Cattle Limit Down — Again!

BOND MARKET RECAP

12/30/2003

The sharp break in the bonds continued despite regularly scheduled economic information that should have discouraged selling. We are convinced that year-end position squaring is taking place, especially since the US equity market began to show signs of weakness around mid session and yet bonds didn’t show the slightest desire to bounce, even in the face of supportive US numbers.

Technical Outlook

BONDS (MAR) 12/31/2003: The market tilt is slightly negative with the close under the pivot. Near-term resistance for bonds is at 109.26 and then again at 110.08, while swing support hits at 108.29 and below there at 108.14. A negative signal for trend short-term was given on a close under the 9-bar moving average. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 108.14.

T-NOTES(MAR) Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The next downside objective is now at 111.20. The market’s close below the pivot swing number is a mildly negative setup. The major trend is down with the cross over back below the 40-day moving average. Near-term resistance for the T-Notes is at 112.17 and then again at 112.23, while swing support hits at 111.31 and below there at 111.20. The market’s short-term trend is negative as the close remains below the 9-day moving average.

STOCK INDICES RECAP

12/30/2003

The stock market failed to make a new high for the move in the S&P but did manage a new high in the Dow by a minor amount. However, the stock market was confronted by a series of bearish economic reports, a lower
dollar and slightly higher energy prices and that could begin to chase some recent longs to the sidelines ahead of the year-end. However, the prevailing trend in the stock market is up and with the prospect of thin conditions on Wednesday the bulls or bears could easily push prices aggressively.

Technical Outlook

S&P500 (MAR) 12/31/2003: The close over the pivot swing is a somewhat positive setup. Underlying support comes in at 1105.95 and 1103.53, with overhead resistance at 1109.85 and 1111.33. 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 1111.33. 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 1111.38. 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 1109.75 and then again at 1111.38, while swing support hits at 1105.75 and below there at 1103.38. 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 1480.00 and above there at 1483.50 with support at 1468.00 and 1459.50. 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 1483.50.

CURRENCY MARKET RECAP

12/30/2003

The Dollar Index continued to fall without the slightest complaint being lodged by either the ECB or the BOJ. In fact, when one looks back to the numbers during the session Tuesday, it would seem that there is even more cause to pressure the
dollar into new low ground. In fact, the size of the range in the dollar almost makes it seem like the losses as going to expand, rather than contract.

Technical Outlook

YEN (MAR): A positive signal for trend short-term was given on a close over the 9-bar moving average. The close below the 1st swing support could weigh on the market. Swing resistance is targeted at 93.73 and above there at 93.85, with the yen finding support around 93.53 and below there at 93.45. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 93.85.

EURO (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 1.2579. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing support for the Euro comes in at 1.2443, with overhead resistance at 1.2579. 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

12/30/2003

Gold prices continue to post new highs but the net daily gain isn’t that impressive. However, the bull case continues to dominate regardless of the pace of gains in the futures market. With the
dollar falling aggressively on Tuesday, it would seem that gold and silver will remain in favor. The London gold afternoon fix was slightly higher confirming that interest in the long side of gold remained firm throughout the day in the European gold market. While silver prices ran to new high, the relative gains in silver were less than what has recently been seen.

Technical Outlook

SILVER (MAR): The market has a bullish tilt coming into today’s trade with the close above the 2nd swing resistance. Initial support for silver is at 595.3 and below there at 589.7 with resistance likely at 598.5 and 603.3. 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 598.5. The market is approaching overbought levels with an RSI over 70. The market made a new contract high on the rally.

GOLD (FEB): Support for gold today comes in near 415.18, while resistance is pegged at 418.98. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 418.98. 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. The market is becoming somewhat overbought now that the RSI is over 70. The market rallied to a new contract high.

COPPER MARKET RECAP

12/30/2003

The copper market saw a slight setback in prices Tuesday partly because the Codelco strike resolution and partly because of the slack US economic information. It is also possible that weaker US equity prices provided a setback to copper prices, which were significantly overbought. Overall the copper market mostly discounted the US reports but might be getting concerned about its overbought technical condition. Year-end might be a time that additional longs decide to bank some pretty significant profits.

ENERGY MARKET RECAP

12/30/2003

The energy complex firmed as the OPEC Secretary General suggested that the cartel would not increase production once the upper banding mechanism was triggered with the 20-day rule. OPEC also suggested that they needed to regain market share from past price support efforts and that might eventually be seen as a negative to prices as OPEC probably wants to get some volume back that was lost to Russian and Mexican output. Also support prices (specifically natural gas) were ideas that a Canadian cold front might drift lower into US than was originally forecast.

