Clouds Of Doubt Are Dissipating–Here’s Why
BOND MARKET RECAP
5/16/2005
June Bonds finished down 0-01 at 115-20, 0-09 off
the high and 0-06 up from the low.
June 10 Yr Treasury Notes finished up 0-005 at
111-315, 0-050 off the high and 0-055 up from the low.
The Treasury market remained positively
biased despite news that capital flows toward the US in the most recent monthly
report slumped to the lowest level since October of 2003. In other words, the
benefit of the early softer than expected New York Fed manufacturing survey was
largely offset by the renewed fears of international diversification away from
US Treasuries. Later in the session the market was also limited by a minor rise
in the May NAHB Housing Index. With oil prices down and equity prices rising we
suspect that some buyers were simply unwilling to pay up for bonds and notes
around the highs on Monday. On balance the New York Fed manufacturing reading
was much weaker than expected and therefore the net shake off the scheduled
numbers on Monday seems to have favored the bull camp.
Technical Outlook
BONDS (JUN) 05/17/2005: 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 downside closing price
reversal on the daily chart is somewhat negative. The market tilt is slightly
negative with the close under the pivot. The next upside target is 116-03. The
next area of resistance is around 115-25 and 116-03, while 1st support hits
today at 115-10 and below there at 115-04.
TNOTES (JUN) 05/17/2005: 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 indicates the
longer-term trend has turned up. The market could take on a defensive posture
with the daily closing price reversal down. The close over the pivot swing is a
somewhat positive setup. The near-term upside target is at 112-100. The next
area of resistance is around 112-040 and 112-100, while 1st support hits today
at 111-250 and below there at 111-195.
Â
STOCK INDICES RECAP
5/16/2005
June S&P finished up 10.4 at 1167.1, 0.4 off the
high and 11.1 up from the low.
June S&P E-Mini closed up 10.25 at 1167. This was
12.25 up from the low and 0.75 off the high.
June Dow closed up 93 at 10251. This was 101 up
from the low and 9 off the high.
The stock market surprised some in the trade by
coming alive in the wake of favorable action in certain medical stocks and
because of very positive leadership in Home Depot and Citigroup shares. We also
think that consistent declines in energy prices is at least beginning to
dissipate the clouds and doubts that have been hanging over the economy. News
that OPEC would work to provide more capacity by the end of the year seemed to
increase the odds that soft oil prices might remain soft. We also think that the
NAHB Index gain around mid session served to countervail the mostly
disappointing early readings from the Empire state manufacturing Index.
Surprisingly the stock market only paid fleeting attention to the news that
foreign investment flow toward the US reversed as that could rekindle the fear
of international diversification away from the US.
Technical Outlook
S&P 500 (JUN) 05/17/2005: Negative momentum
studies in the neutral zone will 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. With the close over the 1st swing resistance number,
the market is in a moderately positive position. The next downside target is now
at 1152.88. The next area of resistance is around 1172.75 and 1175.87, while 1st
support hits today at 1161.25 and below there at 1152.88.
SP EMINI (JUN) 05/17/2005: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The major trend could be turning up with the close back above the
18-day moving average. The market setup is supportive for early gains with the
close over the 1st swing resistance. The next downside objective is now at
1151.13. The next area of resistance is around 1173.50 and 1177.12, while 1st
support hits today at 1160.50 and below there at 1151.13.
NASDAQ (JUN) 05/17/2005: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The major trend could be turning up with the close back above the 18-day
moving average. The close over the pivot swing is a somewhat positive setup. The
near-term upside objective is at 1496.00. The next area of resistance is around
1489.50 and 1496.00, while 1st support hits today at 1472.50 and below there at
1462.00.
Â
CURRENCY MARKET RECAP
5/16/2005
June US Dollar finished up 2 at 8612, 26 off the
high and 7 up from the low.
June Euro finished up 0.09 at 126.45, 0.12 off
the high and 0.31 up from the low.
June Euro Dollar closed up 0.0025 at 96.5825.
This was 0.01 up from the low and 0.005 off the high.
