Cattle: It Wasn’t Mad Cow, But It Was Enough To Make The Funds Sell
BOND MARKET RECAP
8/19/2004
September Bonds closed up 0-04 at 111-06. This
was 0-14 up from the low and 0-04 off the high.
September 10 Yr Treasury Notes finished up 0-045
at 112-285, 0-010 off the high and 0-100 up from the low.
The Treasury market was unmoved by the
initial and ongoing claims readings which showed a drop in initial claims (on an
expectation of an increase) while ongoing claims managed a rise. The second set
of economic numbers, leading indicators declined by .3% and that should have
been enough slowing evidence to lift prices. Even with energy prices reaching
new high levels and the equity market soft Treasuries failed to rally into mid
session and that was surprising and hints at some hesitancy on the part of the
bull camp. Maybe the positive Chicago Fed National activity Index increase put
off the bulls, especially when one considers the size of the existing fund long
in bonds.
Technical Outlook
#BONDS (SEP) 8/20/2004: The daily closing price
reversal up is a positive indicator that could support higher prices. The market
tilt is slightly negative with the close under the pivot. Near-term resistance
for bonds is at 111.16 and then again at 111.22, while swing support hits at
110.29 and below there at 110.16. 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 111.22.
T-NOTES(SEP) The upside closing price reversal on
the daily chart is somewhat bullish. Momentum studies are trending higher, but
have entered overbought levels. The near-term upside objective is at 113.05. The
market’s close below the pivot swing number is a mildly negative setup.
Near-term resistance for the T-Notes is at 113.02 and then again at 113.05,
while swing support hits at 112.22 and below there at 112.14. The market’s
short-term trend is positive on a close above the 9-day moving average.
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STOCK INDICES RECAP
8/19/2004
September S&P finished down 3.2 at 1091.3, 2.8
off the high and 5.5 up from the low.
September S&P E-Mini closed down 3.25 at 1091.25.
This was 5.5 up from the low and 4.25 off the high.
September Dow closed down 38 at 10043. This was
53 up from the low and 32 off the high.
September Dow E-Mini finished down 40 at 10041,
48 off the high and 52 up from the low.
The stock market continued to be fairly
impressive in its action as it mostly ignored another new round of highs in the
energy complex. Even with the economic reports of the day mixed to somewhat
sloppy the market didn’t seem to come under undue pressure even in the face of
rising energy prices. Even around mid session the market failed to tail off as
energy prices forged new highs on the session and the Philly Fed readings came
in with signs of additional slowing. A couple weeks ago the market was looking
for reason to sell but now it seems like the market is discounting reasons to
get short!
Technical Outlook
#S&P500 (SEP) 8/20/2004: The close over the pivot
swing is a somewhat positive setup. Underlying support comes in at 1086.95 and
1082.23, with overhead resistance at 1095.25 and 1098.83. The close above the
9-day moving average is a positive short-term indicator for trend. Momentum
studies are rising from mid-range which could accelerate a move higher if
resistance levels are penetrated. The near-term upside objective is at 1098.83.
S&P E-Mini (SEP): Positive momentum studies in
the neutral zone will tend to reinforce higher price action. The next upside
target is 1100.56. 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
1095.88 and then again at 1100.56, while swing support hits at 1086.13 and below
there at 1081.06. The market’s close above the 9-day moving average suggests the
short-term trend remains positive.
NASDAQ (SEP) 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 1363.50 and above there at 1371.25 with support at
1346.50 and 1337.25. 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 1371.25.
MINI DOW (MAR) The close above the 9-day moving
average is a positive short-term indicator for trend. The market should run into
resistance at 10090 and above there at 10140 with support at 9990 and 9940.
Momentum studies are rising from mid-range which could accelerate a move higher
if resistance levels are penetrated. The near-term upside target is at 10140. It
is a slightly negative indicator that the close was under the swing pivot.
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CURRENCY MARKET RECAP
8/19/2004
September US Dollar finished down 33 at 8782, 32
off the high and 6 up from the low.
September Euro finished up 0.41 at 123.64, 0.11
off the high and 0.29 up from the low.
September Euro Dollar closed unchanged at
98.1325. This was 0.005 up from the low and 0.0025 off the high.
September Canadian Dollar closed up 0.53 at
77.07. This was 0.42 up from the low and 0.1 off the high.
September British Pound finished up 0.96 at
182.78, 0.31 off the high and 0.59 up from the low.
September Swiss closed up 0.16 at 80.53. This was
0.17 up from the low and 0.18 off the high.