Technical Outlook

CRUDE OIL (FEB): Follow through buying looks likely if the market can hold yesterday’s gap on the day session chart. Market positioning is positive with the close over the 1st swing resistance. Support for crude is keyed on 32.58 and below there at 32.37, with resistance pegged at 33.01 and 33.23. The close above the 9-day moving average is a positive short-term indicator for trend. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 32.37.

UNLEADED GAS (FEB): A bullish signal was given with an upside crossover of the daily stochastics. The next upside objective is 97.08. The market has a bullish tilt coming into today’s trade with the close above the 2nd swing resistance. Resistance today is at 97.08, while support should be found around 91.48. The market made a new contract high on the rally. If yesterday’s gap higher on the day session chart holds, additional buying could develop this session. A positive signal for trend short-term was given on a close over the 9-bar moving average.

HEATING OIL (FEB):There could be more upside follow through since the market closed above the 2nd swing resistance. Heating oil should encounter support around 91.19, with resistance is at 95.19. The close above the 9-day moving average is a positive short-term indicator for trend. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 91.19. Follow through buying looks likely if the market can hold yesterday’s gap on the day session chart.

CORN MARKET RECAP

12/30/2003

The corn market also rejected early weakness but was not under as much initial pressure as soybeans. The corn market continues to see the rumor mill kicking out ideas that China is moving to get out of the export business for 2004 and that is providing an underpin to prices. It would also seem like weather is due to shift back toward the bull camp in Argentina later in the week. In the mean time ultra weakness in soybeans will continue to buffet corn prices.

Technical Outlook

CORN (MAR) 12/31/2003: 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 245 1/2. The close over the pivot swing is a somewhat positive setup. Market resistance comes in at 245 1/2 today, with support at 239 . The close below the 9-day moving average is a negative short-term indicator for trend.

SOY COMPLEX RECAP

12/30/2003

The soybean market gapped lower but ended up rejecting most of the losses into mid session but then failed again into the close. The trade is concerned that Chinese buyers might stand back and with South American weather favorable to crop production there certainly was an incentive to liquidate some existing longs. Many traders were fearful early that bone meal might not be eliminated from the US Feed mix and that undermined the trade temporarily.

Technical Outlook

SOYBEANS (MAR) 12/31/03 The close below the 1st swing support could weigh on the market. The next area of resistance is around 792 1/2 and 799 3/4, while 1st support hits today at 777 and below there at 768 3/4. 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 799 3/4.

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 249.8. First resistance comes in at 247.1, with support at 240.6. 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 (MAR): A negative signal for trend short-term was given on a close under the 9-bar moving average. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 27.21. The swing indicator gave a moderately negative reading with the close below the 1st support number. Daily swing resistance is found at 27.55 and above there at 27.67. Support should be encountered at 27.32 and 27.21. Short-term indicators on the defensive. Consider selling an intraday bounce.

WHEAT MARKET RECAP

12/30/2003

After some initial weakness the wheat market managed to recover and close higher on the session. Apparently the market was initially concerned that China might be in the process of canceling 7.3 million tons of a 55 million ton order for Soft Red winter wheat. The wheat market also saw signs that basis levels were weakening and that leaves wheat prices undermined. Providing some support to weather prices were suggestions Tuesday that Canadian wheat and barley Seedings were down due to dryness.

Technical Outlook

WHEAT (MAR) 12/31/2003: 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. Expect near-term support around 362 and below there at 357 3/4, with resistance levels at 368 1/2 and 370 3/4. A negative signal for trend short-term was given on a close under the 9-bar moving average. Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The next downside objective is 357 3/4.

LIVE CATTLE RECAP

12/30/2003

While the February contract did manage to trade, it eventually closed limit down. With foreign importers of US beef calling for scientific proof that all export product is free of tainted material, it would seem as if the road back for the export market is going to be a long and winding
one. In the meantime, the market acts like it wants to find equilibrium but just can’t seem to muster sustained buying interest. Cattle fax suggests that US beef demand has remained strong but that is only a minor barrier against the wave of ongoing selling interest.

Technical Outlook

CATTLE (FEB) 12/31/2003: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The next downside objective is 74.42. There could be some early pressure today given the market’s negative setup with the close below the second swing support. Support should be encountered at 75.00 and below there at 74.42. Market resistance is at 77.32 and then again at 79.07. 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. More downside action may be limited by the RSI under 20, putting the market in extremely oversold territory.

