Sharp Rally In Copper–Here’s Why
BOND MARKET RECAP
2/14/2005
March Bonds finished up 0-13 at 116-07, 0-05 off
the high and 0-15 up from the low.
March 10 Yr Treasury Notes finished up 0-040 at
112-230, 0-025 off the high and 0-070 up from the low.
The Treasury market remained bullishly
biased despite what appeared to be a recent near term weakness. The KC Fed
manufacturing Index was a conflicted report with the month over month Index
rising sharply, while the seasonally adjusted Index slowed to the lowest level
since last spring. With the shipments Index rising and the employment Index
declining it is clear that the macro economic information flow was confusing at
best. In other words, the macro economic outlook remains cloudy and that seems
to leave control over the market with the bull camp. We also think that
persistent weakness in the Dollar lends some support to the Bonds as that seems
to foster intervention buying.
Technical Outlook
BONDS (MAR) 02/15/2005: Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. The major trend could be turning up with the close back above the
18-day moving average. Market positioning is positive with the close over the
1st swing resistance. The next downside objective is 115-14. The next area of
resistance is around 116-19 and 116-27, while 1st support hits today at 115-29
and below there at 115-14.
TNOTES (MAR) 02/15/2005: Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The major trend could be turning up with the close back above the 18-day
moving average. The market has a slightly positive tilt with the close over the
swing pivot. The next downside objective is now at 112-115. The next area of
resistance is around 112-270 and 112-310, while 1st support hits today at
112-175 and below there at 112-115.
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STOCK INDICES RECAP
2/14/2005
March S&P finished down 0.7 at 1206.3, 1.6 off
the high and 2.2 up from the low.
March S&P E-Mini closed down 0.75 at 1206.25.
This was 2.25 up from the low and 2.25 off the high.
March Dow closed down 13 at 10793. This was 18 up
from the low and 15 off the high.
Stock prices started the week out on a soft tone
with AIG leading the Dow lower in the wake of fresh investigation rumors. We
also think that the market was a little concerned about the latest wave of
merger/buyout information but supporting the market against the slightly bearish
early start to the week were expectations from the Philly Fed survey that
upwardly revised US growth projections. Also dampening sentiment Monday were
concerns of rising energy prices and a sagging US Dollar. In fact, the slide in
the Dollar has to be discouraging some international buying of US Securities.
The market could have been lifted by Fed statements Monday, which seemed to
suggest that near term rate hikes might be more difficult to rationalize in the
event that energy prices continue to remain high.
Technical Outlook
S&P 500 (MAR) 02/15/2005: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The cross over and close above the 18-day moving average is an
indication the longer-term trend has turned positive. With the close higher than
the pivot swing number, the market is in a slightly bullish posture. The
near-term upside target is at 1209.95. The next area of resistance is around
1208.20 and 1209.95, while 1st support hits today at 1204.40 and below there at
1202.35.
SP EMINI (MAR) 02/15/2005: Momentum studies are
trending higher but have entered overbought levels. The cross over and close
above the 18-day moving average indicates the longer-term trend has turned up.
The market has a slightly positive tilt with the close over the swing pivot. The
near-term upside objective is at 1210.75. The next area of resistance is around
1208.50 and 1210.75, while 1st support hits today at 1204.00 and below there at
1201.75.
NASDAQ (MAR) 02/15/2005: Positive momentum
studies in the neutral zone will tend to reinforce higher price action. The
major trend could be turning up with the close back above the 18-day moving
average. With the close higher than the pivot swing number, the market is in a
slightly bullish posture. The near-term upside target is at 1548.50. The next
area of resistance is around 1543.00 and 1548.50, while 1st support hits today
at 1532.00 and below there at 1526.50.
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CURRENCY MARKET RECAP
2/14/2005
March US Dollar finished down 61 at 8400, 51 off
the high and 20 up from the low.
March Euro finished up 0.93 at 129.66, 0.24 off
the high and 0.18 up from the low.
March Euro Dollar closed down 0.0075 at 97.0175.
This was 0.0025 up from the low and 0.005 off the high.
March Canadian Dollar closed up 0.19 at 81. This
was 0.28 up from the low and 0.28 off the high.
March British Pound finished up 2.13 at 188.56,
0.32 off the high and 0.28 up from the low.
March Swiss closed up 0.76 at 83.54. This was
0.16 up from the low and 0.14 off the high.
March Japanese Yen closed up 0.56 at 95.26. This
was 0.01 up from the low and 0.33 off the high.
