Unemployment Shocker Unhinges Bonds
BOND MARKET RECAP
11/5/2004
December Bonds closed down 1-11 at 112-08. This
was 1-08 up from the low and 1-11 off the high.
December 10 Yr Treasury Notes finished down 0-270
at 112-135, 0-260 off the high and 0-285 up from the low.
The Treasury market certainly deserved to
slide aggressively as the monthly unemployment report was a shocker. Not only
did the October numbers come in much stronger than the early expectations but
the prior months figures were revised sharply higher. In short, the outlook for
the US economy improved significantly and the stock market resoundingly
reinforced that with yet another big gain. We have to think that the odds of a
rate hike next week were raised with the information seen Friday morning. In the
event that energy prices continue to decline we suspect that the bonds will
encounter even more significant selling pressure.
Technical Outlook
BONDS (DEC) 11/08/2004: The close under the
40-day moving average indicates the longer-term trend could be turning down. A
negative indicator was given with the downside crossover of the 9 & 18 bar
moving average. 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 objective is 109-22. The next area of resistance is
around 113-20 and 114-31, while 1st support hits today at 111-00 and below there
at 109-22.
TNOTES (DEC) 11/08/2004: The close below the
40-day moving average is an indication the longer-term trend has turned down.
The downside crossover of the 9 & 18 bar moving average is a negative signal.
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 close below the 2nd
swing support number puts the market on the defensive. The next downside target
is 110-220. The next area of resistance is around 113-110 and 114-065, while 1st
support hits today at 111-190 and below there at 110-220.
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STOCK INDICES RECAP
11/5/2004
December S&P finished up 7.3 at 1167.8, 3.7 off
the high and 7.5 up from the low.
December S&P E-Mini closed up 7 at 1167.5. This
was 9.25 up from the low and 4.25 off the high.
December Dow closed up 90 at 10391. This was 96
up from the low and 22 off the high.
December Dow E-Mini finished up 90 at 10391, 21
off the high and 111 up from the low.
The stock market was overbought coming into the
action Friday morning but fortunately for the bull camp the monthly payroll
numbers were stellar. In fact, in addition to the much stronger than expected
October payroll gain of 337,000 jobs the September jobs number was raised by
43,000 jobs. Therefore, the stock market sees its recent gains justified and
might even have the ammunition to extend the gains. So far, the S&P has plowed
into new highs for the year, but the Dow continues to lag behind. In other
words, the big cap stocks continue to be held back by higher energy costs and
possibly because of concerns for further rate hikes.
Technical Outlook
S&P 500 (DEC) 11/08/2004: The rally brought the
market to a new contract high. Daily stochastics have risen into overbought
territory which will tend to support reversal action if it occurs. The market’s
short-term trend is positive on the close above the 9-day moving average. The
market has a slightly positive tilt with the close over the swing pivot. The
near-term upside target is at 1178.10. The market is becoming somewhat
overbought now that the RSI is over 70. The next area of resistance is around
1173.50 and 1178.10, while 1st support hits today at 1162.30 and below there at
1155.70.
SP EMINI (DEC) 11/08/2004: The market made a new
contract high on the rally. Daily stochastics have risen into overbought
territory which will tend to support reversal action if it occurs. A positive
signal for trend short-term was given on a close over the 9-bar moving average.
It is a mildly bullish indicator that the market closed over the pivot swing
number. The near-term upside target is at 1179.75. The market is becoming
somewhat overbought now that the RSI is over 70. The next area of resistance is
around 1174.25 and 1179.75, while 1st support hits today at 1160.75 and below
there at 1152.75.
NASDAQ (DEC) 11/08/2004: The market made a new
contract high on the rally. Rising stochastics at overbought levels warrant some
caution for bulls. The close above the 9-day moving average is a positive
short-term indicator for trend. The market setup is supportive for early gains
with the close over the 1st swing resistance. The near-term upside objective is
at 1550.87. With a reading over 70, the 9-day RSI is approaching overbought
levels. The next area of resistance is around 1541.75 and 1550.87, while 1st
support hits today at 1519.25 and below there at 1505.88.
