Another Reason To Drink Coffee…

Technical Outlook

BONDS (MAR) 1/7/2004: The market has a bullish tilt coming into today’s trade with the close above the 2nd swing resistance. Near-term resistance for bonds is at 109.26 and then again at 110.13, while swing support hits at 108.08 and below there at 107.09. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market now above the 40-day moving average suggests the longer-term trend is up. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 107.09.

T-NOTES(MAR) Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The next downside objective is now at 111.02. The market’s close above the 2nd swing resistance number is a bullish indication. Near-term resistance for the T-Notes is at 112.22 and then again at 112.32, while swing support hits at 111.23 and below there at 111.02. The downside crossover (9 below 18) of the moving averages suggests a developing short-term downtrend.

STOCK INDICES RECAP

1/6/2004

The stock market managed to hold near the highs despite negative information from the scheduled economic reports. The stock market mostly discounted news that the energy prices were soaring and the Dollar was falling to a new low.

Technical Outlook

S&P500 (MAR) 1/7/2004: The close over the pivot swing is a somewhat positive setup. Underlying support comes in at 1118.70 and 1114.65, with overhead resistance at 1125.10 and 1127.45. The close above the 9-day moving average is a positive short-term indicator for trend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside objective is at 1127.45. The market is becoming somewhat overbought now that the RSI is over 70.

S&P E-Mini (MAR): A new contract high was made on the rally. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 1128.63. With the close higher than the pivot swing number, the market is in a slightly bullish posture. Near-term resistance for the S&P Mini is at 1125.75 and then again at 1128.63, while swing support hits at 1117.75 and below there at 1112.63. The market’s close above the 9-day moving average suggests the short-term trend remains positive. The 9-day RSI over 70 indicates the market is approaching overbought levels.

NASDAQ (MAR) The market made a new contract high on the rally. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market has a slightly positive tilt with the close over the swing pivot. The market should run into resistance at 1513.25 and above there at 1519.88 with support at 1494.75 and 1482.88. The market is approaching overbought levels with an RSI over 70. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 1519.88.

CURRENCY MARKET RECAP

1/6/2004

The Dollar opened weak and stayed weak as the macro economic numbers from the US were soft and the concern over the pace of the US economy was increased by the strong rise in US Treasury prices. The biggest factory order decline in 7 months in the US is certainly cause to downgrade the monthly payroll report especially with the Fed indicating that they intend to leave interest rates on hold! In other words, the interest rate differential looks to remain steady regardless of what the market recently anticipated. From the action Tuesday it would seem that the BOJ is battling aggressively against the rise in the Yen as the Dollar was down significantly and yet the Yen was unable to rise on the session.

Technical Outlook

YEN (MAR): A positive signal for trend short-term was given on a close over the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. Swing resistance is targeted at 94.50 and above there at 94.56, with the yen finding support around 94.29 and below there at 94.14. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 94.56.

EURO (MAR): Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The next downside target is now at 1.2671. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing support for the Euro comes in at 1.2671, with overhead resistance at 1.2817. The close above the 9-day moving average is a positive short-term indicator for trend. The market is becoming somewhat overbought now that the RSI is over 70. Follow-through selling is indicated by the key reversal down. The market rallied to a new contract high. More selling pressure is likely given yesterday’s gap lower price action on the day session chart.

PRECIOUS METALS RECAP

1/6/2004

The gold market spiked up considerably and then failed leaving some to conclude that the market had temporarily exhausted itself. Surprisingly the silver market managed to stay strong in the face of the gold reversal which would suggest that the silver market is in better technical and fundamental position than the gold market. At the high Tuesday the gold market was $14 an ounce above the level where the COT report pegged the gold market to be long 187,000 contracts. With the dramatic new highs we suspect that even more small specs will become interested in the metals and that could result in significant price volatility ahead.

Technical Outlook

SILVER (MAR): The market has a slightly positive tilt with the close over the swing pivot. Initial support for silver is at 624.3 and below there at 616.7 with resistance likely at 635.4 and 641.3. A positive signal for trend short-term was given on a close over the 9-bar moving average. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 616.7. The market is giving an extremely overbought indicator with the RSI over 90. The market made a new contract high on the rally.

