Cocoa Soars–Here’s Why
BOND MARKET RECAP
2/28/2005
March Bonds finished down 0-28 at 113-03, 1-01
off the high and 0-10 up from the low.
March 10 Yr Treasury Notes finished down 0-170 at
110-280, 0-165 off the high and 0-070 up from the low.
Gains in the Chicago PMI, especially the
employment component, is getting traders concerned that the Feb payroll will
show a big jump in employment and as a result, bonds headed south on Monday. The
core price index for personal consumption expenditure was also up more than
expected and this is one of the key indicators the Fed is watching. Since the
Fed is watching the data to determine the pace of their rate hikes, expectations
for a hot Feb employment number could push bonds sharply lower this week.
Technical Outlook
BONDS (MAR) 03/01/2005: The major trend has
turned down with the cross over back below the 60-day moving average. 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. The outside day down is a negative signal. The close below the 2nd
swing support number puts the market on the defensive. The next downside
objective is 111-26. Some caution in pressing the downside is warranted with the
RSI under 30. The next area of resistance is around 113-21 and 114-21, while 1st
support hits today at 112-08 and below there at 111-26.
TNOTES (MAR) 03/01/2005: 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. The close below the 2nd swing support number puts the market on
the defensive. The next downside objective is now at 110-020. The 9-day RSI
under 30 indicates the market is approaching oversold levels. The next area of
resistance is around 111-065 and 111-255, while 1st support hits today at
110-110 and below there at 110-020.
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STOCK INDICES RECAP
2/28/2005
March S&P finished down 7.5 at 1204.5, 6.3 off
the high and 6 up from the low.
March S&P E-Mini closed down 7.5 at 1204.5. This
was 6.25 up from the low and 10.25 off the high.
March Dow closed down 64 at 10778. This was 48 up
from the low and 60 off the high.
Stocks were hit hard on Monday pressured by 2
drug companies pulled products off the market. Also, a downgrade on the auto
sector by some brokerage companies and another volatile day in energy prices
added to the market’s bearish sentiment. A further decline in the Dollar added
to fears that foreign central banks will diversify away from Dollar securities.
Gains in the Feb Chicago PMI were offset by weak January personal income and
spending and sharp decline in new home sales keeping the mood in the stock
market negative.
Technical Outlook
S&P 500 (MAR) 03/01/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The major trend could be turning up with the close back above
the 18-day moving average. The market’s close below the 1st swing support number
suggests a moderately negative setup for today. The next upside objective is
1216.92. The next area of resistance is around 1210.75 and 1216.92, while 1st
support hits today at 1198.45 and below there at 1192.33.
SP EMINI (MAR) 03/01/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The major trend could be turning up with the
close back above the 18-day moving average. The downside closing price reversal
on the daily chart is somewhat negative. The close below the 1st swing support
could weigh on the market. The near-term upside target is at 1222.00. The next
area of resistance is around 1212.75 and 1222.00, while 1st support hits today
at 1196.25 and below there at 1189.00.
NASDAQ (MAR) 03/01/2005: The downside crossover
(9 below 18) of the moving averages suggests a developing short-term downtrend.
Momentum studies trending lower at mid-range should accelerate a move lower if
support levels are taken out. The major trend has turned down with the cross
over back below the 18-day moving average. The market setup is somewhat negative
with the close under the 1st swing support. The next downside target is now at
1486.75. The next area of resistance is around 1527.50 and 1540.75, while 1st
support hits today at 1500.50 and below there at 1486.75.
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CURRENCY MARKET RECAP
2/28/2005
March US Dollar finished down 14 at 8251, 6 off
the high and 23 up from the low.
March Euro finished unchanged at 132.43, 0.36 off
the high and 0.06 up from the low.
March Euro Dollar closed down 0.01 at 96.99. This
was 0.0025 up from the low and 0.0075 off the high.
March Canadian Dollar closed up 0.43 at 81.08.
This was 0.08 up from the low and 0.38 off the high.
March British Pound finished up 0.54 at 192.18,
0.32 off the high and 0.25 up from the low.
March Swiss closed up 0.12 at 86.15. This was
0.01 up from the low and 0.28 off the high.
March Japanese Yen closed up 0.65 at 95.77. This
was 0.06 up from the low and 0.41 off the high.
