Copper Explodes — Here’s Why

BOND MARKET RECAP

1/8/2004

We are a little surprised that the bonds and notes managed to rise right into the monthly payroll report. In fact, Treasury bonds have risen over two points since the recent low suggesting that some in the trade think the market has factored too much of a non-farm payroll report. It is possible that BOJ intervention was behind the strength in the Treasuries Thursday but we doubt that intervention interest will be there to support prices in the event of a strong payroll report Friday morning.

Technical Outlook

BONDS (MAR) 1/9/2004: The market has a slightly positive tilt with the close over the swing pivot. Near-term resistance for bonds is at 109.24 and then again at 110.03, while swing support hits at 109.00 and below there at 108.19. A positive signal for trend short-term was given on a close over the 9-bar moving average. A bullish signal was given with an upside crossover of the daily stochastics. The next upside objective is 110.03.

T-NOTES(MAR) The daily stochastics gave a bullish indicator with a crossover up. The near-term upside objective is at 112.29. It is a mildly bullish indicator that the market closed over the pivot swing number. 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 112.23 and then again at 112.29, while swing support hits at 112.08 and below there at 111.31. The market’s short-term trend is positive on a close above the 9-day moving average.

STOCK INDICES RECAP

1/8/2004

Wall Street continues to find favor among different stock sectors and seemed to be mostly unaffected by the coming monthly unemployment report. The trade even suggested that soaring base metals prices were indicative of a broad based global recovery and that the Dollar decline was a positive to the US economy. Until proven wrong the stock market thinks that the December payroll report will show a continued improvement in the jobs picture. It should be noted that volume has been running high and that would seem to give added weight to the bull case.

Technical Outlook

S&P500 (MAR) 1/9/2004: The close over the pivot swing is a somewhat positive setup. Underlying support comes in at 1126.45 and 1121.88, with overhead resistance at 1132.95 and 1134.88. 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 1134.88. 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 1135.19. 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 1133.13 and then again at 1135.19, while swing support hits at 1126.38 and below there at 1121.69. 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 setup is supportive for early gains with the close over the 1st swing resistance. The market should run into resistance at 1539.75 and above there at 1543.88 with support at 1523.25 and 1510.88. 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 1543.88.

CURRENCY MARKET RECAP

1/8/2004

The Dollar opening moderately higher but then failed aggressively into the close. Therefore, it would seem that few traders had the capacity to be long the Dollar ahead of extremely critical US economic information. The Canadian Dollar made a massive move in a sign that the Canadian might be prepared to move to a new higher trading range. Since the Yen remained below the recent highs, while the Dollar was exceptionally weak it is possible that the BOJ was heavily involved in the trade with intervention efforts.

Technical Outlook

YEN (MAR): A positive signal for trend short-term was given on a close over the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. Swing resistance is targeted at 94.43 and above there at 94.51, with the yen finding support around 94.29 and below there at 94.23. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 94.51.

EURO (MAR): Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The next downside target is now at 1.2574. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing support for the Euro comes in at 1.2574, with overhead resistance at 1.2854. 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. More selling pressure is likely given yesterday’s gap lower price action on the day session chart.

PRECIOUS METALS RECAP

1/8/2004

The gold market was saved by the aggressive reversal in the Dollar, which managed to slide more than 100 points off its early highs into its close. Therefore, recent gold longs forced from position decided to jump back into the market. With bullish hype rising toward base metals it’s understandable that some spill over buying is seen in gold. It should be noted that silver didn’t enjoy the same favor as gold in the action Thursday.

Technical Outlook

SILVER (MAR): The market has a slightly positive tilt with the close over the swing pivot. Initial support for silver is at 620.3 and below there at 611.2 with resistance likely at 626.6 and 634.3. A positive signal for trend short-term was given on a close over the 9-bar moving average. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 611.2. The market is approaching overbought levels with an RSI over 70. The daily closing price reversal up is a positive indicator that could support higher prices.

