Energy Caves In–Here’s Why

Follow-through technical buying after the
reversal from a contract low yesterday helped to support the early rally.
Short-covering is seen as a positive force with speculators holding a record net
short position in the last Commitment-of-Traders report with options. The lack
of new selling interest from producers in the cash market and from speculators
in futures is seen as a potential bullish force as the market reacts to the
oversold condition of the market. Weakness in basis levels for soybeans at the
gulf triggered the late sell-off as corn drifted to the lows of the day into the
close. Commercial buying was a bit more active to help support the market near
yesterday’s close. Support for March corn comes in at 195 and 191 with
resistance at 197 3/4 and 200 1/2.

Technical Outlook

CORN (MAR) 02/02/2005: The daily stochastics gave
a bullish indicator with a crossover up. 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. With the close higher than the pivot swing
number, the market is in a slightly bullish posture. The near-term upside target
is at 198 1/2. The next area of resistance is around 197 1/2 and 198 1/2, while
1st support hits today at 196 1/2 and below there at 196 1/4.

 

SOY COMPLEX RECAP

2/1/2005

March Soybeans finished down 7 3/4 at 507, 11 1/4
off the high and 1 up from the low. May Soybeans closed down 5 1/2 at 507. This
was 1 up from the low and 9 3/4 off the high.

March Soymeal closed down 1.1 at 152.7. This was
0.2 up from the low and 2.6 off the high.

March Soybean Oil finished down 0.32 at 19.04,
0.39 off the high and 0.02 up from the low.

The early bounce was triggered by short-covering
after reversal action yesterday. Selling was a bit more active as the market
challenged yesterday’s highs and the market pulled-back towards the opening
range into mid-session. The commercial support for the March/May spread along
with a firm tone in the cash market helped provide support as producer selling
remains light. However, basis at the gulf came under pressure during the trading
session and contributed to the late break which was led by the March contract. A
lack of fresh demand for exports has more than offset the slow producer selling
this week. Weekly export sales in the next several weeks could drop off
significantly from recent levels as world buyers shift to new crop South
American soybeans. A lack of significant weather problems with the maturing crop
in Brazil and Argentina helped to pressure the market. Resistance for March
soybeans comes in at 515 1/2 and 519 1/4 with support at 506 and 501.

Technical Outlook

BEANS (MAR) 02/02/2005: The sell-off took the
market to a new contract low. 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 swing
indicator gave a moderately negative reading with the close below the 1st
support number. The next downside objective is 497 1/2. The next area of
resistance is around 513 and 521 3/4, while 1st support hits today at 501 and
below there at 497 1/2.

MEAL (MAR) 02/02/2005: 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. It is a slightly negative indicator that the close was lower than
the pivot swing number. The next downside objective is now at 150.5. The next
area of resistance is around 154.1 and 156.1, while 1st support hits today at
151.3 and below there at 150.5.

BEANOIL (MAR) 02/02/2005: The sell-off took the
market to a new contract low. Daily stochastics are trending lower but have
declined into oversold territory. 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 next downside
objective is now at 18.73. The market is approaching oversold levels on an RSI
reading under 30. The next area of resistance is around 19.24 and 19.54, while
1st support hits today at 18.84 and below there at 18.73.

 

WHEAT MARKET RECAP

2/1/2005

March Wheat finished up 1 1/4 at 292 1/4, 1 3/4 off the high
and 1 3/4 up from the low. May Wheat closed up 2 at 300 3/4. This was 2 1/2 up
from the low and 1 off the high.

While the market lacks fundamental justification
to move higher basis the export news flow, futures are finding solid support
from the improved technical picture after the market put in a new contract low
yesterday and closed higher. Short-covering helped support the market when
futures moved above yesterday’s highs and the follow-through buying is seen as a
factor which helps confirm the reversal. A lack of new export news combined with
fears that Europe and Argentina could be more aggressive exporters over the
near-term helped to limit the buying support. The market held support in spite
of a move to new contract lows for soybeans. March wheat support comes in at 291
1/4 and 289 3/4 with resistance at 296 3/4 and 299 3/4.

Technical Outlook

WHEAT (MAR) 02/02/2005: 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. It is a
mildly bullish indicator that the market closed over the pivot swing number. The
next downside target is now at 288 3/4. The next area of resistance is around
294 and 295 3/4, while 1st support hits today at 290 1/2 and below there at 288
3/4.

 

LIVE CATTLE RECAP

2/1/2005

February Live Cattle finished up 0.55 at 90.77,
0.15 off the high and 0.67 up from the low.

March Feeder Cattle closed up 0.40 at 100.92.
This was 0.42 up from the low and 0.27 off the high.

Cattle continued to find support from ideas that
beef prices have bottomed and hopes that cash cattle will trade higher this week
due to muddy conditions for feedlots from weekend storms. Boxed-beef cut-out
values were up 1 cent into the mid-session to $143.23 as compared with $150.88
last week at this time. Slaughter came in at 116,000 head versus trade guesses
ranging from 116,000 to 120,000. The lower than expected slaughter could be a
sign of weakening demand from the packer. Resistance comes in at 88.87 for April
cattle with 87.97 as support.

Technical Outlook

CATTLE (FEB) 02/02/2005: Positive momentum
studies in the neutral zone will tend to reinforce higher price action. 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 91.450. The next area of resistance
is around 91.170 and 91.450, while 1st support hits today at 90.370 and below
there at 89.820.

