Energy Explodes–Here’s Why
BOND MARKET RECAP
2/22/2005
March Bonds finished down 0-09 at 113-21, 0-10
off the high and 0-04 up from the low.
March 10 Yr Treasury Notes finished down 0-040 at
111-115, 0-060 off the high and 0-020 up from the low.
The Treasury market started out on an
extremely weak note but managed to pare the losses somewhat into the close. We
suspect that the market was confused by the two US economic reports that were
out Tuesday morning because one report showed growth and the other one showed
weakness. With the energy complex rising sharply, the Dollar falling hard and US
equity prices extremely weak we would have expected the overall macro economic
outlook to have provided the Treasuries with some support. However, the market
is still concerned about “big picture” diversification away from US holdings and
isn’t nearly as focused on the scheduled numbers or the direction of the US
economy.
Technical Outlook
BONDS (MAR) 02/23/2005: The major trend has
turned down with the cross over back below the 40-day moving average. 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. It
is a slightly negative indicator that the close was under the swing pivot. The
next downside objective is now at 113-07. The next area of resistance is around
113-28 and 114-06, while 1st support hits today at 113-13 and below there at
113-07.
TNOTES (MAR) 02/23/2005: A negative indicator was
given with the downside crossover of the 9 & 18 bar moving average. 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. The
market’s close below the pivot swing number is a mildly negative setup. The next
downside objective is 111-050. The 9-day RSI under 30 indicates the market is
approaching oversold levels. The next area of resistance is around 111-160 and
111-205, while 1st support hits today at 111-085 and below there at 111-050.
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STOCK INDICES RECAP
2/22/2005
March S&P finished down 17.6 at 1184.7, 18.3 off
the high and 0.7 up from the low.
March S&P E-Mini closed down 17.5 at 1184.75.
This was 0.75 up from the low and 18.5 off the high.
March Dow closed down 182 at 10615. This was 5 up
from the low and 163 off the high.
The stock market came under the most aggressive
liquidation since the early January washout. In considering the breadth of the
negatives presented to the market we can understand the near panic selling
present at times Tuesday. Seeing the Dollar slide would seem to push foreign
buyers away, while rising energy prices would seem to add even more resistance
to the US recovery process. Considering that the US is also trying to play hard
line with Iran it is certainly understandable that equity prices came under
aggressive pressure. Even the US economic report slate was a negative as one set
of economic readings countervailed the other, leaving the outlook for future
growth suspect! In short, the bears have control and would seem to have a number
of elements on their side. Adding into the bearish atmosphere were suggestion
from OPEC that they might implement a ceiling on the days supply of oil, which
in a sense would seem to result in energy prices holding above $50.00 a barrel.
Technical Outlook
S&P 500 (MAR) 02/23/2005: The close below the
60-day moving average is an indication the longer-term trend has turned down.
Momentum studies trending lower at mid-range could accelerate a price break if
support levels are broken. The major trend has turned down with the cross over
back below the 18-day moving average. The market is in a bearish position with
the close below the 2nd swing support number. The next downside target is
1170.10. The next area of resistance is around 1194.19 and 1208.09, while 1st
support hits today at 1175.20 and below there at 1170.10.
SP EMINI (MAR) 02/23/2005: The major trend has
turned down with the cross over back below the 60-day moving average. Momentum
studies trending lower at mid-range could accelerate a price break if support
levels are broken. The major trend has turned down with the cross over back
below the 18-day moving average. The market is in a bearish position with the
close below the 2nd swing support number. The next downside target is now at
1169.94. The next area of resistance is around 1194.37 and 1208.43, while 1st
support hits today at 1175.13 and below there at 1169.94.
NASDAQ (MAR) 02/23/2005: Negative momentum
studies in the neutral zone will tend to reinforce lower price action. 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 1474.38. The next area
of resistance is around 1517.75 and 1537.37, while 1st support hits today at
1486.25 and below there at 1474.38.
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CURRENCY MARKET RECAP
2/22/2005
March US Dollar finished down 114 at 8241, 46 off
the high and 3 up from the low.
March Euro finished up 1.89 at 132.64, 0.06 off
the high and 0.66 up from the low.
