An Increased Concern For Inflation Sends The Treasury Market Lower
BOND MARKET RECAP
2/18/2005
March Bonds finished down 0-27 at 113-30, 0-14
off the high and 0-11 up from the low.
March 10 Yr Treasury Notes finished down 0-165 at
111-155, 0-140 off the high and 0-025 up from the low.
The Treasury market came under significant
pressure following the much hotter than expected monthly Producer Price Index
reading. While the main component of the PPI was up only.3%, the excluding food
and energy component was up a startling 0.8%. Therefore, the Treasury market was
presented with an increased concern for inflation and was also prompted to
consider even more U.S. interest-rate hikes in the near future. With the U.S.
Dollar unable to hold higher levels on the day, it would not seem as if foreign
investors are even attracted to significantly lower US Treasury prices. While
Treasury prices managed to recover some of their early losses, in the wake of
the weak University of Michigan preliminary a sentiment figures, it was clear
that the bias in Treasuries would remain negative.
Technical Outlook
BONDS (MAR) 02/22/2005: Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
The major trend has turned down with the cross over back below the 18-day moving
average. The market is in a bearish position with the close below the 2nd swing
support number. The next downside objective is 112-29. The next area of
resistance is around 114-17 and 115-08, while 1st support hits today at 113-12
and below there at 112-29.
TNOTES (MAR) 02/22/2005: The close under the
60-day moving average indicates the longer-term trend could be turning down.
Momentum studies are declining, but have fallen to oversold levels. The major
trend has turned down with the cross over back below the 18-day moving average.
The defensive setup, with the close under the 2nd swing support, could cause
some early weakness. The next downside target is now at 110-310. The next area
of resistance is around 111-260 and 112-085, while 1st support hits today at
111-055 and below there at 110-310.
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STOCK INDICES RECAP
2/18/2005
March S&P finished up 1.3 at 1202.3, 1.1 off the high and 4.7
up from the low.
March S&P E-Mini closed up 1.25 at 1202.25. This was 4.75 up
from the low and 1.5 off the high.
March Dow closed up 38 at 10797. This was 66 up from the low
and 2 off the high.
While the stock market saw initial selling
pressure Friday morning, in the wake of the hotter than expected PPI report, the
market behaved better than many would have expected considering the complete
fundamental picture facing the market Friday morning. In addition to rising
inflation concerns from areas that exclude food and energy, the U.S.
stock-market was also faced with rising energy prices! Furthermore, with the
U.S. Dollar unable to hold early gains on the session, it is clear that foreign
investors are simply choosing to stay away from the U.S. In our opinion, the
stock market is lucky to have avoided massive declines in the latest week,
especially when one considers all the dialogue regarding the troubles in Social
Security. The stock market could also have come under aggressive pressure on
concerns arising from Middle East tensions and that is something that could
remain an issue in the week ahead.
Technical Outlook
S&P 500 (MAR) 02/22/2005: Momentum studies
trending lower from overbought levels is a bearish indicator and would tend to
reinforce lower price action. 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 up on the daily chart is somewhat positive. It is a
slightly negative indicator that the close was lower than the pivot swing
number. The next downside target is 1195.55. The next area of resistance is
around 1205.09 and 1207.14, while 1st support hits today at 1199.30 and below
there at 1195.55.
SP EMINI (MAR) 02/22/2005: 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 cross over and
close above the 18-day moving average is an indication the longer-term trend has
turned positive. The upside closing price reversal on the daily chart is
somewhat bullish. It is a slightly negative indicator that the close was under
the swing pivot. The next downside objective is now at 1195.32. The next area of
resistance is around 1205.62 and 1207.81, while 1st support hits today at
1199.38 and below there at 1195.32.
NASDAQ (MAR) 02/22/2005: Negative momentum
studies in the neutral zone will tend to reinforce lower price action. The major
trend has turned down with the cross over back below the 18-day moving average.