MINIDOW (DEC) 11/08/2004: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The market’s short-term trend is positive on the close above the
9-day moving average. It is a mildly bullish indicator that the market closed
over the pivot swing number. The next upside target is 10502. The 9-day RSI over
70 indicates the market is approaching overbought levels. The next area of
resistance is around 10461 and 10502, while 1st support hits today at 10329 and
below there at 10239.
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CURRENCY MARKET RECAP
11/5/2004
December US Dollar finished down 56 at 8407, 102
off the high and 4 up from the low.
December Euro finished up 0.86 at 129.46, 0.04
off the high and 1.81 up from the low.
December Euro Dollar closed down 0.08 at 97.58.
This was 0.04 up from the low and 0.075 off the high.
December Canadian Dollar closed up 0.53 at 83.29.
This was 0.89 up from the low and 0.25 off the high.
December British Pound finished up 1.21 at
184.93, 0.13 off the high and 2.43 up from the low.
December Swiss closed up 0.69 at 84.95. This was
1.53 up from the low and 0.03 off the high.
December Japanese Yen closed up 0.35 at 94.76.
This was 0.83 up from the low and 0.2 off the high.
The Dollar surprisingly continued to decline
despite the fact that US payrolls were much better than expected. It is also
surprising that the Dollar failed to find any support from an ultra strong US
equity market. Even moderately lower energy prices failed to alter the
entrenched view toward the Dollar. The US jobs growth for the past two months
simply dwarfs the Euro zone growth but yet the world is content to pressure the
Dollar even lower. Apparently a stronger economy and higher US interest rates
are of no concern to the Forex markets.
Technical Outlook
YEN (DEC) 11/08/2004: 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 market’s close above
the 9-day moving average suggests the short-term trend remains positive. The
daily closing price reversal up on the daily chart is somewhat positive. With
the close over the 1st swing resistance number, the market is in a moderately
positive position. The next downside objective is 93.58. The 9-day RSI over 70
indicates the market is approaching overbought levels. The next area of
resistance is around 95.27 and 95.63, while 1st support hits today at 94.25 and
below there at 93.58.
EURO (DEC) 11/08/2004: The market made a new
contract high on the rally. Daily stochastics have risen into overbought
territory which will tend to support reversal action if it occurs. The market’s
close above the 9-day moving average suggests the short-term trend remains
positive. A positive signal was given by the outside day up. There could be more
upside follow through since the market closed above the 2nd swing resistance.
The next upside objective is 130.86. The market is becoming somewhat overbought
now that the RSI is over 70. The next area of resistance is around 130.38 and
130.86, while 1st support hits today at 128.54 and below there at 127.17.
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PRECIOUS METALS RECAP
11/5/2004
December Gold closed up 3.5 at 434.3. This was
8.8 up from the low and 0.7 off the high.
December Silver finished up 0.122 at 7.505, 0.015
off the high and 0.225 up from the low.
January Platinum closed up 3.3 at 851.9. This was
15.7 up from the low and 0.1 off the high.
Gold and silver were all over the board Friday
morning, as the trade initially feared that the strong payroll readings but when
the Dollar didn’t bounce off the numbers the bulls were enticed back into the
long side. Since the stock market was sharply higher at the same time that the
US Dollar managed new lows one can’t tell if the metals were getting any support
from the hope for physical buying or if the lower Dollar is the real driving
force. We suspect that the COT report Friday afternoon dramatically understated
the net spec and fund long positioning which is in the process of ramping up to
a historical long.
Technical Outlook
SILVER (DEC) 11/08/2004: A bullish signal was
given with an upside crossover of the daily stochastics. Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The market’s close above the 9-day moving average suggests the
short-term trend remains positive. Market positioning is positive with the close
over the 1st swing resistance. The near-term upside target is at 769.3. The next
area of resistance is around 762.5 and 769.3, while 1st support hits today at
738.5 and below there at 721.3.
