Crude: Biggest Drop In Three Years

Increase export news overnight helped to provide
some commercial buying support but there was a lack of new speculator interest
on the move over yesterday’s highs. Speculative sales emerged to push the market
to a new for the 4th session in a row. South Korea bought 157,500 tons of US
corn overnight and Taiwan is tendering for 125,000 tons. Traders were concerned
with increased competition for corn on the world market due to higher than
expected supply of feedwheat from Canada and Eastern Europe and from export
competition from China. With lower freight, traders believe that South Korea is
looking to book more China corn soon. Deliveries came in at 1377 contracts this
morning which added to the bearish tone. For the weekly export sales report,
released before the opening, traders are looking for corn sales near 800,000-1.0
million tons as compared with 1.301 million tons last week. Resistance for March
Corn comes in at the 205 1/2 and 207 1/4 with 202 3/4 and 200 1/2 as next
support.

Technical Outlook

CORN (MAR) 12/02/2004: The market was pushed to a
new contract low. 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
outside day down is somewhat negative. It is a slightly negative indicator that
the close was lower than the pivot swing number. The next downside target is 201
1/4. The 9-day RSI under 30 indicates the market is approaching oversold levels.
The next area of resistance is around 204 1/2 and 206 1/2, while 1st support
hits today at 202 and below there at 201 1/4.

 

SOY COMPLEX RECAP

12/1/2004

January Soybeans finished down 6 3/4 at 528, 10
1/2 off the high and 1 up from the low. March Soybeans closed down 4 1/2 at 531
1/2. This was 1/2 up from the low and 9 off the high.

January Soymeal closed down 0.6 at 153.6. This
was 0.5 up from the low and 3.1 off the high.

January Soybean Oil finished down 0.22 at 20.4,
0.22 off the high and 0.1 up from the low.

Light commercial buying helped support the early
bounce but the market seems to lack the follow-through technical buying from
speculators to recover from the technical damage done on Monday. News that Asia
rust was confirmed in Missouri and South Carolina (bringing the total to 9
states infected) failed to provide much support to the market except for an
early 5 cent bounce in November 2005 contract. Taiwan passed on a tender to buy
40,000-60,000 tons of US soybeans overnight which added to the export demand
concerns which began yesterday with a weaker gulf basis tone. Taiwan indicated
that prices were too high for a purchase. Talk of weaker crush margins and a
slowdown in crush helped to support the meal market early but the same factor is
seen as a bearish demand force for soybeans. CBOT registrations for oil were
1496 contracts late yesterday from 2260 the previous day. Oil deliveries were
113 lots this morning with meal at 239. For the weekly export sales report,
released before the opening, traders are looking for soybean sales near
650,000-850,000 tons, meal sales near 50,000-100,000 tons and oil sales near
5,000-10,000 tons. Resistance for January soybeans comes in at 535 3/4 and 540
with 525 1/4 and 522 as next support levels.

Technical Outlook

BEANS (JAN) 12/02/2004: The major trend has
turned down with the cross over back below the 40-day moving average. Momentum
studies trending lower at mid-range should accelerate a move lower if support
levels are taken out. The market’s short-term trend is negative as the close
remains below the 9-day moving average. The market’s close below the 1st swing
support number suggests a moderately negative setup for today. The next downside
objective is 519. The next area of resistance is around 533 3/4 and 541 3/4,
while 1st support hits today at 522 1/4 and below there at 519.

MEAL (JAN) 12/02/2004: Momentum studies trending
lower at mid-range should accelerate a move lower if support 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 next downside objective is 151.9. The next area of resistance is around
156.7 and 159.2, while 1st support hits today at 153.1 and below there at 151.9.

BEANOIL (JAN) 12/02/2004: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. A negative signal for trend short-term was given on a close under the
9-bar moving average. The market tilt is slightly negative with the close under
the pivot. The next downside target is 20.18. The next area of resistance is
around 20.62 and 20.83, while 1st support hits today at 20.30 and below there at
20.18.

 

WHEAT MARKET RECAP

12/1/2004

December Wheat finished down 3 3/4 at 286, 7 off the high and
1 up from the low. March Wheat closed down 3 3/4 at 297 1/2. This was 1 1/4 up
from the low and 6 1/4 off the high.

