Copper Explodes – Here’s Why
BOND MARKET RECAP
9/21/2004
December Bonds closed up 0-12 at 113-01. This was
0-29 up from the low and 0-04 off the high.
December 10 Yr Treasury Notes finished up 0-025
at 113-095, 0-025 off the high and 0-185 up from the low.
Early in the session some bond longs
decided to rush to exits after the housing starts reading came in a little
better than expected. Even with a sharp 5.5% decline permits the bull camp was
that interested in picking up bonds a ½ point down on the session. Following the
Fed decision to hike rates by 25 basis points, the Treasury market faded sharply
but then managed to return to unchanged levels. While some in the trade
initially thought that the Fed statements hinted at an ongoing series of rates
and were concerned about the rosy dialogue toward the economy the market might
have to fight a bearish tilt for the coming sessions.
Technical Outlook
BONDS (DEC) 09/22/2004: Momentum studies are
trending higher but have entered overbought levels. The close above the 9-day
moving average is a positive short-term indicator for trend. With the close
higher than the pivot swing number, the market is in a slightly bullish posture.
The near-term upside objective is at 113-28. The next area of resistance is
around 113-17 and 113-28, while 1st support hits today at 112-16 and below there
at 111-25.
TNOTES (DEC) 09/22/2004: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. A positive signal for trend short-term was given on a close over the
9-bar moving average. A positive signal was given by the outside day up. It is a
mildly bullish indicator that the market closed over the pivot swing number. The
near-term upside objective is at 113-270. The next area of resistance is around
113-200 and 113-270, while 1st support hits today at 112-305 and below there at
112-155.
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STOCK INDICES RECAP
9/21/2004
December S&P finished up 4.7 at 1127, 5.3 off the
high and 3.9 up from the low.
December S&P E-Mini closed up 5.25 at 1127.5.
This was 6.25 up from the low and 5 off the high.
December Dow closed up 17 at 10215. This was 20
up from the low and 55 off the high.
December Dow E-Mini finished up 20 at 10218, 53
off the high and 26 up from the low.
We are really surprised that the stock market
managed to forge such impressive early gains and that would suggest that the
market was overly concerned about the Fed hiking interest rates. The stock
market took the 25 basis point rate hike and rallied directly after the decision
was made public. The fact that the Fed hinted that the US economy was gaining
traction and could end up with a period of robust growth and that is certainly a
reason to be attracted to stocks. In other words, conditions in the economy
improved and as long as the trade doesn’t fear an overly aggressive rate hike
posture far into the future.
Technical Outlook
S&P 500 (DEC) 09/22/2004: Momentum studies are
trending lower from high levels which should accelerate a move lower on a break
below the 1st swing support. The market’s close above the 9-day moving average
suggests the short-term trend remains positive. With the close over the 1st
swing resistance number, the market is in a moderately positive position. The
next downside objective is now at 1118.15. The next area of resistance is around
1131.59 and 1136.54, while 1st support hits today at 1122.40 and below there at
1118.15.
SP EMINI (DEC) 09/22/2004: Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. The market’s short-term trend is positive on the close above the
9-day moving average. The market setup is supportive for early gains with the
close over the 1st swing resistance. The next downside target is now at 1115.94.
The next area of resistance is around 1133.12 and 1138.43, while 1st support
hits today at 1121.88 and below there at 1115.94.
NASDAQ (DEC) 09/22/2004: The market made a new
contract high on the rally. Daily stochastics have risen into overbought
territory which will tend to support reversal action if it occurs. 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
near-term upside objective is at 1453.37. The next area of resistance is around
1443.25 and 1453.37, while 1st support hits today at 1426.75 and below there at
1420.38.
MINIDOW (DEC) 09/22/2004: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. A negative signal for trend short-term was given on a close under the
9-bar moving average. It is a mildly bullish indicator that the market closed
over the pivot swing number. The next downside objective is now at 10146. The
next area of resistance is around 10257 and 10303, while 1st support hits today
at 10179 and below there at 10146.
