A Major Rotation — Away From Bonds And Into Stocks
BOND MARKET RECAP
10/1/2004
December Bonds closed down 0-24 at 111-15. This
was 0-07 up from the low and 0-12 off the high.
December 10 Yr Treasury Notes finished down 0-150
at 112-050, 0-070 off the high and 0-040 up from the low.
Treasury prices continued to slide despite
what appeared to be a mixed bag of US economic information. Michigan Sentiment
figures were weak but construction spending was higher than expected. Rounding
out the mixed economic report sweep were conflicting readings from the ISM.
While the Business Index and New orders readings softened, the Employment and
Production readings firmed impressively. Therefore, the net shake of the numbers
was a little bearish but didn’t really reach the level one would have expected
given the size of the Treasury price decline. In the end, professional rotation
from bonds to stocks seemed to be forcing the liquidation in bonds and notes.
Technical Outlook
BONDS (DEC) 10/04/2004: 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. It is a slightly negative indicator that the close was
lower than the pivot swing number. The next downside objective is now at 110-23.
The next area of resistance is around 112-01 and 112-18, while 1st support hits
today at 111-04 and below there at 110-23.
TNOTES (DEC) 10/04/2004: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. The market’s short-term trend is negative as the close
remains below the 9-day moving average. It is a slightly negative indicator that
the close was under the swing pivot. The next downside target is now at 111-230.
The next area of resistance is around 112-160 and 112-265, while 1st support
hits today at 111-305 and below there at 111-230.
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STOCK INDICES RECAP
10/1/2004
December S&P finished up 18.3 at 1133.2, 0.3 off the high and
14 up from the low.
December S&P E-Mini closed up 18.25 at 1133.25. This was 21.5
up from the low and 0.25 off the high.
December Dow closed up 127 at 10192. This was 97 up from the
low and 3 off the high.
December Dow E-Mini finished up 129 at 10194, 1 off the high
and 157 up from the low.
The stock market surprised a large portion of the
market on Friday by the magnitude and direction of prices. It seems like the
beginning of the quarter action resulted in a major rotation away from bonds and
into stocks. The question becomes can the economy show enough progress to
justify a continuation of that trend. While we see the chance that energy prices
might consolidate we would think that energy prices actually need to decline in
order to give the recovery a boost. Economic numbers released during the session
Friday failed to give a clear cut message as some were below expectations and
others were above expectations. In the end, the big rally seemed to mostly
unjustified from a typical fundamental standing.
Technical Outlook
S&P 500 (DEC) 10/04/2004: A bullish signal was
given with an upside crossover of the daily stochastics. 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 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 target is at
1144.07. The next area of resistance is around 1140.35 and 1144.07, while 1st
support hits today at 1126.05 and below there at 1115.48.
SP EMINI (DEC) 10/04/2004: A bullish signal was
given with an upside crossover of the daily stochastics. 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. There could be more upside follow through since the market closed above
the 2nd swing resistance. The next upside target is 1149.68. The next area of
resistance is around 1144.12 and 1149.68, while 1st support hits today at
1122.38 and below there at 1106.19.
NASDAQ (DEC) 10/04/2004: The daily stochastics
gave a bullish indicator with a crossover up. 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. Follow through buying looks likely if the
market can hold yesterday’s gap on the day session chart. There could be more
upside follow through since the market closed above the 2nd swing resistance.
The next upside objective is 1480.50. With a reading over 70, the 9-day RSI is
approaching overbought levels. The next area of resistance is around 1472.00 and
1480.50, while 1st support hits today at 1441.00 and below there at 1418.50.
MINIDOW (DEC) 10/04/2004: The cross over and
close above the 40-day moving average is an indication the longer-term trend has
turned positive. The daily stochastics gave a bullish indicator with a crossover
up. Momentum studies are trending higher from mid-range, which should support 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 market’s close
above the 2nd swing resistance number is a bullish indication. The next upside
target is 10313. The next area of resistance is around 10273 and 10313, while
1st support hits today at 10115 and below there at 9997.
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CURRENCY MARKET RECAP
10/1/2004
December US Dollar finished up 25 at 8776, 16 off the high and
29 up from the low.
December Euro finished down 0.26 at 124.06, 0.11 off the high
and 0.21 up from the low.
December Euro Dollar closed unchanged at 97.695. This was 0.02
up from the low and 0.01 off the high.