The Dollar extended the downside action seen from
the high last week in dramatic fashion Monday and with the US economic report
slate apparently unable to stem the tide of selling it would seem like even more
losses are ahead. Renewed legal concerns for a large US insurer, higher oil
prices early and weakness in the US stock market seemed to dash any fresh buying
interest in the Dollar and that tilt was simply exaggerated by the talk that the
US Federal Reserve might be less inclined to hike interest rates in the next
FOMC meeting. If the US Fed were to acknowledge that high oil prices were
hindering the US recovery that might be enough to apply significant additional
follow through selling to the Dollar.
Technical Outlook
YEN (MAR) 02/15/2005: 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 close below the 18-day moving average is
an indication the longer-term trend has turned down. Follow through buying looks
likely if the market can hold yesterday’s gap on the day session chart. 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 objective is 95.68. The next area of resistance is around 95.43 and
95.68, while 1st support hits today at 95.09 and below there at 95.00.
EURO (MAR) 02/15/2005: Positive momentum studies
in the neutral zone will tend to reinforce higher price action. The cross over
and close above the 18-day moving average is an indication the longer-term trend
has turned positive. The gap upmove on the day session chart is a bullish
indicator for trend. There could be more upside follow through since the market
closed above the 2nd swing resistance. The near-term upside target is at 130.09.
The next area of resistance is around 129.87 and 130.09, while 1st support hits
today at 129.45 and below there at 129.26.
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PRECIOUS METALS RECAP
2/14/2005
April Gold closed up 5.3 at 427.3. This was 3.3
up from the low and 0.4 off the high.
March Silver finished up 0.13 at 7.34, 0.01 off
the high and 0.115 up from the low.
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Given another session of moderately broad based
buying interest in all the metals it is clear that the bull camp maintains
control. With the US Dollar sharply lower it isn’t surprising that gold was
leading the upward charge in the precious metals. However, because all of the
metals were posting significant gains it would seem like the funds and the small
specs were moving into play regardless of the slightly overbought near term
positioning. With today the first full trade for many Asian players in over a
week it is possible that some of the buying Monday was simply catch up buying.
Technical Outlook
SILVER (MAR) 02/15/2005: The moving average
crossover up (9 above 18) indicates a possible developing short-term uptrend.
Studies are showing positive momentum but are now in overbought territory, so
some caution is warranted. The cross over and close above the 18-day moving
average is an indication the longer-term trend has turned positive. Market
positioning is positive with the close over the 1st swing resistance. The next
upside target is 743.9. The market is becoming somewhat overbought now that the
RSI is over 70. The next area of resistance is around 740.3 and 743.9, while 1st
support hits today at 727.8 and below there at 718.9.
GOLD (APR) 02/15/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The market now above the 18-day moving average suggests the
longer-term trend has turned up. The gap upmove on the day session chart is a
bullish indicator for trend. The market’s close above the 2nd swing resistance
number is a bullish indication. The near-term upside objective is at 430.2. The
next area of resistance is around 429.1 and 430.2, while 1st support hits today
at 425.5 and below there at 422.9.
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COPPER MARKET RECAP
2/14/2005
March Copper closed up 1.70 at 143.95. This was
1.45 up from the low and 0.85 off the high.
The copper market wasted no time in returning to
bull market status as it forged a sharp rally out of the box on Monday morning.
It seemed like the return of Asian traders fueled the sharp rally but by mid
morning the market was unable to hold the early aggressive gains. With the Press
reporting increased fund buying in zinc and copper prices starting the week out
some strong we suspect that the funds were behind a large portion of the Monday
rally. We also think that a significant downside follow through in the US Dollar
gave US copper an additional lift, despite the fact that recent exchange stock
figures has showed a slight build in supply.
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ENERGY MARKET RECAP
2/14/2005
March Crude Oil closed up 0.28 at 47.44. This was
0.84 up from the low and 0.31 off the high.
March Heating Oil closed down 1.14 at 129.44.
This was 1.69 up from the low and 2.81 off the high.
March Unleaded Gas finished down 0.57 at 127.80,
2.10 off the high and 1.60 up from the low.
March Natural Gas finished unchanged at 6.09,
0.02 off the high and 0.12 up from the low.
March Propane closed up 0.01 at 0.75. This was
equal to the low and 0.01 off the high.
The energy complex continued to rise despite the
fact that some OPEC members were out early downplaying the need for a production
cut prior to the March meeting. However, the market instead decided to focus on
the Secretary General comments that the cartel would not rule out a production
cut for the second quarter. The Secretary General of OPEC also suggested that
OPEC capacity was 2 million barrels and that could have been considered bearish
if the market weren’t so entrenched in the bullish posture. It is also possible
that the disruption of Iraqi oil flow, the bombing in Lebanon and the ongoing
aggressive dialogue toward Iran added in buying interest on Monday.
