Energy: The Bullish Perfect Storm?

Technical Outlook

#BONDS (SEP) 7/7/2004: The market tilt is
slightly negative with the close under the pivot. Near-term resistance for bonds
is at 108.04 and then again at 108.18, while swing support hits at 107.15 and
below there at 107.08. A positive signal for trend short-term was given on a
close over the 9-bar moving average. Rising stochastics at overbought levels
warrant some caution for bulls. The next upside objective is 108.18. The market
is approaching overbought levels with an RSI over 70.

T-NOTES(SEP) Momentum studies are trending
higher, but have entered overbought levels. The near-term upside objective is at
110.27. The market’s close below the pivot swing number is a mildly negative
setup. Near-term resistance for the T-Notes is at 110.18 and then again at
110.27, while swing support hits at 110.05 and below there at 110.02. The
market’s short-term trend is positive on a close above the 9-day moving average.
With a reading over 70, the 9-day RSI is approaching overbought levels.

 

STOCK INDICES RECAP

7/6/2004

The stock market looked a little weak into the
opening, opened slightly lower but then began to give ground as the technical
structure of the market fell part and the rise in energy prices began to create
some concern on Wall Street. However, the market might have found some light
support from the fact that US economic reports were somewhat of a countervailing
force to monthly payroll reports seen late last week. With the sloppy macro
economic tilt we suspect that a host of economists are set to downgrade their
earnings forecasts and that could keep the stock market under pressure.

Technical Outlook

#S&P500 (SEP) 7/7/2004: The defensive setup, with
the close under the 2nd swing support, could cause some early weakness. More
selling pressure is likely given yesterday’s gap lower price action on the day
session chart. Underlying support comes in at 1110.55 and 1107.38, with overhead
resistance at 1118.85 and 1123.98. The close below the 9-day moving average is a
negative short-term indicator for trend. The close below the 40-day moving
average is an indication the longer-term trend is down. Momentum studies are
still bearish, but are now at oversold levels and will tend to support reversal
action if it occurs. The next downside objective is now at 1107.38.

S&P E-Mini (SEP): Momentum studies are declining,
but have fallen to oversold levels. The next downside target is 1101.25. The
close below the 2nd swing support number puts the market on the defensive.
Near-term resistance for the S&P Mini is at 1123.00 and then again at 1134.25,
while swing support hits at 1106.50 and below there at 1101.25. The market’s
close below the 9-day moving average is an indication the short-term trend
remains negative.

NASDAQ (SEP) The gap lower on the day session
chart is bearish and puts the market on the defensive. A negative signal for
trend short-term was given on a close under the 9-bar moving average. There
could be some early pressure today given the market’s negative setup with the
close below the 2nd swing support. The market should run into resistance at
1467.75 and above there at 1487.13 with support at 1437.25 and 1426.13. Momentum
studies trending lower at mid-range could accelerate a price break if support
levels are broken. The next downside objective is 1426.13. The market back below
the 40-day moving average suggests the longer-term trend could be turning down.

MINI DOW (MAR) The downside crossover of the 9 &
18 bar moving average is a negative signal. The market should run into
resistance at 10261 and above there at 10339 with support at 10140 and 10097.
Momentum studies are still bearish, but are now at oversold levels and will tend
to support reversal action if it occurs. The next downside target is now at
10097. The close below the 40-day moving average is an indication the
longer-term trend is down. The defensive setup, with the close under the 2nd
swing support, could cause some early weakness.

 

CURRENCY MARKET RECAP

7/6/2004

The Dollar Index surprisingly held together
despite the disappointment in the US numbers last week, the sharp recovery in
energy prices and the moderate weakness in the US equity market. The performance
in the Pound leaves it as the standout currency and with the lackluster US
growth expectation one might concede that the UK economy is the strongest in the
G7 and that the UK is the most likely to raise interest rates. Some suggest that
the Dollar found support from the countervailing employment type readings from
Challenger and the payroll component of the ISM Non manufacturing Index tempered
the disappointment from the June payroll reading but that is a big leap of
faith. The Yen is showing surprising weakness and that might be because of the
weak US economic numbers and the fact that energy prices are rising sharply.