GOLD (FEB): Support for gold today comes in near 418.33, while resistance is pegged at 429.33. Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The next downside target is now at 418.33. The close over the pivot swing is a somewhat positive setup. 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.

COPPER MARKET RECAP

1/8/2004

Copper prices exploded in a surprising move that is certainly in the upper echelon of daily price gains. Apparently the market is convinced that soaring demand for all base metals is a sign that the bull market in copper is going to continue. It certainly helped to see another Canadian strike threat, which in turn pulled the funds in as aggressive buyers. Until something changes the bull camp lives on.

ENERGY MARKET RECAP

1/8/2004

The energy complex just won’t weaken even after seeing partially disappointing inventory numbers. Prices were firm even in the face of news that OPEC overproduced by 1.3 million barrels per day in December. In other words, the bulls are simply not discouraged by rising supply. Even the natural gas market managed to rally in the face of a much smaller than expected weekly inventory draw. In other words, demand appears to be dominating energy price action!

Technical Outlook

CRUDE OIL (MAR): The close over the pivot swing is a somewhat positive setup. Support for crude is keyed on 33.42 and below there at 32.98, with resistance pegged at 34.04 and 34.22. The close above the 9-day moving average is a positive short-term indicator for trend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 34.22.

UNLEADED GAS (MAR): Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 101.54. The market has a bullish tilt coming into today’s trade with the close above the 2nd swing resistance. Resistance today is at 101.54, while support should be found around 95.94. 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 is approaching overbought levels with an RSI over 70.

HEATING OIL (MAR): Market positioning is positive with the close over the 1st swing resistance. Heating oil should encounter support around 93.63, with resistance is at 98.23. Short-term indicators suggest buying pullbacks today. The close above the 9-day moving average is a positive short-term indicator for trend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 98.23.

CORN MARKET RECAP

1/8/2004

Corn closed higher finding support from fund buying (2600 contracts) and from overnight news that Malaysia was buying corn from the US and not China. For the Crop production report with the final USDA estimate for the 2003 crop season, traders are looking for production to come in near 10.297 billion bushels (range 10.181-10.433) as compared with the December USDA forecast of 10.278 billion bushels. The average trade estimate for December 1st stocks was 8.2 billion bushels (range 8.1-8.33) as compared with 7.638 billion last year. For the Supply/Demand report, we revised exports higher by 25 million bushels and domestic usage higher by 50 million bushels. In addition, we revised industrial usage by 10 million bushels. This would leave ending stocks at 1.214 billion bushels. The average trade estimate is for ending stocks to come in near 1.252 billion bushels (range 1.317-1.150) as compared with 1.299 billion bushels as last months USDA forecast.

Technical Outlook

CORN (MAR) 1/9/2004: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 256 1/4. There could be more upside follow through since the market closed above the 2nd swing resistance. Market resistance comes in at 256 1/4 today, with support at 246 1/4. The close above the 9-day moving average is a positive short-term indicator for trend. The outside day up gives the market a positive tilt. The upside daily closing price reversal gives the market a bullish tilt.

SOY COMPLEX RECAP

1/8/2004

Rumors that China might be buying oil from South America and word of commercial buying in oil helped support the higher close in soybeans and oil. The USDA reports on Monday morning should set the tone for the market for at least a week or until weather becomes a more important factor in South America. For the production report with is the final for the 2003 crop, traders are looking for production to come in near 2.451 billion bushels (range 2.420-2.475) as compared with the December USDA forecast of 2.452 billion bushels. The average trade estimate for December 1st stocks was 1.75 billion bushels (range 1.723-1.799), which is down 364 million bushels from last year. As a result, the market still need to see a price level which may ration demand on about 320 million bushels which the US consumed last year and will not be available to consume this year. For the Supply/Demand report, we revised exports and crush higher by 15 million bushels each, which leaves ending stocks at just 95 million bushels. The average trade estimate is for ending stocks to come in near 111 million bushels (range 125-83) as compared with 125 million bushels as last months USDA forecast.