March Euro Dollar closed down 0.0025 at 97.005.
This was 0.005 up from the low and 0.0025 off the high.
March Canadian Dollar closed up 0.42 at 81.66.
This was 0.6 up from the low and 0.04 off the high.
March British Pound finished up 1.85 at 190.96,
0.12 off the high and 0.84 up from the low.
March Swiss closed up 1.79 at 86.44. This was
0.55 up from the low and 0.03 off the high.
March Japanese Yen closed up 1.39 at 96.19. This
was 0.22 up from the low and 0.11 off the high.
The Dollar followed through on the weekend theme
that more foreign central banks are moving away from US investments and with
energy prices rising sharply and US stocks down aggressively we can understand
the ongoing negative attitude toward the Dollar. The US economic numbers
released Tuesday morning were hardly supportive to the Dollar especially when
one considers that soaring energy prices are likely to keep the US economy
hobbled. Some suggest that the confusing dialogue flowing from President Bush on
the Iran situation is adding to the negative bias in the Dollar. In short, the
Dollar bears seemed to have a number of bearish themes to choose from in the
action Tuesday.
Technical Outlook
YEN (MAR) 02/23/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The cross over and close above the 18-day
moving average indicates the longer-term trend has turned up. The gap upmove on
the day session chart is a bullish indicator for trend. There could be more
upside follow through since the market closed above the 2nd swing resistance.
The near-term upside target is at 96.49. The next area of resistance is around
96.35 and 96.49, while 1st support hits today at 96.03 and below there at 95.84.
EURO (MAR) 02/23/2005: The market now above the
60-day moving average suggests the longer-term trend has turned up. 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 cross over and close above the 18-day moving average is an indication the
longer-term trend has turned positive. The gap up on the day session chart gave
a bullish indicator and more follow through could be seen this session. The
market has a bullish tilt coming into today’s trade with the close above the 2nd
swing resistance. The near-term upside target is at 133.20. The 9-day RSI over
70 indicates the market is approaching overbought levels. The next area of
resistance is around 132.99 and 133.20, while 1st support hits today at 132.28
and below there at 131.77.
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PRECIOUS METALS RECAP
2/22/2005
April Gold closed up 7.4 at 435.8. This was 3 up
from the low and 0.6 off the high.
March Silver finished up 0.103 at 7.52, 0.04 off
the high and 0.06 up from the low.
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The gold market responded as would be expected
given the sharp rise in the Dollar. We also think that the gold and silver are
being lifted by inflationary concerns and by the fear of escalating Middle East
tensions (between the US and Iran). It is also possible that sharp gains in
energy prices were attracting some additional speculative buying as that could
increase the inflationary threat and could in a sense leave the US twin deficit
condition in even greater peril. In conclusion, the gold and silver were seeing
more than one theme prompting buyers into action! The mainstay of the bull
market in gold would certainly seem to be the idea that money is indeed
re-diversifying away from the US.
Technical Outlook
SILVER (MAR) 02/23/2005: 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 gap upmove on the day session chart is a bullish indicator for trend. A
positive setup occurred with the close over the 1st swing resistance. The
near-term upside target is at 761.5. With a reading over 70, the 9-day RSI is
approaching overbought levels. The next area of resistance is around 757.0 and
761.5, while 1st support hits today at 747.1 and below there at 741.5.
GOLD (APR) 02/23/2005: The cross over and close
above the 60-day moving average is an indication the longer-term trend has
turned positive. 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 is an indication the longer-term trend has turned
positive. Follow through buying looks likely if the market can hold yesterday’s
gap on the day session chart. There could be more upside follow through since
the market closed above the 2nd swing resistance. The next upside objective is
438.8. The market is approaching overbought levels with an RSI over 70. The next
area of resistance is around 437.6 and 438.8, while 1st support hits today at
434.0 and below there at 431.6.
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COPPER MARKET RECAP
2/22/2005
March Copper closed down 0.25 at 148.95. This was
0.90 up from the low and 1.55 off the high.