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CURRENCY MARKET RECAP
9/21/2004
December US Dollar finished down 87 at 8831, 89
off the high and 16 up from the low.
December Euro finished up 1.5 at 123.12, 0.28 off
the high and 0.74 up from the low.
December Euro Dollar closed down 0.025 at 97.765.
This was 0.02 up from the low and 0.02 off the high.
December Canadian Dollar closed up 0.39 at 77.53.
This was 0.25 up from the low and 0.15 off the high.
December British Pound finished up 1.36 at
178.68, 0.32 off the high and 0.76 up from the low.
December Swiss closed up 1.12 at 79.92. This was
0.47 up from the low and 0.18 off the high.
December Japanese Yen closed up 0.12 at 91.51.
This was 0.38 up from the low and 0.12 off the high.
From the early action it would seem that the
Dollar was coming under pressure from the idea that the Fed would go ahead and
hike interest rates. With the Euro up 104 points prior into the Fed decision, it
was clear that the Euro was anticipating a move by the Fed as the move seems to
make it harder for the US economy to gather momentum quickly. On the other hand,
a 153 point rise in the Euro and a 149 point rise in the Pound seems to be a
little extreme considering the favorable dialogue that the Fed heaped onto the
market.
Technical Outlook
YEN (DEC) 09/22/2004: Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
The market’s short-term trend is positive on the close above the 9-day moving
average. A positive signal was given by the outside day up. The market has a
slightly positive tilt with the close over the swing pivot. The next downside
target is 90.95. The next area of resistance is around 91.76 and 91.94, while
1st support hits today at 91.26 and below there at 90.95.
EURO (DEC) 09/22/2004: A bullish signal was given
with an upside crossover of the daily stochastics. Positive momentum studies in
the neutral zone will tend to reinforce higher price action. A positive signal
for trend short-term was given on a close over the 9-bar moving average. 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 124.02. The
next area of resistance is around 123.62 and 124.02, while 1st support hits
today at 122.61 and below there at 121.99.
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PRECIOUS METALS RECAP
9/21/2004
December Gold closed up 3.1 at 410.1. This was
0.5 up from the low and 1.9 off the high.
December Silver finished up 0.093 at 6.373, 0.027
off the high and 0.048 up from the low.
October Platinum closed up 10.1 at 852. This was
3 up from the low and 4 off the high.
Both gold and silver managed to post firm closes
despite no knowing the outcome of the FOMC meeting. However, with the Dollar
down nearly 60 points for most of the session it is understandable why the bull
camp prevailed. We suspect that gold needed to see a rate hike from the US as
that seemed to provide concern for the US recovery, which in turn applied
pressure to the Dollar. On the other hand, silver, gold, platinum and copper all
seemed to attract fund buying interest and that was more than likely the main
feature of the session.
Technical Outlook
SILVER (DEC) 09/22/2004: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The close above the 9-day moving average is a positive
short-term indicator for trend. The gap upmove on the day session chart is a
bullish indicator for trend. There could be more upside follow through since the
market closed above the 2nd swing resistance. The next upside target is 644.3.
The next area of resistance is around 641.1 and 644.3, while 1st support hits
today at 633.6 and below there at 629.3.
GOLD (DEC) 09/22/2004: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. A positive signal for trend short-term was given on a close over
the 9-bar moving average. The gap up on the day session chart gave a bullish
indicator and more follow through could be seen this session. There could be
more upside follow through since the market closed above the 2nd swing
resistance. The near-term upside target is at 412.8. The next area of resistance
is around 411.3 and 412.8, while 1st support hits today at 408.9 and below there
at 408.1.
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COPPER MARKET RECAP
9/21/2004
December Copper finished up 2.20 at 134.15, 0.80
off the high and 0.85 up from the low.
The copper market exploded for a big run and
supposedly managed most of the rise off fund buying. With the aluminum market
also claiming to have fund buying it is clear that the base metals markets are
in vogue. Surprisingly neither copper nor aluminum appears to be put off by the
sagging macro economic condition. As usually the underlying theme behind the
bull condition was the expectation of even more Chinese buying. By their actions
the funds certainly made copper prices much more expensive to the Chinese. With
the sharp Dollar decline the US copper market price gain on Tuesday was at least
partially offset.