The market’s close below the pivot swing number is a mildly negative setup. The
next downside objective is 1505.50. The next area of resistance is around
1523.00 and 1531.50, while 1st support hits today at 1510.00 and below there at
1505.50.
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CURRENCY MARKET RECAP
2/18/2005
March US Dollar finished up 4 at 8352, 27 off the high and 8
up from the low.
March Euro finished down 0.01 at 130.75, 0.08 off the high and
0.58 up from the low.
March Euro Dollar closed down 0.01 at 97.0075. This was 0.0075
up from the low and 0.005 off the high.
March Canadian Dollar closed down 0.1 at 81.24. This was 0.19
up from the low and 0.16 off the high.
March British Pound finished down 0.11 at 189.11, 0.19 off the
high and 0.39 up from the low.
March Swiss closed up 0.02 at 84.65. This was 0.5 up from the
low and 0.05 off the high.
March Japanese Yen closed down 0.08 at 94.8. This was 0.21 up
from the low and 0.15 off the high.
The Dollar index failed to hold early gains that
took place in the wake of the hotter than expected US PPI report. With investors
backing away from the Dollar in the face of potentially inflationary signals, it
would appear as if the Dollar is simply out of favor. Furthermore, with the
University of Michigan preliminary sentiment figures showing a slight
contraction, we understand early longs dumping some positions in the close. We
also understand that some traders are now avoiding the long side of the Dollar,
because of all the excess U.S. government debt talk of late. Surprisingly there
were no prime benefactors to the Dollar’s slump in the action on Friday.
Recently, the British Pound and the Canadian Dollar have managed to capitalize
on U.S. Dollar weakness.
Technical Outlook
YEN (MAR) 02/22/2005: Positive momentum studies
in the neutral zone will tend to reinforce higher price action. The market back
below the 18-day moving average suggests the longer-term trend could be turning
down. It is a slightly negative indicator that the close was lower than the
pivot swing number. The near-term upside objective is at 95.14. The next area of
resistance is around 94.97 and 95.14, while 1st support hits today at 94.62 and
below there at 94.43.
EURO (MAR) 02/22/2005: Momentum studies are
trending higher but have entered overbought levels. 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 next upside objective is 131.28. The next area of resistance is around
131.08 and 131.28, while 1st support hits today at 130.42 and below there at
129.97.
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PRECIOUS METALS RECAP
2/18/2005
April Gold closed down 0.2 at 428.4. This was 1.4 up from the
low and 1 off the high.
March Silver finished up 0.047 at 7.417, 0.038 off the high
and 0.077 up from the low.
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While the gold market eventually managed to
finish the session higher, but it spent most of the session somewhat weaker.
However, from the action Friday, it’s clear that the silver market remains in
favor, while the gold market is somewhat suspect. For the metals markets in
general to have failed to respond sharply, to hotter than expected inflation
readings, has to be a disappointment for the bull camp. Certainly a stronger
U.S. Dollar early in the session discouraged some buying of gold, but with the
Dollar falling to unchanged levels around mid session, we are surprised that
gold didn’t manage a better closing performance.
Technical Outlook
SILVER (MAR) 02/22/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The cross over and close above
the 18-day moving average is an indication the longer-term trend has turned
positive. The close over the pivot swing is a somewhat positive setup. The
near-term upside objective is at 752.2. With a reading over 70, the 9-day RSI is
approaching overbought levels. The next area of resistance is around 747.5 and
752.2, while 1st support hits today at 736.0 and below there at 729.3.
GOLD (APR) 02/22/2005: The upside crossover (9
above 18) of the moving averages suggests a developing short-term uptrend.
Rising stochastics at overbought levels warrant some caution for bulls. The
market now above the 18-day moving average suggests the longer-term trend has
turned up. It is a mildly bullish indicator that the market closed over the
pivot swing number. The next upside objective is 430.7. The next area of
resistance is around 429.6 and 430.7, while 1st support hits today at 427.2 and
below there at 425.9.