The market found support from speculative buying
early in the session with talk of an oversold condition for traditional
technical indicators and fund short-covering helping to support. However,
continued concerns for the market ability to absorb the massive world crop
without moving lower and fears that US prices will need to remain in a downtrend
to stay competitive added to the bearish tone. Deliveries this morning were 486
lots and talk of a good start for the 2004/2005 winter wheat crop continues to
provide overhead selling resistance. South Korea bought 21,500 tons of US wheat
overnight but other export news is slow. For the weekly export sales report,
released before the opening, traders are looking for wheat sales near
300,000-450,000 tons as compared with 443,400 tons last week. Resistance for
March wheat comes in at the 303 and 308 with 295 and 291 as next support.

Technical Outlook

WHEAT (MAR) 12/02/2004: 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. The outside day down and close below the previous day’s low is a negative
signal. The swing indicator gave a moderately negative reading with the close
below the 1st support number. The next downside objective is now at 291 1/4.
With a reading under 30, the 9-day RSI is approaching oversold levels. The next
area of resistance is around 301 1/4 and 306 1/4, while 1st support hits today
at 293 3/4 and below there at 291 1/4.

 

LIVE CATTLE RECAP

12/1/2004

February Live Cattle closed down 0.67 at 88.87.
This was 0.32 up from the low and 0.82 off the high.

January Feeder Cattle finished down 0.67 at
103.27, 1.12 off the high and 0.02 up from the low.

Ideas that the dry weather forecast in the plains
for the next several days will cause an increase in market-ready cattle sales
helped to trigger the sharp break in February cattle. In addition, traders are
fearful that the recent sharp run-up in beef prices could be met with retail
consumer resistance added to the long liquidation trend. Commercial selling was
noted early in the session which helped to push the market into speculative
sell-stops below the market. Boxed-beef cut-out values were up $2.13 at
mid-session to $147.36 as compared with $138.07 last week at this time. The
surge in beef prices could help support packer margins and allow packers to pay
higher in the cash market next week.

Technical Outlook

CATTLE (FEB) 12/02/2004: 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 market setup
is somewhat negative with the close under the 1st swing support. The next upside
target is 90.150. The next area of resistance is around 89.450 and 90.150, while
1st support hits today at 88.320 and below there at 87.870.

 

LEAN HOGS RECAP

12/1/2004

February Lean Hogs closed down 1.25 at 75.90.
This was 0.22 up from the low and 1.82 off the high.

February Pork Bellies finished down 1.75 at
100.10, 1.40 off the high and 0.25 up from the low.

The sweeping key reversal for February hogs (new
contract high and close below Tuesday’s lows) is a strong technical signal of a
near-term top. Cash hogs were $1.00 higher on the session which supported a move
to new contract highs for the discounted February futures but speculative long
liquidation selling emerged to pressure the market. With slaughter near capacity
and hog weights heavy, traders are nervous that the excess production will begin
to pressure the pork prices if the export news slows. The CME 2-Day Lean Index
for the period ending November 29th was reported at 77.38, unchanged from the
previous session and down from 78.80 last week at this time. The index is likely
to bounce in the next few days after recent cash strength. Weakness in bellies
after a bearish weekly cold storage report helped to pressure. Weekly average
weights for Iowa/Minnesota hogs for the week ending November 27th were reported
at 268.3 pounds, unchanged from last week but up from 265.6 pounds last year.

Technical Outlook

HOGS (FEB) 12/02/2004: The rally brought the
market to a new contract high. A bearish signal was triggered on a crossover
down in the daily stochastics. Momentum studies are trending lower from high
levels which should accelerate a move lower on a break below the 1st swing
support. The market’s close above the 9-day moving average suggests the
short-term trend remains positive. The outside day down is somewhat negative.
The market setup is somewhat negative with the close under the 1st swing
support. The next downside objective is 74.270. The next area of resistance is
around 76.920 and 78.350, while 1st support hits today at 74.900 and below there
at 74.270.