GOLD (FEB): Support for gold today comes in near 417.25, while resistance is pegged at 430.85. A crossover down in the daily stochastics is a bearish signal. Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The next downside target is now at 417.25. It is a slightly negative indicator that the close was under the swing pivot. The close above the 9-day moving average is a positive short-term indicator for trend. The market is becoming somewhat overbought now that the RSI is over 70. The market rallied to a new contract high. The daily closing price reversal down is a negative indicator for prices.

COPPER MARKET RECAP

1/6/2004

The copper market managed a fresh high but then fell back rather aggressively as the funds decided to dump longs. We also have to think that the technicals reached a massively overbought condition around the highs Tuesday morning and with the weaker than expected US factory orders and the US Fed hinting that the economy remains soft enough to require holding rates low, we can understand some concern on the part of the fundamental longs in the copper market. We see no reason for the trend to breakup off the news Tuesday but the market had to be exhausted.

ENERGY MARKET RECAP

1/6/2004

The energy complex had divergent action Tuesday with the products out performing crude oil. Maybe because the cold is expected to pull down product stocks more than crude the buyers concentrated in the products. It is also possible that the products had more technical buying capacity than crude because of their relatively balanced technical positioning. Remember the crude oil is carrying a significantly large fund long and that could leave it vulnerable to excessive volatility. Traders should also expect another round of volatility off the weekly inventory reports to be released Wednesday morning. Some crude longs might have been put off by rather disappointing US economic reports Tuesday morning.

Technical Outlook

CRUDE OIL (MAR): The market rallied to a new contract high. The daily closing price reversal down is a negative indicator for prices. The close over the pivot swing is a somewhat positive setup. Support for crude is keyed on 33.06 and below there at 32.68, with resistance pegged at 33.91 and 34.38. The close above the 9-day moving average is a positive short-term indicator for trend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 34.38.

UNLEADED GAS (MAR): Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 99.45. The market tilt is slightly negative with the close under the pivot. Resistance today is at 99.45, while support should be found around 95.05. The market made a new contract high on the rally. The market could take on a defensive posture with the daily closing price reversal down. A positive signal for trend short-term was given on a close over the 9-bar moving average.

HEATING OIL (MAR):The close over the pivot swing is a somewhat positive setup. Heating oil should encounter support around 93.10, with resistance is at 98.30. The close above the 9-day moving average is a positive short-term indicator for trend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 98.30. The market rallied to a new contract high.

CORN MARKET RECAP

1/6/2004

March corn closed 1 1/2 lower on the session and down 3 1/2 from the highs of the day as the higher opening failed to generate new buying interest. The lack of confirmation of any buying from China and talk of increased producer selling helped pressure. In addition, there is talk that the final USDA crop production estimate next week might be a bit higher than their last estimate. Weakness in the wheat market and news that Taiwan bought some corn from China this week added to the bearish tone into the close. With more producer movement early this week, cash grain dealers suggest that the pipeline is filled and increased sales are needed to keep the pipeline flowing.

Technical Outlook

CORN (MAR) 1/7/2004: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 256 1/4. It is a slightly negative indicator that the close was under the swing pivot. Market resistance comes in at 256 1/4 today, with support at 248 1/4. The close above the 9-day moving average is a positive short-term indicator for trend.

SOY COMPLEX RECAP

1/6/2004

March futures closed unchanged on the session and near the middle of a 10 1/4 cent range. The overbought condition of the market basis the COT report was seen as a limiting factor to the upside and talk that next weeks final USDA Crop Production estimate might increase added to the choppy trade. Positioning ahead of these reports added to the buying support in the market. Expectations for a further dip in short-term exports helped to pressure the market but expectations that ending stocks could tighten again in next weeks reports helped support. While parts of Argentina seem to drying quickly with the heat, Brazil regions look to receive more rains into the weekend.

Technical Outlook

SOYBEANS (MAR) 01/07/04 The market has a slightly positive tilt with the close over the swing pivot. The next area of resistance is around 805 1/4 and 810 1/2, while 1st support hits today at 795 and below there at 790 . The market’s close on the 9-day moving average is neutral. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 810 1/2.

