Copper Liquidation Continues–Here’s Why
BOND MARKET RECAP
5/13/2005
June Bonds finished up 0-16 at 115-21, 0-07 off
the high and 0-17 up from the low.
June 10 Yr Treasury Notes finished up 0-100 at
111-310, 0-035 off the high and 0-120 up from the low.
The Treasury market continued to benefit
from concerns spinning out of the Hedge fund area and certainly benefited from
the softer than expected University of Michigan sentiment readings. In fact, the
Treasury market basically shrugged off the softer than expected build in US
Business Inventory reading. The fact that the stock market continued to favor
the bear track allows the Treasury market to except and foster concern for the
US economy. In the end the Treasury market wasn’t even willing to consider the
sharp slide in energy prices as a development that could eventually take some
pressure off the US economy. Therefore, macro concerns appear to outnumber the
reasons to think that economic conditions are improving.
Technical Outlook
BONDS (JUN) 05/16/2005: 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 slightly positive tilt with the close over
the swing pivot. The near-term upside objective is at 116-11. The 9-day RSI over
70 indicates the market is approaching overbought levels. The next area of
resistance is around 116-00 and 116-11, while 1st support hits today at 115-06
and below there at 114-22.
TNOTES (JUN) 05/16/2005: The daily stochastics
have crossed over up which is a bullish indication. Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The cross over and close above the 18-day moving average
is an indication the longer-term trend has turned positive. The market has a
slightly positive tilt with the close over the swing pivot. The near-term upside
objective is at 112-135. The next area of resistance is around 112-070 and
112-135, while 1st support hits today at 111-220 and below there at 111-110.
Â
STOCK INDICES RECAP
5/13/2005
June S&P finished down 2.5 at 1156.7, 8.6 off the
high and 9.5 up from the low.
June S&P E-Mini closed down 2.25 at 1157. This
was 10.25 up from the low and 8.5 off the high.
June Dow closed down 31 at 10157. This was 80 up
from the low and 80 off the high.
While the stock market showed periodic signs of
strength on Friday morning the back and fill action suggests that sentiment in
the marketplace is disjoined and easily undermined. NYSE floor traders suggested
that they just wanted to get beyond this week as the hedge fund contagion, the
Ford downgrade and slack Wal-Mart earnings certainly spooked a number of
investors. However, in looking just at the scheduled numbers and the net change
in oil prices it is possible that the macro economic setup for the economy
actually improved over the last five sessions. While the stock market managed to
rally into mid session following a decline in the Michigan sentiment numbers,
the soft sentiment readings seemed to countervail the string of better numbers
that was present into the opening Friday morning.
Technical Outlook
S&P 500 (JUN) 05/16/2005: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The close below the 18-day moving average is an indication the
longer-term trend has turned down. The market tilt is slightly negative with the
close under the pivot. The next downside objective is now at 1138.28. The next
area of resistance is around 1165.55 and 1174.47, while 1st support hits today
at 1147.45 and below there at 1138.28.
SP EMINI (JUN) 05/16/2005: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The close under the 18-day moving average indicates the longer-term
trend could be turning down. The market tilt is slightly negative with the close
under the pivot. The next downside target is 1137.82. The next area of
resistance is around 1166.37 and 1175.31, while 1st support hits today at
1147.63 and below there at 1137.82.
NASDAQ (JUN) 05/16/2005: The cross over and close
above the 40-day moving average indicates the longer-term trend has turned up.
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. With the close over the 1st swing resistance number, the market is in a
moderately positive position. The near-term upside objective is at 1496.50. The
next area of resistance is around 1486.00 and 1496.50, while 1st support hits
today at 1462.00 and below there at 1448.50.
Â
CURRENCY MARKET RECAP
5/13/2005
June US Dollar finished up 58 at 8610, 3 off the
high and 49 up from the low.
June Euro finished down 0.82 at 126.36, 0.24 off
the high and 0.1 up from the low.
