Dollar Rallies, But Not For The Reason You Might Think
BOND MARKET RECAP
1/19/2005
March Bonds closed up 0-02 at 113-31. This was
0-13 up from the low and 0-18 off the high.
March 10 Yr Treasury Notes finished up 0-005 at
111-295, 0-060 off the high and 0-065 up from the low.
As we suspected the Treasury market ramped
up to a new contract high off the muted inflation report but then failed to hold
the gains into the close. The rest of the economic information Wednesday was
offsetting with the claims down big and the ongoing claims up moderately. The
Housing starts were up sharply and the housing permits were down and that
completed the mostly mixed scheduled economic report slate for the session.
However, late in the session the Fed Beige Book went on to suggest that growth
continues and that inflation remains mostly under control. However, one has to
wonder if the Treasury market has enough evidence of economic weakness to
markedly rise above the highs carved out during the session Wednesday.
Technical Outlook
BONDS (MAR) 01/20/2005: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The major trend could be turning up with the close back above the 18-day
moving average. The market has a slightly positive tilt with the close over the
swing pivot. The next upside target is 115-00. The 9-day RSI over 70 indicates
the market is approaching overbought levels. The next area of resistance is
around 114-17 and 115-00, while 1st support hits today at 113-19 and below there
at 113-03.
TNOTES (MAR) 01/20/2005: The cross over and close
above the 60-day moving average indicates the longer-term trend has turned up.
The moving average crossover up (9 above 18) indicates a possible developing
short-term uptrend. 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 indicates the longer-term trend has
turned up. It is a mildly bullish indicator that the market closed over the
pivot swing number. The next upside objective is 112-110. The next area of
resistance is around 112-055 and 112-110, while 1st support hits today at
111-250 and below there at 111-175.
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STOCK INDICES RECAP
1/19/2005
March S&P finished down 12.2 at 1183.5, 12.7 off
the high and 0.3 up from the low.
March S&P E-Mini closed down 12.5 at 1183.25.
This was equal to the low and 14 off the high.
March Dow closed down 90 at 10530. This was 3 up
from the low and 100 off the high.
The bulls in the stock market have to extremely
disappointed, as the slate of earnings reports seemed to be good enough to
sustain higher prices. However, the market not only failed to hold the early
gains but at times during the session slumped significantly. Even the economic
information was disappointing to the bull camp as every improvement in the
numbers on Wednesday was accompanied by a disappointing offset. Even more
discouraging were comments from the Fed’s Geithner suggesting that the US
economic outlook was “reasonable favorable” as opposed to something more
definitive like entrenched. The Fed also damaging the stock market outlook by
once again bringing up the concerning subject of soaring trade and budget
deficits!
Technical Outlook
S&P 500 (MAR) 01/20/2005: The close below the
40-day moving average is an indication the longer-term trend has turned down.
Rising from oversold levels, daily momentum studies would support higher prices,
especially on a close above resistance. The close below the 18-day moving
average is an indication the longer-term trend has turned down. The close below
the 1st swing support could weigh on the market. The next upside objective is
1199.45. The next area of resistance is around 1189.70 and 1199.45, while 1st
support hits today at 1176.70 and below there at 1173.45.
SP EMINI (MAR) 01/20/2005: The close below the
40-day moving average is an indication the longer-term trend has turned down.
The stochastic indicator is rising from oversold levels, which is bullish and
should support higher prices. The major trend has turned down with the cross
over back below the 18-day moving average. The swing indicator gave a moderately
negative reading with the close below the 1st support number. The near-term
upside objective is at 1200.75. The next area of resistance is around 1190.25
and 1200.75, while 1st support hits today at 1176.25 and below there at 1172.75.
NASDAQ (MAR) 01/20/2005: The market back below
the 60-day moving average suggests the longer-term trend could be turning down.
A crossover down in the daily stochastics is a bearish signal. 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 defensive setup, with the close under the 2nd swing support,
could cause some early weakness. The next downside objective is 1515.38. The
next area of resistance is around 1559.75 and 1586.37, while 1st support hits
today at 1524.25 and below there at 1515.38.
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CURRENCY MARKET RECAP
1/19/2005
March US Dollar finished up 18 at 8364, 22 off
the high and 69 up from the low.
March Euro finished down 0.37 at 130.03, 1.25 off
the high and 0.33 up from the low.
March Euro Dollar closed unchanged at 97.025.
This was 0.005 up from the low and 0.005 off the high.
March Canadian Dollar closed down 0.35 at 81.44.
This was 0.24 up from the low and 0.63 off the high.
March British Pound finished up 0.28 at 186.27,
1.37 off the high and 0.33 up from the low.