December Canadian Dollar closed down 0.07 at 79.13. This was
0.15 up from the low and 0.1 off the high.
December British Pound finished down 1.44 at 178.79, 0.12 off
the high and 0.43 up from the low.
December Swiss closed down 0.33 at 80.21. This was 0.09 up
from the low and 0.16 off the high.
December Japanese Yen closed down 0.34 at 90.93. This was 0.08
up from the low and 0.22 off the high.
The Dollar rebounded back away from an
excessively oversold condition and will have to show at least another day of
upside strength just to smooth over the technical damage done by the slide this
week. Unfortunately for the Dollar bulls the economic report slate from the US
was disappointing and that certainly undermines the Dollar’s attempt to bounce.
However, the run up in US equity prices was so significant that one can’t help
but begin to look for signs that the US economy is about to show an improvement.
Seeing the massive slide in Pound prices after aggressive attempts to rally
early in the week is a real undermine of that currency.
Technical Outlook
YEN (DEC) 10/04/2004: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. 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 near-term upside objective is at
91.26. The next area of resistance is around 91.08 and 91.26, while 1st support
hits today at 90.78 and below there at 90.67.
EURO (DEC) 10/04/2004: 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
somewhat negative with the close under the 1st swing support. The near-term
upside objective is at 124.35. The next area of resistance is around 124.22 and
124.35, while 1st support hits today at 123.90 and below there at 123.72.
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PRECIOUS METALS RECAP
10/1/2004
December Gold closed up 0.8 at 421.2. This was 2.7 up from the
low and 0.1 off the high.
December Silver finished up 0.005 at 6.943, 0.037 off the high
and 0.063 up from the low.
October Platinum closed up 0.4 at 861.4. This was 9.4 up from
the low and 1.6 off the high.
The gold market suffered a little profit taking
in the face of a higher US Dollar and possibly in the face of the coming Chinese
holidays. However, it is a little disappointing to the bull camp in gold and
silver that neither market managed to rise in the face of a strong upward thrust
in equity prices as some traders were thinking that physical demand had been
driving metals prices. We also think that some metals bulls were a little
concerned about the COT reports as they are expected to register a significant
increase in the net spec and fund long. The rebound in the US Dollar was
significant enough from the Thursday low that a number of fresh longs in gold
might have been forced to the sidelines.
Technical Outlook
SILVER (DEC) 10/04/2004: 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. With the close higher
than the pivot swing number, the market is in a slightly bullish posture. The
near-term upside objective is at 703.7. The market is becoming somewhat
overbought now that the RSI is over 70. The next area of resistance is around
699.3 and 703.7, while 1st support hits today at 689.4 and below there at 683.7.
GOLD (DEC) 10/04/2004: Momentum studies are
trending higher but have entered overbought levels. 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 423.3. With a reading over 70, the 9-day RSI is approaching
overbought levels. The next area of resistance is around 422.6 and 423.3, while
1st support hits today at 419.8 and below there at 417.8.
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COPPER MARKET RECAP
10/1/2004
December Copper finished up 0.80 at 140.40, equal to the high
and 1.70 up from the low.
The copper market just won’t stay down even with
the other metals markets taking profits and fretting the potential for less
Chinese buying over the coming week. We have to think that copper prices were
supported by the surprisingly large rally in equity prices as that would seem to
upgrade the sluggish macro economic outlook. Since the trade documented week
ending and pre-holiday position balancing we have to think that the Chinese
element will not be a major impact for at least a couple sessions. On the other
hand, if US equity prices were to continue rising that could more than
overshadow the Chinese absence.
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ENERGY MARKET RECAP
10/1/2004
December Crude Oil closed up 0.48 at 49.69. This was 0.89 up
from the low and 0.06 off the high.
December Heating Oil closed up 1.05 at 139.76. This was 2.56
up from the low and 0.14 off the high.
December Unleaded Gas finished up 2.29 at 133.25, 0.15 off the
high and 2.75 up from the low.
December Natural Gas finished down 0.06 at 7.57, 0.01 off the
high and 0.14 up from the low.
December Propane closed unchanged at 0.84. This was equal to
the low and equal to the high.
The energy complex continues to show less
volatility and that is probably because the old bullish items have been mostly
played out and the market is lacking a fresh theme. However, it goes without
saying that inventories remain so tight that the bull camp will retain control
over prices. On the other hand, there continues to be signs of rising supply
flow with OPEC thought to have increased daily production by 260,000 barrels per
day over the last 4 weeks alone. The Nigerian talks are ongoing which could mean
that progress is being made but that could also mean that the parties haven’t
reached a final solution. In our opinion, as long as the hurricane front is
empty and Russian production isn’t threatened we suspect that prices will track
sideways or correct slightly.