The copper market did manage a new contract high
but was unable to fully hold that new high ground. While we suspect that overall
metals market sentiment supported copper it is also possible that soaring energy
prices and notable weakness in equity prices conspired to undermine copper after
the contract highs were posted. Some in the trade suggested that the Dollar
slide might have prompted the early gains but that would not explain why the
market failed to hold the early gains. In our opinion, the Dollar would seem to
have more downside and that in turn should provide some near term additional
buying to copper.
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ENERGY MARKET RECAP
2/22/2005
March Crude Oil closed up 2.80 at 51.15. This was
2.04 up from the low and 0.25 off the high.
March Heating Oil closed up 9.09 at 144.02. This
was 5.32 up from the low and 0.38 off the high.
March Unleaded Gas finished up 4.55 at 130.89,
1.91 off the high and 2.89 up from the low.
March Natural Gas finished up 0.19 at 6.10, 0.02
off the high and 0.14 up from the low.
March Propane closed up 0.02 at 0.78. This was
equal to the low and 0.00 off the high.
The energy complex exploded on the upside Tuesday
under the guise of slightly colder US forecasts, or as some bulls suggested, a
cold end to the heating season. In our opinion, the weather has brought mostly
average temps but seeing a slight cooling down was enough to inspire buyers
already excited by OPEC statements and forecasts of rising 2005 demand.
Apparently the Saudi’s indicated that they might not allow stockpiles to rise
above 52 days, which would seem to position the cartel for at least a token
production cut in the next meeting. Until the DOE or IEA step up and call OPEC
to task over the apparent desire to manufacture ultra high price levels we think
the bulls will control.
Technical Outlook
CRUDE OIL (MAR) 02/23/2005: The upside crossover
of the 9 & 18 bar moving average is a positive signal. Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The major trend could be turning up with the close back above the
18-day moving average. The gap up on the day session chart gave a bullish
indicator and more follow through could be seen this session. The market’s close
above the 2nd swing resistance number is a bullish indication. The next upside
objective is 52.99. The market is becoming somewhat overbought now that the RSI
is over 70. The next area of resistance is around 52.29 and 52.99, while 1st
support hits today at 50.01 and below there at 48.42.
UNLEADED (MAR) 02/23/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The market now above the 18-day moving average suggests the
longer-term trend has turned up. If yesterday’s gap higher on the day session
chart holds, additional buying could develop this session. Since the close was
above the 2nd swing resistance number, the market’s posture is bullish and could
see more upside follow-through early in the session. The near-term upside
objective is at 135.44. The next area of resistance is around 133.28 and 135.44,
while 1st support hits today at 128.49 and below there at 125.85.
HEATING OIL (MAR) 02/23/2005: The upside
crossover (9 above 18) of the moving averages suggests a developing short-term
uptrend. 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 is an indication the longer-term trend has turned
positive. Follow through buying looks likely if the market can hold yesterday’s
gap on the day session chart. There could be more upside follow through since
the market closed above the 2nd swing resistance. The next upside target is
148.48. The market is becoming somewhat overbought now that the RSI is over 70.
The next area of resistance is around 146.87 and 148.48, while 1st support hits
today at 141.17 and below there at 137.09.
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CORN MARKET RECAP
2/22/2005
May Corn finished up 7 1/2 at 215 1/4, 1
3/4 off the high and 5 up from the low. December Corn closed up 5 1/2 at 237.
This was 3 up from the low and 2 1/2 off the high.
Strength in soybeans and weather concerns in
Brazil helped support the early bounce as the funds are scrambling to cover
shorts. As of February 15th, funds were still net short near 100,000 contracts
and the path of least resistance is higher. Funds were noted buyers of near
25,000 contracts into the mid-session. Weekly export inspections, released
during the session, came in at 23.8 million bushels as compared with 22-28
million expected. Cumulative shipments for the season have reached 40.8% of the
USDA forecast as compared with 45.3% on average for this time of the year. South
Korea is tendering to buy 55,000 tons of optional origin corn with traders
believing that recent optional origin purchases have come from China. Support
for May corn moves up to 211 1/2 and 209 1/2 with resistance at 216 3/4 and 223.
Technical Outlook
CORN (MAY) 02/23/2005: The cross over and close
above the 60-day moving average is an indication the longer-term trend has
turned positive. Momentum studies are trending higher but have entered
overbought levels. The market now above the 18-day moving average suggests the
longer-term trend has turned up. If yesterday’s gap higher on the day session
chart holds, additional buying could develop this session. There could be more
upside follow through since the market closed above the 2nd swing resistance.