After being pushed sharply lower on news that key
indicators in Japan showed solid gains in January giving support to the Yen, the
Dollar trimmed losses when the Feb Chicago PMI came in higher than expected. The
March Dollar broke below some key support levels and although the market has
fallen to technically over sold levels, a further break to the 82 level can not
be ruled out. Dollar sentiment remains bearish and with the economic reports not
having much influence on the Dollar’s direction, we would think that traders
would need to see very surprisingly strong economic data to have any long
lasting positive impact on the currency.
Technical Outlook
YEN (MAR) 03/01/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The cross over and close above the 18-day
moving average is an indication the longer-term trend has turned positive. If
yesterday’s gap higher on the day session chart holds, additional buying could
develop this session. There could be more upside follow through since the market
closed above the 2nd swing resistance. The next upside target is 96.32. The next
area of resistance is around 96.00 and 96.32, while 1st support hits today at
95.54 and below there at 95.39.
EURO (MAR) 03/01/2005: 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. The market has a slightly positive tilt with
the close over the swing pivot. The near-term upside objective is at 132.92. The
next area of resistance is around 132.64 and 132.92, while 1st support hits
today at 132.22 and below there at 132.09.
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PRECIOUS METALS RECAP
2/28/2005
April Gold closed up 1.5 at 437.6. This was 1 up
from the low and 1.7 off the high.
March Silver finished up 0.068 at 7.359, 0.041
off the high and 0.069 up from the low.
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Gold traded higher today on dollar weakness and
higher oil prices and general concerns about inflation. The dollar went to a new
low for the month of February, falling against the Yen after strong economic
data out of Japan. May crude and heating oil went to new contract highs on
colder weather forecasts for the US, which added to inflation fears. April gold
traded at its highest level since January 3rd and closed at its highest level
since December 30th.
Technical Outlook
SILVER (MAR) 03/01/2005: Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. The market now above the 18-day moving average suggests the
longer-term trend has turned up. It is a mildly bullish indicator that the
market closed over the pivot swing number. The next downside target is 724.3.
The next area of resistance is around 741.4 and 746.2, while 1st support hits
today at 730.5 and below there at 724.3.
GOLD (APR) 03/01/2005: 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 mildly bullish indicator that the
market closed over the pivot swing number. The near-term upside objective is at
440.4. With a reading over 70, the 9-day RSI is approaching overbought levels.
The next area of resistance is around 438.9 and 440.4, while 1st support hits
today at 436.3 and below there at 435.1.
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COPPER MARKET RECAP
2/28/2005
March Copper closed up 1.10 at 150.00. This was
0.70 up from the low and 0.50 off the high.
May copper gapped higher this morning and traded
to a new contract high, following through on the strong close the market made
last Friday. Weaker dollar action lent some support today as well. Chile, the
worlds largest copper miner reported that their January production totaled
431,072 metric tons in January, which, an 11.9% gain over year-ago figures.
Miners are expanding production in response to high prices being driven by
strong demand from Asia. LME copper prices traded to 16 year highs today. While
May contract closed at a new contract high, although it failed to hold above the
key 150.00 resistance level that it has penetrated earlier in the session.
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ENERGY MARKET RECAP
2/28/2005
April Crude Oil closed up 0.26 at 51.75. This was
0.65 up from the low and 0.20 off the high.
April Heating Oil closed up 2.56 at 145.42. This
was 2.12 up from the low and 0.48 off the high.
April Unleaded Gas finished down 0.39 at 141.18,
1.02 off the high and 1.28 up from the low.
April Natural Gas finished up 0.02 at 6.73, 0.02
off the high and 0.12 up from the low.
April Propane closed up 0.01 at 0.79. This was
equal to the low and equal to the high.
Energy market saw a very volatile trade Monday as
the technical over bought situation of the market clashes with a supportive
fundamental setup. Expiration of the March product markets contributed to the
wild price action in the energy complex. While the energy markets are over due
for a correction based on technical signals, any price pullbacks may be shallow
and short lived considering that the Northeast has been hit by a cold blast,
heating oil supplies are tight, and there is no confirmed agreement among OPEC
members as to possible changes in production at the March 16th meeting.
Technical Outlook
CRUDE OIL (APR) 03/01/2005: 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 52.48. The market is approaching
overbought levels with an RSI over 70. The next area of resistance is around
52.17 and 52.48, while 1st support hits today at 51.33 and below there at 50.79.
UNLEADED (APR) 03/01/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The major trend could be
turning up with the close back above the 18-day moving average. The market’s
close below the pivot swing number is a mildly negative setup. The near-term
upside target is at 143.41. The next area of resistance is around 142.33 and
143.41, while 1st support hits today at 140.03 and below there at 138.82.
