Energy Is Overbought–Here’s Why

Ideas that futures are overbought and that the
market has already experienced a significant amount of short-covering in the
past week helped trigger the early sell-off today. March corn recovered to close
at psychological pivot at 200 and above the opening which is slightly positive.
Slow export demand news and fears that a continued rally could slow demand
helped to trigger the selling. Indonesia officials indicated overnight that they
hope to need to import less than 1 million tons this coming year as compared
with 1.3 million tons last year due to improved production outlook for the
coming season. Fears of increased planted acreage in the US this year added to
the negative tone. In addition, basis was mixed with some locations weaker based
on talk of increased producer selling. However, gulf basis was higher which
helped support the nearby futures. Support for March corn comes in at 198 3/4
and 197 with resistance at 201 1/2 and 203 3/4.

Technical Outlook

CORN (MAY) 02/16/2005: The market back below the
40-day moving average suggests the longer-term trend could be turning down. The
upside crossover of the 9 & 18 bar moving average is a positive signal.
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 market
tilt is slightly negative with the close under the pivot. The next upside target
is 209. The next area of resistance is around 208 1/4 and 209, while 1st support
hits today at 206 3/4 and below there at 205 3/4.

 

SOY COMPLEX RECAP

2/15/2005

May Soybeans finished down 3/4 at 535 1/2, 3 off
the high and 2 3/4 up from the low. November Soybeans closed up 1/4 at 547 3/4.
This was 2 3/4 up from the low and 2 off the high.

May Soymeal closed up 1.9 at 163.1. This was 2.3
up from the low and 0.9 off the high.

March Soybean Oil finished down 0.35 at 19.62,
0.27 off the high and 0.07 up from the low.

Talk of stressful weather for the southern Brazil
region as the crop can experience yield loss during the pod filling stage helped
trigger the call for a higher opening but news of weak crush demand and ideas
that futures are overbought helped trigger some light selling into the opening.
Weakness in palm oil futures overnight and fears that soybean demand is
switching to South American origin from the US soon helped to trigger some
selling as well. The NOPA monthly crush report was considered slightly
disappointing to demand this morning with the January crush pegged at 141.4
million bushels as compared with 140-145 million expected. The December crush
was 143.4 million bushels. In addition, the oil market came under selling
pressure from news of higher stocks (1.2 billion pounds at end of January from
966.4 million pounds at end of December) and higher yields during January (11.35
pounds per bushel from 11.28 last month). Talk that the surge higher in futures
on Monday attracted increased producer selling helped pressure the market this
morning and evidence of increased producer selling showed up in the form of
lower basis bids at processing plants in the western cornbelt. Resistance for
March soybeans comes in at 539 1/2 and 542 with support at 528 1/2 and 522 1/4.

Technical Outlook

BEANS (MAY) 02/16/2005: A positive indicator was
given with the upside crossover of the 9 & 18 bar moving average. 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 mildly bullish indicator that the market closed
over the pivot swing number. The next upside objective is 541 1/4. With a
reading over 70, the 9-day RSI is approaching overbought levels. The next area
of resistance is around 538 1/4 and 541 1/4, while 1st support hits today at 532
3/4 and below there at 530.

MEAL (MAY) 02/16/2005: 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 setup is supportive for early gains with the close
over the 1st swing resistance. The next upside objective is 165.1. With a
reading over 70, the 9-day RSI is approaching overbought levels. The next area
of resistance is around 164.2 and 165.1, while 1st support hits today at 161.4
and below there at 159.4.

BEANOIL (MAY) 02/16/2005: The close below the
40-day moving average is an indication the longer-term trend has turned down.
Momentum studies are rising from mid-range, which could accelerate 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 setup is somewhat negative with the close under the 1st swing support.
The near-term upside target is at 20.21. The next area of resistance is around
19.93 and 20.21, while 1st support hits today at 19.53 and below there at 19.40.