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COPPER MARKET RECAP
2/18/2005
March Copper closed down 0.15 at 149.20. This was 1.20 up from
the low and 0.30 off the high.
While copper prices showed some weakness off the
high posted on Thursday, it was clear that buyers were still willing to support
prices in the vicinity of contract highs. For copper prices to have stayed
within a relative proximity of the highs, in the wake of a significant increase
in the Shanghai copper stocks, it is clear that bullish sentiment remains in
place. We suspect that an early close, due to the upcoming holiday, could have
robbed the market of some of volatility and in a sense narrowed the trading
range in the action Friday. With copper prices bordering on the 150 level basis
the May contract, one has to guard against upcoming increased price volatility.
Given that the funds were noted buyers in several sessions over the last week,
we suspect that the current Commitment of Traders report underestimates the
magnitude of the small spec and fund long.
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ENERGY MARKET RECAP
2/18/2005
March Crude Oil closed up 0.81 at 48.35. This was 0.75 up from
the low and 0.15 off the high.
March Heating Oil closed up 3.65 at 134.93. This was 3.13 up
from the low and 0.57 off the high.
March Unleaded Gas finished up 2.70 at 126.35, 0.65 off the
high and 3.10 up from the low.
March Natural Gas finished down 0.01 at 5.91, 0.06 off the
high and 0.01 up from the low.
March Propane closed unchanged at 0.76. This was equal to the
low and equal to the high.
The energy complex started out firmer, corrected
slightly and then posted a strong finish. It would seem like speculators were
simply willing to bid up prices into a long holiday weekend. With recent
tensions in the Middle East, particularly with Syria, we can understand the
increased speculative interest on the long side. However mild temperatures
continue to prevail throughout a wide portion of United States and that should
have been a limiting factor. It is also clear that natural gas pricing is
missing out on the Middle East tension premium that the regular energy complex
is enjoying. In looking back over the last week, it is clear that the bull camp
took significant advantage of the prospects for improving demand in the coming
months.
Technical Outlook
CRUDE OIL (MAR) 02/22/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The cross over and close above
the 18-day moving average indicates the longer-term trend has turned up. The
market setup is supportive for early gains with the close over the 1st swing
resistance. The next upside objective is 49.10. The next area of resistance is
around 48.80 and 49.10, while 1st support hits today at 47.90 and below there at
47.30.
UNLEADED (MAR) 02/22/2005: The cross over and
close above the 60-day moving average indicates the longer-term trend has turned
up. 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 close below the 18-day moving
average is an indication the longer-term trend has turned down. The upside
closing price reversal on the daily chart is somewhat bullish. With the close
over the 1st swing resistance number, the market is in a moderately positive
position. The near-term upside objective is at 129.48. The next area of
resistance is around 128.22 and 129.48, while 1st support hits today at 124.48
and below there at 121.99.
HEATING OIL (MAR) 02/22/2005: Momentum studies
are trending higher from mid-range, which should support 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
target is at 137.99. The next area of resistance is around 136.78 and 137.99,
while 1st support hits today at 133.08 and below there at 130.59.
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CORN MARKET RECAP
2/18/2005
May Corn finished up 3/4 at 207 3/4, 1 off the high and 1 1/4
up from the low. December Corn closed up 1/2 at 231 1/2. This was 3/4 up from
the low and 1 1/4 off the high.
Strength in soybeans and weather concerns in
Brazil helped support the early bounce but without a continued rally in
soybeans, the corn market looks vulnerable to weakness with more and more talk
of weaker export demand ahead. China and Argentina prices are currently lower
than the US for most Asian locations and the bumper Argentina new crop has yet
to be harvested. High international freight rates gives China a significant
price advantage for the South Korea market and traders believe that recent
optional origin purchases from South Korea will be directed at China. The Brazil
weather is also stressing the corn crop but with the bumper Argentina crop, the
strength in the soybeans has had less impact in corn. Support for May corn comes
in at 204 3/4 with resistance at 208 1/2 and 211. Another close under 204 3/4
would leave 198 3/4 as next downside technical swing objective.