Technical Outlook
CRUDE OIL (DEC) 10/04/2004: The market rallied to
a new contract high. Studies are showing positive momentum but are now in
overbought territory, so some caution is warranted. The close above the 9-day
moving average is a positive short-term indicator for trend. A positive signal
was given by the outside day up. Market positioning is positive with the close
over the 1st swing resistance. The near-term upside target is at 50.43. The
9-day RSI over 70 indicates the market is approaching overbought levels. The
next area of resistance is around 50.16 and 50.43, while 1st support hits today
at 49.22 and below there at 48.54.
UNLEADED (DEC) 10/04/2004: The market rallied to
a new contract high. The daily stochastics gave a bullish indicator with a
crossover up. Momentum studies are trending higher but have entered overbought
levels. A positive signal for trend short-term was given on a close over the
9-bar moving average. A positive signal was given by the outside day up. The
market setup is supportive for early gains with the close over the 1st swing
resistance. The near-term upside objective is at 135.50. The market is
approaching overbought levels with an RSI over 70. The next area of resistance
is around 134.69 and 135.50, while 1st support hits today at 131.80 and below
there at 129.70.
HEATING OIL (DEC) 10/04/2004: 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 daily closing price reversal up is a positive
indicator that could support higher prices. With the close over the 1st swing
resistance number, the market is in a moderately positive position. The
near-term upside objective is at 141.85. With a reading over 70, the 9-day RSI
is approaching overbought levels. The next area of resistance is around 141.11
and 141.85, while 1st support hits today at 138.41 and below there at 136.46.
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CORN MARKET RECAP
10/1/2004
December Corn finished up 1/2 at 206, 1 1/4 off the high and
1/2 up from the low. March Corn closed up 3/4 at 217. This was 3/4 up from the
low and 1 off the high.
The market found early support from ideas that
the market is oversold basis traditional technical indicators and talk of
potential damage to corn plants in the northern cornbelt next week from a
freeze. December corn closed higher on the week after hitting a new contract low
which might attract some technical buying on the reversal. While an October
frost in Minnesota is not considered early, the cold weather in the northern
cornbelt in August and the late plantings date in Minnesota combined to leave
some fields not totally mature and a hard freeze can cause losses. Taiwan bought
56,000 tons of US corn overnight. The strength in the soybean complex and talk
of the oversold condition of the market helped support the market as much as the
frost talk as the trade seems to believe that even with freeze damage, the crop
will still be significantly higher than the last USDA forecast. Support for
December corn comes in at 204 1/2 and 202 1/4 with 206 and 206 3/4 as near-term
resistance.
Technical Outlook
CORN (DEC) 10/04/2004: Rising from oversold
levels, daily momentum studies would support higher prices, especially on a
close above resistance. A negative signal for trend short-term was given on a
close under the 9-bar moving average. The market has a slightly positive tilt
with the close over the swing pivot. The next upside objective is 207 3/4. The
9-day RSI under 30 indicates the market is approaching oversold levels. The next
area of resistance is around 206 3/4 and 207 3/4, while 1st support hits today
at 205 1/4 and below there at 204 1/2.
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SOY COMPLEX RECAP
10/1/2004
November Soybeans finished up 7 1/2 at 534 1/2, 5
off the high and 6 1/2 up from the low. January Soybeans closed up 7 1/4 at 542.
This was 7 up from the low and 3 3/4 off the high.
December Soymeal closed up 2 at 161.7. This was
2.0 up from the low and 0.6 off the high.
December Soybean Oil finished up 0.16 at 20.9,
0.34 off the high and 0.12 up from the low.
Fears of possible frost damage in Minnesota and
other parts of the northern cornbelt for the weekend and early next week helped
to support the early gains. In addition, ideas that the market is oversold, talk
of interest in US soybeans from China and export news helped support. The USDA
announced a sale of 110,000 tons of US soybeans to unknown destination. Cash
basis levels in the Midwest were steady to lower amid the outlook for active
harvest over the next week. After taking out last weeks lows early this week,
November soybeans closed 11 1/2 cents higher on the week. The reversal could
attract some technical buying early next week. December Meal closed 2.60 higher
on the week with December oil up 26 points for the week. A lack of deliveries
for the second day in a row, a sharp jump in palm oil overnight and frost fears
helped support the oil futures with strong gains early. Meal deliveries against
the October contract were at 57 contracts this morning. Resistance for November
soybeans moves down to 542 and 549 3/4 with support at 529 and 524 1/2.