 

COCOA MARKET RECAP

12/1/2004

March Cocoa finished up 8 at 1659, 4 off the high
and 24 up from the low.

The cocoa market managed another minor rise
Wednesday but the extension wasn’t overly impressive. Apparently the funds
continue to buy the market possibly because the market has managed to climb back
above a series of key technical areas on the charts. The market was once again
limited by origin selling but apparently physical supply flow off the harvest
isn’t overcoming the market. With the market attempting to return to an old gap
area on the charts we suspect that the small specs will begin to pulled into the
market along with the funds.

Technical Outlook

COCOA (MAR) 12/02/2004: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The close above
the 9-day moving average is a positive short-term indicator for trend. The close
over the pivot swing is a somewhat positive setup. The next downside objective
is now at 1626. The next area of resistance is around 1673 and 1682, while 1st
support hits today at 1645 and below there at 1626.

 

COFFEE MARKET RECAP

12/1/2004

March Coffee closed up 1.15 at 98.60. This was
2.50 up from the low and 0.65 off the high.

March coffee closed 115 points higher on the
session but managed to stay inside of Tuesday’s range. Traders remain nervous
over the extreme overbought condition of the market basis the last COT report
which showed a record high net long position. However, technically based traders
were impressed with the jump in open interest on the move to contract highs on
Tuesday. Open interest jumped 3,929 contracts to 97,071. A potential significant
world production deficit for the coming year if the 2005/2006 crop from Brazil
is down much from this year helped to provide underlying support for the recent
rally. London closed strong for the third session in a row which added to the
positive tone. Talk that the Vietnam harvest may not be as high as expected due
to adverse weather was also seen as a supportive factor.

Technical Outlook

COFFEE (MAR) 12/02/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The market’s close above the
9-day moving average suggests the short-term trend remains positive. With the
close higher than the pivot swing number, the market is in a slightly bullish
posture. The near-term upside objective is at 101.25. The market is becoming
somewhat overbought now that the RSI is over 70. The next area of resistance is
around 100.15 and 101.25, while 1st support hits today at 97.05 and below there
at 95.00.

 

SUGAR MARKET RECAP

12/1/2004

March Sugar closed up 0.06 at 8.90. This was 0.12
up from the low and 0.02 off the high.

March sugar closed 6 higher on the session and up
12 from the lows of the day as trade house buying supported the market on the
early break. Early selling due to lower price action in London pulled the market
down to the lowest level since November 22nd before the recovery. News that Iran
bought 40,000 tonnes of raw sugar helped to provide underlying support as
traders are waiting for increased cash market activity before assuming that the
market can move to a higher price level. In Brazil, the National Union of Fuel
and Lubricants Distributors indicates that nearly 1/3rd of the fuel ethanol
produced is sold illegally in order to avoid taxes or to mix above the 25% legal
limit. This, along with a surge in ethanol exports this year has made actual
demand calculations difficult.

Technical Outlook

SUGAR (MAR) 12/02/2004: 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 daily closing
price reversal up is a positive indicator that could support higher prices. The
market setup is supportive for early gains with the close over the 1st swing
resistance. The next upside objective is 9.01. The next area of resistance is
around 8.97 and 9.01, while 1st support hits today at 8.83 and below there at
8.74.

 

COTTON MARKET RECAP

12/1/2004

March Cotton finished down 0.89 at 43.89, 0.89
off the high and 0.64 up from the low.

March cotton closed 89 points lower on the
session giving back all of Tuesday’s gains and more. Improving weather in the
West Texas region for harvest and fears that an extended rally could slow US
export business helped to pressure the market. For the weekly export sales
report, released before the opening, traders are looking for cotton sales near
150,000-220,000 bales as compared with 258,000 bales last week. Certified cotton
stocks deliverable to the exchange as of November 30th totaled 79,103 bales from
76,482 bales the previous session.

Technical Outlook

COTTON (MAR) 12/02/2004: 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. The swing indicator gave a moderately negative reading
with the close below the 1st support number. The near-term upside target is at
45.48. The next area of resistance is around 44.65 and 45.48, while 1st support
hits today at 43.13 and below there at 42.43.