The next upside objective is 221. With a reading over 70, the 9-day RSI is
approaching overbought levels. The next area of resistance is around 218 1/2 and
221, while 1st support hits today at 212 and below there at 207 3/4.
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SOY COMPLEX RECAP
2/22/2005
May Soybeans finished up 27 1/4 at 583, 5 1/2 off
the high and 19 3/4 up from the low. November Soybeans closed up 25 3/4 at 596.
This was 18 1/2 up from the low and 3 off the high.
May Soymeal closed up 6.3 at 175.5. This was 5.4
up from the low and 1.3 off the high.
March Soybean Oil finished up 1.68 at 21.75, 0.29
off the high and 1.32 up from the low.
Failure to challenge the overnight session high
at 575 1/2 helped trigger the sell-off after the opening. However, the fund
buying emerged to drive futures sharply higher with May futures gaining 72 1/2
cents in the past 7 trading session. Funds were noted buyers of near 7,500
contracts into the mid-session. While there is some rain in the forecast for
southern Brazil, crop conditions deteriorated significantly over the weekend due
to hot and dry weather and traders are concerned that the scattered showers in
the forecast this week (1/4 to 1 inch coverage of 50-75%) will not be enough in
some areas to slow production losses. With the market at a 5-month high, the
short-covering was still active. Late last week, several South American analysts
dropped their production forecasts by near 2.5 million tons for Brazil and more
losses are expected for the weekend and early this week. Taiwan is tendering to
buy 40,000-60,000 tons of soybeans from Brazil or the US and traders seem
hopeful that Japan may buy more April delivery soybeans and are not ruling out
US origin. Weekly export inspections, released during the session, came in at
33.6 million bushels as compared with 21-26 million expected. Cumulative
shipments for the season have reached 73.7% of the USDA forecast as compared
with 68% on average for this time of the year. Resistance for May soybeans comes
in at 598 and 609 1/2 with support at 579 1/2 and 561.
Technical Outlook
BEANS (MAY) 02/23/2005: Momentum studies are
trending higher but have entered overbought levels. The major trend could be
turning up with the close back above the 18-day moving average. Since the close
was above the 2nd swing resistance number, the market’s posture is bullish and
could see more upside follow-through early in the session. The next upside
objective is 604 1/2. With a reading over 70, the 9-day RSI is approaching
overbought levels. The next area of resistance is around 595 1/2 and 604 1/2,
while 1st support hits today at 570 1/2 and below there at 554 1/4.
MEAL (MAY) 02/23/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The cross over and close above
the 18-day moving average indicates the longer-term trend has turned up. Since
the close was above the 2nd swing resistance number, the market’s posture is
bullish and could see more upside follow-through early in the session. The
near-term upside objective is at 183.7. The market is approaching overbought
levels with an RSI over 70. The next area of resistance is around 180.6 and
183.7, while 1st support hits today at 172.8 and below there at 168.1.
BEANOIL (MAY) 02/23/2005: The cross over and
close above the 60-day moving average is an indication the longer-term trend has
turned positive. Rising stochastics at overbought levels warrant some caution
for bulls. The cross over and close above the 18-day moving average indicates
the longer-term trend has turned up. The gap upmove on the day session chart is
a bullish indicator for trend. The market’s close above the 2nd swing resistance
number is a bullish indication. The next upside target is 23.26. The market is
approaching overbought levels with an RSI over 70. The next area of resistance
is around 22.71 and 23.26, while 1st support hits today at 21.09 and below there
at 20.01.
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WHEAT MARKET RECAP
2/22/2005
May Wheat finished up 16 3/4 at 320 3/4, 7 1/4 off the high
and 14 3/4 up from the low. July Wheat closed up 14 1/2 at 325 1/2. This was 12
1/4 up from the low and 8 1/2 off the high.
Strength in the soybean market helped support the
move to the highest level since November 22nd in spite of bearish export news
over the weekend. Egypt bought 60,000 tons of French wheat over the weekend
after an optional origin tender for 30,000-60,000 tons. Turkey has set a tender
to sell 100,000 tons of red milling wheat and 100,000 tons of durum wheat.