MEAL (MAR): Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 248.6. First resistance comes in at 246.7, with support at 243.1. 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.

BEAN OIL (MAR): A positive signal for trend short-term was given on a close over the 9-bar moving average. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 28.77. With the close higher than the pivot swing number, the market is in a slightly bullish posture. Daily swing resistance is found at 28.67 and above there at 28.77. Support should be encountered at 28.45 and 28.33.

WHEAT MARKET RECAP

1/6/2004

News that China had purchased more US wheat helped trigger initial strength in wheat but selling intensified on a test of last weeks highs and long liquidation pressured the market into the close. The USDA announced that 175,000 tons of US wheat, previously classified as “unknown destination” was switched to China. While the news is a positive development, traders viewed the purchase as old news and without new wheat sales; the news was seen as neutral. In addition, the sale was broken down to be 105,000 tons of spring wheat and 70,000 tons of white wheat. Talk of light winterkill damage in the plains due to bitter cold weather in some areas which lacked snow cover and a continued dry outlook provided some initial support as well. A lack of short-term export news on new sales and the overbought condition of the market may have prompted some of the late selling.

Technical Outlook

WHEAT (MAR) 1/7/2004: The market tilt is slightly negative with the close under the pivot. Expect near-term support around 388 1/2 and below there at 385 , with resistance levels at 400 and 408 . A positive signal for trend short-term was given on a close over the 9-bar moving average. The market back below the 40-day moving average suggests the longer-term trend could be turning down. Stochastics are at mid-range, but trending higher which should reinforce a move higher if resistance levels are taken out. The next upside objective is 408 .

LIVE CATTLE RECAP

1/6/2004

February cattle closed 140 lower on the session as the higher opening failed to find any new buyers. Fears of a back-up of beef in US coolers due to the export ban and continued weakness in beef prices added to the bearish tone. While US officials push to get US beef into export channels again soon, key buyers such as Japan and Mexico are expected to shy away from US beef for at least a few months before allowing imports again. Slaughter came in at 117,000 head as compared with trade expectations of 115,000 to 125,000 head. This is the second day in a row in which actual slaughter was below expectations which suggests weak packer demand. News that funds were still net long near 23,000 contracts (as of December 30th) added to the bearish tone as traders suspect increased long liquidation ahead. Another swing down after the 3-day bounce would leave 69.55 as next downside objective.

Technical Outlook

CATTLE (FEB) 1/7/2004: Rising from over sold levels, daily momentum studies would support higher prices especially on a close above resistance. The next upside objective is 75.85. The close below the 1st swing support could weigh on the market. Support should be encountered at 73.10 and below there at 72.65. Market resistance is at 74.70 and then again at 75.85. The market could take on a defensive posture with the daily closing price reversal down. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market is approaching over sold levels on an RSI reading under 30.

LEAN HOGS RECAP

1/6/2004

The market opened slightly lower and closed sharply lower on the session finding selling pressures from weakness in the cattle market and ideas that the bullish weather news in the mid-west may have peaked on Tuesday. The market found some additional selling pressures from talk of the steep premium of futures the cash market and weakness in pork values from Monday night. The 2-day lean index for the period ending January 2nd was up 61 cents to 49.77. For the weekly cold storage report, released after the close, traders were looking for an in-movement of 1.5-2.0 million pounds. Slaughter came in at 387,000 head as compared with trade expectations of 388,000 to 392,000 head.

Technical Outlook

HOGS (FEB) 1/7/2004: The market setup is somewhat negative with the close under the 1st swing support. Resistance levels comes in at 55.32 and 56.20 today, while support is around 53.97 and then 53.50. The close above the 9-day moving average is a positive short-term indicator for trend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 56.20.

COCOA MARKET RECAP

1/6/2004

After a sharp break in the prior session the cocoa market managed a surprise rally Tuesday off what appeared to be a wave of industry buying. It would not seem like political developments were behind the move but given the magnitude of the rally we would not rule out such a development coming to light in the next few days. Some times information out of the Ivory Coast takes a while to surface. As of last reports it would seem that rebel officials are in fact returning to the main government in a unity move. Therefore, it is possible that industry buyers saw the lows as attractive enough levels to cover forward needs. Maybe the commercial accounts see some lower crop numbers developing with the influx of harvest!