 

WHEAT MARKET RECAP

2/15/2005

May Wheat finished down 2 1/2 at 306 3/4, 2 1/4 off the high
and 1 up from the low. July Wheat closed down 3 at 313 1/2. This was 3/4 up from
the low and 2 1/4 off the high.

News before the opening from the USDA that
100,000 tons of US wheat was sold to Iraq failed to provide much support as the
business was not a big surprise. A sharp drop of nearly 6 cents in Minneapolis
wheat helped pull Chicago wheat lower on the session. The market never recovered
and closed lower on the day. Ideas that futures are overbought after a 13 cent
jump off of Thursday’s lows helped trigger some selling. The positive technical
action of the past week has provided underlying support with speculators
liquidating part of their record net short position. A lack of weather problems
in any of the world’s key producing nations along with more moisture headed to
the central plains of the US for the weekend keeps the weather as a bearish
factor for the short-term. In addition, the EU wheat crop is also experiencing
good winter weather conditions. March wheat support comes in at 296 3/4 and 294
3/4 with resistance at 302 and 307 1/4.

Technical Outlook

WHEAT (MAY) 02/16/2005: The close below the
60-day moving average is an indication the longer-term trend has turned down.
The upside crossover (9 above 18) of the moving averages suggests a 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 market tilt is
slightly negative with the close under the pivot. The near-term upside target is
at 310 1/4. The next area of resistance is around 308 1/4 and 310 1/4, while 1st
support hits today at 305 1/4 and below there at 304.

 

LIVE CATTLE RECAP

2/15/2005

April Live Cattle finished up 0.07 at 87.02, 0.12
off the high and 0.32 up from the low.

March Feeder Cattle closed up 0.12 at 100.25.
This was 0.40 up from the low and 0.05 off the high.

April cattle closed slightly higher on the day as
traders await cash trade this week and the discount to last weeks cash along
with some threatening weather into the weekend helped to support. Boxed beef
cutout values were down $.02 into the mid-session to $145.40 as compared with
$147.28 last week at this time. Slaughter came in at 117,000 head as compared
with 116,000-119,000 head expected. Packer bid developed at $87 in the panhandle
as compared with last weeks trade at $90 and $92 offers from feedlots.

Technical Outlook

CATTLE (APR) 02/16/2005: The downside crossover
of the 9 & 18 bar moving average is a negative signal. Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
major trend has turned down with the cross over back below the 18-day moving
average. The close over the pivot swing is a somewhat positive setup. The next
downside target is 86.550. The next area of resistance is around 87.250 and
87.420, while 1st support hits today at 86.820 and below there at 86.550.

 

LEAN HOGS RECAP

2/15/2005

April Lean Hogs finished up 0.42 at 73.00, 0.07
off the high and 1.15 up from the low.

March Pork Bellies closed down 1.60 at 86.12.
This was 0.82 up from the low and 0.97 off the high.

Hog futures closed higher on the session finding
support from talk of higher cash prices for later this week and into next week
and ideas that the futures are oversold after recent sharp losses. Improving
packer demand due to improved profit margins along with ideas that producer
marketings might slow helped to support. Slaughter came in at 401,000 head as
compared with 396,000-402,000 head expected. Higher than expected slaughter
indicates strong demand from the packer and could help stabilize cash markets
this week. The 2-day lean index for the period ending Feb 11th came in at 68.39,
down.83 on the session and down from 71.89 last week.

Technical Outlook

HOGS (APR) 02/16/2005: The crossover up in the
daily stochastics is a bullish signal. Rising from oversold levels, daily
momentum studies would support higher prices, especially on a close above
resistance. 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 setup is supportive for early gains
with the close over the 1st swing resistance. The near-term upside target is at
73.950. The next area of resistance is around 73.600 and 73.950, while 1st
support hits today at 72.400 and below there at 71.520.

 

COCOA MARKET RECAP

2/15/2005

May Cocoa finished up 31 at 1592, 6 off the high
and 30 up from the low.

