Copper Falls Apart — Here’s Why

It would seem that the corn market backed away
from the short covering mentality and might have been pushed into that stance by
the presence of rainy Midwest weather. Export sales expectations call for
500,000 to 800,000 metric tons. With the crop conditions concern partly arising
out of pockets of dryness, even the generally light and scattered rain coverage
from Tuesday night put pressure on near term pricing. It is really surprising
that the story that China might be a net importer of corn, in the 1st half of
2005 wasn’t embraced or deemed to be as important as near term weather. We are
also a little surprised that strength in soybeans didn’t lend corn some support.
However, with forecasts are calling for cooler weather, we suspect that downside
action will be somewhat discouraged by the weather! Late in the session
Wednesday, Argentina pegged their 2004/2005 corn area at 3.04 million hecs and
also suggested that 2003/2004 corn output would be 12.7 million metric tons.
Support for December corn now falls to the recent gap area of 234 3/4, with
lower support at 233 1/4. Resistance for December corn comes in at 239 3/4 and
242.

Technical Outlook

#CORN (DEC) 08/19/04: Momentum studies are
trending higher from mid-range which should support a move higher if resistance
levels are penetrated. The near-term upside objective is at 240 3/4. The
market’s close below the pivot swing number is a mildly negative setup. Market
resistance comes in at 240 3/4 today, with support at 232 3/4. The downside
crossover (9 below 18) of the moving averages suggests a developing short-term
downtrend.

 

SOY COMPLEX RECAP

8/18/2004

September Soybeans finished up 8 1/2 at 600 1/4,
2 3/4 off the high and 12 1/4 up from the low. November Soybeans closed up 6 3/4
at 590 3/4. This was 11 3/4 up from the low and 3 3/4 off the high.

December Soymeal closed up 1.8 at 179.4. This was
3.4 up from the low and 0.9 off the high.

December Soybean Oil finished up 0.12 at 22.47,
0.27 off the high and 0.31 up from the low.

The soybean market certainly managed to recoil
from the early weakness and reportedly saw some light technical buying once
prices moved into positive ground. The Press also reported heavy stop loss
buying and with the market violating several chart points that is certainly
possible. Export sales expectations call for 200,000 to 350,000 metric tons,
while oil export sales are expected to be 1,000 to 5,000. Export sales
expectations in meal are seen at 70,000 to 110,000. While the presence of rain
in the Midwest sparked negative early talk, the fact that cool weather is
returning seems to leave the question of maturity levels in play. Gulf CIF bids
in soybeans were unchanged to down 4-5. Talk on the floor is that an extension
of gains might prompt some fresh forward coverage, as some would be buyers were
hesitant to buy beans early this week and are now being pressured to act by the
new highs for the week. This mornings highs in the November beans were the
highest price levels since July 29th and that could prompt technical and hedge
stop loss buying. Support in November soybeans comes in at 586 1/4 and 577 ¾.
Resistance in November is seen at 597 ¾ and 607.

Technical Outlook

#SOYBEANS (NOV) 08/19/04: With the close higher
than the pivot swing number, the market is in a slightly bullish posture. The
next area of resistance is around 598 1/2 and 604 1/4, while 1st support hits
today at 583 and below there at 573 1/4. The market’s close above the 9-day
moving average suggests the short-term trend remains positive. Positive momentum
studies in the neutral zone will tend to reinforce higher price action. The next
upside target is 604 1/4.

MEAL (DEC): Momentum studies are trending higher
from mid-range which should support a move higher if resistance levels are
penetrated. The near-term upside objective is at 183.1. First resistance comes
in at 181.6, with support at 177.3. The market’s short-term trend is positive on
a close above the 9-day moving average. It is a mildly bullish indicator that
the market closed over the pivot swing number.

BEAN OIL (DEC): The market’s close above the
9-day moving average suggests the short-term trend remains positive. Studies are
showing positive momentum, but are now in overbought territory so some caution
is warranted. The next upside target is 23.04. With the close higher than the
pivot swing number, the market is in a slightly bullish posture. Daily swing
resistance is found at 22.76 and above there at 23.04. Support should be
encountered at 22.18 and 21.88.