Technical Outlook

COCOA (MAR)01/07/04 The market has a bullish tilt coming into today’s trade with the close above the 2nd swing resistance. Cocoa should run into resistance at 1591 and above there at 1627 with support at 1509 and 1463. The daily stochastics have crossed over up which is a bullish indication. The next upside target is 1626.50.

COFFEE MARKET RECAP

1/6/2004

March coffee drove sharply higher and to the highest level since September 15th with active speculative buying emerging after the lower opening. Funds have been active buyers in the past few sessions which is thought to be short-covering after the COT report with options showed funds still holding a net short position of over 8800 contracts as of December 30th. However, the jump in open interest this week could indicate that the buying may be more than just short-covering. Major sellers were on the sidelines as the Vietnam supply bearishness has already peaked and traders believe that Brazil tightness could develop in the months ahead after the smaller crop for the current crop season. CSCE stocks were unchanged at 4.361 million bags. Funds were noted buyers of near 7000 contracts. Medical studies which suggest that drinking coffee can reduce diabetes added to the positive tone.

Technical Outlook

COFFEE (MAR)1/7/04 The market has a slightly positive tilt with the close over the swing pivot. The 9-day RSI over 70 indicates the market is approaching overbought levels. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The near-term upside objective is at 72.15.The Coffee contract should run into resistance at 71.30 and above there at 72.15 with support at 68.8 and 67.15. The upside crossover (9 above 18) of the moving averages suggests a developing short-term uptrend.

SUGAR MARKET RECAP

1/6/2004

The spike-bottom action in sugar in the past few sessions could indicate that the market is in need of a bounce to correct the oversold condition. For the week ending December 30th, fund traders were net sellers of near 20,000 contracts and moved from a net long to a net short position and the jump in open interest (up more than 10,000 contracts in last two sessions) suggests that selling has intensified. The void of new sellers today helped support the solid gains in sugar and strength in other New York commodities, new 15 year highs for the CRB Index and further weakness in the US dollar added to the more positive tone. While the longer-term cash fundamentals still look negative, there seems to be too much pent-up demand to see further pressure on prices over the near-term.

Technical Outlook

SUGAR (MAR) 1/7/2004: Market positioning is positive with the close over the 1st swing resistance. Swing resistance comes in at 6.03, with support found at 5.65. The close above the 9-day moving average is a positive short-term indicator for trend. Momentum studies are still bearish, but are now at oversold levels and will tend to support reversal action if it occurs. The next downside target is now at 5.65.

COTTON MARKET RECAP

1/6/2004

March Cotton closed slightly lower in choppy trade as participants seem to want to wait for further clarification on the longer-term fundamentals from speakers at the Beltwide Cotton Conference in San Antonio, Texas. Dunavant commented on the strong export trend for the US industry at the expense of the slowing domestic usage trend but talk of continued strong imports from China was seen as positive. He indicated that March futures should trade no lower than 73 to 72 and that May futures could trade up to 82 “if” China imports remain strong. Dunavant believes China imports should stay strong and reach 8-9 million bales this season and 5-7 million bales for the 2004/2005 season. Other speakers at the conference were also supportive to the cotton price outlook but the market failed to generate new buying interest and long liquidation selling due to overbought condition helped to push values slightly lower on the session.

Technical Outlook

COTTON (MAR) 1/7/2004: A positive signal for trend short-term was given on a close over the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. Next resistance area comes in at 76.07 and then again at 76.44, while support is targeted at 75.27 and 74.84. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 76.44. The market is approaching overbought levels with an RSI over 70. ORANGE JUICE (MAR)1/7/04 The market has a bullish tilt coming into today’s trade with the close above the 2nd swing resistance. Orange Juice should run into resistance at 67.90 and above there at 68.40 with support at 65.90 and 64.40. The market’s short-term trend is negative as the close remains below the 9-day moving average. The daily stochastics have crossed over up which is a bullish indication. The near-term upside objective is at 68.4.