Technical Outlook

SOYBEANS (MAR) 01/09/04 The market has a slightly positive tilt with the close over the swing pivot. The next area of resistance is around 803 and 806 , while 1st support hits today at 792 and below there at 784 . 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 806 .

MEAL (MAR): Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The next downside target is now at 237.9. First resistance comes in at 242.8, with support at 239.9. The close below the 9-day moving average is a negative short-term indicator for trend. The close over the pivot swing is a somewhat positive setup.

BEAN OIL (MAR): A positive indicator was given with the upside crossover of the 9 & 18 bar moving average. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 28.99. A positive setup occurred with the close over the 1st swing resistance. Daily swing resistance is found at 28.79 and above there at 28.99. Support should be encountered at 28.07 and 27.55. Short-term indicators suggest buying dips today.

WHEAT MARKET RECAP

1/8/2004

The wheat market closed mixed in choppy trade. The EU granted import licenses for 77,577 tonnes with 47,440 tonnes coming from the US which was seen as supportive. Talk that China may beek some new crop wheat soon supported the higher close (and new contract high) for July wheat and the weather outlook in the plains helped as well. The average trade estimate for December 1st stocks was 1.509 billion bushels (range 1.479-1.530) as compared with 1.320 billion last year. For the Supply/Demand report, we revised exports higher by 20 million bushels and left the rest of the table unchanged from last month. This would leave ending stocks at 563 million bushels. The average trade estimate is for ending stocks to come in near 555 million bushels (range 478-583) as compared with 583 million bushels as last months USDA forecast. The USDA will also release the winter wheat Seedings report with an average trade estimate for the report at 45.83 million acres (range 45.5-46.175) as compared with 44.945 million last year.

Technical Outlook

WHEAT (MAR) 1/9/2004: The market tilt is slightly negative with the close under the pivot. Expect near-term support around 390 and below there at 386 , with resistance levels at 398 and 402 . A positive signal for trend short-term was given on a close over the 9-bar moving average. The market back below the 40-day moving average suggests the longer-term trend could be turning down. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 402 .

LIVE CATTLE RECAP

1/8/2004

After filling the gap left on December 31st, the cattle market closed lower led by a lack of follow-through buying and a lack of confidence that Japan would quickly lift their ban on US beef soon. In fact, a representative of the Ag Ministry denied rumors yesterday that the Ag Ministry was weighing proposals to lift the ban on US beef imports on the condition that the beef was inspected by private-sector organizations approved by the government. A general conclusion that it will just take time to ease Japanese mad cow disease concerns and that Japanese officials are unlikely to take a risk like quickly lifting the ban before more investigation and with little incentive o do so helped to trigger long liquidation selling. Cash traded steady this week but continued weakness in the beef market added to the negative tone. Boxed-beef cut-out values for choice 600-750 lb were down $1.60 to $127.26 as compared with $141.67 last week at this time. Slaughter came in at 121,000 head as compared with 115,000-122,000 expected.

Technical Outlook

CATTLE (FEB) 1/9/2004: Rising from over sold levels, daily momentum studies would support higher prices especially on a close above resistance. The next upside objective is 76.80. The market has a slightly positive tilt with the close over the swing pivot. Support should be encountered at 74.47 and below there at 73.90. Market resistance is at 75.92 and then again at 76.80. The market could take on a defensive posture with the daily closing price reversal down. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market is approaching over sold levels on an RSI reading under 30.

LEAN HOGS RECAP

1/8/2004

February hogs closed 95 lower on the session and more than 200 points lower from Monday’s highs as the weakness in the pork values this week, declining packer profit margins and a weak tone in the cash market helped pressure. The premium of futures to the cash market and expectations for still hefty supply in the weeks just ahead added to the long liquidation selling. Slaughter came in at 382,000 head as compared with 380,000-388,000 expected. Cash markets are expected to come in near steady on Friday with a weak tone. Pork cut-out values were down 21 cents to $56.01 as compared with $57.38 last week at this time.