March Swiss closed down 0.17 at 84.48. This was
0.23 up from the low and 0.87 off the high.
March Japanese Yen closed down 0.57 at 97.59.
This was 0.14 up from the low and 0.81 off the high.
The Dollar managed an impressive rally off the
early lows but probably didn’t manage the rally off the scheduled economic
numbers. In fact, we have to think that the Dollar rally came more off a
technical failure in the Swiss and the Euro than it did off anything from the
US. Certainly the Fed commentary down playing a currency crisis is chasing some
longs from the Euro and the Swiss but in the meantime it still doesn’t appear as
if the Dollar has the fundamental information to do anything but stop going
down. The Pound apparently got enough favorable information from the employment
report to outperform all the currencies on Wednesday but we are not sure that
the information will be followed with additional news to solidify the recent
gains.
Technical Outlook
YEN (MAR) 01/20/2005: A positive indicator was
given with the upside crossover of the 9 & 18 bar moving average. Studies are
showing positive momentum but are now in overbought territory, so some caution
is warranted. The cross over and close above the 18-day moving average indicates
the longer-term trend has turned up. A negative signal was given by the outside
day down. The market setup is somewhat negative with the close under the 1st
swing support. The next upside target is 98.70. The next area of resistance is
around 98.06 and 98.70, while 1st support hits today at 97.12 and below there at
96.81.
EURO (MAR) 01/20/2005: 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 outside day down and close below the previous day’s low is a
negative signal. It is a slightly negative indicator that the close was lower
than the pivot swing number. The next downside objective is 128.68. The next
area of resistance is around 130.82 and 131.83, while 1st support hits today at
129.24 and below there at 128.68.
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PRECIOUS METALS RECAP
1/19/2005
February Gold closed down 0.2 at 423.3. This was
0.6 up from the low and 3.9 off the high.
March Silver finished down 0.03 at 6.625, 0.12
off the high and 0.02 up from the low.
April Platinum closed up 6.2 at 867.9. This was
2.7 up from the low and 5 off the high.
The gold and silver markets failed to hold early
gains and given the conclusively bullish fundamental tilt into the opening
Wednesday, a number of bull players have to be disappointed with the net result
of the action. Certainly seeing the Dollar recover and mount a 50-60 point rally
off the recent lows is distressing to the bulls but the fact that the Asian
demand theme was mostly discarded is an additional disappointment. Even in the
face of more gold merger and acquisition talk the gold market failed to inspire
fresh buying and that seems to leave the precious metals in a vulnerable
position.
Technical Outlook
SILVER (MAR) 01/20/2005: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The major trend has turned down with the cross over back
below the 18-day moving average. The market could take on a defensive posture
with the daily closing price reversal down. The market tilt is slightly negative
with the close under the pivot. The next upside target is 679.0. The next area
of resistance is around 669.5 and 679.0, while 1st support hits today at 655.5
and below there at 651.1.
GOLD (FEB) 01/20/2005: Daily stochastics are
showing positive momentum from oversold levels, which should reinforce a move
higher if near-term resistance is taken out. The major trend has turned down
with the cross over back below the 18-day moving average. The daily closing
price reversal down puts the market on the defensive. The market has a slightly
positive tilt with the close over the swing pivot. The next upside target is
428.6. The next area of resistance is around 425.5 and 428.6, while 1st support
hits today at 421.1 and below there at 419.7.
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COPPER MARKET RECAP
1/19/2005
March Copper finished up 0.80 at 140.95, 1.35 off
the high and 0.55 up from the low.
The copper market attempted an impressive rally
Wednesday but was only able to hold a portion of the gains into the close. We
have to think that the action was disappointing to the bull camp as copper in
the past has managed massive gains off the type of information in play into the
opening Wednesday. In fact, with favorable US corporate earnings information, a
weak US Dollar and several optimistic Asian copper demand stories floating
around early in the session we would have expected copper prices to have ramped
up aggressively. In the end the market failed to muster the typical buying
action and that could be a sign of waning upside momentum.
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ENERGY MARKET RECAP
1/19/2005
February Crude Oil closed down 0.83 at 47.55.
This was 0.05 up from the low and 0.80 off the high.
February Heating Oil closed down 0.12 at 134.26.
This was 0.41 up from the low and 1.74 off the high.
February Unleaded Gas finished up 0.13 at 126.32,
1.38 off the high and 1.02 up from the low.
February Natural Gas finished up 0.16 at 6.29,
0.04 off the high and 0.14 up from the low.
February Propane closed down 0.00 at 0.76. This
was equal to the low and equal to the high.