HEATING OIL (APR) 03/01/2005: Momentum studies
are trending higher but have entered overbought levels. The cross over and close
above the 18-day moving average indicates the longer-term trend has turned up.
With the close over the 1st swing resistance number, the market is in a
moderately positive position. The near-term upside target is at 147.61. The
market is approaching overbought levels with an RSI over 70. The next area of
resistance is around 146.72 and 147.61, while 1st support hits today at 144.12
and below there at 142.41.
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CORN MARKET RECAP
2/28/2005
May Corn finished up 1 1/4 at 222 3/4, 2
1/4 off the high and 3 1/4 up from the low. December Corn closed up 3 1/2 at
242. This was 3 up from the low and 1/2 off the high.
The continued stressful weather situation in
Brazil helped support the early gains but there was a lack of new buyers to
support the market after the firm opening. However, funds turned more active
buyers late in the day when it appeared that the market was going to hold onto
recent gains with funds noted buyers of near 5000 contracts. Traders are already
nervous that a rally will increased producer selling while causing US exporters
to become less competitive on the world market. South Korea bought 60,000 tons
of China corn over the weekend and there was a lack of interest in US corn.
Country basis levels were lower on talk of a jump in producer movement. Heavy
deliveries added to the bearish tone after the higher opening as there were
1,394 contracts delivered against the March contract on first notice day as
compared with trade expectations of 500-1000 contracts. Weekly export shipments,
however, helped provide some support on the early break. Weekly export
inspections, released during the session came in at 31.7 million bushels as
compared with trade expectations at 25-30 million bushels. Cumulative shipments
have reached 42.4% of the USDA forecast for the season as compared with 47.2% on
average for this time of the year. Export shipments need to average 42.9 million
bushels per week to reach the USDA projections. Support for May corn comes in at
220 1/2 and 218 1/2 with resistance at 224 3/4 and 229 3/4.
Technical Outlook
CORN (MAY) 03/01/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The cross over and close above
the 18-day moving average is an indication the longer-term trend has turned
positive. With the close higher than the pivot swing number, the market is in a
slightly bullish posture. The near-term upside objective is at 228. With a
reading over 70, the 9-day RSI is approaching overbought levels. The next area
of resistance is around 225 1/2 and 228, while 1st support hits today at 220 and
below there at 217.
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SOY COMPLEX RECAP
2/28/2005
May Soybeans finished up 17 1/2 at 622, 2 off the
high and 11 up from the low. November Soybeans closed up 11 at 619. This was 8
up from the low and 1 off the high.
May Soymeal closed up 4.8 at 183.0. This was 3.0
up from the low and 1.5 off the high.
March Soybean Oil finished up 0.68 at 23.22, 0.08
off the high and 0.32 up from the low.
The lack of rain in the forecast this week for
southern Brazil along with only light coverage over the weekend helped support
continued buying from speculators this morning on ideas that yield losses are
ongoing. Funds were noted buyers of near 5000 contracts into the mid-session.
Weekend rains were not enough to slow the stress in many areas and traders are
lowering their production forecasts again. Only light deliveries for oil and no
deliveries for meal or soybeans helped provide some underlying support and the
weaker US dollar and general fund buying of commodities added to the positive
tone. Weekly export inspections, released during the session came in at 27.36
million bushels as compared with trade expectations at 23-28 million bushels.
Cumulative shipments have reached 76.3% of the USDA forecast for the season as
compared with 70.4% on average for this time of the year. Resistance for May
soybeans comes in at 624 1/4 and 638 (50% retracement of the contract high to
low move) with support at 620 and 610 3/4.
Technical Outlook
BEANS (MAY) 03/01/2005: 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 gap upmove on the day session chart is a
bullish indicator for trend. The market’s close above the 2nd swing resistance
number is a bullish indication. The near-term upside target is at 632 3/4. With
a reading over 70, the 9-day RSI is approaching overbought levels. The next area
of resistance is around 628 1/2 and 632 3/4, while 1st support hits today at 615
1/2 and below there at 606 3/4.
MEAL (MAY) 03/01/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The cross over and close above the 18-day moving average indicates
the longer-term trend has turned up. If yesterday’s gap higher on the day
session chart holds, additional buying could develop this session. Since the
close was above the 2nd swing resistance number, the market’s posture is bullish
and could see more upside follow-through early in the session. The near-term
upside target is at 187.8. The market is becoming somewhat overbought now that
the RSI is over 70. The next area of resistance is around 186.2 and 187.8, while
1st support hits today at 182.0 and below there at 179.4.