 

LEAN HOGS RECAP

2/1/2005

February Lean Hogs finished down 0.15 at 73.62,
0.12 off the high and 0.55 up from the low.

February Pork Bellies closed down 0.20 at 93.80.
This was 0.37 up from the low and 0.10 off the high.

With cash markets at most locations steady to
$2.00 lower, the market gapped lower and was under selling pressure for much of
the session. Weakness in pork product prices along with talk that packer profit
margins are poor which could encourage lower cash trade this week added to the
bearish tone. In addition, weather looks favorable for moving hogs this week
which could help pressure the market as well. For the weekly cold storage
report, released after the close, traders are looking for a 2 million pound
increase to a 2 million pound decrease. Slaughter came in at 393,000 head versus
trade guesses ranging from 393,000 to 396,000. The lower than expected slaughter
could be a sign of weakening demand from the packer. The CME 2-day lean index
for the period ending January 28th came in at 75.01, up 9 cents from the
previous session and up from 73.86 one week previous.

Technical Outlook

HOGS (FEB) 02/02/2005: Momentum studies are still
bearish but are now at oversold levels and will tend to support reversal action
if it occurs. The major trend has turned down with the cross over back below the
18-day moving average. It is a slightly negative indicator that the close was
lower than the pivot swing number. The next downside objective is now at 72.850.
The next area of resistance is around 73.950 and 74.170, while 1st support hits
today at 73.300 and below there at 72.850.

 

COCOA MARKET RECAP

2/1/2005

March Cocoa finished up 36 at 1561, 6 off the
high and 31 up from the low.

The cocoa market finished the second session of
the week impressively and in the process managed to reject some significant
early weakness. Some traders suggested that the trade was anticipating some
tightening ahead as the main crop supply flow dries up. However, the early
washout apparently came off suggestions from Ghana that crop setbacks forecasts
might have overstated the problems in their crop. Also driving cocoa prices down
early in the action Tuesday were rumors that the arrival rate was being revised
upward! Apparently the funds simply looked beyond the initial negatives and
decided to step into fresh longs around the lows Tuesday morning.

Technical Outlook

COCOA (MAR) 02/02/2005: 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. Market positioning is positive with the close over the 1st swing
resistance. The next upside target is 1591. The next area of resistance is
around 1579 and 1591, while 1st support hits today at 1543 and below there at
1518.

 

COFFEE MARKET RECAP

2/1/2005

March Coffee closed up 0.45 at 105.80. This was
2.50 up from the low and 0.10 off the high.

The highest close since December 29th leaves the
market in a position to move to new contract highs as the recent consolidation
has helped correct the overbought condition. The early break found support from
the trade as buyers are still looking to book needs on minor corrections and
producer selling emerges on rallies to limit the gains. With a significant world
production deficit this season, the market will need to eat into stock piles in
order to satisfy demand. While the market is still somewhat overbought, the
recent traders report still showed the structure of the market as positive.

Technical Outlook

COFFEE (MAR) 02/02/2005: 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 upside daily closing price reversal gives the market a
bullish tilt. It is a mildly bullish indicator that the market closed over the
pivot swing number. The next upside target is 107.75. The next area of
resistance is around 107.05 and 107.75, while 1st support hits today at 104.50
and below there at 102.60.

 

SUGAR MARKET RECAP

2/1/2005

March Sugar closed down 0.27 at 8.95. This was
0.04 up from the low and 0.10 off the high.

Long liquidation selling for March sugar
accelerated on the move back under 9.00 and with funds holding a net long
position of near 75,000 contracts, futures look vulnerable to more long
liquidation if support is violated. With only 18 trading sessions before the
March contract goes off of the board, open interest is still 217,781 contracts
as compared with total open interest of 427,831 contracts. Surging world demand
for sugar and ethanol helped support the bull trend but recent weakness in crude
oil and some focus shift to the possibility of another bumper crop harvest in
center-south Brazil this spring helped to pressure. The market held support at
892 which is a 50% correction of the January 10th to January 26th rally.

Technical Outlook

SUGAR (MAR) 02/02/2005: A bearish signal was
triggered on a crossover down in the daily stochastics. Momentum studies are
trending lower from high levels which should accelerate a move lower on a break
below the 1st swing support. The cross over and close above the 18-day moving
average indicates the longer-term trend has turned up. More selling pressure is
likely given yesterday’s gap lower price action on the day session chart. The
defensive setup, with the close under the 2nd swing support, could cause some
early weakness. The next downside objective is now at 8.83. The next area of
resistance is around 9.02 and 9.10, while 1st support hits today at 8.88 and
below there at 8.83.

 

COTTON MARKET RECAP

2/1/2005

March Cotton finished up 0.12 at 43.88, 0.47 off
the high and 0.47 up from the low.

Fund selling helped pressure the market early in
the session after the higher opening but trade house buying helped support the
market on the break. May closed higher in quiet trade. Funds held a hefty net
long position coming into the week and there is a sense that funds are
liquidating much of this position. The speculative net long position is clashing
with the bearish old crop fundamentals which call for massive ending stocks for
the US and the world into mid-2005. Traders remain hopeful that surging world
demand will deplete stocks quickly if China and/or the US have a bad crop in
2005.

Technical Outlook

COTTON (MAR) 02/02/2005: 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 mildly bullish indicator that the market closed over the pivot swing
number. The next downside target is 42.94. The next area of resistance is around
44.35 and 44.82, while 1st support hits today at 43.41 and below there at 42.94.