May cocoa traded higher Tuesday supported by a
weaker Dollar and more talk that arrivals at the Ivory Coast are beginning to
drop sharply as the end of the main crop season nears in March. The Coffee and
Cocoa Bourse estimated Ivory Coast arrivals to be down more than 125,300 tonnes
for the season beginning October through January 31st compared to the same
period during the 2003/04 season due to less cocoa supply rather than farmers
holding out for higher prices. As a result, Ivory Coast farmgate prices have
been firming this week.

Technical Outlook

COCOA (MAY) 02/16/2005: The cross over and close
above the 60-day moving average is an indication the longer-term trend has
turned positive. Momentum studies trending lower at mid-range should accelerate
a move lower if support levels are taken out. 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
downside objective is now at 1550. The next area of resistance is around 1610
and 1622, while 1st support hits today at 1574 and below there at 1550.

 

COFFEE MARKET RECAP

2/15/2005

May Coffee closed up 5.20 at 120.60. This was
5.80 up from the low and 0.30 off the high.

The coffee market held support on a shallow
correction of just two days off of the highs before experiencing another round
of active fund buying. Speculative buying emerged to drive May coffee to new
contract highs, up 520 points on the day and to the highest level for nearby
futures in 5 years. A firm tone for the cash market in Vietnam and “less”
producer selling out of Brazil than traders had feared since producer loans were
no rolled-over for another year helped to support. Commercial shorts seem caught
short bought the market with trade houses thinking they could buy back shorts on
a more significant break. Commercial short-covering added to the bullish tone
late in the session.

Technical Outlook

COFFEE (MAY) 02/16/2005: A new contract high was
made on the rally. The daily stochastics have crossed over up which is a bullish
indication. 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. There could be more upside
follow through since the market closed above the 2nd swing resistance. The next
upside objective is 125.30. The market is approaching overbought levels with an
RSI over 70. The next area of resistance is around 123.60 and 125.30, while 1st
support hits today at 117.55 and below there at 113.15.

 

SUGAR MARKET RECAP

2/15/2005

May Sugar closed up 0.07 at 9.46. This was 0.12
up from the low and 0.01 off the high.

May sugar held support above Monday’s lows and
closed 7 higher on the session. Spillover support from the surge higher in the
other soft commodity markets and a lack of aggressive long liquidation selling
out of the March contract helped support. News that Pakistan dropped a
withholding tax of 6% on imports helped to provide support as the news signaled
that the government is still trying to encourage increased imports in order to
cool down the sharp rise in cash sugar prices in Pakistan. As of February 14th,
March open interest was down 18,868 contracts to 70,386 contracts with March
futures expiring on February 28th.

Technical Outlook

SUGAR (MAY) 02/16/2005: The daily stochastics
have crossed over up which is a bullish indication. 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. The market setup
is supportive for early gains with the close over the 1st swing resistance. The
near-term upside objective is at 9.56. The next area of resistance is around
9.52 and 9.56, while 1st support hits today at 9.40 and below there at 9.31.

 

COTTON MARKET RECAP

2/15/2005

May Cotton finished up 0.44 at 46.91, 0.69 off
the high and 0.31 up from the low.

Cotton futures pushed moderately higher on the
session to close higher for the 5th day in a row. Strength in other industrial
and raw commodity markets and a potential shift in fund interest from the
short-side to the long side helped support the solid gains. Demand factors seem
to be in high gear and until prices move high enough to encourage increased
producer selling or discourage new demand, the market looks to remain strong.
Ideas that planted acreage may not increase in the US and might decline for the
coming year due to low pricing and hopes that China planted acreage drops helped
provide underlying support.

Technical Outlook

COTTON (MAY) 02/16/2005: 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. A positive setup occurred with the close over the 1st swing
resistance. The near-term upside objective is at 48.00. The next area of
resistance is around 47.41 and 48.00, while 1st support hits today at 46.41 and
below there at 46.01.