
are thought to be holding a massive net short position which has fueled
short-covering but with a record crop to absorb, the buying seems to slow on
rallies. In a special update from Argentina, the USDA’s Foreign Ag Service
reported that more rain is needed in the next few weeks in the western growing
areas if the USDA estimate for 15.5 million tons of production is going to be
achievable. Argentina production last year was 12.75 million tons. Open interest
is down just 1000 contracts since the USDA report. Producers are holding tight
to the freshly harvested crop which has supported a firm tone in the basis.
Continued dry weather reports from South Africa helped provide some underlying
support. For the weekly export sales report, released before the opening,
traders are looking for sales near 1.0-1.4 million tons as compared with 1.484
million tons last week. Support for December corn comes in at 203 3/4 and 202
1/2 with 207 1/4 and 210 1/2 as resistance.

Technical Outlook

CORN (DEC) 10/21/2004: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The close above the 9-day moving average is a positive
short-term indicator for trend. 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. The near-term upside objective is at 210 3/4.
The next area of resistance is around 208 and 210 3/4, while 1st support hits
today at 204 and below there at 202 3/4.

 

SOY COMPLEX RECAP

10/20/2004

November Soybeans finished up 4 3/4 at 532 1/2, 1
1/2 off the high and 7 1/2 up from the low. January Soybeans closed up 2 1/2 at
534 3/4. This was 6 1/4 up from the low and 1 3/4 off the high.

December Soymeal closed up 1.6 at 158.4. This was
1.9 up from the low and 0.1 off the high.

December Soybean Oil finished down 0.04 at 20.63,
0.29 off the high and 0.14 up from the low.

The lack of producer selling has helped support a
run at the October 11th close which was the trading session before the USDA
report. Given the bearish nature of the report, a recovery to prices before the
report release could spark significant short-covering from speculators who were
reported to be holding a record net short position into the report basis the
last Commitment-of-Traders report with options. The early bounce was met with
some commercial selling as the fuel for the current rally seems to be coming
from short-covering. However, open interest is soybeans is up sharply since the
report release. Producers are also holding tight to freshly harvested soybeans
which is providing support to the basis and is helping to support some bull
spreading from commercial traders. A surge higher in palm oil overnight and
continued talk of bio-diesel demand for soyoil for the coming year helped to
support the oil market with December oil back to within 3 ticks of the October
11th close on the early highs today. Argentina officials indicate that farmers
should plant near 14.2 million hectares this season which is near unchanged from
last year. Dry weather in the northern provinces was given as the reason for the
lower than expected estimate. The USDA projected Argentina production at 39
million tons as compared with 34 million tons this year in the October world
Supply/demand report. This helped support the late rally. For the weekly export
sales report, released before the opening, traders are looking for soybean sales
near 900,000-1.2 million tons, meal sales near 150,000-225,000 tons and oil
sales near 5,000-20,000 tons. November soybean resistance comes in at 539
(October 11th close) and 549 with 528 1/2 and 516 as support.

Technical Outlook

BEANS (NOV) 10/21/2004: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The market’s close above the 9-day moving average
suggests the short-term trend remains positive. The close over the pivot swing
is a somewhat positive setup. The near-term upside objective is at 540. The next
area of resistance is around 537 and 540, while 1st support hits today at 528
and below there at 522.

MEAL (DEC) 10/21/2004: Positive momentum studies
in the neutral zone will tend to reinforce higher price action. The close above
the 9-day moving average is a positive short-term indicator for trend. With the
close over the 1st swing resistance number, the market is in a moderately
positive position. The next upside objective is 159.9. The next area of
resistance is around 159.3 and 159.9, while 1st support hits today at 157.4 and
below there at 156.0.

BEANOIL (DEC) 10/21/2004: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The market’s close above the 9-day moving average
suggests the short-term trend remains positive. The daily closing price reversal
down puts the market on the defensive. The close over the pivot swing is a
somewhat positive setup. The near-term upside target is at 21.09. The next area
of resistance is around 20.84 and 21.09, while 1st support hits today at 20.42
and below there at 20.24.

 

WHEAT MARKET RECAP

10/20/2004

December Wheat finished down 5 3/4 at 313 1/2, 7 3/4 off the
high and 1/2 up from the low. March Wheat closed down 4 3/4 at 325. This was 1/2
up from the low and 7 off the high.