 

WHEAT MARKET RECAP

8/18/2004

September Wheat finished down 7 at 301 3/4, 5 1/2 off the high
and 1/4 up from the low. December Wheat closed down 7 at 315 1/2. This was 1/2
up from the low and 6 off the high.

December wheat closed lower after as the market
appeared to be taking profits after two days of short covering action. Jordan
tendered to buy 50,000 metric tons of US or other origin hard wheat, but
overnight reports that Malaysia bought Black Sea milling wheat underscores the
competition the US faces from worldwide exporters this year that it didn’t last
year. For tomorrow morning’s weekly export sales report, wheat exports are
expected to come in around 400,000-500,000 metric tons as compared with 565,900
last week. Basis levels were reported firmer at the gulf.

Technical Outlook

#WHEAT (DEC) 08/19/04: The close below the 2nd
swing support number puts the market on the defensive. Look for near-term
support at 312 and below there at 310 1/4, with resistance levels at 318 1/2 and
323 1/4. The market’s close below the 9-day moving average is an indication the
short-term trend remains negative. Daily stochastics are showing positive
momentum from oversold levels which should reinforce a move higher if near-term
resistance is taken out. The next upside target is 323 1/4.

 

LIVE CATTLE RECAP

8/18/2004

October Live Cattle closed down 0.35 at 88.67.
This was 0.17 up from the low and 0.97 off the high.

October Feeder Cattle finished down 0.20 at
114.87, 0.52 off the high and 0.30 up from the low.

October cattle spent most of the day within
yesterday’s range and still have not broken out of last Friday’s big up day.
Early morning boxed beef strength is an indication of strong demand as retailers
gear up for the Labor Day holiday. Boxed beef price were $1.46 higher to $141.70
this morning. Light trading was reported at $87.00 for cash live cattle in the
plains. This shows a slight improvement over last week and should be supportive
if more trade develops at that level. Otherwise, the trade may be disappointed,
as feedlots were hoping for $88-90 versus $84-86 last week. (A few reported at
$87). Today’s estimated slaughter came in at 122,000 head, at the bottom end of
expectations ranging from 122,000-126,000 and compared to 120,000 last week and
135,000 a week ago. Trade estimates for this Friday’s Cattle on Feed Report put
on feed supplies for August 1st at 101.8-104 percent of last year, placements in
July at 83-92 percent and marketings at 84-89 percent.

Technical Outlook

#CATTLE (OCT) 08/19/04: Positive momentum studies
in the neutral zone will tend to reinforce higher price action. The next upside
target is 90.02. It is a slightly negative indicator that the close was lower
than the pivot swing number. Support should be encountered at 88.10 and below
there at 87.72. Market resistance is at 89.25 and then again at 90.02. The
market’s close above the 9-day moving average suggests the short-term trend
remains positive.

 

LEAN HOGS RECAP

8/18/2004

October Lean Hogs closed down 0.40 at 64.80. This
was 0.45 up from the low and 0.30 off the high.

February Pork Bellies finished down 0.77 at
93.57, 1.27 off the high and 0.62 up from the low.

October hogs closed lower after spending the day
in the bottom half of yesterday’s wide range down. Weekly average weights showed
no change from last week at 259.9 pounds but up from 258.0 pound a year ago. The
CME lean hog index as of August 16th came in at 77.73, down 0.52 from the
previous session. Today’s slaughter came in at 399,000 head, near the top of
expectations ranging from 390,000-400,000 and compared to 386,000 last week and
373,000 a year ago. This is the second day in a row where slaughter is near a
record high for the year. Trade estimates for this Friday’s monthly Cold Storage
report call for 24-27 million lbs of frozen bellies in storage as of July 31
versus 37.1 million on June 30th and 32.1 million in July 2003. Pork stock are
expected to come in lower as well, with talk of 350-358 million pounds versus
379.3 million on June 30th and 440.7 million a year ago.

Technical Outlook

#HOGS (OCT) 08/19/04: The market’s close below
the pivot swing number is a mildly negative setup. Resistance levels comes in at
65.17 and 65.50 today, while support is around 64.42 and then 64.00. The
market’s short-term trend is negative as the close remains below the 9-day
moving average. Daily stochastics are trending lower, but have declined into
oversold territory. The next downside objective is now at 64.00.