The energy complex mostly marked time Wednesday
ahead of the unusual afternoon release of the weekly inventory readings. We
suspect that recent comments from the OPEC President undermined energy prices,
as the cartel indicated that they are still attempting to stabilize oil prices
and that would seem to suggest that they will refrain from shaking up the market
with an end of January move. The market is still on edge with respect to Iraqi
supply concerns but it would also seem like weather has seen its influence
decline slightly.
Technical Outlook
CRUDE OIL (MAR) 01/20/2005: Momentum studies are
trending higher but have entered overbought levels. The cross over and close
above the 18-day moving average is an indication the longer-term trend has
turned positive. The market tilt is slightly negative with the close under the
pivot. The next upside target is 48.83. The next area of resistance is around
48.26 and 48.83, while 1st support hits today at 47.46 and below there at 47.22.
UNLEADED (MAR) 01/20/2005: Momentum studies are
trending higher but have entered overbought levels. The cross over and close
above the 18-day moving average is an indication the longer-term trend has
turned positive. It is a slightly negative indicator that the close was under
the swing pivot. The next upside target is 130.52. The next area of resistance
is around 129.25 and 130.52, while 1st support hits today at 127.15 and below
there at 126.33.
HEATING OIL (MAR) 01/20/2005: 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
tilt is slightly negative with the close under the pivot. The near-term upside
target is at 135.94. The next area of resistance is around 134.58 and 135.94,
while 1st support hits today at 132.48 and below there at 131.74.
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CORN MARKET RECAP
1/19/2005
March Corn finished up 3/4 at 196 3/4, 3/4
off the high and 1/4 up from the low. May Corn closed up 1/2 at 204. This was
1/2 up from the low and 1 off the high.
After 4 days of new contract lows, the market
managed to bounce. News that Egypt bought 100,000 tons of US corn helped provide
some support. A recovery in the other grain markets, technical short-covering
and some light commercial buying provided support. Cash basis levels were firm
and the market lacked the fund selling which has been active in recent trading
sessions. Weekly export sales were delayed until Monday due to holiday on Monday
and the Inauguration ceremony. Short covering after the recent sell-off has
added to the bullish tone. Resistance for March corn comes in at 198 1/2 and 199
1/2 with 195 3/4 and 191 as next support.
Technical Outlook
CORN (MAR) 01/20/2005: 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. With the close
higher than the pivot swing number, the market is in a slightly bullish posture.
The next downside objective is 196. The next area of resistance is around 197
1/4 and 197 3/4, while 1st support hits today at 196 1/4 and below there at 196.
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SOY COMPLEX RECAP
1/19/2005
March Soybeans finished up 4 1/4 at 517 3/4, 3
3/4 off the high and 2 1/2 up from the low. May Soybeans closed up 2 1/2 at 518
3/4. This was 3/4 up from the low and 4 1/4 off the high.
March Soymeal closed up 1.8 at 155.5. This was
1.1 up from the low and 1.5 off the high.
March Soybean Oil finished up 0.17 at 19.61, 0.09
off the high and 0.09 up from the low.
More stability in the cash market and ideas that
futures are oversold helped support the bounce. The market found some support
from firm edible oil prices overnight and talk that a continued period of high
crude oil prices should provide some underlying fundamental support to soybean
oil. Talk of good livestock feeding demand due to recent cool weather helped
support meal. While the weekend rains in southern Brazil helped trigger the
sharp break yesterday, the outlook for a generally dry forecast for this region
may have slowed the selling. Weekly export sales were delayed until Monday due
to holiday on Monday and the Inauguration ceremony. The lack of new
market-moving news along with a lack of new fund selling has helped to support
the bounce. Resistance for March soybeans comes in at 524 1/2 and 528 3/4 with
support at 515 and 510 (contract lows).
Technical Outlook
BEANS (MAR) 01/20/2005: 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.
With the close over the 1st swing resistance number, the market is in a
moderately positive position. The next downside target is now at 512. The next
area of resistance is around 520 3/4 and 524 1/4, while 1st support hits today
at 514 3/4 and below there at 512.
MEAL (MAR) 01/20/2005: The upside crossover (9
above 18) of the moving averages suggests a developing short-term uptrend.
Momentum studies are declining, but have fallen to oversold levels. The close
below the 18-day moving average is an indication the longer-term trend has
turned down. The gap upmove on the day session chart is a bullish indicator for
trend. The market setup is supportive for early gains with the close over the
1st swing resistance. The next downside objective is now at 153.0. The next area
of resistance is around 156.7 and 158.2, while 1st support hits today at 154.2
and below there at 153.0.
BEANOIL (MAR) 01/20/2005: 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.