LEAN HOGS RECAP

12/30/2003

The hog market forged an inside day Tuesday with a slightly lower close but the market was expecting the Hog and Pig report to be negative. The Hog & Pig report was bearish with All hogs 101% versus a year ago. The average guess was 99.8% compared to range of estimates of 98.6 to 102. Pig Crop for September to November was 102% of year ago as compared to an average guess of 99.5 (range of estimates were 97.6 to 101). The trade called the report bearish but Mad cow support should continue to countervail weakness off the internal numbers.

Technical Outlook

HOGS (FEB) 12/31/2003: It is a slightly negative indicator that the close was under the swing pivot. Resistance levels comes in at 54.35 and 54.87 today, while support is around 53.27 and then 52.72. 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 target is at 54.87.

COCOA MARKET RECAP

12/30/2003

The cocoa market finished lower again as the farmer sales activity continues to dominate the action. Without stories of renewed political tensions at the Ivory Coast the market is confronted with rising supply. We think supply is flowing because of lower farm gate prices and because of the rebels return to the Ivory Coast Government. CSCE cocoa warehouse stocks continued to rise Tuesday with an increase of 3,326 bags.

Technical Outlook

COCOA (MAR)12/31/03 The market tilt is slightly negative with the close under the pivot. Cocoa should run into resistance at 1544 and above there at 1554 with support at 1530 and 1526. Momentum studies are declining, but have fallen to oversold levels. The next downside target is 1525.50.

COFFEE MARKET RECAP

12/30/2003

After an attempt to rally, March coffee fell back and settled below the prior close. News that Vietnam was moving it large crop to the market seemed to undermine, as did ideas that rains in Brazil were keeping the crop in good condition. With the coffee market attempting to maintain holiday type conditions it is now surprise that the market lacked follow through buying around the highs Tuesday. In a supportive development Peru suggested that the 2003 harvest was down 16% to 2.467 million bags.

Technical Outlook

COFFEE (MAR)12/31/03 The downside closing price reversal on the daily chart is somewhat negative. The close equal to the pivot swing number is a neutral directional indicator. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside objective is now at 62.95.The Coffee contract should run into resistance at 64.10 and above there at 64.75 with support at 63.2 and 62.95. The market’s short-term trend is positive on a close above the 9-day moving average.

SUGAR MARKET RECAP

12/30/2003

March sugar continued to trade lower as the bearish technical setup of the market is likely to pressure prices to test contract lows at 5.50. A lack of cash activity despite the sharp drop in prices is adding to the market’s bearish tone. Speculators continue to liquidate long positions ahead of year end since the market will have a hard time sustaining higher prices without active cash buying.

Technical Outlook

SUGAR (MAR) 12/31/2003: It is a slightly negative indicator that the close was under the swing pivot. Swing resistance comes in at 5.91, with support found at 5.65. 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 5.65. Some caution in pressing the downside is warranted with the RSI under 30.

COTTON MARKET RECAP

12/30/2003

The cotton market managed to hold all of the prior sessions gains and added to those with a gap higher opening. With the prior days export figures coming in above expectations and the Chinese showing up in force in the export tally the market is supported for additional gains. For some reason the March cotton market seems to pointing to the 75.00 level. as a critical pivot point. One might note that markets like copper and soybeans has seen a slight pause in Chinese interest and maybe that same type of pause might be seen in the cotton market but in a big picture setup the Chinese would not seem to be done with their buying binge.

Technical Outlook

COTTON (MAR) 12/31/2003: A positive indicator was given with the upside crossover of the 9 & 18 bar moving average. The market has a slightly positive tilt with the close over the swing pivot. Next resistance area comes in at 74.85 and then again at 75.32, while support is targeted at 73.90 and 73.42. The market now above the 40-day moving average suggests the longer-term trend is up. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 75.32. ORANGE JUICE (MAR)12/31/03 The sell-off took the market to a new contract low. The close below the 1st swing support could weigh on the market. Orange Juice should run into resistance at 65.10 and above there at 66.20 with support at 63.60 and 63.20. The 9-day RSI under 20 suggests the market is extremely oversold. The market’s short-term trend is negative as the close remains below the 9-day moving average. Momentum studies are declining, but have fallen to oversold levels. The next downside objective is now at 63.2.