June Euro Dollar closed up 0.015 at 96.58. This
was 0.015 up from the low and equal to the high.
June Canadian Dollar closed down 0.88 at 79.11.
This was 0.03 up from the low and 0.67 off the high.
June British Pound finished down 1.54 at 184.79,
0.68 off the high and 0.2 up from the low.
June Swiss closed down 0.65 at 81.83. This was
0.07 up from the low and 0.19 off the high.
June Japanese Yen closed down 0.54 at 93.43. This
was 0.11 up from the low and 0.31 off the high.
The US Dollar continued to rise Friday morning
and managed to mostly hold the gains right through a rather disappointing
University of Michigan sentiment reading. With US Treasuries rising consistently
in the wake of better than expected US economic readings it would seem that the
Dollar markets view of the US economy is in direct conflict with the Treasury
market. However, headlines continued to trumpet the threat of a recession in
Italy and that would seem to lower the competition for the Dollar and in turn
make the recent improvement in the US numbers.
Technical Outlook
YEN (JUN) 05/16/2005: Momentum studies are
declining, but have fallen to oversold levels. The close under the 18-day moving
average indicates the longer-term trend could be turning down. More selling
pressure is likely given yesterday’s gap lower price action on the day session
chart. There could be some early pressure today given the market’s negative
setup with the close below the 2nd swing support. The next downside objective is
now at 93.06. The next area of resistance is around 93.63 and 93.90, while 1st
support hits today at 93.22 and below there at 93.06.
EURO (JUN) 05/16/2005: Daily stochastics are
trending lower but have declined into oversold territory. The close under the
18-day moving average indicates the longer-term trend could be turning down. The
gap lower on the day session chart is bearish and puts the market on the
defensive. The defensive setup, with the close under the 2nd swing support,
could cause some early weakness. The next downside target is 126.06. With a
reading under 30, the 9-day RSI is approaching oversold levels. The next area of
resistance is around 126.52 and 126.73, while 1st support hits today at 126.19
and below there at 126.06.
Â
PRECIOUS METALS RECAP
5/13/2005
June Gold closed down 1.5 at 420.7. This was 1.4
up from the low and 2 off the high.
July Silver finished down 0.025 at 6.94, 0.04 off
the high and 0.06 up from the low.
Â
The Dollar rise simply catches the gold market
without alternative supporting arguments and it is also clear that the gold and
silver markets continue to hold rather overbought fund and small spec long
positioning. The trade was also talking up the number of significant long term
moving average violations seen during the week and that would seem to cultivate
the idea that a long term down trend pattern might be in place. In addition to
Dollar pressure this week, the gold market also saw signs of broad based
physical commodity liquidation in copper, platinum and energies. In other words,
the metals markets seem to be getting more deflationary pressure than
inflationary pressure.
Technical Outlook
SILVER (JUL) 05/16/2005: A bearish signal was
triggered on a crossover down in the daily stochastics. Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The close under the 18-day moving average indicates the longer-term
trend could be turning down. It is a slightly negative indicator that the close
was under the swing pivot. The next downside objective is now at 683.5. The next
area of resistance is around 699.0 and 703.5, while 1st support hits today at
689.1 and below there at 683.5.
GOLD (JUN) 05/16/2005: Momentum studies are still
bearish but are now at oversold levels and will tend to support reversal action
if it occurs. The close below the 18-day moving average is an indication the
longer-term trend has turned down. It is a slightly negative indicator that the
close was lower than the pivot swing number. The next downside target is now at
417.5. The market is approaching oversold levels on an RSI reading under 30. The
next area of resistance is around 422.4 and 424.2, while 1st support hits today
at 419.0 and below there at 417.5.
Â
COPPER MARKET RECAP
5/13/2005
June Copper closed down 1.55 at 139.25. This was
1.75 up from the low and 2.15 off the high.