Market positioning is positive with the close over the 1st swing resistance. The
next downside objective is 19.43. The next area of resistance is around 19.70
and 19.79, while 1st support hits today at 19.52 and below there at 19.43.
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WHEAT MARKET RECAP
1/19/2005
March Wheat finished up 2 1/2 at 299, 3 off the high and 3 up
from the low. May Wheat closed up 2 at 306 1/4. This was 2 3/4 up from the low
and 2 3/4 off the high.
The market found technical support from the
ability to hold above the January 4th lows on the break yesterday which keeps
the market under the positive influence of the weekly reversal from a contract
low for the week ending January 7th. Short-covering was noted due to the
oversold condition with speculators thought to be holding a hefty net short
position. The warming trend of the Midwest has some traders nervous with the
persistent freeze/thaw cycle and more cold weather this weekend could keep
traders nervous over possible root damage into the spring. This helped support
July wheat but the close was 3 1/2 cents off of the highs. Syria sold 100,000
tons of wheat overnight. Weekly export sales were delayed until Monday due to
holiday on Monday and the Inauguration ceremony. March wheat support comes in at
297 1/2 and 296 with resistance at 303 1/2 and 305 1/2.
Technical Outlook
WHEAT (MAR) 01/20/2005: The upside crossover of
the 9 & 18 bar moving average is a positive signal. Stochastics trending lower
at midrange will tend to reinforce a move lower especially if support levels are
taken out. The close under the 18-day moving average indicates the longer-term
trend could be turning down. Market positioning is positive with the close over
the 1st swing resistance. The next downside target is 293. The next area of
resistance is around 302 and 305, while 1st support hits today at 296 and below
there at 293.
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LIVE CATTLE RECAP
1/19/2005
February Live Cattle finished down 1.77 at 89.35,
1.65 off the high and 0.15 up from the low.
January Feeder Cattle closed down 0.95 at 106.25.
This was 0.05 up from the low and 0.80 off the high.
News from the USDA Secretary of Agriculture the
she saw no reason yet for the USDA to change its decision to lift the ban on
Canadian cattle scheduled for March 7th helped trigger a rush of new selling and
long liquidation selling. With a lack of new export activity, new supply from
Canada may be tough to absorb without higher trade. Lower beef prices and good
feedlot weather added to the bearish tone. Boxed-beef cut-out values were down
$1.37 to $155.95 at mid-session as compared with $153.25 one week ago. Slaughter
came in at just 110,000 head as compared with trade expectations of
118,000-121,000 head. This was the second day in a row with slaughter down well
below expectations and could be a sign of weaker demand from the packer.
Technical Outlook
CATTLE (FEB) 01/20/2005: The daily stochastics
have crossed over down which is a bearish indication. Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The close under
the 18-day moving average indicates the longer-term trend could be turning down.
The gap down on the day session chart is bearish with more selling pressure
possible today. The defensive setup, with the close under the 2nd swing support,
could cause some early weakness. The next downside target is 87.950. The next
area of resistance is around 90.220 and 91.500, while 1st support hits today at
88.450 and below there at 87.950.
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LEAN HOGS RECAP
1/19/2005
February Lean Hogs finished up 0.20 at 75.77,
0.37 off the high and 0.67 up from the low.
February Pork Bellies closed up 0.55 at 93.92.
This was 1.00 up from the low and 0.47 off the high.
Hogs were mixed again with February hogs slightly
higher and April hogs slightly lower on the session. Traders view the period
after the Canadian border is open to cattle imports (March 7th) as a more
bearish time frame for pork prices as more beef competes with pork and could
impact prices. Weekly average weights for Iowa/Minnesota for the week ending
January 15th came in at 268.4 pounds which was down from 268.9 (record high)
last week and 265.7 million pounds last year. Traders are looking for the weekly
cold storage report to show an in-movement of 1.5-5.0 million pounds as compared
with 2.112 million pounds last week. The 2-Day Lean index for the period ending
January 15th was up.35 to 72.60 as compared with 71.80 one week previous.
Slaughter came in at 399,000 head as compared with trade expectations of
397,000-400,000 head.
Technical Outlook
HOGS (FEB) 01/20/2005: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The cross over
and close above the 18-day moving average indicates the longer-term trend has
turned up. The market’s close below the pivot swing number is a mildly negative
setup. The next downside target is 74.670. The next area of resistance is around
76.270 and 76.750, while 1st support hits today at 75.270 and below there at
74.670.
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COCOA MARKET RECAP
1/19/2005
March Cocoa finished up 3 at 1499, 11 off the
high and 16 up from the low.