September Japanese Yen closed up 0.05 at 91.56.
This was 0.23 up from the low and 0.24 off the high.
The currency markets finally managed to exhibit
some trend tendencies with the downside breakout in the Dollar. Many traders
assume that the escalating violence in Iraq is pulling the US into an extended
quagmire and with soaring energy prices it is not surprising that the Dollar
remained under pressure. The big benefactors on the session were the Canadian
and the Pound and that is not surprising considering the recent trends in those
currencies.
Technical Outlook
#CURRENCIES 8/20/2004: YEN (SEP): 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.
Swing resistance is targeted at 91.80 and above there at 92.03, with the yen
finding support around 91.33 and below there at 91.09. Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
92.03.
EURO (SEP): Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 1.2400. The defensive setup, with the close
under the 2nd swing support, could cause some early weakness. Swing support for
the Euro comes in at 1.2320, with overhead resistance at 1.2400. The close above
the 9-day moving average is a positive short-term indicator for trend. More
selling pressure is likely given yesterday’s gap lower price action on the day
session chart.
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PRECIOUS METALS RECAP
8/19/2004
October Gold closed up 2.7 at 407.9. This was 0.9
up from the low and 1.1 off the high.
September Silver finished down 0.017 at 6.82,
0.12 off the high and 0.015 up from the low.
October Platinum closed up 4.1 at 863. This was 2
up from the low and 4 off the high.
Surprisingly gold and silver managed to track
higher despite the fact that equity prices and the outlook for the economy was
soft. Over the past two weeks the outlook for the economy seemed to hold a
little more sway over the impact of the Dollar. However, with reports of
fighting in Iraq, soaring energy prices and a weaker Dollar that was apparently
enough to lift gold and silver attention away from the physical demand hope and
more toward a flight to quality focus. It should be noted that both gold and
silver have seen volume and open interest readings rise over the last two weeks.
Technical Outlook
#P-METALS 8/20/2004: SILVER (SEP): The market has
a slightly positive tilt with the close over the swing pivot. Initial support
for silver is at 675.3 and below there at 671.1 with resistance likely at 698.1
and 688.8. 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 698.1. The market could take on
a defensive posture with the daily closing price reversal down.
GOLD (OCT): Support for gold today comes in near
405.95, while resistance is pegged at 409.95. Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 409.95. Short-term indicators suggest buying
pullbacks today. Market positioning is positive with the close over the 1st
swing resistance. The close above the 9-day moving average is a positive
short-term indicator for trend. Follow through buying looks likely if the market
can hold yesterday’s gap on the day session chart.
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COPPER MARKET RECAP
8/19/2004
September Copper finished up 2.10 at 129.15, 0.05
off the high and 2.15 up from the low.
After the apparent overdone reaction in copper on
Wednesday, copper prices started out higher and with the LME stocks posting a
minor decline the prior concern over rising stocks was diminished. It seems as
if Chinese treatment and refining charges are going to rise sharply and that
would seem to indicate a pattern of tight supply or at least ongoing strong
demand. Other traders suggested that a soft Dollar provided some arbitrage
buying in copper but it is still a little surprising that copper is so capable
of discounting generally soft macroeconomic conditions.
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ENERGY MARKET RECAP
8/19/2004
September Crude Oil closed up 1.43 at 48.70. This
was 1.05 up from the low and 0.05 off the high.
September Heating Oil closed up 4.05 at 126.55.
This was 2.95 up from the low and 0.15 off the high.
September Unleaded Gas finished up 2.64 at
132.36, 0.14 off the high and 3.56 up from the low.
September Natural Gas finished up 0.13 at 5.51,
0.01 off the high and 0.18 up from the low.
September Propane closed up 0.00 at 0.88. This
was equal to the low and equal to the high.
The energy complex started the session out
slightly higher and then added to gains on news reports of ongoing fighting and
mortar attacks in Iraq. It would seem that the Press is intent on seeing $50
crude pricing as the market continues to add to crude oil prices off the same
threat. In fact crude oil prices have managed a $4 August rally in the face of
declining supplies concerns from Venezuela and Russia. Certainly the recent
evidence of US inventory tightening gives the market added bullish impetus but
prices are seemingly rising on the slightest bullish development.
Technical Outlook
#ENERGIES 8/20/2004: CRUDE OIL (SEP): The market
rallied to a new contract high. 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. Support
for crude is keyed on 48.15 and below there at 47.35, with resistance pegged at
49.25 and 49.55. 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 49.55. The market is becoming somewhat overbought now that
the RSI is over 70.