Jordon is tendering for 50,000 tons of wheat. Funds were holding a net short
position of near 33,000 contracts as of last Tuesday and short-covering due to
the soybean situation seems to be the driving force for the rally. Funds were
noted buyers of near 20,000 contracts into the mid-session. Weekly export
inspections, released during the session, came in at 21.2 million bushels as
compared with 13-19 million expected. Cumulative shipments for the season have
reached 77% of the USDA forecast as compared with 73.4% on average for this time
of the year. Traders will monitor the cash markets overnight to see the extent
of producer selling. May wheat support comes in at 314 and 309 1/2 with 325 1/4
as next resistance.
Technical Outlook
WHEAT (MAY) 02/23/2005: The market now above the
60-day moving average suggests the longer-term trend has turned up. Momentum
studies are trending higher from mid-range, which should support a move higher
if resistance levels are penetrated. The market now above the 18-day moving
average suggests the longer-term trend has turned up. Follow through buying
looks likely if the market can hold yesterday’s gap on the day session chart.
The market has a bullish tilt coming into today’s trade with the close above the
2nd swing resistance. The near-term upside objective is at 340 3/4. The 9-day
RSI over 70 indicates the market is approaching overbought levels. The next area
of resistance is around 331 3/4 and 340 3/4, while 1st support hits today at 309
3/4 and below there at 297.
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LIVE CATTLE RECAP
2/22/2005
April Live Cattle finished up 0.10 at 85.55, 0.45
off the high and 0.25 up from the low.
March Feeder Cattle closed up 0.20 at 98.50. This
was 0.70 up from the low and 0.55 off the high.
April cattle closed 10 higher on the session but
down 45 from the highs of the day as the bullishness of the USDA report wore off
quickly. Boxed-beef cut-out values at mid-session were down $.53 to $130.04 as
compared with $145.49 last week. Slaughter came in at 121,000 head from trade
expectations for 116,000-119,000 head. The higher slaughter is a bit supportive
but with hefty on-feed supplies coming soon, the slaughter pace needs to
increase or cattle might back-up on feedyards. The retailer does not want to get
caught holding beef on March 7th when the Canadian border opens so the process
of reducing the beef pipeline has kept the tone in the boxed-beef market weak
and packer demand for slaughter weak as well.
Technical Outlook
CATTLE (APR) 02/23/2005: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The close under the 18-day moving average indicates the
longer-term trend could be turning down. The daily closing price reversal up is
a positive indicator that could support higher prices. The market’s close below
the pivot swing number is a mildly negative setup. The next downside objective
is now at 84.900. The next area of resistance is around 85.870 and 86.270, while
1st support hits today at 85.200 and below there at 84.900.
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LEAN HOGS RECAP
2/22/2005
April Lean Hogs finished up 0.67 at 73.55, 0.30
off the high and 0.55 up from the low.
March Pork Bellies closed down 0.17 at 84.80.
This was 0.95 up from the low and 0.67 off the high.
The market pushed higher led by higher cash
market trade as packers needed hogs to keep up a near frantic slaughter pace.
Traders will be watching pork cut-out values this afternoon to see if the high
pork production of last week (up 8.9% from last year) will begin to pressure
values. In addition, the Monthly Cold Storage report for released this
afternoon, is expected to show belly stocks near 63.0-69.8 million pounds, up
from 56.6 million pounds last month and 63.1 million pounds last year. Of more
interest to the hog trader could be the total pork in cold storage, which was
near a 30-year peak last month with some traders looking for a record high
storage number this afternoon. The 2-day lean index for the period ending
February 18th came in at 67.64, up.37 on the session but down from 68.39 last
week. Slaughter came in at 400,000 head from trade expectations for
395,000-401,000 head.
Technical Outlook
HOGS (APR) 02/23/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The close under the 18-day moving average
indicates the longer-term trend could be turning down. The market has a slightly
positive tilt with the close over the swing pivot. The next upside target is
74.320. The next area of resistance is around 73.970 and 74.320, while 1st
support hits today at 73.150 and below there at 72.650.