The liquidation in copper continued and with the
general bias toward a host of physical commodities negative it would not seem
like the bears are ready to back away from the sell side. Certainly the Dollar
pressure remained a primary source of selling pressure but it didn’t help the
market to see a moderate rise in weekly Shanghai copper stocks. We also think
that the mostly bearish global economic outlook is serving to undermine copper
as well as concern for Chinese demand in the event that the Chinese actually
change the value of their currency. As if the list of negatives in the copper
wasn’t long enough, it should also be noted that copper has violated a series of
long term technical levels and the tech players are sellers.
Â
ENERGY MARKET RECAP
5/13/2005
June Crude Oil closed up 0.13 at 48.67. This was
0.92 up from the low and 0.25 off the high.
June Heating Oil closed down 0.93 at 137.03. This
was 1.48 up from the low and 0.47 off the high.
June Unleaded Gas finished down 1.98 at 141.22,
1.78 off the high and 2.17 up from the low.
June Natural Gas finished up 0.03 at 6.54, 0.01
off the high and 0.10 up from the low.
June Propane closed unchanged at 0.79. This was
0.01 up from the low and equal to the high.
The energy complex came into the session with
slightly higher price action but it appeared that the early bounce was a simple
profit taking move or basically a technical reaction to the steep declines of
the week. The even number mark of $50.00 in June crude oil has apparently become
a pivot point for sentiment in the pit and as long as prices hold below that
level many players fear more downside action. Apparently the US government got
some complaints about the quality of oil stats that are being provided and that
could actually serve to increase price volatility if the trade is uncomfortable
with current inventory readings. A Wall Street Journal article Friday morning
seemed to hint at a possible glut of natural gas supplies and that simply
contributed to the weakness already underway in the energy complex. The WSJ
article was a rather long term forecast but considering that the market is
looking for bearish news we can understand it spinning the news into a near term
bearish item.
Technical Outlook
CRUDE OIL (JUN) 05/16/2005: Daily stochastics are
trending lower but have declined into oversold territory. The close under the
18-day moving average indicates the longer-term trend could be turning down. The
upside daily closing price reversal gives the market a bullish tilt. The market
tilt is slightly negative with the close under the pivot. The next downside
target is 47.34. The next area of resistance is around 49.25 and 49.67, while
1st support hits today at 48.09 and below there at 47.34.
UNLEADED (JUN) 05/16/2005: 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 market setup is somewhat negative with the close under the 1st
swing support. The next downside target is now at 137.18. With a reading under
30, the 9-day RSI is approaching oversold levels. The next area of resistance is
around 143.19 and 145.07, while 1st support hits today at 139.25 and below there
at 137.18.
HEATING OIL (JUN) 05/16/2005: Daily stochastics
are trending lower but have declined into oversold territory. The market back
below the 18-day moving average suggests the longer-term trend could be turning
down. It is a slightly negative indicator that the close was under the swing
pivot. The next downside objective is 134.83. Some caution in pressing the
downside is warranted with the RSI under 30. The next area of resistance is
around 138.00 and 138.72, while 1st support hits today at 136.06 and below there
at 134.83.
Â
CORN MARKET RECAP
5/13/2005
July Corn finished down 3/4 at 203 1/2, 3/4
off the high and 1/2 up from the low. December Corn closed down 1/2 at 221 3/4.
This was 1/2 up from the low and 1 off the high.
Failure to take out yesterday’s lows helped
support some short-covering even though the other grains continued to collapse.
Ideas that tonight’s Commitment-of-Traders report with options will show an
extreme oversold condition helped to support. With warmer weather and rain in
the forecast for the eastern cornbelt, the trade believes that crop conditions
could improve. Deliveries were still hefty this morning at 516 contracts from
598 contracts yesterday. Funds were noted sellers of near 2000 contracts into
the mid-session. May corn expired at mid-session at a new contract low at 195
1/4. July corn resistance comes in at 205 with 202 1/4 and 197 3/4 as next
support.
Technical Outlook
CORN (JUL) 05/16/2005: Daily stochastics are
trending lower but have declined into oversold territory. The market back below
the 18-day moving average suggests the longer-term trend could be turning down.