Technical Outlook

HOGS (FEB) 1/9/2004: The market setup is somewhat negative with the close under the 1st swing support. Resistance levels comes in at 54.47 and 55.12 today, while support is around 53.47 and then 53.12. Short-term indicators on the defensive. Consider selling an intraday bounce. The close below the 9-day moving average is a negative short-term indicator for trend. The close below the 40-day moving average is an indication the longer-term trend is down. A crossover down in the daily stochastics is a bearish signal. Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The next downside target is now at 53.12.

COCOA MARKET RECAP

1/8/2004

The cocoa market continued to correct as the trade realized that the recent violence was potentially containable. It was also noted that origin selling surfaced around the recent highs and that is proof that higher prices pulled out some harvest supply. In other words, the market did what was necessary and is now retracing most of the recent gains. An estimate calling for 150,000 tons of Ivory Coast cocoa to be smuggled out of the country explains part of the slow arrival rate but not all off the shortfall.

Technical Outlook

COCOA (MAR)01/09/04 The market tilt is slightly negative with the close under the pivot. Cocoa should run into resistance at 1635 and above there at 1667 with support at 1587 and 1571. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 1666.50.

COFFEE MARKET RECAP

1/8/2004

March coffee came under pressure from origin sales, likely from Brazil & Vietnam) to end lower Thursday. Although the supply outlook appears to be improving, there is increasing talk in the marketplace coffee prices have rallied too fast. European roaster buying has been a featured trade since the strength in the Euro makes coffee prices look cheap. However, roaster buying has cooled and we would not be surprised to see another down day in Friday’s session.

Technical Outlook

COFFEE (MAR)1/9/04 The market tilt is slightly negative with the close under the pivot. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The near-term upside objective is at 71.00.The Coffee contract should run into resistance at 69.60 and above there at 71.00 with support at 67.15 and 66.10. The market’s short-term trend is positive on a close above the 9-day moving average.

SUGAR MARKET RECAP

1/8/2004

March sugar fell sharply on heavy fund selling and the technical failure of the contract not being able to rally back over 6 cents. There was scant news to drive market direction therefore, the market’s bearish technical setup over whelmed price action. The last COT report showed the market in a bearish setup with funds turning net short and small traders reducing their net long position which makes the market vulnerable to further selling. The next support for March sugar is at 5.70 then the December, 2003 low.

Technical Outlook

SUGAR (MAR) 1/9/2004: The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing resistance comes in at 5.99, with support found at 5.61. The close below the 9-day moving average is a negative short-term indicator for trend. Stochastics are rising from over sold levels which is bullish and should support higher prices. The near-term upside target is at 5.99.

COTTON MARKET RECAP

1/8/2004

March cotton prices recovered most of the ground lost during Wednesday’s session to close sharply higher despite lower than expected export sales. Solid fund and speculative buying drove prices higher as there seems to be growing expectations that the USDA could lower China’s crop production in next week’s USDA report. In the last report the USDA estimated China’s production at 22 million bales, but cotton merchant Dunavant this week predicted China’s crop to be only around 20.7 million bales, which would mean imports in 2003/04 would be higher. Weekly export sales came in at 116,800 bales, which was below the range of estimates of between 125,000 and 150,000 bales. Shipments came in at 147,300 bales compared to estimates between 150,000 and 175,000 bales and down from 175,200 bales last week.

Technical Outlook

COTTON (MAR) 1/9/2004: A positive signal for trend short-term was given on a close over the 9-bar moving average. Daily studies suggest buying dips today. The market setup is supportive for early gains with the close over the 1st swing resistance. Next resistance area comes in at 75.81 and then again at 76.20, while support is targeted at 74.46 and 73.50. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 76.20. ORANGE JUICE (MAR)1/9/04 The close below the 1st swing support could weigh on the market. Orange Juice should run into resistance at 65.45 and above there at 66.10 with support at 64.60 and 64.40. The market’s short-term trend is negative as the close remains below the 9-day moving average. Daily stochastics are showing positive momentum from oversold levels which should reinforce a move higher if near-term resistance is taken out. The near-term upside objective is at 66.1.