June Canadian Dollar closed down 0.32 at 78.79.
This was 0.24 up from the low and 0.13 off the high.
June British Pound finished down 1.24 at 183.55,
0.12 off the high and 0.45 up from the low.
June Swiss closed up 0.18 at 82.01. This was 0.29
up from the low and 0.05 off the high.
June Japanese Yen closed up 0.28 at 93.71. This
was 0.54 up from the low and 0.05 off the high.
The Dollar started out firm but began to lose
momentum in the face of a weaker than expected US Fed manufacturing report. Also
dampening the Dollars strength were reports of a setback in US capital inflows
from foreign sources. In other words, the recent bullish track toward the Dollar
was called into question by the fact that foreign central banks began to reverse
flows away from the US. With the investment flow toward the US, the lowest since
October of 2003, it would seem like the tide turned in the Dollar. In fact, many
traders might now react violently to the US industrial production report in the
event that the US fails to produce a strong reading!
Technical Outlook
YEN (JUN) 05/17/2005: The moving average
crossover down (9 below 18) indicates a possible developing short-term
downtrend. Momentum studies are still bearish but are now at oversold levels and
will tend to support reversal action if it occurs. The close below the 18-day
moving average is an indication the longer-term trend has turned down. The daily
closing price reversal up on the daily chart is somewhat positive. A positive
setup occurred with the close over the 1st swing resistance. The next downside
objective is 93.00. The next area of resistance is around 94.00 and 94.17, while
1st support hits today at 93.42 and below there at 93.00.
EURO (JUN) 05/17/2005: Momentum studies are
declining, but have fallen to oversold levels. The close under the 18-day moving
average indicates the longer-term trend could be turning down. The daily closing
price reversal up on the daily chart is somewhat positive. The market has a
slightly positive tilt with the close over the swing pivot. The next downside
target is now at 125.98. Some caution in pressing the downside is warranted with
the RSI under 30. The next area of resistance is around 126.66 and 126.83, while
1st support hits today at 126.24 and below there at 125.98.
Â
PRECIOUS METALS RECAP
5/16/2005
June Gold closed down 1.4 at 419.3. This was 1.1
up from the low and 0.8 off the high.
July Silver finished up 0.018 at 6.958, 0.032 off
the high and 0.063 up from the low.
Â
The gold market might have avoided a more
significant washout with the reversal action in the Dollar on Monday. With an
extremely disconcerting reading on the rate of foreign investment into the US
apparently reversing the direction of the Dollar it might be possible that the
consistent selling pressure in the gold market dies down for a couple sessions.
The Press noted some Asian bargain hunting buying around the lows and that might
serve to discourage near term selling pressure. China seemed to suggest that
they would not bow to pressure on their currency and that seemed to confuse a
market that has been thoroughly convinced that the Chinese were moving swiftly
toward a re-peg or a restricted float.
Technical Outlook
SILVER (JUL) 05/17/2005: Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The close under the 18-day moving average indicates the longer-term
trend could be turning down. With the close higher than the pivot swing number,
the market is in a slightly bullish posture. The next downside target is 685.6.
The next area of resistance is around 700.6 and 704.5, while 1st support hits
today at 691.1 and below there at 685.6.
GOLD (JUN) 05/17/2005: Momentum studies are
declining, but have fallen to oversold levels. The close below the 18-day moving
average is an indication the longer-term trend has turned down. It is a slightly
negative indicator that the close was lower than the pivot swing number. The
next downside objective is now at 417.4. The market is approaching oversold
levels on an RSI reading under 30. The next area of resistance is around 420.2
and 421.1, while 1st support hits today at 418.4 and below there at 417.4.
Â
COPPER MARKET RECAP
5/16/2005
June Copper closed up 0.55 at 139.80. This was
1.80 up from the low and 0.30 off the high.