It is a slightly negative indicator that the close was under the swing pivot.
The next downside objective is now at 202 1/2. With a reading under 30, the
9-day RSI is approaching oversold levels. The next area of resistance is around
204 and 204 3/4, while 1st support hits today at 203 and below there at 202 1/2.
Â
SOY COMPLEX RECAP
5/13/2005
July Soybeans finished down 10 3/4 at 612 3/4, 10
1/4 off the high and 6 1/4 up from the low. November Soybeans closed down 10 1/2
at 609. This was 5 up from the low and 10 off the high.
July Soymeal closed down 2.6 at 189.4. This was
1.9 up from the low and 2.8 off the high.
July Soybean Oil finished down 0.55 at 22.22,
0.46 off the high and 0.2 up from the low.
The surge in the US dollar, increasing fears of a
slowing economy in China and the US and bearish short-term weather forecasts was
enough to trigger more selling in soybeans and products this morning. Funds were
noted sellers of near 3000 contracts which helped drive July soybeans to the
lowest level since February 25th. Export news was very quiet overnight and the
market is still trying to absorb the bearish reaction to bullish USDA news
yesterday. May soybeans went off the board at mid-session at 603 3/4, down 16
cents on the day. Deliveries this morning came in at 133 contracts for soybeans
and 53 contracts for oil. After good rains this week, a drier trend for parts of
next week should allow for active planting progress and improved soil
conditions. For the NOPA crush report on Monday, traders are looking for April
soybeans crushed near 129.3 million bushels. July soybean resistance comes in at
616 with 601 as next key support which represents a 50% correction of the
February-March rally.
Technical Outlook
BEANS (JUL) 05/16/2005: Momentum studies are
declining, but have fallen to oversold levels. The market back below the 18-day
moving average suggests the longer-term trend could be turning down. The market
setup is somewhat negative with the close under the 1st swing support. The next
downside objective is now at 597 1/4. The next area of resistance is around 621
and 630 1/4, while 1st support hits today at 604 1/2 and below there at 597 1/4.
MEAL (JUL) 05/16/2005: The close below the 60-day
moving average is an indication the longer-term trend has turned down. Daily
stochastics are trending lower but have declined into oversold territory. The
close under the 18-day moving average indicates the longer-term trend could be
turning down. The market’s close below the 1st swing support number suggests a
moderately negative setup for today. The next downside objective is 185.0. The
next area of resistance is around 191.7 and 194.3, while 1st support hits today
at 187.1 and below there at 185.0.
BEANOIL (JUL) 05/16/2005: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The close under the 18-day moving average indicates the longer-term
trend could be turning down. The gap lower on the day session chart is bearish
and puts the market on the defensive. The defensive setup, with the close under
the 2nd swing support, could cause some early weakness. The next downside
objective is now at 21.63. The next area of resistance is around 22.55 and
22.94, while 1st support hits today at 21.89 and below there at 21.63.
Â
WHEAT MARKET RECAP
5/13/2005
July Wheat finished down 6 at 302 3/4, 4 3/4 off the high and
1/4 up from the low. December Wheat closed down 5 1/2 at 322. This was 1/4 up
from the low and 5 1/2 off the high.
On top of the slow start to export sales for the
new crop season, rains overnight in Kansas and a massive ending stocks estimate
for the new crop season, traders were forced to absorb a sharply higher trade in
the US dollar overnight. With US wheat still not low enough to compete on the
world market, the surge higher in the US dollar only causes US wheat to become
even more noncompetitive especially in Europe. The European Union raised its
export subsidy for wheat up to 6 euros this week from 5.89 euros two weeks ago.
Drought conditions in Spain may help alleviate some of the excess stocks from
Europe. A lack of rains in far western Kansas and the far southern plains helped
provide some underlying support but the late break in soybeans added to the
negative tone. Deliveries came in at 111 contracts. July wheat resistance comes
in at 307 1/2 with 302 1/4 (contract low) and 299 1/2 as next support.