GOLD (DEC) 11/08/2004: The daily stochastics have
crossed over up which is a bullish indication. Momentum studies are trending
higher but have entered overbought levels. The market’s short-term trend is
positive on the close above the 9-day moving average. The outside day up is a
positive signal. The market setup is supportive for early gains with the close
over the 1st swing resistance. The near-term upside target is at 441.7. The next
area of resistance is around 439.0 and 441.7, while 1st support hits today at
429.6 and below there at 422.8.
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COPPER MARKET RECAP
11/5/2004
December Copper finished up 1.40 at 136.30, 1.20
off the high and 2.20 up from the low.
The copper market forged an upside breakout and
would seem to be set to return to the old highs. Not only have Chinese exchange
stocks continued to drop but LME stocks have continued to drop and that supply
tightening comes right on top of an improvement in demand prospects. With a
series of technical violations made on the upside it was clear that the funds
were rushing into the fray. The US payroll figure was so strong that it seemed
like all the metals were given a boost off the hope for expanded physical
demand. As if the supply and demand elements weren’t enough, the copper market
also saw renewed threats of a strike at a Codelco facility in Chile.
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ENERGY MARKET RECAP
11/5/2004
December Crude Oil closed up 0.79 at 49.61. This
was 1.31 up from the low and 0.09 off the high.
December Heating Oil closed up 0.20 at 137.41.
This was 2.41 up from the low and 1.09 off the high.
December Unleaded Gas finished up 0.94 at 128.68,
0.42 off the high and 2.93 up from the low.
December Natural Gas finished down 0.25 at 7.95,
0.25 off the high and 0.25 up from the low.
December Propane closed down 0.01 at 0.89. This
was 0.00 up from the low and equal to the high.
We are actually surprised that oil prices didn’t
continue to decline as Private forecasting services continue to suggest that
OPEC shipments are rising. However, if the economic outlook in the US is
brightening significantly that might once again ratchet up the demand outlook.
However, it seemed like October OPEC output actually contracted slightly in
October because of some supply problems in Nigeria. In fact, the OPEC October
production tally declined by 90,000 barrels per day and that is a supportive
element for prices. Furthermore, the Venezuelan oil Minister suggested that oil
prices could still resume the upside track on the slightest supply glitch and
the market made note of that prediction.
Technical Outlook
CRUDE OIL (DEC) 11/08/2004: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The market’s short-term trend is negative as the close
remains below the 9-day moving average. The upside closing price reversal on the
daily chart is somewhat bullish. With the close higher than the pivot swing
number, the market is in a slightly bullish posture. The next downside objective
is now at 47.91. The next area of resistance is around 50.30 and 50.70, while
1st support hits today at 48.91 and below there at 47.91.
UNLEADED (DEC) 11/08/2004: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
market’s close below the 9-day moving average is an indication the short-term
trend remains negative. The upside daily closing price reversal gives the market
a bullish tilt. It is a slightly negative indicator that the close was lower
than the pivot swing number. The next downside target is now at 124.71. The next
area of resistance is around 130.35 and 131.40, while 1st support hits today at
127.01 and below there at 124.71.
HEATING OIL (DEC) 11/08/2004: Daily stochastics
are trending lower but have declined into oversold territory. A negative signal
for trend short-term was given on a close under the 9-bar moving average. The
market’s close below the pivot swing number is a mildly negative setup. The next
downside objective is 133.58. The next area of resistance is around 139.16 and
140.57, while 1st support hits today at 135.66 and below there at 133.58.
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CORN MARKET RECAP
11/5/2004
December Corn finished up 2 at 199 1/2, 1
1/4 off the high and 2 1/4 up from the low. March Corn closed up 2 1/4 at 211
3/4. This was 3 up from the low and 1 off the high.