UNLEADED GAS (SEP): Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
135.21. The market setup is supportive for early gains with the close over the
1st swing resistance. Resistance today is at 135.21, while support should be
found around 127.81. A positive signal for trend short-term was given on a close
over the 9-bar moving average.
HEATING OIL (SEP): There could be more upside
follow through since the market closed above the 2nd swing resistance. Heating
oil should encounter support around 122.75, with resistance is at 128.95. 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 128.95.
The market is becoming somewhat overbought now that the RSI is over 70. The
market rallied to a new contract high. Follow through buying looks likely if the
market can hold yesterday’s gap on the day session chart.
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CORN MARKET RECAP
8/19/2004
September Corn finished up 3 3/4 at 229
1/4, 1/4 off the high and 4 up from the low. December Corn closed up 4 at 240
1/4. This was 4 up from the low and 1/2 off the high.
According to some Press outlets the rally in corn
early Thursday morning was sparked by frost concerns. With the threat of
“weekend†frost in Canadian Barley areas it seems that the lack of maturity in
some Northern US growing regions is going to be an issue that provides the
market with an underpin. However, the soybean market did not show the same knee
jerk reaction on the frost theme as corn and that could leave the corn bulge as
a suspect move. However, with Northern crop tours citing maturity problems in
Iowa and Southern Minnesota it certainly seems like the corn has a story that is
at least capable of discouraging would-be sellers. The weekly export sales
readings in corn came in at 717,600 metric tons and that was within the range of
expectations of 500,000 to 800,000 tons. In a slightly negative note South
Africa raised their 2003/2004 corn crop from 8.06 million metric tons to 8.48
million metric tons.
Technical Outlook
#CORN (DEC) 8/20/2004: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The near-term upside target is at 243 3/4. There could be more upside
follow through since the market closed above the 2nd swing resistance. Market
resistance comes in at 243 3/4 today, with support at 234 3/4. The close above
the 9-day moving average is a positive short-term indicator for trend.
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SOY COMPLEX RECAP
8/19/2004
September Soybeans finished down 2 at 598 1/4, 2
3/4 off the high and 11 1/4 up from the low. November Soybeans closed down 1 1/4
at 589 1/2. This was 11 1/2 up from the low and 2 1/2 off the high.
December Soymeal closed down 1.3 at 178.1. This
was 3.6 up from the low and 1.4 off the high.
December Soybean Oil finished down 0.05 at 22.42,
0.13 off the high and 0.12 up from the low.
The soybean market traded relatively weaker than
the corn market for most of the session and that is surprising considering that
the soybean market would seem to retain more yield variability than corn from a
timing perspective. In fact, with the Southern Minnesota croup tour citing
maturity concerns it is a little surprising that beans didn’t behave better
during the session Thursday. Export sales for beans came in at 260,700 metric
tons off expectations of 200,000 to 350,000. Export sales for meal came in at
80,800 off expectations of 70,000 to 110,000. Soybean oil exports came in at
10,200 compared to 1,000 to 5,000 expected. Following the neutral export sales
data and before the opening, the market was made aware of a 110,000 metric ton
soybean sale to an unknown entity for 2004/2005 but that only seemed to provide
the market with a temporary lift. Seeing basis premium levels rise above $1.00
could have been considered a headline or a psychologically important development
but weather continues to be a conflicted issue.
Technical Outlook
#SOYBEANS (NOV) 08/20/04 The market has a
slightly positive tilt with the close over the swing pivot. The next area of
resistance is around 596 2/4 and 601 1/4, while 1st support hits today at 582
2/4 and below there at 573 1/4. A positive indicator was given with the upside
crossover of the 9 & 18 bar moving average. 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 601 1/4.
MEAL (DEC): Momentum studies are rising from
mid-range which could accelerate a move higher if resistance levels are
penetrated. The near-term upside target is at 182.6. First resistance comes in
at 180.6, with support at 175.6. 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 (DEC): 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 22.67. It is a slightly negative indicator that the close was lower
than the pivot swing number. Daily swing resistance is found at 22.55 and above
there at 22.67. Support should be encountered at 22.30 and 22.17.
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WHEAT MARKET RECAP
8/19/2004
September Wheat finished up 7 3/4 at 309 1/2, 1 1/2 off the
high and 6 up from the low. December Wheat closed up 8 at 323 1/2. This was 6
1/2 up from the low and 1 1/2 off the high.