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ENERGY MARKET RECAP
9/21/2004
October Crude Oil closed up 0.75 at 47.10. This
was 0.50 up from the low and 0.30 off the high.
October Heating Oil closed up 3.70 at 130.29.
This was 2.74 up from the low and 0.61 off the high.
October Unleaded Gas finished up 1.51 at 128.96,
0.74 off the high and 2.66 up from the low.
October Natural Gas finished up 0.36 at 5.61,
0.03 off the high and 0.24 up from the low.
October Propane closed up 0.03 at 0.81. This was
0.01 up from the low and equal to the high.
We suspect that energy prices continue to get
support from concerns over Russian supply and possibly from the expectation of
more tropical storms moving into the Gulf of Mexico. Some traders suggested that
the aggressive political maneuvering by Putin suggests that Yukos will
eventually be shut down and parceled off and that is certainly a supportive
argument. The Press was throwing around rumors that Yukos was prepared to halt
some supply flow to Lithuania but officials suggested there had been no
communication from Moskow about a halt in the supply flow. In any regard the
energy complex is getting enough information to rally. In the end the most
likely source of the gains Tuesday was an expectation of inventory declines
Wednesday morning.
Technical Outlook
CRUDE OIL (OCT) 09/22/2004: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The close above the 9-day moving average is a positive short-term
indicator for trend. The gap upmove on the day session chart is a bullish
indicator for trend. With the close over the 1st swing resistance number, the
market is in a moderately positive position. The near-term upside objective is
at 47.84. The next area of resistance is around 47.49 and 47.84, while 1st
support hits today at 46.70 and below there at 46.25.
UNLEADED (OCT) 09/22/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The close above the 9-day
moving average is a positive short-term indicator for trend. With the close over
the 1st swing resistance number, the market is in a moderately positive
position. The near-term upside objective is at 131.88. The next area of
resistance is around 130.66 and 131.88, while 1st support hits today at 127.26
and below there at 125.08.
HEATING OIL (OCT) 09/22/2004: A new contract high
was made on the rally. Daily stochastics have risen into overbought territory
which will tend to support reversal action if it occurs. The market’s short-term
trend is positive on the close above the 9-day moving average. Follow through
buying looks likely if the market can hold yesterday’s gap on the day session
chart. 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 133.10. The
market is approaching overbought levels with an RSI over 70. The next area of
resistance is around 131.96 and 133.10, while 1st support hits today at 128.62
and below there at 126.41.
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CORN MARKET RECAP
9/21/2004
December Corn finished unchanged at 212
3/4, 1 1/4 off the high and 1/2 up from the low. March Corn closed unchanged at
222 3/4. This was 1/2 up from the low and 1 1/4 off the high.
The market managed a new contract low for the 8th
session in a row before experiencing a bounce off of the lower opening. With the
oversold condition, technical buying increased into mid-session but the rally
failed to attract new buyers and December futures ending the session near
unchanged. So far in September, crop conditions have improved. Over the past 14
years, the crops in good to excellent condition have improved in 11 of the 14
years. In 10 of these 11 years, the crop production forecast from the USDA for
October 1st increased from the September report. In the past 33 years, the
October production forecast was higher than the September forecast for 20 of the
years and lower in 12 years with one year unchanged. Ideas that the market is
technically oversold helped slow the selling but the market still seems to lack
a “reason” for commercial buyers to get more active. Weather looks bearish for
the coming week due to active harvest conditions with warm and dry weather
anticipated for most of the next 10 days. December corn resistance comes in at
215 and 217 1/2 with 212 1/4, 210 and 206 1/4 as next support levels.
Technical Outlook
CORN (DEC) 09/22/2004: The market was pushed to a
new contract low. Daily stochastics declining into oversold territory suggest
the selling may be drying up soon. The market’s short-term trend is negative as
the close remains below the 9-day moving average. The market’s close below the
pivot swing number is a mildly negative setup. The next downside objective is
211 1/4. With a reading under 30, the 9-day RSI is approaching oversold levels.