BEANOIL (MAY) 03/01/2005: Momentum studies are
trending higher but have entered overbought levels. The cross over and close
above the 18-day moving average is an indication the longer-term trend has
turned positive. The gap up on the day session chart gave a bullish indicator
and more follow through could be seen this session. With the close over the 1st
swing resistance number, the market is in a moderately positive position. The
near-term upside target is at 23.74. The 9-day RSI over 70 indicates the market
is approaching overbought levels. The next area of resistance is around 23.57
and 23.74, while 1st support hits today at 23.13 and below there at 22.85.
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WHEAT MARKET RECAP
2/28/2005
May Wheat finished up 12 at 345 1/4, 1 1/4 off the high and 12
1/4 up from the low. July Wheat closed up 12 1/4 at 351 1/2. This was 12 1/2 up
from the low and 1/2 off the high.
The market continues to follow the soybean market
higher which supported more fund buying and the move to the highest level since
September 22nd. Along with the weather in South America, cold weather in China
may have impacted some production and light deliveries against the March
contract added to the positive tone. There were only 108 contracts delivered
against March wheat on first notice day today while traders were looking for
deliveries of 1000 contracts or more. In addition, in spite of all of the
badmouthing regarding exports, the pace remains impressive. Weekly export
inspections, released during the session came in at 22.3 million bushels as
compared with trade expectations at 13-18 million bushels. Cumulative shipments
have reached 79.2% of the USDA forecast for the season as compared with 75.1% on
average for this time of the year. Funds were noted buyers of near 5000
contracts into the mid-session. May wheat support comes in at 338 and 334 with
346 1/2 and 355 1/2 as next resistance.
Technical Outlook
WHEAT (MAY) 03/01/2005: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The market now above the 18-day moving average suggests the longer-term
trend has turned up. The market has a bullish tilt coming into today’s trade
with the close above the 2nd swing resistance. The near-term upside target is at
356. With a reading over 70, the 9-day RSI is approaching overbought levels. The
next area of resistance is around 352 and 356, while 1st support hits today at
338 1/2 and below there at 329.
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LIVE CATTLE RECAP
2/28/2005
April Live Cattle finished down 0.05 at 86.05,
0.90 off the high and 0.10 up from the low.
March Feeder Cattle closed up 0.75 at 99.15. This
was 0.55 up from the low and 0.32 off the high.
Fears of weak short-term demand due to the
snowstorm on the east coast along with the good weather in the plains to promote
more active sales this week helped trigger the weakness in April futures and
close which was 5 lower on the day but 90 points off of the highs of the day.
Boxed-beef cut-out values at mid-session were up $.46 to $140.42 as compared
with $139.57 last week. Ideas that the beef market may be near a low helped
trigger the short-covering bounce in the June contract as the stiff discount of
June cattle to the cash market and ideas that the upcoming rollover period could
support June added to the positive tone. In addition, traders are becoming more
convinced that the initial imports from Canada in the first week or more after
the March 7th opening date could be very slow. Slaughter came in at 118,000 head
from trade expectations for 114,000-119,000 head.
Technical Outlook
CATTLE (APR) 03/01/2005: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The market back below the 18-day moving average suggests
the longer-term trend could be turning down. The daily closing price reversal
down is a negative indicator for prices. The market has a slightly positive tilt
with the close over the swing pivot. The next downside objective is now at
85.270. The next area of resistance is around 86.520 and 87.250, while 1st
support hits today at 85.570 and below there at 85.270.
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LEAN HOGS RECAP
2/28/2005
April Lean Hogs finished up 0.07 at 74.22, 0.42
off the high and 0.30 up from the low.
March Pork Bellies closed up 0.70 at 88.10. This
was 0.95 up from the low and 0.40 off the high.
April hogs closed slightly higher with choppy,
two-sided trade. Cash markets were mostly $.50 higher to start the week which
helped support the futures early but the premium of futures to the cash market
limited gains. Strength in the loin market and higher pork cut-out values on
Friday afternoon added to the positive tone. The 2-day lean index for the period
ending February 24th came in at 70.16, up.41 on the session and up from 67.27
last week. Slaughter came in at 385,000 head from trade expectations for
388,000-395,000 head. The poor profit margins from packers encouraged less
demand for live inventory and may be the reason for the slow slaughter pace of
the past several trading sessions.