The lack of follow-through selling on the early
break helped to support the bounce into the mid-session and strength in the
other grains added to the more positive tone. Talk of the extreme oversold
condition of the market also helped trigger some short-covering. The jump in
open interest over the past several weeks suggests that speculators are building
a large net short position and tonight’s weekly Commitment-of-Traders report is
expected to show a large net short position. December corn closed higher on the
session Friday but down 2 3/4 cents for the week. Informa Economics (Sparks)
pegged the crop at 11.75 billion bushels which would be up 137 million bushels
from the October report. Export news was quiet overnight and basis levels are
mostly steady with some weakness noted at river locations. Support for December
corn comes in at 197 and 192 1/2 with resistance at 201 3/4 and 203 1/4.
Technical Outlook
CORN (DEC) 11/08/2004: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
close below the 9-day moving average is a negative short-term indicator for
trend. A positive setup occurred with the close over the 1st swing resistance.
The next downside objective is now at 195 3/4. The next area of resistance is
around 201 1/4 and 202 3/4, while 1st support hits today at 197 3/4 and below
there at 195 3/4.
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SOY COMPLEX RECAP
11/5/2004
January Soybeans finished down 1 at 505 1/4, 5
1/4 off the high and 1 up from the low. March Soybeans closed up 1/4 at 512.
This was 2 up from the low and 5 1/2 off the high.
December Soymeal closed down 1.8 at 147.0. This
was 0.2 up from the low and 2.5 off the high.
December Soybean Oil finished up 0.39 at 20.27,
0.03 off the high and 0.45 up from the low.
Slow export sales news overnight and weak sales
for the weekly report yesterday kept the negative tone in tact for the soybean
complex. Traders are also bracing for another increase in production for next
weeks USDA Crop Production report. Informa Economics (Sparks) pegged the crop at
3.15 billion bushels which would be up 43 million bushels from the October
report. However, traders had expected a larger increase in soybean production
estimates for next weeks crop. Country basis bids were higher due to tight
producer selling with crushers in Iowa and Indiana boosting basis bids by 2-3
cents. The weak gulf basis yesterday triggered lower basis bids at river
locations. There were no deliveries against the November contract overnight and
export news was quiet. January soybeans closed 28 cents lower on the week with
December Meal down $6.90 for the week and December Oil down 120 points in spite
of the bounce on Friday. The new low close for January soybeans leaves the
technical action bearish. January soybean support comes in at 505 1/2 and 499
3/4 with resistance at 513 1/2 and 516.
Technical Outlook
BEANS (JAN) 11/08/2004: The market broke to a new
contract low. The moving average crossover down (9 below 18) indicates a
possible developing short-term downtrend. Daily stochastics declining into
oversold territory suggest the selling may be drying up soon. The market’s close
below the 9-day moving average is an indication the short-term trend remains
negative. The market’s close below the pivot swing number is a mildly negative
setup. The next downside objective is now at 500 1/4. The market is approaching
oversold levels on an RSI reading under 30. The next area of resistance is
around 508 1/4 and 512 1/2, while 1st support hits today at 502 1/4 and below
there at 500 1/4.
MEAL (DEC) 11/08/2004: The market broke to a new
contract low. Daily stochastics declining into oversold territory suggest the
selling may be drying up soon. The market’s short-term trend is negative as the
close remains below the 9-day moving average. The defensive setup, with the
close under the 2nd swing support, could cause some early weakness. The next
downside objective is 144.9. The market is approaching oversold levels on an RSI
reading under 30. The next area of resistance is around 148.3 and 150.2, while
1st support hits today at 145.7 and below there at 144.9.
BEANOIL (DEC) 11/08/2004: Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The market’s short-term trend is negative as the close remains below the
9-day moving average. The market setup is supportive for early gains with the
close over the 1st swing resistance. The next downside target is 19.69. The next
area of resistance is around 20.51 and 20.64, while 1st support hits today at
20.03 and below there at 19.69.
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WHEAT MARKET RECAP
11/5/2004
December Wheat finished up 3 1/2 at 306 1/2, 2 1/2 off the
high and 6 up from the low. March Wheat closed up 3 1/4 at 319 1/2. This was 6
up from the low and 2 1/2 off the high.