Technical Outlook
WHEAT (JUL) 05/16/2005: Daily stochastics are
trending lower but have declined into oversold territory. The close below the
18-day moving average is an indication the longer-term trend has turned down.
The market is in a bearish position with the close below the 2nd swing support
number. The next downside objective is now at 299. The market is approaching
oversold levels on an RSI reading under 30. The next area of resistance is
around 305 1/4 and 308 3/4, while 1st support hits today at 300 1/4 and below
there at 299.
Â
LIVE CATTLE RECAP
5/13/2005
June Live Cattle finished up 0.47 at 87.27, 0.05
off the high and 0.72 up from the low.
May Feeder Cattle closed down 0.07 at 111.42.
This was 0.32 up from the low and 0.07 off the high.
June cattle closed higher for the fifth day in a
row and tested the April peak while August cattle managed to hit a new contract
high but failed to add more than 1 tick to the previous high. The lack of
strength in August could attract some technical selling early next week
especially if the tone in the cash market is weak as traders look for hefty
placements for next weeks Cattle-on-Feed report. Boxed-beef cut-out values were
up $.21 at mid session to $153.84 as compared with $159.19 one week ago. Cash
cattle in the southern plains traded a few head at $90.00-$90.50 on Friday with
feedlots into the middle of the day still passing on offers and waiting for
$91.00. Slaughter came in at 124,000 head as compared with trade expectations of
117,000-125,000 head. Slaughter for the week has reached 649,000 head as
compared with 656,000 last week and 691,000 last year.
Technical Outlook
CATTLE (JUN) 05/16/2005: The moving average
crossover up (9 above 18) indicates a possible developing short-term uptrend.
Rising stochastics at overbought levels warrant some caution for bulls. The
market now above the 18-day moving average suggests the longer-term trend has
turned up. The market setup is supportive for early gains with the close over
the 1st swing resistance. The next upside target is 87.870. The next area of
resistance is around 87.650 and 87.870, while 1st support hits today at 86.900
and below there at 86.350.
Â
LEAN HOGS RECAP
5/13/2005
June Lean Hogs finished down 0.67 at 75.82, 0.72
off the high and 0.90 up from the low.
May Pork Bellies closed down 0.32 at 80.85. This
was 1.25 up from the low and 0.35 off the high.
June hogs closed sharply lower on the day and
even challenged the weekly lows with steady cash markets and concerns for
increased pork production ahead helping to trigger long liquidation selling.
While the pork cut-out values jump this week which might support the cash market
for a few days next week, traders are looking for a weaker tone for the cash
market by later next week. Ideas that some hogs have been backed-up in the
country during the planting season and that the hefty weight could add to pork
production in the weeks ahead helped pressure. The CME 2-Day lean Index for the
period ending May 11th came in at 77.75 which was down.49 from the previous
session and up from 76.34 the previous week. Slaughter came in at 356,000 head
as compared with trade expectations of 358,000-366,000 head. Slaughter for the
week reached 1.819 million head which was down 1.3% from last year but pork
production for the week was up.2% from last year due to higher weights.
Technical Outlook
HOGS (JUN) 05/16/2005: The daily stochastics have
crossed over down which is a bearish indication. Momentum studies trending lower
at mid-range could accelerate a price break if support levels are broken. The
close under the 18-day moving average indicates the longer-term trend could be
turning down. The defensive setup, with the close under the 2nd swing support,
could cause some early weakness. The next downside objective is 74.170. The next
area of resistance is around 76.620 and 77.400, while 1st support hits today at
75.020 and below there at 74.170.
Â
COCOA MARKET RECAP
5/13/2005
July Cocoa finished down 42 at 1430, 33 off the
high and 2 up from the low.
As we suspected cocoa came under more pressure
following the passing of another key date in the Ivory Coast Peace process.