The copper market was unable to avoid another
round of new lows for the move on Monday and with the Dollar initially strong we
can understand the downside extension. However, the market appeared to see some
bargain hunting buying around the lows and might also have been lifted by talk
that Chinese copper imports were set to recover in May and June after some early
1st quarter weakness in imports. Perhaps the most important bullish catalyst in
copper on Monday is the fact that the Dollar reversed significantly off the
highs and might be poised for the first substantial correction since mid April.
Â
ENERGY MARKET RECAP
5/16/2005
June Crude Oil closed down 0.06 at 48.61. This
was 1.01 up from the low and 0.09 off the high.
June Heating Oil closed down 2.00 at 135.03. This
was 1.63 up from the low and 0.47 off the high.
June Unleaded Gas finished down 0.70 at 140.52,
1.28 off the high and 2.82 up from the low.
June Natural Gas finished down 0.09 at 6.45, 0.03
off the high and 0.04 up from the low.
June Propane closed down 0.00 at 0.79. This was
equal to the low and equal to the high.
Energy prices were mostly weak on Monday despite
repeated attempts to climb back into positive territory. In fact, the market
remained down despite news that Chinese April crude oil imports reached the
highest level ever. However, the energy complex looked at the weekend dialogue
from OPEC and has accepted that near term supply will remain adequate and that
OPEC might even tolerate an additional decline in the OPEC basket price of $5.00
per barrel. Even talk of another active hurricane season failed to spark short
covering in a market that has been under pressure for almost two full months. A
reversal in the Dollar might begin to provide some support to crude oil but only
if the Dollar manages to forge a couple days of downside action.
Technical Outlook
CRUDE OIL (JUN) 05/17/2005: 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. It is a mildly bullish indicator that the market closed over the
pivot swing number. The next downside objective is now at 47.28. The next area
of resistance is around 49.16 and 49.48, while 1st support hits today at 48.06
and below there at 47.28.
UNLEADED (JUN) 05/17/2005: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The close below the 18-day moving average is an indication
the longer-term trend has turned down. It is a slightly negative indicator that
the close was lower than the pivot swing number. The next downside objective is
now at 136.04. With a reading under 30, the 9-day RSI is approaching oversold
levels. The next area of resistance is around 142.56 and 144.23, while 1st
support hits today at 138.47 and below there at 136.04.
HEATING OIL (JUN) 05/17/2005: Momentum studies
are declining, but have fallen to oversold levels. The close below the 18-day
moving average is an indication the longer-term trend has turned down. The gap
lower price action on the day session chart is a bearish indicator for trend.
The market setup is somewhat negative with the close under the 1st swing
support. The next downside objective is 132.64. With a reading under 30, the
9-day RSI is approaching oversold levels. The next area of resistance is around
136.07 and 136.83, while 1st support hits today at 133.98 and below there at
132.64.
Â
CORN MARKET RECAP
5/16/2005
July Corn finished up 3 1/2 at 207, 1/2 off
the high and 1 1/4 up from the low. December Corn closed up 3 1/2 at 225 1/4.
This was 1 1/4 up from the low and 1/2 off the high.
5/16/2005 December corn market held its early
gains and closed at its strongest level since May 10th after surprising the
trade with a much firmer opening than was expected. The new found bullish
sentiment seems to be focused on the idea that the much better than expected
early start to the 2005 season is being tempered. However, the opening optimism
could be short lived if the outlook for warmer Midwest temperatures comes to
fruition. With the US corn crop still early or at least trending back toward
normal it would seem to be difficult to completely reverse the overt negative
attitude generated by recent supply and demand projections. The conundrum of too
much rain in the western Corn Belt combined with not enough rain in the eastern
Corn Belt does put some uncertainty back into the equation. Therefore, the trade
seems to be looking forward with more interest than normal to the
Wednesday/Thursday forecast for rain in the eastern Corn Belt, as the 6 to 10
day forecast beyond the mid week rain event is for mostly dry and warmer
conditions. The corn market exhibited almost no reaction to the news that
Argentine 2005 corn output was set to reach a record level. While there is some
supply uncertainty, a chain of uncertainty is needed to countervail the slack
demand large crop theme! While the replanting dialogue is also supporting prices
somewhat, that issue could begin to die down as more seasonal weather settles
into place over the coming two weeks. US export inspections for corn were 26.9
million bushels off expectations of 27 to 33 million bushels and therefore the
trade was either unaffected or slightly deflated by the inspections data.