Technical Outlook
CRUDE OIL (MAR) 02/15/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The cross over and close above the 18-day moving average
indicates the longer-term trend has turned up. With the close higher than the
pivot swing number, the market is in a slightly bullish posture. The near-term
upside objective is at 48.45. The next area of resistance is around 48.01 and
48.45, while 1st support hits today at 46.87 and below there at 46.16.
UNLEADED (MAR) 02/15/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The close under the 18-day moving average
indicates the longer-term trend could be turning down. The market tilt is
slightly negative with the close under the pivot. The near-term upside target is
at 131.62. The next area of resistance is around 129.65 and 131.62, while 1st
support hits today at 125.95 and below there at 124.23.
HEATING OIL (MAR) 02/15/2005: The major trend has
turned down with the cross over back below the 60-day moving average. Momentum
studies are rising from mid-range, which could accelerate a move higher if
resistance levels are penetrated. The market back below the 18-day moving
average suggests the longer-term trend could be turning down. The market tilt is
slightly negative with the close under the pivot. The near-term upside target is
at 134.22. The next area of resistance is around 131.69 and 134.22, while 1st
support hits today at 127.19 and below there at 125.22.
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CORN MARKET RECAP
2/14/2005
March Corn finished up 2 1/4 at 200 1/2, 1
1/4 off the high and 2 up from the low. May Corn closed up 2 1/2 at 208 1/2.
This was 2 1/4 up from the low and 1 off the high.
A fund short-covering surge supported the gap
higher opening which is seen as a bullish technical development. The sharply
higher trade in soybeans supported the early sharp gains and contributed to the
short-covering trend of the large traders. Funds were holding a record net short
position of over 129,000 contracts as of February 8th (futures and options
combined) so the move to the highest level since January 12th sparked buying.
Basis levels are weaker in the Midwest with talk of increased producer selling.
Once the early fund buying subsided, futures drifted lower but the close over
psychological resistance at 2.00 is seen as positive. Weekly export inspections
came in at 29.5 million bushels as compared with trade expectations at 22-27
million. Cumulative exports have reached 39.6% of the USDA forecast for the
entire season as compared with 43.5% on average for this time of the year.
Support for March corn comes in at 198 and 197 with resistance at 202 and 203
3/4.
Technical Outlook
CORN (MAR) 02/15/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The major trend could be turning up with the close back above
the 18-day moving average. With the close over the 1st swing resistance number,
the market is in a moderately positive position. The next upside target is 203
1/2. The next area of resistance is around 202 and 203 1/2, while 1st support
hits today at 199 and below there at 197 1/4.
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SOY COMPLEX RECAP
2/14/2005
March Soybeans finished up 10 at 535 3/4, 1 1/4
off the high and 9 3/4 up from the low. May Soybeans closed up 9 3/4 at 536 1/4.
This was 9 3/4 up from the low and 3/4 off the high.
March Soymeal closed up 4.1 at 161.2. This was
3.8 up from the low and 0.2 off the high.
March Soybean Oil finished down 0.04 at 19.97,
0.43 off the high and 0.2 up from the low.
Short-covering and talk of declining crop
estimates in Brazil due to dryness in the southern growing regions helped to
provide early support. The gap higher on a Monday is seen as a positive
development but after closing higher for 6 sessions in a row, the market may be
a bit overbought. The weekend Commitment-of-Traders report with options showed
the market in an extreme oversold condition with funds and the combined net
short position of the speculator both at a record extreme for soybeans, meal and
oil. Weekly export inspections came in at 26.09 million bushels as compared with
trade expectations at 21-26 million. Cumulative exports have reached 69.9% of
the USDA forecast for the entire season as compared with 65% on average for this
time of the year. Basis levels in the Midwest and at the gulf are slightly lower
due to more active selling noted from producers. Wet weather in northern Brazil
has delayed harvest. Oil found some support from sharply higher trade in
Malaysia palm futures overnight. For the monthly NOPA crush report for Tuesday
morning traders are looking for January crush near 142 million bushels (140-145
range) as compared with the December crush at 143.4 million bushels. Support for
March soybeans comes in at 528 1/2 and 522 1/4 with resistance at 539 1/2 and
544 1/2.
Technical Outlook
BEANS (MAR) 02/15/2005: The major trend could be
turning up with the close back above the 60-day moving average. Momentum studies
are rising from mid-range, which could accelerate a move higher if resistance
levels are penetrated. The market now above the 18-day moving average suggests
the longer-term trend has turned up. The market setup is supportive for early
gains with the close over the 1st swing resistance. The near-term upside
objective is at 544 1/2. The 9-day RSI over 70 indicates the market is
approaching overbought levels. The next area of resistance is around 541 1/4 and
544 1/2, while 1st support hits today at 530 1/4 and below there at 522 3/4.