Follow-through technical buying after the
reversal on Thursday helped to support the market. Kansas City and Minneapolis
wheat led the rally with talk of tighter supply for high quality, high protein
wheat. Egypt, South Korea, and Japan were active buyers in the past few sessions
and the weekly export sales report indicated that cumulative US export sales for
the 2004/2005 marketing season have reached 62.5% of the USDA forecast for the
season as compared with 51.8% on average for this time of the year. The new low
for the US dollar and the fast pace of sales could lead to a higher export
forecast in next weeks USDA supply/demand report. A higher export forecast could
tighten the ending stocks forecast further. Winter wheat planting progress and
crop conditions look favorable into early next week. Japan bought 121,000 tonnes
of wheat at their weekly tender with 80,000 of the total from the US. December
wheat closed 10 cents lower on the week. December wheat support comes in at 301
1/2 and 300 1/4 with resistance at 308 and 311 1/2.
Technical Outlook
WHEAT (DEC) 11/08/2004: Daily stochastics are
trending lower but have declined into oversold territory. The close below the
9-day moving average is a negative short-term indicator for trend. It is a
mildly bullish indicator that the market closed over the pivot swing number. The
next downside objective is now at 297 1/4. The next area of resistance is around
310 3/4 and 314, while 1st support hits today at 302 1/4 and below there at 297
1/4.
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LIVE CATTLE RECAP
11/5/2004
December Live Cattle closed down 0.37 at 82.45.
This was 0.07 up from the low and 0.82 off the high.
January Feeder Cattle finished down 0.45 at
101.75, 1.05 off the high and 0.05 up from the low.
Cattle experienced choppy and two-sided trade
inside of Thursday’s range on Friday. February cattle bounced off of key support
at 85.60 and bounced all the way to 86.40 before speculative selling emerged to
break the market back to lower on the session. Boxed-beef prices were down $1.16
to $130.16 at mid-session as compared with $139.45 last week at this time.
Packer bids for cash cattle at mid-day were still mostly $81.00 with a few bids
at $82.00 but there was still no trade after cash traded at $84.00-$85.00 last
week and some Nebraska cattle traded this week at $3.00 lower.
Technical Outlook
CATTLE (DEC) 11/08/2004: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The close below the 9-day moving average is a negative
short-term indicator for trend. The market’s close below the pivot swing number
is a mildly negative setup. The next downside objective is 81.750. The 9-day RSI
under 20 suggests the market is extremely oversold. The next area of resistance
is around 82.900 and 83.520, while 1st support hits today at 82.020 and below
there at 81.750.
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LEAN HOGS RECAP
11/5/2004
December Lean Hogs closed down 1.60 at 72.25.
This was 0.05 up from the low and 2.10 off the high.
February Pork Bellies finished down 0.80 at
101.70, 1.35 off the high and 1.45 up from the low.
After opening into contract highs for the 7th up
day in a row, the sweeping reversal and lower close for December hogs leaves the
appearance that a near-term top is in place. The CME 2-Day Lean Index for the
period ending November 3rd was reported at 72.52, up 61 cents from the previous
session and up from 71.09 the previous week. Cash markets were $.50 higher on
the session but there was a general feeling that packers may have filled
near-term needs and cash could drift a bit lower early next week. In addition,
longs took profits with plenty of talk of an overbought condition.
Technical Outlook
HOGS (DEC) 11/08/2004: The market made a new
contract high on the rally. Studies are showing positive momentum but are now in
overbought territory, so some caution is warranted. The market’s short-term
trend is positive on the close above the 9-day moving average. The outside day
down and close below the previous day’s low is a negative signal. The close
below the 1st swing support could weigh on the market. The near-term upside
target is at 74.900. The next area of resistance is around 73.320 and 74.900,
while 1st support hits today at 71.200 and below there at 70.620.
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COCOA MARKET RECAP
11/5/2004
December Cocoa finished up 65 at 1633, 5 off the
high and 61 up from the low.