December wheat traded to new highs on the week
and to the highest level since August 11th after weekly export sales come in at
743,200 metric tons versus expectations of 400,000-500,000. This is the highest
weekly number so far this marketing year. Traders were encouraged by the fact
that 234,000 tonnes were reported sold to Pakistan was encouraging after they
bought 150,000 optional origin wheat last week. The US National Oceanic and
Atmospheric Administration is calling for a weak El Nino to develop this fall
and winter. The last one brought a severe drought to Australia in 2002 and
severely reduced their wheat crop that year. It also brought heavy rains to
Europe. In the US it aggravated drought in the plains.
Technical Outlook
#WHEAT (DEC) 8/20/2004: The market has a bullish
tilt coming into today’s trade with the close above the 2nd swing resistance.
Expect near-term support around 319 2/4 and below there at 314 1/4, with
resistance levels at 327 2/4 and 330 1/4. A positive signal for trend short-term
was given on a close over the 9-bar moving average. 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 330 1/4.
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LIVE CATTLE RECAP
8/19/2004
October Live Cattle closed down 2.12 at 86.55.
This was 0.80 up from the low and 1.55 off the high.
October Feeder Cattle finished down 1.70 at
113.17, 1.62 off the high and 1.02 up from the low.
Cattle opened and lower this morning and then
quickly sold off sharply on heavy fund selling. While there was no direct report
of mad cow showing up in an animal, there was a story out of Seattle regarding a
recently deceased woman from who suffered severe dementia and whose remains have
been shipped to the Cleveland Clinic for examination for prion disease. Today’s
sharp break came despite a strong week for boxed beef prices. Much of that
strength may be attributable to buying for Labor Day needs, leaving many traders
wondering what will happen to demand after those needs are met. The boxed beef
cutout this morning was reported $0.30 higher at $141.80. The market may be
disappointed with cash live cattle activity so far this week. Yesterday trades
were reported at $87 after feedlots had been looking for $88-90. Fund traders,
many of them technically based, were likely frustrated that December cattle did
not add to their gains from last Friday’s big up day and gave up on the open
this morning. The market opening below the 40-day moving average triggered stops
as well. Today’s estimated slaughter came in at 125,000 head, versus
expectations ranging from 122,000-127,000 and compared to 125,000 last week and
135,000 a year ago. Trade estimates for this Friday’s Cattle on Feed Report put
on feed supplies for August 1st at 101.8-104 percent of last year, placements in
July at 83-92 percent and marketings at 84-89 percent.
Technical Outlook
#CATTLE (OCT) 8/20/2004: A bearish signal was
triggered on a crossover down in the daily stochastics. The next downside
objective is 84.40. There could be some early pressure today given the market’s
negative setup with the close below the 2nd swing support. Support should be
encountered at 85.37 and below there at 84.40. Market resistance is at 87.72 and
then again at 89.10. The gap lower on the day session chart is bearish and puts
the market on the defensive. A negative signal for trend short-term was given on
a close under the 9-bar moving average.
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LEAN HOGS RECAP
8/19/2004
October Lean Hogs closed up 0.52 at 65.32. This
was 0.67 up from the low and 0.47 off the high.
February Pork Bellies finished down 0.65 at
92.92, 1.47 off the high and 0.12 up from the low.
October lean hogs got a corrective bounce today
after breaking 347 points since last Friday. A strong slaughter pace has
accompanied the ample hog supplies that have driven prices lower this past two
weeks, and this at least helps keep the hog market current. Peoria Hogs traded
steady with a top of $49.00, although earlier reports indicated hogs trading
steady to $1.00 lower in the Midwest. The CME lean hog index as of August 17th
came in at 76.99, down 0.74 from the previous session. Today’s slaughter came in
at 397,000head, compared to expectations ranging from 395,000-400,000 and
compared to 388,000 last week and 381,000 a year ago. Slaughter has been running
well above last week’s pace and expectations are running for a strong kill on
Saturday as well. Trade estimates for this tomorrow’s monthly Cold Storage
report call for 24-27 million lbs of frozen bellies in storage as of July 31
versus 37.1 million on June 30th and 32.1 million in July 2003. Pork stocks are
expected to come in lower as well, with talk of 350-358 million pounds versus
379.3 million on June 30th and 440.7 million a year ago.