Certainly the ongoing gains in the Dollar added to the liquidation pressure but
the cocoa market just doesn’t have the uncertainty to prop up prices against the
current liquidation wave. If supply and demand are thought to be in balance and
the future offers little in the way of change it is not surprising that the spec
and fund longs continue to scramble out of positions.
Technical Outlook
COCOA (JUL) 05/16/2005: A bearish signal was
triggered on a crossover down in the daily stochastics. Daily stochastics are
trending lower but have declined into oversold territory. The market back below
the 18-day moving average suggests the longer-term trend could be turning down.
The gap lower price action on the day session chart is a bearish indicator for
trend. The close below the 2nd swing support number puts the market on the
defensive. The next downside target is now at 1403. The 9-day RSI under 30
indicates the market is approaching oversold levels. The next area of resistance
is around 1447 and 1472, while 1st support hits today at 1413 and below there at
1403.
Â
COFFEE MARKET RECAP
5/13/2005
July Coffee closed down 1.00 at 121.50. This was
0.40 up from the low and 1.40 off the high.
We are a little surprised that coffee managed to
escape the week without seeing the fund selling interest present in a number of
other commodity markets. News that exports from Ecuador increased sharply might
have had a minor negative impact on prices, but only because the information
flow Friday was relatively thin in coffee. However, with weather appearing to
uneventful and July coffee hovering just above critical chart one has to respect
this markets ability to washout out a larger portion of the weak handed longs.
Technical Outlook
COFFEE (JUL) 05/16/2005: Daily stochastics are
trending lower but have declined into oversold territory. The close under the
18-day moving average indicates the longer-term trend could be turning down. The
market tilt is slightly negative with the close under the pivot. The next
downside objective is now at 120.00. The next area of resistance is around
122.35 and 123.50, while 1st support hits today at 120.60 and below there at
120.00.
Â
SUGAR MARKET RECAP
5/13/2005
July Sugar closed up 0.09 at 8.35. This was 0.13
up from the low and 0.02 off the high.
Apparently the sugar market attracted some
interested buying around the lows Friday and the buying might have been
professional or commercial in nature and that might give the low posted Friday
at 822 in the July contract a little more significance. Early in the session the
Press was picking up indications that the pit was buying and therefore it is
possible that more than one source turned a little more positive toward prices.
With the funds net short sugar it is possible that the fund buying Friday was
simple profit taking instead of the beginning of an upward wave in prices.
Technical Outlook
SUGAR (JUL) 05/16/2005: Momentum studies trending
lower at mid-range should accelerate a move lower if support levels are taken
out. The market back below the 18-day moving average suggests the longer-term
trend could be turning down. 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 target is now at 8.18. The next area of
resistance is around 8.42 and 8.47, while 1st support hits today at 8.28 and
below there at 8.18.
Â
COTTON MARKET RECAP
5/13/2005
July Cotton finished down 1.33 at 53.75, 1.15 off
the high and 0.70 up from the low.
The cotton market fell apart in the wake of fund
selling and could be headed back to the early May consolidation lows. Apparently
the disappointing weekly export sales on Thursday fostered selling in addition
to some timely rains in Texas. In other words, demand is suspect and the threats
against future supply are being downgraded. It is also possible that consistent
gains in the Dollar leave the cotton market concerned about ongoing weakness in
exports in the weeks and months ahead. Furthermore, the cotton market might be
in the process of wringing out a large collection of weak handed longs
considering the magnitude of the technical failure seen on Friday.
Technical Outlook
COTTON (JUL) 05/16/2005: The market back below
the 40-day moving average suggests the longer-term trend could be turning down.
The daily stochastics have crossed over down which is a bearish indication.
Stochastics trending lower at midrange will tend to reinforce a move lower
especially if support levels are taken out. The market back below the 18-day
moving average suggests the longer-term trend could be turning down. The market
is in a bearish position with the close below the 2nd swing support number. The
next downside objective is 52.02. The next area of resistance is around 54.67
and 55.71, while 1st support hits today at 52.83 and below there at 52.02.