The early bounce to the highest level since
September 29th failed to attract new buying and the move back under the opening
trigger speculative long liquidation selling. Commercial buyers seem interested
on breaks but there is little in the way of commercial buying on the rallies as
the world seems well supplied with wheat. Open interest is down near 6800
contracts since the October 12th USDA report which suggests that short-covering
is the fuel for the rally. South Korea is tendering for 42,700 tons of US wheat
(two separate tenders) while Syria is tendering to sell 100,000 tons of wheat.
South Africa lowered their wheat production estimate by 74,000 tons due to a dry
weather spell. For the weekly export sales report, released before the opening,
traders are looking for sales near 400,000-600,000 tons as compared with 592,400
tons last week. December wheat support comes in at 312 and 309 with resistance
at 319 1/4 and 324 1/4.

Technical Outlook

WHEAT (DEC) 10/21/2004: The close below the
40-day moving average is an indication the longer-term trend has turned down.
Stochastics are at mid-range but trending higher, which should reinforce a move
higher if resistance levels are taken out. The market’s short-term trend is
positive on the close above the 9-day moving average. The daily closing price
reversal down puts the market on the defensive. The swing indicator gave a
moderately negative reading with the close below the 1st support number. The
near-term upside target is at 323 1/2. The next area of resistance is around 317
1/2 and 323 1/2, while 1st support hits today at 309 1/2 and below there at 307
1/4.

 

LIVE CATTLE RECAP

10/20/2004

December Live Cattle closed down 2.05 at 87.00.
This was 0.30 up from the low and 1.90 off the high.

November Feeder Cattle finished down 1.70 at
110.60, 1.60 off the high and 0.05 up from the low.

The cattle market collapsed with December down
205 into the close as early active selling from commercial traders pushed
futures into sell-stops from speculators and the market saw a void of new
interest from buyers. Several packers announced 1-day cut-backs in slaughter and
closed some plants due to poor operating margins. Slaughter came in at only
107,000 head as compared with 126,000 last week and 132,000 head last year. With
weights already high, traders are nervous that a slow-down in slaughter will
cause more cattle to back-up in feedlots.

Technical Outlook

CATTLE (DEC) 10/21/2004: The close under the
40-day moving average indicates the longer-term trend could be turning down. A
bearish signal was triggered on a crossover down in the daily stochastics.
Momentum studies trending lower at mid-range should accelerate a move lower if
support levels are taken out. The market’s close below the 9-day moving average
is an indication the short-term trend remains negative. The market is in a
bearish position with the close below the 2nd swing support number. The next
downside target is 85.220. The next area of resistance is around 88.100 and
89.600, while 1st support hits today at 85.920 and below there at 85.220.

 

LEAN HOGS RECAP

10/20/2004

December Lean Hogs closed down 0.60 at 65.90.
This was 0.10 up from the low and 0.90 off the high.

February Pork Bellies finished down 1.72 at
92.80, 1.40 off the high and 0.05 up from the low.

The hog market pushed moderately lower on the
session led by the 2005 contracts as the December futures found some support
from a steady tone in the cash market and a discount of futures to cash. Cash
markets were mixed with $.50 lower at some locations and $.50 higher at others.
The CME 2-Day Lean Index for the period ending October 18th was reported at
70.50, down $.56 from the previous session and down from 77.01 on October 7th.
Weekly average weights for Iowa/Minnesota for the week ending October 16th were
reported at 265.5 pounds as compared with 262.8 the previous week and 265.0 last
year. Slaughter came in at 401,000 head (third day in a row over 400,000) as
compared with trade expectations at 399,000-402,000. Weakness in the cattle
market added to the bearish tone.

Technical Outlook

HOGS (DEC) 10/21/2004: 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 market’s close above the 9-day
moving average suggests the short-term trend remains positive. 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. The next upside
objective is 67.070. The next area of resistance is around 66.370 and 67.070,
while 1st support hits today at 65.400 and below there at 65.120.

 

COCOA MARKET RECAP

10/20/2004

December Cocoa finished down 13 at 1427, 15 off
the high and 3 up from the low.