MEAL (MAR) 02/15/2005: The cross over and close
above the 60-day moving average indicates the longer-term trend has turned up.
Momentum studies are rising from mid-range, which could accelerate a move higher
if resistance levels are penetrated. The market now above the 18-day moving
average suggests the longer-term trend has turned up. 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 objective is
164.3. The next area of resistance is around 163.2 and 164.3, while 1st support
hits today at 159.2 and below there at 156.3.
BEANOIL (MAR) 02/15/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The cross over and close above the 18-day
moving average is an indication the longer-term trend has turned positive. The
daily closing price reversal down is a negative indicator for prices. With the
close higher than the pivot swing number, the market is in a slightly bullish
posture. The next upside objective is 20.65. The next area of resistance is
around 20.28 and 20.65, while 1st support hits today at 19.66 and below there at
19.40.
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WHEAT MARKET RECAP
2/14/2005
March Wheat finished up 7 1/4 at 301 3/4, 1/2 off the high and
7 1/4 up from the low. May Wheat closed up 6 1/4 at 309 1/4. This was 6 3/4 up
from the low and 1/4 off the high.
The surge higher in soybeans supported the early
gains and the market held on to solid gains in spite of the sell-off from the
highs in soybeans and corn. Another round of moisture across the plains this
weekend and more in the forecast for this weekend has kept weather as a bearish
force. A lack of a weather problem for any of the worlds major producers and
word over the weekend from India officials that production this year could jump
3 million tons to 75 million helped to limit the buying support. Short-covering
was also seen as a supportive force as the weekend traders report showed a
record net short position of the speculator. Weekly export inspections came in
at 15.8 million bushels as compared with trade expectations at 12-17 million.
Cumulative exports have reached 74.9% of the USDA forecast for the entire season
as compared with 71.8% on average for this time of the year. After the lower
close on Friday, sellers turned a bit more active when the early rally failed to
move above Friday’s highs. However, the late move over Friday’s highs attracted
new buying. March wheat support comes in at 297 3/4 and 293 1/2 with resistance
at 306 1/2 and 311 1/2.
Technical Outlook
WHEAT (MAR) 02/15/2005: The cross over and close
above the 60-day moving average is an indication the longer-term trend has
turned positive. Stochastics are at mid-range but trending higher, which should
reinforce a move higher if resistance levels are taken out. The cross over and
close above the 18-day moving average indicates the longer-term trend has turned
up. 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 near-term upside objective is at 307 3/4. The next area of
resistance is around 305 1/2 and 307 3/4, while 1st support hits today at 298
and below there at 292 1/2.
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LIVE CATTLE RECAP
2/14/2005
April Live Cattle finished up 0.12 at 86.95, 0.25
off the high and 0.40 up from the low.
March Feeder Cattle closed down 0.02 at 100.12.
This was 0.57 up from the low and 0.22 off the high.
April cattle closed slightly higher in quiet
trade with the market anticipating a steady tone in the cash market this week. A
daily barrage of news regarding the possible opening, or a possible blocking of
the opening of the border with Canada has kept the trade volatile. Boxed beef
cutout values were down $1.24 into the mid-session to $145.09 as compared with
$144.85 last week at this time. Slaughter came in at 118,000 head as compared
with 114,000-118,000 head expected.
Technical Outlook
CATTLE (APR) 02/15/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
major trend has turned down with the cross over back below the 18-day moving
average. The close over the pivot swing is a somewhat positive setup. The next
downside objective is 86.270. The next area of resistance is around 87.250 and
87.550, while 1st support hits today at 86.620 and below there at 86.270.
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LEAN HOGS RECAP
2/14/2005
April Lean Hogs finished up 0.05 at 72.57, 0.57
off the high and 0.12 up from the low.
March Pork Bellies closed down 0.37 at 87.72.
This was 0.57 up from the low and 0.17 off the high.
Hog futures closed only slightly higher on the
session giving back most of the day’s gains as a continued weak tone in the cash
market helped pressure futures in spite of the short-term oversold condition.
The cash markets were steady to $1.00 lower and the 2-day lean index for the
period ending February 10th came in 69.22, down $.66 from the previous session
and down from 73.56 one week previous. Slaughter came in at 403,000 head as
compared with 392,000-395,000 head expected. Higher than expected slaughter
indicates strong demand from the packer and could help stabilize cash markets
this week.