Technical Outlook
BEANS (NOV) 10/04/2004: Daily stochastics are
showing positive momentum from oversold levels, which should reinforce a move
higher if near-term resistance is taken out. 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
next upside target is 545 1/2. Short-term indicators suggest buying dips today.
The next area of resistance is around 540 1/4 and 545 1/2, while 1st support
hits today at 528 3/4 and below there at 522 3/4.
MEAL (DEC) 10/04/2004: 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 short-term trend is positive on
the close above the 9-day moving average. Market positioning is positive with
the close over the 1st swing resistance. The next upside target is 163.9.
Short-term indicators suggest buying pullbacks today. The next area of
resistance is around 163.0 and 163.9, while 1st support hits today at 160.4 and
below there at 158.8.
BEANOIL (DEC) 10/04/2004: 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 close below the 9-day
moving average is an indication the short-term trend remains negative. The close
over the pivot swing is a somewhat positive setup. The next upside objective is
21.41. The next area of resistance is around 21.13 and 21.41, while 1st support
hits today at 20.67 and below there at 20.50.
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WHEAT MARKET RECAP
10/1/2004
December Wheat finished down 3 at 303 3/4, 4 3/4 off the high
and 3 1/4 up from the low. March Wheat closed down 2 3/4 at 316. This was 3 up
from the low and 4 1/2 off the high.
The market bounced early in the session finding
support from ideas that futures are oversold after yesterday’s sharp break and
from overflow strength on gains in the other grains. However, a lack of new
export news and continued speculative selling helped drive the market to new
contract lows for the second session in a row. December Wheat closed 17 lower on
the week. Good rains reported in the US plains and in key Australia growing
regions this week are seen as bearish supply factors. Commercial buyers also
seem less interested in booking wheat after the sharp revision higher this week
in US Spring wheat production and also upward revisions in the world crop from
the International Grain Council. Resistance for December wheat comes in at 307
and 312 with 303 1/2 and 296 1/2 as next support levels.
Technical Outlook
WHEAT (DEC) 10/04/2004: Daily stochastics are
trending lower but have declined into oversold territory. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. The market tilt is slightly negative with the close under the pivot.
The next downside objective is now at 296 1/4. The market is approaching
oversold levels on an RSI reading under 30. The next area of resistance is
around 307 3/4 and 312, while 1st support hits today at 299 3/4 and below there
at 296 1/4.
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LIVE CATTLE RECAP
10/1/2004
December Live Cattle closed up 1.00 at 88.27. This was 1.27 up
from the low and 0.12 off the high.
November Feeder Cattle finished up 0.70 at 110.20, 0.30 off
the high and 1.30 up from the low.
The market turned higher and gathered upside
momentum during the session on Friday as traders remain hopeful over a possible
firm cash market this week and over the outlook for some exports soon. News that
Japan and US officials will meet early next week in Colorado for working-level
talks helped to provide some short-covering support to the market as traders
feel the countries are close to an agreement to allow some beef to begin to move
to Japan. Boxed-beef cutout values (600-750 choice) were down $.82 on the day at
mid-session to $134.96 as compared with $137.40 last week at this time. The
lower beef price combined with packer margins deep in the red has kept the tone
in the cash market weak but there is still no trade in the cash market into
mid-session.
Technical Outlook
CATTLE (DEC) 10/04/2004: The cross over and close
above the 40-day moving average is an indication the longer-term trend has
turned positive. The daily stochastics have crossed over up which is a bullish
indication. Positive momentum studies in the neutral zone will tend to reinforce
higher price action. The market’s close above the 9-day moving average suggests
the short-term trend remains positive. A positive setup occurred with the close
over the 1st swing resistance. The next upside objective is 89.370. The next
area of resistance is around 88.970 and 89.370, while 1st support hits today at
87.600 and below there at 86.600.
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LEAN HOGS RECAP
10/1/2004
December Lean Hogs closed down 0.45 at 68.67. This was 0.12 up
from the low and 0.47 off the high.
February Pork Bellies finished down 0.42 at 96.95, 1.05 off
the high and 0.55 up from the low.