Technical Outlook
CORN (JUL) 05/17/2005: Daily stochastics are
trending lower but have declined into oversold territory. The market back below
the 18-day moving average suggests the longer-term trend could be turning down.
Follow through buying looks likely if the market can hold yesterday’s gap on the
day session chart. There could be more upside follow through since the market
closed above the 2nd swing resistance. The next downside objective is now at 205
1/4. The next area of resistance is around 207 3/4 and 208 1/2, while 1st
support hits today at 206 1/4 and below there at 205 1/4.
Â
SOY COMPLEX RECAP
5/16/2005
July Soybeans finished up 10 3/4 at 623 1/2, 1
1/2 off the high and 11 1/2 up from the low. November Soybeans closed up 9 1/4
at 618 1/4. This was 9 3/4 up from the low and 3/4 off the high.
July Soymeal closed up 4.3 at 193.7. This was 4.2
up from the low and 0.3 off the high.
July Soybean Oil finished down 0.06 at 22.16,
0.07 off the high and 0.21 up from the low.
5/16/2005 Soybeans closed higher on follow
through buying after from last Fridays’ reversal. However, the threat to bean
production off the weather is still indirect, and therefore most of the strength
is indirectly the result of uncertainty in corn conditions and corn acres. US
export inspections today were insignificant with a 9.9 million bushel pace
coming in within the range of expectations. While it would not seem like the
trade is fearful of rotation from early corn intentions to more soybean acres,
the issue could be on the minds of some players. The market certainly sees a
slight undermining from the demand front in the wake of weekend news of another
foot and mouth incident, and with ongoing Dollar gains, few traders are positive
on demand. For this afternoon’s weekly crop conditions report, the market is
expecting the averageness to continue, which means that a slightly warmer 6 to
10 day forecast might end up being bearish to beans. In the mean time the mid
week rain event could be considered slightly negative, as too much rain in corn
areas yet to planted might increase soybean acres.
Technical Outlook
BEANS (JUL) 05/17/2005: Momentum studies trending
lower at mid-range should accelerate a move lower if support levels are taken
out. The close under the 18-day moving average indicates the longer-term trend
could be turning down. The market setup is supportive for early gains with the
close over the 1st swing resistance. The next downside target is now at 608. The
next area of resistance is around 630 and 634, while 1st support hits today at
617 and below there at 608.
MEAL (JUL) 05/17/2005: The major trend could be
turning up with the close back above the 60-day moving average. The daily
stochastics have crossed over up which is a bullish indication. Momentum studies
are rising from mid-range, which could accelerate a move higher if resistance
levels are penetrated. The close under the 18-day moving average indicates the
longer-term trend could be turning down. A positive setup occurred with the
close over the 1st swing resistance. The near-term upside target is at 197.2.
The next area of resistance is around 195.9 and 197.2, while 1st support hits
today at 191.5 and below there at 188.3.
BEANOIL (JUL) 05/17/2005: Daily stochastics are
trending lower but have declined into oversold territory. The major trend has
turned down with the cross over back below the 18-day moving average. It is a
slightly negative indicator that the close was lower than the pivot swing
number. The next downside objective is 21.85. The next area of resistance is
around 22.30 and 22.40, while 1st support hits today at 22.02 and below there at
21.85.
Â
WHEAT MARKET RECAP
5/16/2005
July Wheat finished up 3 1/2 at 306 1/4, 1 1/4 off the high
and 2 1/4 up from the low. December Wheat closed up 3 1/4 at 325 1/4. This was 1
3/4 up from the low and 1 off the high.
5/16/2005 July wheat closed higher today on
follow-through from Friday’s bounce off of the February lows, but the action was
less than convincing, as the market never managed to trade above Friday’s highs.