 

COCOA MARKET RECAP

8/18/2004

September Cocoa finished up 31 at 1608, 42 off
the high and 6 up from the low.

We are a little surprised that the cocoa market
managed such significant gains and appeared to do so off talk that Ghana was
still seeing dryness. We thought that the run into the August high had factored
the dryness but apparently recent cash buying sparked buyers to reconsider the
potential future tightness. However, with the ICCO coming out with a 2003/2004
surplus projection of 148,000 tons we would think that the market would have
seen some longs discouraged from the long side.

Technical Outlook

COCOA (SEP) 08/19/04 The gap upmove on the day
session chart is a bullish indicator for trend. The market has a slightly
positive tilt with the close over the swing pivot. Cocoa should run into
resistance at 1632 and above there at 1665 with support at 1584 and 1569.
Momentum studies are declining, but have fallen to oversold levels. The next
downside target is 1569.00.

 

COFFEE MARKET RECAP

8/18/2004

September Coffee closed down 2.60 at 66.60. This
was 0.10 up from the low and 2.50 off the high.

The coffee market fell back aggressively
Wednesday and would seem to be ready to extract all of the week’s gains. While
we doubt that the rise in Mexican 03/04 coffee exports were the sole source of
the selling pressure there were also reports of increased origin selling and
improved quality of export supplies. It should also be noted that Mexico raised
their 04/05 coffee crop by 2.3% and raised the 03/04 coffee crop by 4.8%.
Therefore, more supply, hedge sales and technical support failure seems to have
been more than enough cause to sink prices.

Technical Outlook

COFFEE (SEP) 8/19/04 There could be some early
pressure today given the market’s negative setup with the close below the 2nd
swing support. 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 69.80. The Coffee contract should run
into resistance at 67.90 and above there at 69.80 with support at 65.3 and
64.60. The upside crossover (9 above 18) of the moving averages suggests a
developing short-term uptrend.

 

SUGAR MARKET RECAP

8/18/2004

October Sugar closed up 0.18 at 7.72. This was
0.10 up from the low and 0.04 off the high.

After showing some moderate liquidation pressure
early in the week the sugar market managed a very impressive rally. While the
liquidation impetus was mostly technical in nature the recovery rally might have
been mostly fundamental. It seems that the sugar market is concerned about a
“go-slow” labor policy as key Brazilian ports and that some Middle East buying
actually finally stepped up in the face of the August correction. In other
words, low prices seemed to bring out some buyers. With signs of trade buying in
the action Wednesday that might give the market some upside follow through
potential.

Technical Outlook

#SUGAR (OCT) 08/19/04: The market’s close above
the 2nd swing resistance number is a bullish indication. Swing resistance comes
in at 7.85, with support found at 7.57. The market’s short-term trend is
negative as the close remains below the 9-day moving average. Daily stochastics
are trending lower, but have declined into oversold territory. The next downside
objective is now at 7.57.

 

COTTON MARKET RECAP

8/18/2004

October Cotton finished up 0.75 at 47.35, 0.65
off the high and 1.00 up from the low.

Given the magnitude of ongoing gains and the trek
up through several layers of resistance it is clear that long term stop loss
buying is being seen. While reports of lower production seem to be behind the
move we have to think that some commercial buying is taking place strictly from
a hedge perspective. The cotton paid almost no attention to the fact that the
Pakistan crop might come in well above its previous target. For tomorrow
morning’s weekly export sales report, cotton exports are expected to come in
around 172,000-225,000 bales as compared with 286,100 last week. Given the
massive short position in place in cotton significant short covering gains
shouldn’t be surprising.

Technical Outlook

#COTTON (OCT) 08/19/04: The market’s close above
the 9-day moving average suggests the short-term trend remains positive. With
the close higher than the pivot swing number, the market is in a slightly
bullish posture. Next resistance area comes in at 48.18 and then again at 48.91,
while support is targeted at 46.53 and 45.61. The cross over and close above the
40-day moving average indicates the longer-term trend has turned up. Studies are
showing positive momentum, but are now in overbought territory so some caution
is warranted. The next upside target is 48.91.