The next area of resistance is around 213 1/2 and 214 1/2, while 1st support
hits today at 212 and below there at 211 1/4.
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SOY COMPLEX RECAP
9/21/2004
November Soybeans finished down 1 1/2 at 542 1/4,
4 1/4 off the high and 3/4 up from the low. January Soybeans closed down 1 1/4
at 549 1/2. This was 3/4 up from the low and 4 1/2 off the high.
December Soymeal closed down 1.1 at 162.3. This
was 0.9 up from the low and 1.2 off the high.
December Soybean Oil finished up 0.09 at 21.71,
0.29 off the high and 0.26 up from the low.
The early break to a fresh 12 month low was met
with a lack of new selling interest from speculators with talk of an oversold
condition. However, traders suspect active harvest selling pressures over the
next week with near ideal weather for the central and eastern cornbelt. As a
result, nearby futures closed at the lowest level since July of 2003. Gulf basis
levels were lower this morning due to the advancing harvest. Midwest basis was
also weak with Indiana soy processor bids down 5-10 cents in response to
increased country movement and talk of higher than expected yields. Palm oil
futures were down 13 points this morning which may have helped pressure the
soybean oil market early in the session but the market bounced nearly 45 points
after a 1-month low failed to attract new selling. So far in September, crop
conditions have improved. Over the past 14 years, the crops in good to excellent
condition have improved in just 7 of the 14 year. In 5 of the 7 years, the crop
production forecast from the USDA for October 1st increased an average of 86
million bushels from the September report and in the other 2 years, crop
production was lowered by an average 44 million bushels. In the past 32 years,
the October production forecast was higher than the September forecast for 16 of
the years and lower in 16 years. Resistance for November soybeans comes in near
552 1/4 and 558 3/4 with next support at 541 and then 533.
Technical Outlook
BEANS (NOV) 09/22/2004: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. A negative signal for trend short-term was given on a close
under the 9-bar moving average. The market tilt is slightly negative with the
close under the pivot. The next downside objective is 538 1/4. The 9-day RSI
under 30 indicates the market is approaching oversold levels. The next area of
resistance is around 544 3/4 and 548, while 1st support hits today at 539 3/4
and below there at 538 1/4.
MEAL (DEC) 09/22/2004: Momentum studies are
declining, but have fallen to oversold levels. A negative signal for trend
short-term was given on a close under the 9-bar moving average. The market’s
close below the 1st swing support number suggests a moderately negative setup
for today. The next downside objective is now at 160.3. The 9-day RSI under 30
indicates the market is approaching oversold levels. The next area of resistance
is around 163.3 and 164.4, while 1st support hits today at 161.3 and below there
at 160.3.
BEANOIL (DEC) 09/22/2004: Momentum studies are
declining, but have fallen to oversold levels. The market’s short-term trend is
negative as the close remains below the 9-day moving average. The upside daily
closing price reversal gives the market a bullish tilt. The market has a
slightly positive tilt with the close over the swing pivot. The next downside
objective is 21.17. Some caution in pressing the downside is warranted with the
RSI under 30. The next area of resistance is around 21.98 and 22.26, while 1st
support hits today at 21.44 and below there at 21.17.
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WHEAT MARKET RECAP
9/21/2004
December Wheat finished up 6 at 334 3/4, 2 off the high and 7
1/2 up from the low. March Wheat closed up 5 1/4 at 345 1/4. This was 7 up from
the low and 1 1/4 off the high.