Technical Outlook
#HOGS (OCT) 8/20/2004: Market positioning is
positive with the close over the 1st swing resistance. Resistance levels comes
in at 65.90 and 66.42 today, while support is around 64.75 and then 64.12. The
close below the 9-day moving average is a negative 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 64.12.
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COCOA MARKET RECAP
8/19/2004
September Cocoa finished up 90 at 1698, 19 off
the high and 48 up from the low.
The cocoa market literally exploded Thursday
morning and seemed to garner the lift off concentrated fund and small spec
buying. After the opening the cocoa even managed to post a gain of $101 a ton
and that left many to conclude that there was no physical or origin selling
present. Like the energy market a little bit of buying is going a long way in
the cocoa market. With both funds and small specs throwing themselves at the
cocoa market we have to think that the cocoa spec long is bordering on the
largest ever modern day long position. Surprisingly weather services claimed
that rains at the Ivory Coast might have been enough to improve conditions but
the market showed almost no reaction to that news.
Technical Outlook
COCOA (SEP) 08/20/04 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 1732 and above there at 1758 with support at
1665 and 1624. The daily stochastics have crossed over up which is a bullish
indication. The next upside target is 1757.75.
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COFFEE MARKET RECAP
8/19/2004
September Coffee closed up 0.50 at 67.10. This
was 0.80 up from the low and 0.40 off the high.
While Dec coffee closed higher Thursday volume
was light and a lack of fresh news had the featured trade being roll over
activity ahead of the September contract’s first notice day on Monday. The ICO
forecasted global coffee production for 2003/04 at 100.97 million bags, down
86.8 million bags from the 2002/03 season. Beginning stocks in exporting
countries for 2003/04 were estimated at 21.46 million bags, while world
consumption was estimated at 113.08 million bags. ICO projected 2004/05 world
coffee production between 112 and 117 million bags with Brazil producing 38.3
million bags. Despite Thursday’s recovery, overall market sentiment remains
bearish and a retest of contract lows can not be rules out.
Technical Outlook
COFFEE (SEP) 8/20/04 The daily closing price
reversal up is positive. The market tilt is slightly negative with the close
under the pivot. Daily stochastics are showing positive momentum from oversold
levels which should reinforce a move higher if near-term resistance is taken
out. The near-term upside objective is at 68.20. The Coffee contract should run
into resistance at 67.70 and above there at 68.20 with support at 66.5 and
65.80. The market’s short-term trend is negative as the close remains below the
9-day moving average.
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SUGAR MARKET RECAP
8/19/2004
October Sugar closed down 0.03 at 7.69. This was
0.09 up from the low and 0.07 off the high.
October sugar closed slightly higher in a
sideways trade that featured spec selling and fund buying. The negative and
positive news seemed to cancel each other out on Thursday providing the market
with very little direction which kept the trading range relatively tight. News
of an end to a 3 day work slowdown by Brazil dockworkers was negative since the
protest had been slowing exports and providing a sense of supply tightness.
Indonesia is forecasting a 14% hike in sugar cane output for 2004. France’s
second sugar beet test was lower vs last year and lower compared to 2 weeks ago.
Bangladesh was reported to be buyer of 2 cargoes (24,000 to 26,000 tons)of low
quality white sugar while Tunisia bought 2 cargoes (36,000 tons)of white sugar
for Jan to Feb, 2005 delivery. Oct sugar still appears to be in need of further
downside correction based on technical signal. Resistance is at 7.84 and support
at 7.60 then 7.50.
Technical Outlook
#SUGAR (OCT) 8/20/2004: It is a slightly negative
indicator that the close was under the swing pivot. Swing resistance comes in at
7.85, with support found at 7.53. The close below the 9-day moving average is a
negative 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 7.53.
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COTTON MARKET RECAP
8/19/2004
October Cotton finished up 0.48 at 47.83, 0.07
off the high and 1.43 up from the low.
The cotton market failed to extend the recent
short covering pattern and basically forged an inside day. While Cotton exports
came in above expectations of 172,000-225,000 bales at 246,000 bales that didn’t
seem to spark any follow through buying. Some traders are suggesting that a long
term down trend could be reversed with a rise above 52.80, but that is a long
way up on the charts. So far hurricane damage assessments in North Carolina were
for minimal damage and therefore the cotton market is in need of some fresh
news.
Technical Outlook
#COTTON (OCT) 8/20/2004: 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. Next
resistance area comes in at 48.58 and then again at 48.99, while support is
targeted at 47.08 and 45.99. Rising stochastics at overbought levels warrant
some caution for bulls. The next upside objective is 48.99.