Technical Outlook
HOGS (APR) 02/15/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
major trend has turned down with the cross over back below the 18-day moving
average. With the close higher than the pivot swing number, the market is in a
slightly bullish posture. The next downside target is now at 72.000. The next
area of resistance is around 72.900 and 73.370, while 1st support hits today at
72.250 and below there at 72.000.
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COCOA MARKET RECAP
2/14/2005
May Cocoa finished up 1 at 1561, 24 off the high
and 9 up from the low.
The cocoa market initially tried to rally but
gave up those gains into mid session. We suspect that currency implications
provided the US market with some support but that the market would seem to be
mostly without a clear cut bullish theme. The market seems to be reeling
slightly from the tempering of mid crop supply concerns, which seemed to be the
primary force behind the January through February rally. Also tempering upside
interest in cocoa are suggestions that some private ending stocks are tending
toward minor surplus forecasts for the 2005 crop.
Technical Outlook
COCOA (MAY) 02/15/2005: Momentum studies trending
lower at mid-range should accelerate a move lower if support levels are taken
out. The close under the 18-day moving average indicates the longer-term trend
could be turning down. The market tilt is slightly negative with the close under
the pivot. The next downside target is 1532. The next area of resistance is
around 1577 and 1597, while 1st support hits today at 1545 and below there at
1532.
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COFFEE MARKET RECAP
2/14/2005
May Coffee closed down 0.80 at 115.40. This was
0.65 up from the low and 1.60 off the high.
The coffee market certainly showed signs of
correcting the recent overbought status in the action Monday. We suspect that
the profit taking was initially sparked by producer or hedge selling as last
week’s highs were pretty difficult to refuse by growers who would have been
lucky to see 75 to 80 cents six months ago. We also suspect that the failure to
hold above critical support at 115 also prompted some small spec and funds longs
to bank some profits. In fact a number of traders might be watching the 114.75
level as a critical chart point in the action today. News that Brazilian growers
are looking to renegotiate debt is probably of little consequence to the near
term direction of coffee prices.
Technical Outlook
COFFEE (MAY) 02/15/2005: A bearish signal was
triggered on a crossover down in the daily stochastics. 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 now
above the 18-day moving average suggests the longer-term trend has turned up.
The market tilt is slightly negative with the close under the pivot. The next
downside objective is now at 113.40. The next area of resistance is around
116.50 and 117.85, while 1st support hits today at 114.30 and below there at
113.40.
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SUGAR MARKET RECAP
2/14/2005
May Sugar closed down 0.05 at 9.39. This was 0.07
up from the low and 0.05 off the high.
May sugar closed 10 lower on the session after
the weekend traders report showed a hefty net long position of the speculator
and cash business activity slowed some from late last week. Continued
speculative long liquidation selling and rolling out of the March contract
helped to pressure. While demand is expected to be solid from Pakistan, India
and possibly Russia and China for the second half of the year, traders are still
nervous over supply as Brazil is expected to see a bumper crop this year and the
harvest is slated to start earlier than normal. In addition, Brazil ethanol
stocks are high which raises concerns that mills will crush cane for more sugar
exports as compared with more ethanol production. For February 11th, March open
interest was down 23,146 contracts to 89,254 lots.
Technical Outlook
SUGAR (MAY) 02/15/2005: A crossover down in the
daily stochastics is a bearish signal. Momentum studies trending lower at
mid-range should accelerate a move lower if support levels are taken out. The
cross over and close above the 18-day moving average indicates the longer-term
trend has turned up. It is a slightly negative indicator that the close was
lower than the pivot swing number. The next downside target is now at 9.27. The
next area of resistance is around 9.44 and 9.50, while 1st support hits today at
9.33 and below there at 9.27.
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COTTON MARKET RECAP
2/14/2005
May Cotton finished up 0.28 at 46.47, 0.28 off
the high and 0.42 up from the low.
Cotton pushed higher on follow-through technical
buying from the positive action on Thursday. The move to the highest level since
January 27th helped support additional technical buying Friday but we also think
that North American acreage projections (corn, soybeans, wheat, cotton) and
options expiration could have been fostering some long interest in cotton. With
a number of commodities reacting to fund buying this week and many markets also
speculating on a return of Chinese buying interest, we think that cotton was
possibly getting some spillover buying off the physical demand track.
Technical Outlook
COTTON (MAY) 02/15/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The major trend could be turning up with the
close back above the 18-day moving average. A positive setup occurred with the
close over the 1st swing resistance. The next upside target is 47.13. The next
area of resistance is around 46.82 and 47.13, while 1st support hits today at
46.12 and below there at 45.74.