Dry weather in Kansas and other parts of the southern plains lent some
fundamental support, as did a bullish Export Inspections report. This morning’s
USDA weekly export inspections came in at 18.133 million bushels, which was
above the upper end of trade expectations. Cumulative inspections have reached
98.38% of the USDA estimate for the season, versus a 5-year average of 94.5% for
this time of the year. Traders are watching for further declines in the
condition of the winter wheat crop in this afternoon’s Crop Progress &
Conditions report. July wheat resistance comes in at 308 3/4 with 302 1/2 as
support.
Technical Outlook
WHEAT (JUL) 05/17/2005: Momentum studies are
declining, but have fallen to oversold levels. The close below the 18-day moving
average is an indication the longer-term trend has turned down. A positive setup
occurred with the close over the 1st swing resistance. The next downside
objective is 302 1/2. The next area of resistance is around 308 and 309 1/2,
while 1st support hits today at 304 1/2 and below there at 302 1/2.
Â
LIVE CATTLE RECAP
5/16/2005
June Live Cattle finished down 0.32 at 86.95,
0.35 off the high and 0.12 up from the low.
May Feeder Cattle closed up 0.07 at 111.50. This
was 0.15 up from the low and 0.15 off the high.
After trading higher for five sessions in a row,
June cattle failed to make it above last Friday’s high (and strong close) on the
opening today and spent the rest of the session trading lower on the day and
inside Friday’s range. A late rally took August cattle managed to new contract
highs. Cash cattle on the plains were quiet today, with no bids on offers at
$93. Last week the market traded at $90-90.50. At mid-session, boxed beef cutout
values were up $1.17 on the day to $155.01 as compared with $158.93 one week
ago. Slaughter came in at 113,000 head as compared with trade expectations of
115,000-120,000 head.
Technical Outlook
CATTLE (JUN) 05/17/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The market now above the 18-day moving average suggests the
longer-term trend has turned up. It is a slightly negative indicator that the
close was under the swing pivot. The near-term upside target is at 87.470. The
next area of resistance is around 87.170 and 87.470, while 1st support hits
today at 86.720 and below there at 86.550.
Â
LEAN HOGS RECAP
5/16/2005
June Lean Hogs finished down 0.12 at 75.70, 0.22
off the high and 0.45 up from the low.
May Pork Bellies closed up 0.35 at 81.20. This
was 0.30 up from the low and 0.50 off the high.
June hogs closed lower today after trading in a
quiet, narrow range inside Friday’s sharply lower session. Cash hogs in the
Midwest traded steady to $1 higher this morning, as packer profit margins
improved with the gain in pork product values last week. However, concerns that
higher than normal weights at this time of the year could spark a sharp increase
in production on only a moderate increase in marketings continue to weigh on the
futures. The CME 2-Day Lean Index for the period ending May 12th came in at
77.06, which was down 0.69 from the previous session and down from 77.26 the
previous week. Slaughter came in a little better than expected at 382,000 head
as compared with trade expectations of 365,000-380,000 head.
Technical Outlook
HOGS (JUN) 05/17/2005: Stochastics trending lower
at midrange will tend to reinforce a move lower especially if support levels are
taken out. 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 next downside target
is 74.970. The next area of resistance is around 76.020 and 76.300, while 1st
support hits today at 75.370 and below there at 74.970.
Â
COCOA MARKET RECAP
5/16/2005
July Cocoa finished up 21 at 1451, 3 off the high
and 34 up from the low.
The cocoa market forged an impressive reversal
after posting some very damaging action late last week. Some suggested that the
reversal in the Dollar caused the market to short cover but we doubt that the
market is poised for a consistent recovery unless the uncertainty at the Ivory
Coast remains low. On the other hand, seeing a general rise in a number of
commodity markets and a strong rise in equity prices might have prompted some
funds to pick up some cocoa at the deflated prices early in the action Monday.
Technical Outlook
COCOA (JUL) 05/17/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
close below the 18-day moving average is an indication the longer-term trend has
turned down. The daily closing price reversal up is a positive indicator that
could support higher prices. The market setup is supportive for early gains with
the close over the 1st swing resistance. The next downside objective is 1407.