The cocoa market once again attempted to rally
and then gave up the gains into the close. Apparently origin or harvest selling
pressure surfaced and the commercial buyers are confident that they can wait for
even lower prices ahead. The market didn’t really boost prices on the initial
news that Ivory Coast farmers were going to block ports but once the farmers
indicated they would end the blockage prices did show some weakness. In short,
the period of highest supply in cocoa would still seem to be ahead and that is
weakening the resolve of the bull camp. Even a sharply lower Dollar failed to
provide much in the way of arbitrage support for cocoa possibly because the
technical failure on the charts in the action Wednesday.

Technical Outlook

COCOA (DEC) 10/21/2004: A positive indicator was
given with the upside crossover of the 9 & 18 bar moving average. Stochastics
are at mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The close below the 9-day moving average is a
negative short-term indicator for trend. The market tilt is slightly negative
with the close under the pivot. The near-term upside objective is at 1448. The
next area of resistance is around 1436 and 1448, while 1st support hits today at
1418 and below there at 1412.

 

COFFEE MARKET RECAP

10/20/2004

December Coffee closed up 1.70 at 74.65. This was
2.75 up from the low and 1.10 off the high.

The coffee market soared aggressively as roaster
buying seemed to be joined by spec and fund buying. Apparently there is some
concern about dryness in Brazil despite rain. However, some traders have
suggested that the rain was spotty and that some concern remains in place. With
mixed flowering the trade is probably justified in rising away from the recent
consolidation lows but with the December contract climbing above 74.40 it seemed
like the funds were pulled in on the long side. If coffee prices weren’t so
cheap compared to the May and June highs the market might not have had such a
significant reaction to recent events.

Technical Outlook

COFFEE (DEC) 10/21/2004: A bullish signal was
given with an upside crossover of the daily stochastics. Daily momentum studies
are on the rise from low levels and should accelerate a move higher on a push
through the 1st swing resistance. The market’s close above the 9-day moving
average suggests the short-term trend remains positive. The outside day up and
close above the previous day’s high is a positive signal. The market’s close
above the 2nd swing resistance number is a bullish indication. The near-term
upside target is at 78.05. The next area of resistance is around 76.55 and
78.05, while 1st support hits today at 72.75 and below there at 70.40.

 

SUGAR MARKET RECAP

10/20/2004

March Sugar closed up 0.11 at 9.04. This was 0.06
up from the low and 0.03 off the high.

The sugar market barely managed a higher high
versus the prior session and would seem to be partially tracking the direction
of the energy market. Unfortunately the bullish attitude was generated by
speculative buying instead of more sustainable bullish news like increased
physical demand talk. In the end the exchange apparently saw increased small
spec and fund buying which certainly resumes the rebuilding of that massively
long positioning. All in the sugar market had an extremely low volume session
and therefore the direction of trade offers little sense of the current trend.

Technical Outlook

SUGAR (MAR) 10/21/2004: Momentum studies trending
lower at mid-range should accelerate a move lower if support levels are taken
out. The market’s close below the 9-day moving average is an indication the
short-term trend remains negative. Market positioning is positive with the close
over the 1st swing resistance. The next downside objective is 8.95. The next
area of resistance is around 9.08 and 9.12, while 1st support hits today at 9.00
and below there at 8.95.

 

COTTON MARKET RECAP

10/20/2004

December Cotton finished up 0.45 at 47.99, 0.91
off the high and 0.89 up from the low.

The cotton market opened sharply higher, traded
even higher, set back sharply and then returned back toward the highs.
Supposedly the trade came in as sellers on the opening pulse and that seemed to
take some of the wind out of the market. Supporting the cotton market is talk
that the US crop is large enough that producers are able to pay off operating
loans without selling part of their crop into the cash market. In other words, a
large amount of cotton is moving into the loan program instead into the cash
market. The trade continues to talk about a massive production coming from the
US and that was thought to be limiting the market on the upside. Furthermore,
talk about a bumper cotton crop in India is simply insult to injury for the bull
camp. Weekly export sales expectations call for 150,000 to 300,000 bales
compared to last weeks 98,800 bales.

Technical Outlook

COTTON (DEC) 10/21/2004: Positive momentum
studies in the neutral zone will tend to reinforce higher price action. The
close above the 9-day moving average is a positive short-term indicator for
trend. With the close higher than the pivot swing number, the market is in a
slightly bullish posture. The near-term upside target is at 49.79. The next area
of resistance is around 48.89 and 49.79, while 1st support hits today at 47.09
and below there at 46.20.