December wheat opened lower but closed moderately
higher finding support from news of the slow harvest pace in Canada. Talk of
improving crop conditions for the harvest in North Dakota and Canada helped to
limit the early buying support but news that the Canadian harvest is still well
behind helped to support. Funds were noted buyers of near 2000 contracts into
the mid-session. In Saskatchewan, the grain crop is only 17% harvested as of
September 19th as compared with 91% last year and 67% as the 5-year average. For
the US spring wheat crop, harvest reached 81% as of Sunday as compared with 94%
as the average pace. A warmer and drier pattern is expected over the next week
in the Canadian Prairies which seems to be limiting the buying support. Taiwan
bought 43,380 tonnes of US wheat overnight. Resistance for December wheat comes
in at 339 3/4 and 341 1/2 with support at 331 1/4 and 328 1/2.
Technical Outlook
WHEAT (DEC) 09/22/2004: The crossover up in the
daily stochastics is a bullish signal. Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The close above the 9-day moving average is a positive short-term indicator for
trend. The market setup is supportive for early gains with the close over the
1st swing resistance. The near-term upside target is at 342 3/4. The next area
of resistance is around 339 1/2 and 342 3/4, while 1st support hits today at 330
and below there at 324.
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LIVE CATTLE RECAP
9/21/2004
October Live Cattle closed down 0.35 at 85.65.
This was 0.25 up from the low and 0.27 off the high.
October Feeder Cattle finished down 0.27 at
112.52, 0.12 off the high and 0.42 up from the low.
Cattle pushed slightly lower in choppy trade as
the market continues to wait for news or confirmation of eventual exports to
Japan as the two sides seem close to some compromise. The failure of December
cattle to move higher after the bullish data from the USDA on Friday is seen as
a psychological bearish force for the market. Traders are also concerned that
overall demand for beef in Japan is weak as another cow has tested positive for
mad cow. Boxed-beef cutout values (600-750 choice) were up $1.50 on the day at
mid-session to $136.94 as compared with $133.47 last week at this time.
Slaughter came in at 126,000 head as compared with trade expectations at
120,000-126,000 head.
Technical Outlook
CATTLE (OCT) 09/22/2004: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. 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
lower than the pivot swing number. The next upside target is 86.170. The next
area of resistance is around 85.900 and 86.170, while 1st support hits today at
85.400 and below there at 85.150.
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LEAN HOGS RECAP
9/21/2004
October Lean Hogs closed up 0.65 at 74.45. This
was 0.62 up from the low and 0.30 off the high.
February Pork Bellies finished unchanged at
101.22, 0.52 off the high and 1.02 up from the low.
October hogs surge higher and to new contract
highs and closed higher for the 8th session in a row. Cash hogs were higher
again and the discount of futures to cash continues to provide support in a time
frame where cash hogs prices generally move low. Peoria live hogs were $1.00
higher in response to solid gains in pork product prices yesterday afternoon.
News that another cow in Japan tested positive for mad cow added to the positive
tone regarding pork exports. The CME 2-Day Lean index for the period ending
September 17th was up $1.19 to 74.95 as compared with 71.66 one week previous.
Traders believe the index will be up near 80 cents tomorrow. December hogs
tested resistance at 70.00 into the close.
Technical Outlook
HOGS (OCT) 09/22/2004: The market made a new
contract high on the rally. Daily stochastics have risen into overbought
territory which will tend to support reversal action if it occurs. The market’s
close above the 9-day moving average suggests the short-term trend remains
positive. The market setup is supportive for early gains with the close over the
1st swing resistance. The next upside target is 75.270. With a reading over 70,
the 9-day RSI is approaching overbought levels. The next area of resistance is
around 74.900 and 75.270, while 1st support hits today at 74.020 and below there
at 73.450.
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COCOA MARKET RECAP
9/21/2004
December Cocoa finished up 18 at 1492, 2 off the
high and 26 up from the low.
Despite even more stories that soil moisture
levels improved at the Ivory Coast the cocoa market managed to post another
strong session. It is even more surprising that prices managed to rise in the
face of news that arrivals from the last crop at the Ivory Coast were 4% above
the prior years tally. However, the market is still not set on what the current
crop will post and it is possible that some traders expected the balance sheet
to come out of last year with a slightly larger balance of beans. Furthermore,
with industry buying noted for a 3rd straight session it is understandable that
cocoa prices favored the upside.