Technical Outlook
CORN (MAY) 02/22/2005: The cross over and close
above the 40-day moving average is an indication the longer-term trend has
turned positive. 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 indicates the longer-term trend has turned up. The market has a slightly
positive tilt with the close over the swing pivot. The next upside target is 209
3/4. The next area of resistance is around 208 3/4 and 209 3/4, while 1st
support hits today at 206 3/4 and below there at 205 1/2.
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SOY COMPLEX RECAP
2/18/2005
May Soybeans finished up 2 3/4 at 555 3/4, 11 1/4
off the high and 4 3/4 up from the low. November Soybeans closed up 3 3/4 at 570
1/4. This was 6 1/4 up from the low and 8 off the high.
May Soymeal closed down 2.3 at 169.2. This was
equal to the low and 4.8 off the high.
March Soybean Oil finished up 0.25 at 20.07, 0.11
off the high and 0.27 up from the low.
A drier trend in the forecast for southern Brazil
for the past two mornings has led to more speculative buying and short-covering
in soybeans. Funds were noted buyers of near 10,000 contracts into the
mid-session. Commercial buyers and speculators were waiting for lower prices
before this week but a shift to a hot and dry pattern seems more entrenched each
day this week and there is growing concern of ongoing production losses in the
Rio Grande Do Sul and Parana states of Brazil. Traders believe that funds bought
nearly 15,000 contracts yesterday and there is short-covering this morning with
fear of a dry forecast for Tuesday morning. Traders believe that China may have
bought up to 8 cargoes of Brazil soybeans this week and possible 1-2 cargoes of
US soybeans for early March shipment but none of the rumored purchases have been
confirmed. Bullish macro economic factors for commodity markets in general added
to the positive tone with inflation readings from economic reports this morning
also providing support. Resistance for May soybeans comes in at 561 and 579 1/2
with support at 552 1/2 and 548.
Technical Outlook
BEANS (MAY) 02/22/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The market now above the
18-day moving average suggests the longer-term trend has turned up. It is a
mildly bullish indicator that the market closed over the pivot swing number. The
next upside target is 573 1/4. With a reading over 70, the 9-day RSI is
approaching overbought levels. The next area of resistance is around 563 3/4 and
573 1/4, while 1st support hits today at 547 3/4 and below there at 541 1/2.
MEAL (MAY) 02/22/2005: 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 indicates
the longer-term trend has turned up. 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 near-term upside target
is at 175.8. With a reading over 70, the 9-day RSI is approaching overbought
levels. The next area of resistance is around 172.4 and 175.8, while 1st support
hits today at 167.8 and below there at 166.5.
BEANOIL (MAY) 02/22/2005: The major trend could
be turning up with the close back above the 40-day moving average. 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 indicates the
longer-term trend has turned up. The market setup is supportive for early gains
with the close over the 1st swing resistance. The next upside objective is
20.57. The next area of resistance is around 20.40 and 20.57, while 1st support
hits today at 20.00 and below there at 19.76.
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WHEAT MARKET RECAP
2/18/2005
May Wheat finished up 3/4 at 304, 1 1/2 off the high and 2 1/2
up from the low. July Wheat closed unchanged at 311. This was 2 up from the low
and 1 off the high.