Technical Outlook
HOGS (APR) 03/01/2005: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The market now above the 18-day moving average suggests
the longer-term trend has turned up. The close over the pivot swing is a
somewhat positive setup. The near-term upside objective is at 74.970. The next
area of resistance is around 74.570 and 74.970, while 1st support hits today at
73.870 and below there at 73.550.
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COCOA MARKET RECAP
2/28/2005
May Cocoa finished up 76 at 1730, 16 off the high
and 65 up from the low.
Cocoa futures soared today on reports of renewed
violence overnight in the Ivory Coast. Pro-government militia attacked rebel
positions in the western part of the country, thus ending a truce that had been
established over the past several months. While UN forces were able to
reestablish order, a rebel spokesman commented that the peace efforts were
essentially over. The London futures market barely reacted to the news
overnight, but New York gapped higher on the opening and shot up from there, as
fund buying reportedly came into the market. In the process, May cocoa took out
its December 6th high of $1,723 and closed at its highest level since November
15th. London followed New York higher.
Technical Outlook
COCOA (MAY) 03/01/2005: Momentum studies are
trending higher but have entered overbought levels. The major trend could be
turning up with the close back above the 18-day moving average. The gap upmove
on the day session chart is a bullish indicator for trend. Since the close was
above the 2nd swing resistance number, the market’s posture is bullish and could
see more upside follow-through early in the session. The next upside objective
is 1798. With a reading over 70, the 9-day RSI is approaching overbought levels.
The next area of resistance is around 1770 and 1798, while 1st support hits
today at 1690 and below there at 1637.
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COFFEE MARKET RECAP
2/28/2005
May Coffee closed up 4.15 at 121.55. This was
3.55 up from the low and 1.55 off the high.
May coffee closed 415 higher on the session
Monday and recovered all of Friday’s losses. The weekly closing price reversal
from a 5-year high last week failed to attract new selling interest and a surge
higher in Cocoa and strength in other commodity markets helped support solid
speculative buying on coffee. New fundamental news seems to be lacking for
coffee but cash markets remain firm. Weather in Brazil has supported soybeans
and to some extent sugar recently and some overflow support may be helping the
coffee market as well.
Technical Outlook
COFFEE (MAY) 03/01/2005: Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The cross over and close above the 18-day moving average indicates the
longer-term trend has turned up. With the close over the 1st swing resistance
number, the market is in a moderately positive position. The next downside
target is 116.00. The next area of resistance is around 124.10 and 126.15, while
1st support hits today at 119.05 and below there at 116.00.
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SUGAR MARKET RECAP
2/28/2005
May Sugar closed up 0.14 at 9.17. This was 0.18
up from the low and 0.06 off the high.
Ideas that China import demand may be perking up
and uncertainties over the impact of dry weather in Brazil helped support solid
gains in New York sugar on Monday. Strength in the London contract and firm cash
premiums for Thailand sugar added to the positive tone. The long liquidation
trend continued for the March contract into the final hour in a very wild
trading session and traders have moved from expectations of deliveries of near
4500 contracts to near 265 lots. Support for May sugar moves up to 902 with 920,
927 and 934 as next resistance.
Technical Outlook
SUGAR (MAY) 03/01/2005: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The major trend
has turned down with the cross over back below the 18-day moving average. A
positive setup occurred with the close over the 1st swing resistance. The next
downside target is 8.90. The next area of resistance is around 9.29 and 9.38,
while 1st support hits today at 9.05 and below there at 8.90.
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COTTON MARKET RECAP
2/28/2005
May Cotton finished up 1.09 at 51.27, 0.08 off
the high and 0.72 up from the low.
May cotton surge higher and moved to the highest
level since October 7th as the continued strength in soybeans gives traders hope
that growers in the delta may be attracted to soybeans and could switch away
from ideas of planting more cotton. In addition, strength in the CRB Index and
prospects for strong growth in world consumption for the coming year continues
to support. Follow-through buying from Friday’s upside break-out seemed to be
the driving force of the strong rally in cotton in spite of fundamental news to
support the higher trade.
Technical Outlook
COTTON (MAY) 03/01/2005: Rising stochastics at
overbought levels warrant some caution for bulls. 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 51.91. The 9-day RSI over 70 indicates the market is approaching overbought
levels. The next area of resistance is around 51.66 and 51.91, while 1st support
hits today at 50.87 and below there at 50.31.