Another wide range in cocoa prices but this time
cocoa managed a slightly higher close. In a slightly negative note the market
saw evidence of increasing Brazilian cocoa exports and that is a recovery after
a long term structural disease setback. However, in the near term we doubt that
Brazilian supply flow is gong to have a dramatic influence on the overall trend
of cocoa prices in 2005. In the short term evidence of light spec buying might
support prices but we doubt that commercial buying will be willing to pay up for
product much higher in the trading range.
Technical Outlook
COCOA (MAR) 01/20/2005: Daily stochastics are
showing positive momentum from oversold levels, which should reinforce a move
higher if near-term resistance is taken out. The major trend has turned down
with the cross over back below the 18-day moving average. The upside closing
price reversal on the daily chart is somewhat bullish. The close over the pivot
swing is a somewhat positive setup. The near-term upside target is at 1524. The
next area of resistance is around 1512 and 1524, while 1st support hits today at
1486 and below there at 1471.
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COFFEE MARKET RECAP
1/19/2005
March Coffee closed down 0.30 at 104.10. This was
0.80 up from the low and 1.15 off the high.
The coffee market inched lower in quiet trade as
the market managed to consolidate this weeks gains. London stalled on the rally
which contributed to the choppy trade in New York. Origin selling was noted in
London and was more than the buyers could absorb as buyers seem to have decent
coverage in place. Lower than expected monthly stocks at the end of December
helped support the market. End of December stocks were down 91,483 bags to 5.075
million bags as compared with 5.49 million bags at the end of 2003. Vietnam’s
key coffee growing province (Dak Lak) reported coffee production for the
2004/2005 season at just 4.7 million bags, down 25% from last year due to
drought. The province normally represents near 60% of the countries production.
Technical Outlook
COFFEE (MAR) 01/20/2005: Positive momentum
studies in the neutral zone will tend to reinforce higher price action. The
cross over and close above the 18-day moving average indicates the longer-term
trend has turned up. With the close higher than the pivot swing number, the
market is in a slightly bullish posture. The next upside target is 106.10. The
next area of resistance is around 105.05 and 106.10, while 1st support hits
today at 103.15 and below there at 102.25.
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SUGAR MARKET RECAP
1/19/2005
March Sugar closed up 0.03 at 8.87. This was 0.06
up from the low and 0.01 off the high.
May sugar closed higher for the 6th session in a
row but on quiet trade with a tight range of just 4 ticks. Traders remain
optimistic that buying from India and Pakistan could support higher trade over
the near-term but the buying does not seem to have triggered much in the way of
hectic action in the cash market. Brazil exportable surplus seems plentiful and
Europe is still actively offering sugar on the world market. Pakistan raised its
import quota for 2005 to 250,000 tons this week from 200,000 tons previous as
the production short-fall has left internal prices at a 3-year high. Production
for the 2004/2005 season is expected to hit just 3.3-3.4 million tons from 4.0
million last year. Traders also believe that India will be in the market for
more cargoes after production for the 2004/2005 season is expected to hit just
11.5 million tonnes from 13.8 million tonnes last year and 20 million tonnes the
previous year.
Technical Outlook
SUGAR (MAR) 01/20/2005: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The close below the 18-day moving average is an
indication the longer-term trend has turned down. It is a mildly bullish
indicator that the market closed over the pivot swing number. The next upside
target is 8.92. The next area of resistance is around 8.90 and 8.92, while 1st
support hits today at 8.84 and below there at 8.79.
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COTTON MARKET RECAP
1/19/2005
March Cotton finished up 1.25 at 47.96, 0.04 off
the high and 1.31 up from the low.
Cotton opened higher and attracted solid buying
from funds and speculators. Trade house selling is active on the cotton rallies
but not enough to offset the surge in fund buying which is coming from index and
trend-following systems. Traders expect China to be an active buying during the
first quarter and traders remain hopeful that producer selling remains light.
Certified cotton stocks deliverable against the NYBOT as of January 18th totaled
59,991 bales from 58,829 bales the previous session and 61,236 bales two
sessions ago. A 50% correction of the September to November break leaves next
resistance for May cotton at 49.45.
Technical Outlook
COTTON (MAR) 01/20/2005: The crossover up in the
daily stochastics is a bullish signal. Momentum studies are trending higher but
have entered overbought levels. The cross over and close above the 18-day moving
average indicates the longer-term trend has turned up. The market’s close above
the 2nd swing resistance number is a bullish indication. The near-term upside
target is at 48.99. The market is approaching overbought levels with an RSI over
70. The next area of resistance is around 48.63 and 48.99, while 1st support
hits today at 47.29 and below there at 46.30.