The cocoa market extended the massive pattern of
gains and did so because violence was escalating instead of mitigating. We
suspect that a progressively lower US Dollar gave the US cocoa market an
additional lift. If the fighting gets beyond an easy solution (it may be already
beyond solving) we suspect that March cocoa prices will mount a run all the way
up to the August consolidation around 1,700 to 1,750. Some traders are already
expecting the flow of harvest to be impeded by aggressive fighting and that is
brining in spec, fund and commercial buyers.
Technical Outlook
COCOA (DEC) 11/08/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The market’s short-term trend
is positive on the close above the 9-day moving average. The gap up on the day
session chart gave a bullish indicator and more follow through could be seen
this session. 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. The next upside target is 1685. The market is becoming somewhat
overbought now that the RSI is over 70. The next area of resistance is around
1666 and 1685, while 1st support hits today at 1600 and below there at 1553.
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COFFEE MARKET RECAP
11/5/2004
December Coffee closed up 0.40 at 78.30. This was
0.30 up from the low and 0.90 off the high.
The coffee market managed a strong pulse up to
the highest prices since early October but the trade didn’t seem comfortable
holding prices up at that level. Some traders talked about a slight up tick in
seasonal roaster demand but right now the market probably can’t expect
consistent upside action off demand expectations alone. So far, Brazilian
growers have sold a little more than half of their 2004-2005 crop and that pace
of forward sales is running slightly behind year ago levels. A slight decline in
exchange warehouse stocks is taking place and that might be an offshoot of the
rising demand pattern. Therefore, the bull camp seems to have a minimal amount
of control over prices.
Technical Outlook
COFFEE (DEC) 11/08/2004: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The market’s short-term trend is positive on the close above the 9-day
moving average. The close over the pivot swing is a somewhat positive setup. The
next upside objective is 79.60. The next area of resistance is around 78.85 and
79.60, while 1st support hits today at 77.70 and below there at 77.25.
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SUGAR MARKET RECAP
11/5/2004
March Sugar closed up 0.05 at 8.48. This was 0.07
up from the low and 0.01 off the high.
The sugar market managed to extend the bounce off
the new low for the week in the action Friday but there would seem to be more
technical short covering action than fundamental buying interest. The Russians
suggested that their Refinery output was set to increase 18% on the year and
that at least pulls down the amount of stocks held to 3.58 million tons, which
is below the year prior figure of 4.38 million. Apparently there was some fresh
fund buying possibly because some minor technical levels were regained on the
charts. However, with the Press also suggesting that the trade was buying that
would seem to broaden the long interest and potentially given the upside tilt
some legs.
Technical Outlook
SUGAR (MAR) 11/08/2004: The crossover up in the
daily stochastics is a bullish signal. Daily stochastics are showing positive
momentum from oversold levels, which should reinforce a move higher if near-term
resistance is taken out. The market’s short-term trend is negative as the close
remains below the 9-day moving average. The market setup is supportive for early
gains with the close over the 1st swing resistance. The next upside objective is
8.54. The next area of resistance is around 8.52 and 8.54, while 1st support
hits today at 8.44 and below there at 8.39.
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COTTON MARKET RECAP
11/5/2004
December Cotton finished down 0.01 at 43.36, 0.44
off the high and 0.16 up from the low.
The December contract barely managed to respect
the week’s low in the action Friday and it would seem like the bear camp
maintains control over the near term direction of prices. Private crop forecasts
put the US cotton crop up to 21.9 million bales and that is a minor from the
prior reading. The new upward adjustment in production figures was also seen
from the USDA in the last monthly report so the new figures are only minimally
negative. The next USDA update will be out on November 12th. So far, cotton
hasn’t seen much in the way of support from the improvement in the economy and
that is because supply is choking the market.
Technical Outlook
COTTON (DEC) 11/08/2004: Momentum studies are
declining, but have fallen to oversold levels. 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 next downside target is
now at 42.83. The next area of resistance is around 43.66 and 44.03, while 1st
support hits today at 43.06 and below there at 42.83.