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COCOA MARKET RECAP
2/22/2005
May Cocoa finished down 11 at 1609, 11 off the
high and 19 up from the low.
The cocoa market might have been overdone
technically and since the fundamental track wasn’t in a position to provide
consistent support we are not surprised at the setback on Tuesday. However, it
is a little surprising that the market failed to respond to news that Ivory
Coast farmers were threatening to strike again because they have yet to receive
payment from the government for the costs of the COOP. Maybe the market isn’t
concerned about the threat of a strike considering that we are basically between
crops. On the other hand, if the farmers were to actually follow through on the
strike threat we suspect that prices would certainly respond.
Technical Outlook
COCOA (MAY) 02/23/2005: The downside crossover (9
below 18) of the moving averages suggests a developing short-term downtrend.
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 tilt is slightly negative with the close under
the pivot. The near-term upside target is at 1637. The next area of resistance
is around 1624 and 1637, while 1st support hits today at 1594 and below there at
1577.
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COFFEE MARKET RECAP
2/22/2005
May Coffee closed down 3.05 at 117.25. This was
1.00 up from the low and 1.05 off the high.
The coffee market forged a quasi gap down trade
and that comes after a couple sessions of consolidation, which in turns weakens
the bull camp. However, given that the market managed to recoil off the lows it
would seem like some physical buyers saw the lower prices as attractive. Since
the funds recently added to their already extensive net long position, seeing
the market fail at chart support levels should not be taken lightly. Since the
bull tilt is generally thought to be “big picture” in nature we suspect that
professional and trade buyers will be ready to buy weakness and that the 115
level basis the May contract will be decent support.
Technical Outlook
COFFEE (MAY) 02/23/2005: Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. The cross over and close above the 18-day moving average indicates
the longer-term trend has turned up. The close below the 2nd swing support
number puts the market on the defensive. The next downside target is 115.25. The
next area of resistance is around 118.25 and 119.30, while 1st support hits
today at 116.25 and below there at 115.25.
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SUGAR MARKET RECAP
2/22/2005
May Sugar closed up 0.16 at 9.37. This was 0.32
up from the low and 0.02 off the high.
May sugar opened 16 lower on the session but
closed 16 higher on the day as trade houses were strong buyers on the break.
Surging values in London futures helped provide support and the sharp break in
the US dollar helped support many dollar-denominated markets. The
Commitment-of-Traders report over the weekend showed a significant overbought
condition but fund selling failed to emerge on the early break to the lowest
level since January 13th. Tunisia bought 28,000 tons of white sugar and Iraq
extended the deadline for its tender to buy 25,000-50,000 tons of white sugar.
The surge higher in soybeans due to hot and dry weather in Brazil helped provide
some buying support as well.
Technical Outlook
SUGAR (MAY) 02/23/2005: The cross over and close
above the 40-day moving average is an indication the longer-term trend has
turned positive. 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. A positive signal
was given by the outside day up. The market has a bullish tilt coming into
today’s trade with the close above the 2nd swing resistance. The next downside
objective is now at 8.96. The next area of resistance is around 9.54 and 9.63,
while 1st support hits today at 9.20 and below there at 8.96.
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COTTON MARKET RECAP
2/22/2005
May Cotton finished up 1.95 at 49.43, 0.04 off
the high and 1.58 up from the low.
December cotton closed 180 higher on the session
and has now moved more than 50% of the way back up from the September-November
break with next resistance at 54.44. The highest close since late September for
new crop cotton leaves the market in a position to attract new fund buying
ahead. The surge in soybeans has eased concerns that producers in the south will
switch away from soybeans to plant more cotton for the coming season. In
addition, the sharp drop in the US dollar and strength in many other commodity
markets help keep a bullish tone for the cotton market.
Technical Outlook
COTTON (MAY) 02/23/2005: 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.
Follow through buying looks likely if the market can hold yesterday’s gap on the
day session chart. There could be more upside follow through since the market
closed above the 2nd swing resistance. The next upside target is 50.66. With a
reading over 70, the 9-day RSI is approaching overbought levels. The next area
of resistance is around 50.24 and 50.66, while 1st support hits today at 48.62
and below there at 47.43.