December hogs pushed slightly lower with an
inside trading session Friday with talk of a slowdown in the long run from
exports of pork to Japan “if” the US ban is lifted soon helping to pressure.
News of meetings with Japan beef experts for next week helped support cattle and
pressure hogs. Cash markets were mostly steady but weakness in the pork cut-out
values, released late Thursday helped to pressure. The CME 2-Day Lean index for
the period ending September 29th came in at 80.55 which was down $.16 from the
previous session and up from 77.08 on September 15th.
Technical Outlook
HOGS (DEC) 10/04/2004: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. A negative signal
for trend short-term was given on a close under the 9-bar moving average. It is
a slightly negative indicator that the close was under the swing pivot. The next
downside target is 68.170. The next area of resistance is around 68.950 and
69.350, while 1st support hits today at 68.370 and below there at 68.170.
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COCOA MARKET RECAP
10/1/2004
December Cocoa finished down 3 at 1450, 10 off the high and 12
up from the low.
The cocoa market forged a narrow trading range
but couldn’t avoid making a slightly bearish trade on the charts. Apparently the
industry buyers are not keen to aggressively step in on the long side on every
dip as there didn’t seem to be as much support under the market at the end of
the week. Dampening price action in cocoa were comments from the Ivory Coast
President suggesting that the coming crop was going to be equal to last years
crop. In other words, the Ivory Coast President was downplaying the dryness
damage and that is bearish.
Technical Outlook
COCOA (DEC) 10/04/2004: 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 objective is
now at 1428. The next area of resistance is around 1461 and 1471, while 1st
support hits today at 1439 and below there at 1428.
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COFFEE MARKET RECAP
10/1/2004
December Coffee closed down 2.20 at 80.15. This was 0.80 up
from the low and 1.15 off the high.
A new low for the move leaves the market with a
slightly negative tilt. It is clear that small specs and funds are more
interested in the short side than the long side and with the market lacking
patently supportive bullish information it would seem like the fundamental and
technical tilt is pointing down. Supply news from El Salvador was mixed with
total 2003-2004 exports managing a slight increase but the most recent monthly
export reading showed a smart decline in excess of 18%. However, with Brazil
predicting its September coffee exports to reach 2.5 million bags the balance
from the supply front points to the bear case.
Technical Outlook
COFFEE (DEC) 10/04/2004: 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. The market’s close below the 1st swing
support number suggests a moderately negative setup for today. The next downside
objective is 78.30. The next area of resistance is around 81.10 and 82.15, while
1st support hits today at 79.20 and below there at 78.30.
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SUGAR MARKET RECAP
10/1/2004
March Sugar closed down 0.16 at 8.90. This was 0.03 up from
the low and 0.20 off the high.
March sugar closed 16 lower on the session but
still up 27 points on the week. The market hit a high of 910 on the opening
which was the same high as Wednesday and the market experienced active long
liquidation selling on the failure to pierce key resistance at 911. Traders
viewed the selling as profit-taking in nature. The outside-day down could
attract some light speculative selling early next week.
Technical Outlook
SUGAR (MAR) 10/04/2004: Rising stochastics at
overbought levels warrant some caution for bulls. A positive signal for trend
short-term was given on a close over the 9-bar moving average. The outside day
down and close below the previous day’s low is a negative signal. The market’s
close below the 1st swing support number suggests a moderately negative setup
for today. The near-term upside objective is at 9.17. The next area of
resistance is around 9.01 and 9.17, while 1st support hits today at 8.79 and
below there at 8.72.
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COTTON MARKET RECAP
10/1/2004
October Cotton finished down 0.10 at 48.00, 0.50 off the high
and 0.50 up from the low.
Cotton prices continued to slide with a new low
for the move. One might have expected a slight benefit from the sharp rise in
equity prices but since the view toward the economy isn’t broadly improved we
aren’t surprised that cotton was mostly left in its recent downward track. NYBOT
cotton stocks were up slightly to 94,794 bales. With the weather front largely
expected to be quiet in the coming week we would have to think that the long
liquidation effort will remain in control.
Technical Outlook
COTTON (DEC) 10/04/2004: 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 upside daily closing price reversal gives
the market a bullish tilt. A positive setup occurred with the close over the 1st
swing resistance. The next downside objective is 45.85. The next area of
resistance is around 47.44 and 47.70, while 1st support hits today at 46.52 and
below there at 45.85.