The next area of resistance is around 1469 and 1480, while 1st support hits
today at 1433 and below there at 1407.
Â
COFFEE MARKET RECAP
5/16/2005
July Coffee closed down 5.25 at 116.25. This was
0.25 up from the low and 4.50 off the high.
July coffee fell below support at 120 as weak
handed longs opted to exit positions. With Monday’s action further damaging the
market’s technical setup, the next downside target for July coffee is at 112.75.
COT report with options showed the combined net position of the non-commercial
and non-reportable traders at over 28,500 contracts as of May 10th suggesting
the market was still somewhat over bought. With prices unable to make an upside
breakout above 130 last week, it is understandable some traders decided to exit.
Good weather in Brazil this weak should make for an active early harvest with
temperatures turning cooler over the weekend, but not so low as to warrant frost
concerns. Colombian coffee production for this marketing year through April was
reported up around 9% vs same period last year with total 04/05 production
forecasted at up 4%. Demand was poor at Brazil’s government auction of 2002/03
arabica held in stock under the option program. While July coffee may be pushed
back to the April lows, the longer-term outlook is supportive with production
expected to be lower in Brail and with the International Coffee Organization
lowering their world coffee production forecast for the 2005/06 season to 106
million bags vs 113.4 million bags in the previous season.
Technical Outlook
COFFEE (JUL) 05/17/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
market back below the 18-day moving average suggests the longer-term trend could
be turning down. The gap down on the day session chart is bearish with more
selling pressure possible today. The market is in a bearish position with the
close below the 2nd swing support number. The next downside target is 112.60.
The next area of resistance is around 118.60 and 122.05, while 1st support hits
today at 113.90 and below there at 112.60.
Â
SUGAR MARKET RECAP
5/16/2005
July Sugar closed unchanged at 8.35. This was
0.07 up from the low and 0.07 off the high.
While July sugar remains stuck inside a well
defined range, a lack of significant physical sugar business, producer sales and
a bearish commitment of traders with options setup suggest support 8.20 may not
hold. With non-commercials increasing their net short position and
non-reportable traders still net long as of May 10th make the market vulnerable
to speculative selling if support is violated. Russia’s sugar producers
association reported that 1.113 million metric tons of refined sugar was
produced from raw sugar imported between Jan and May 11th, up from 1.037 million
tons the same period last year. As of May 11th, Russian refineries only had 14
working days worth of total raw sugar stocks vs 19 days worth of stocks same
period last year. Reports that India has ample supplies of sugar going into the
hot summer months is somewhat bearish.
Technical Outlook
SUGAR (JUL) 05/17/2005: Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
The market back below the 18-day moving average suggests the longer-term trend
could be turning down. It is a mildly bullish indicator that the market closed
over the pivot swing number. The next downside objective is 8.21. The next area
of resistance is around 8.42 and 8.49, while 1st support hits today at 8.28 and
below there at 8.21.
Â
COTTON MARKET RECAP
5/16/2005
July Cotton finished down 1.74 at 52.01, 1.14 off
the high and 0.01 up from the low.
The cotton market extended the downside thrust in
the action Monday and in the process fell all the way down to the March through
May consolidation lows. We suspect that carry over selling from the technical
damage done last week combined with international trade developments to leave
cotton under pressure. It is also possible that rising New York cotton stocks
and slightly better crop conditions added to the liquidation bias on Monday
morning. While some traders feared ongoing fund liquidation and others fretted
over bearish Asian economic developments we think that record Chinese April
crude oil imports suggest that China is still growing strongly and that export
business could serve to discourage a downside breakout in cotton.
Technical Outlook
COTTON (JUL) 05/17/2005: The major trend has
turned down with the cross over back below the 60-day moving average.
Stochastics trending lower at midrange will tend to reinforce a move lower
especially if support 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 downside
objective is 51.15. The next area of resistance is around 52.58 and 53.44, while
1st support hits today at 51.44 and below there at 51.15.