Technical Outlook
COCOA (DEC) 09/22/2004: The crossover up in the
daily stochastics is a bullish signal. Daily momentum studies are on the rise
from low levels and should accelerate a move higher on a push through the 1st
swing resistance. A positive signal for trend short-term was given on a close
over the 9-bar moving average. With the close over the 1st swing resistance
number, the market is in a moderately positive position. The next upside
objective is 1514. Short-term indicators suggest buying dips today. The next
area of resistance is around 1506 and 1514, while 1st support hits today at 1478
and below there at 1458.
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COFFEE MARKET RECAP
9/21/2004
December Coffee closed up 1.95 at 81.65. This was
0.80 up from the low and 0.75 off the high.
December coffee gapped higher and closed up 195
points to reach the highest level since June 17th. Fund short-covering, new
speculative buying and a lack of commercial selling interest overhead helped to
support the solid gains. The market seems to be building a weather premium for
the flowering period ahead in Brazil as dry weather in the forecast for the next
week is beginning to provide some weather support. Normal, seasonal rains in the
coffee areas into October should produce a good flowering for next years crop
but the more time which goes by without seeing rain in the Brazil forecast, the
more the trade rationalizes the building of a weather premium. Colombia truckers
are still on strike from September 14th and the trade sees a continuation of the
strike into next week as a potentially bullish force.
Technical Outlook
COFFEE (DEC) 09/22/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The market’s close above the
9-day moving average suggests the short-term trend remains positive. The gap
upmove on the day session chart is a bullish indicator for trend. With the close
over the 1st swing resistance number, the market is in a moderately positive
position. The near-term upside objective is at 83.15. The market is becoming
somewhat overbought now that the RSI is over 70. The next area of resistance is
around 82.40 and 83.15, while 1st support hits today at 80.90 and below there at
80.10.
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SUGAR MARKET RECAP
9/21/2004
October Sugar closed up 0.21 at 7.59. This was
0.26 up from the low and 0.01 off the high.
The outside day up after moving to the lowest
level since late August for March sugar shows that the market is developing
support near the 820 level. March sugar closed 16 higher on the session and up
24 points from the lows. There was fund long liquidation noted early in the
session but trade house buying helped to provide solid support. Tunisia bought
28,000 tons of white sugar and traders await news from Iraq on more business
soon. Thailand officials indicate that the 2004/2005 cane production is forecast
to reach 60.87 million tons which is down near 6% from last year. With only 7
trading sessions left for October sugar, open interest (Sept 20th) was reported
at 49,733 contracts.
Technical Outlook
SUGAR (MAR) 09/22/2004: The downside crossover (9
below 18) of the moving averages suggests a developing short-term downtrend.
Momentum studies trending lower at mid-range could accelerate a price break if
support levels are broken. A negative signal for trend short-term was given on a
close under the 9-bar moving average. The outside day up is somewhat positive.
Market positioning is positive with the close over the 1st swing resistance. The
next downside objective is 8.12. The next area of resistance is around 8.54 and
8.61, while 1st support hits today at 8.30 and below there at 8.12.
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COTTON MARKET RECAP
9/21/2004
October Cotton finished up 0.85 at 50.20, 0.05
off the high and 0.65 up from the low.
The market tried to follow-through to the upside
from the bounce off of 5 week lows but after solid gains early in the session,
the market drifted toward unchanged to close only slightly higher on the
session. Traders are hopeful that the break of the past few weeks will help
attract new export business and the sales report this week should carry some
weight as sales have been slow over the past several weeks. Shipments were
especially slow. Sunny weather in the forecast for a good portion of the
southeast is seen as a slightly negative factor as the crop dries out from
recent torrential rains.
Technical Outlook
COTTON (DEC) 09/22/2004: Daily stochastics are
trending lower but have declined into oversold territory. The close below the
9-day moving average is a negative short-term indicator for trend. The market
has a slightly positive tilt with the close over the swing pivot. The next
downside target is now at 47.14. The next area of resistance is around 48.58 and
48.94, while 1st support hits today at 47.68 and below there at 47.14.