Strength in the soybean market helped support the
move over yesterday’s highs but a lack of new buying support helped trigger the
move back to near unchanged at mid-session and the market hovered near unchanged
for most of the session. Volume was light with a lack of new news and focus on
soybean trade keeping buyers and sellers quiet. Hefty world supply of exportable
wheat has kept a lid on rallies and a lack of new crop weather concerns has kept
a bearish tone in tact for wheat. Higher production estimates for India and
fears that a good China wheat crop could cause diminished China import needs are
also factors which have limited the positive influence of rising soybean prices
on wheat. More rain in the forecast for Kansas next week suggests good soil
conditions for the winter wheat crop into early March and this helped pressure
new crop July futures. May wheat support comes in at 300 1/2 with resistance at
304. Another close under 300 1/2 would leave the next technical objective down
at 289 1/4, however, as long as soybeans stay strong, wheat could remain in a
choppy trading range.
Technical Outlook
WHEAT (MAY) 02/22/2005: Momentum studies are
trending higher from mid-range, which should support 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 next upside
objective is 307 3/4. The next area of resistance is around 306 and 307 3/4,
while 1st support hits today at 302 and below there at 299 3/4.
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LIVE CATTLE RECAP
2/18/2005
April Live Cattle finished down 1.85 at 85.45, 1.35 off the
high and 0.10 up from the low.
March Feeder Cattle closed down 2.32 at 98.30. This was equal
to the low and 2.15 off the high.
April cattle closed 185 lower on the session and
to the lowest level since December 16ht ahead of the USDA Cattle-on-Feed report.
Weakness in the cash market in Nebraska and continued weakness in beef prices
helped drive futures sharply lower. Boxed-beef cut-out values at mid-session
were down $1.49 to $140.50 as compared with $146.33 last week. Nebraska cattle
traded at $88.00-$88.50 and feedlots passed on packer bids at $88.00 in the
panhandle, down $2.00 from last week. The retailer does not want to get caught
holding beef on March 7th when the Canadian border opens so the process of
reducing the beef pipeline has kept the tone in the boxed-beef market weak and
packer demand for slaughter weak as well.
Technical Outlook
CATTLE (APR) 02/22/2005: The close under the
60-day moving average indicates the longer-term trend could be turning down.
Daily stochastics declining into oversold territory suggest the selling may be
drying up soon. The close under the 18-day moving average indicates the
longer-term trend could be turning down. The gap lower on the day session chart
is bearish and puts the market on the defensive. The defensive setup, with the
close under the 2nd swing support, could cause some early weakness. The next
downside objective is now at 84.320. With a reading under 30, the 9-day RSI is
approaching oversold levels. The next area of resistance is around 86.150 and
87.200, while 1st support hits today at 84.750 and below there at 84.320.
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LEAN HOGS RECAP
2/18/2005
April Lean Hogs finished down 0.97 at 72.87, 1.22 off the high
and 0.37 up from the low.
March Pork Bellies closed down 1.00 at 84.97. This was 0.37 up
from the low and 1.07 off the high.
After opening near unchanged on the session,
April hogs closed down 97 on the session as weakness in the cattle market and
growing concerns for hefty meat supplies into early March helped pressure. Hog
slaughter is running well above the pace anticipated from the last Hogs and Pigs
report. In addition, recent data from the poultry industry suggests that broiler
production should soon begin to come in near 3-5% above last year. The
Cattle-on-Feed report this afternoon is expected to show an ample supply of
market ready cattle going into March and the border with Canada opens on March
7th. The 2-day lean index for the period ending February 16th came in at 67.03,
down.22 on the session and down from 69.22 last week.
Technical Outlook
HOGS (APR) 02/22/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The major trend has turned down with the cross
over back below the 18-day moving average. The close below the 2nd swing support
number puts the market on the defensive. The next upside target is 74.670. The
next area of resistance is around 73.670 and 74.670, while 1st support hits
today at 72.100 and below there at 71.500.
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COCOA MARKET RECAP
2/18/2005
May Cocoa finished up 4 at 1620, 13 off the high and 14 up
from the low.
The cocoa market managed another new high for the
move and would seem to have left technical trends pointing upward. With the
market reaching the highest level since mid December, it would certainly seem as
if something is developing on the supply front. The market has been aware of
slow arrivals into the Ivory Coast, and has also been concerned about dryness in
the mid crop and that could be finally sparking commercial and trade buying.
Unfortunately we also suspect that part of the recent buying has been fuelled in
a large part by small spec and fund buying and that could leave the market
overdone technically.
Technical Outlook
COCOA (MAY) 02/22/2005: 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. The market has a slightly
positive tilt with the close over the swing pivot. The near-term upside target
is at 1646. The next area of resistance is around 1633 and 1646, while 1st
support hits today at 1607 and below there at 1593.
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COFFEE MARKET RECAP
2/18/2005
May Coffee closed up 0.80 at 120.30. This was 2.00 up from the
low and 0.70 off the high.
The coffee market managed to remain within
striking distance of the recent contract highs with a slightly higher trade on
Friday. It would seem as if the trade, spec and fund buyers are willing to step
in and support coffee prices on weakness as the early decline Friday was
reversed rather distinctly. It is clear from the COT report that the spec long
is building to a moderately overbought condition, but since the market
technically closed below the level where the last COT report figures were last
measured, it is actually possible that the COT report actually overstated the
magnitude of the spec and fund long. While the market has seen some lower
Brazilian green coffee export figures we doubt that the market is justifying a
large portion of the January and February gains on the export flow. In general
digging into the overall supply of coffee at the exchanges is really the main
catalyst behind the bull market mentality.
Technical Outlook
COFFEE (MAY) 02/22/2005: Momentum studies are
trending lower from high levels which should accelerate a move lower on a break
below the 1st swing support. The cross over and close above the 18-day moving
average is an indication the longer-term trend has turned positive. The close
over the pivot swing is a somewhat positive setup. The next downside target is
117.30. The market is approaching overbought levels with an RSI over 70. The
next area of resistance is around 121.60 and 122.65, while 1st support hits
today at 118.95 and below there at 117.30.
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SUGAR MARKET RECAP
2/18/2005
May Sugar closed down 0.09 at 9.21. This was 0.02 up from the
low and 0.09 off the high.
May sugar in London collapsed to the lowest level
since late December which helped trigger additional long liquidation selling in
New York. Traders were nervous with the lack of new buying interest from India
and fears that both Indonesia and Pakistan could be close to booking any
near-term needs. In addition, traders were nervous that the
Commitment-of-Traders report for release this afternoon might show a continued
hefty net long position and a significant long liquidation trend. As of February
17th, open interest for March sugar was down to 41,191 contracts.
Technical Outlook
SUGAR (MAY) 02/22/2005: The close below the
40-day moving average is an indication the longer-term trend has turned down.
Stochastics trending lower at midrange will tend to reinforce a move lower
especially if support levels are taken out. The close under the 18-day moving
average indicates the longer-term trend could be turning down. The close below
the 1st swing support could weigh on the market. The next downside target is now
at 9.12. The next area of resistance is around 9.26 and 9.33, while 1st support
hits today at 9.16 and below there at 9.12.
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COTTON MARKET RECAP
2/18/2005
May Cotton finished up 0.82 at 47.48, 0.12 off the high and
0.82 up from the low.
The highest close since late December for new
crop cotton leaves the market in a position to attract new fund buying next
week. December cotton closed 65 higher on the session and up 140 on the week.
The demand from China should continue to gain steam in the weeks just ahead as
textile exports from China are growing rapidly this year and China mills seem to
have exhausted their own crop supply from last year. Ideas that world and China
planted acreage will drop for the coming season has provided underlying support.
In addition, the macro-economic factors for commodity markets in general look
favorable and with inflationary readings in Friday morning’s economic releases,
fund traders might begin to shy away from the short side of cotton.
Technical Outlook
COTTON (MAY) 02/22/2005: 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. There could be more upside
follow through since the market closed above the 2nd swing resistance. The next
upside target is 48.24. The next area of resistance is around 47.95 and 48.24,
while 1st support hits today at 47.01 and below there at 46.37.