Technical Outlook

#CURRENCIES 7/7/2004: YEN (SEP): A negative
signal for trend short-term was given on a close under the 9-bar moving average.
The close below the 1st swing support could weigh on the market. Swing
resistance is targeted at 91.90 and above there at 92.26, with the yen finding
support around 91.38 and below there at 91.22. Momentum studies trending lower
at mid-range could accelerate a price break if support levels are broken. The
next downside objective is 91.22. Bearish daily studies indicate selling minor
rallies this session.

EURO (SEP): Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 1.2354. The defensive setup, with the close
under the 2nd swing support, could cause some early weakness. Swing support for
the Euro comes in at 1.2222, with overhead resistance at 1.2354. The close above
the 9-day moving average is a positive short-term indicator for trend. More
selling pressure is likely given yesterday’s gap lower price action on the day
session chart.

 

PRECIOUS METALS RECAP

7/6/2004

The gold market failed miserably after it became
apparent that the Dollar wasn’t poised to extend the recent downside thrust. It
also seemed like the funds were giving up on the bull case as the Press reported
significantly long liquidation by the funds. With the Dealers also reported to
be selling gold the market had little choice but to slide lower but it was
apparent that the August gold managed to bounce off the 40 day moving average
down at $389.2. It was apparent for most of the session that gold was under more
liquidation pressure than silver and that also gave the gold a subtle push down.

Technical Outlook

#P-METALS 7/7/2004: SILVER (SEP): The market tilt
is slightly negative with the close under the pivot. Initial support for silver
is at 588.5 and below there at 579.3 with resistance likely at 600.2 and 607.5.
A positive signal for trend short-term was given on a close over the 9-bar
moving average. Stochastics are at mid-range, but trending higher which should
reinforce a move higher if resistance levels are taken out. The next upside
objective is 600.2.

GOLD (AUG): Support for gold today comes in near
382.90, while resistance is pegged at 404.50. Stochastics trending lower at
midrange will tend to reinforce a move lower especially if support levels are
taken out. The next downside target is now at 382.90. Short-term indicators on
the defensive. Consider selling an intraday bounce. The market setup is somewhat
negative with the close under the 1st swing support. The close below the 9-day
moving average is a negative short-term indicator for trend.

 

COPPER MARKET RECAP

7/6/2004

The copper market showed a lack of follow through
Tuesday as producer sales effectively countered the threat against supply
brought on by strikes. We suspect that the macro economic condition is
deteriorating somewhat and that might make commercial buyers slightly less
interested in the long side especially since the September contract has risen
over 10 cents above its June lows, around the highs Tuesday morning. With the
funds long less 7,000 contracts as of last week it might not take much selling
to level the fund positioning and reduce the long liquidation threat.

 

ENERGY MARKET RECAP

7/6/2004

The energy complex continued to get a near
perfect storm of bullish developments and that could eventually put the market
in an overbought condition. It should also be noted that the market is noting
strong demand in addition to the series of supply problems that surfaced over
the weekend. So far, most of the bullish supply developments have come from
international supply developments and that has apparently pulled the funds back
into the long side after a significant liquidation in the month of June. Some
traders are suggesting that OPEC lacks the extra capacity to meet soaring near
term demand especially if Iraq or Russian production is temporarily derailed.

Technical Outlook

#ENERGIES 7/7/2004: CRUDE OIL (AUG): The cross
over and close above the 40-day moving average is an indication the longer-term
trend is up. There could be more upside follow through since the market closed
above the 2nd swing resistance. Support for crude is keyed on 39.25 and below
there at 38.68, with resistance pegged at 40.05 and 40.28. The close above the
9-day moving average is a positive short-term indicator for trend. Daily
stochastics have risen into overbought territory which will tend to support
reversal action if it occurs. The near-term upside target is at 40.28.

UNLEADED GAS (AUG): Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
129.89. The market has a bullish tilt coming into today’s trade with the close
above the 2nd swing resistance. Resistance today is at 129.89, while support
should be found around 123.99. If yesterday’s gap higher on the day session
chart holds, additional buying could develop this session. A positive signal for
trend short-term was given on a close over the 9-bar moving average.

HEATING OIL (AUG): Market positioning is positive
with the close over the 1st swing resistance. Heating oil should encounter
support around 107.46, with resistance is at 111.46. Short-term indicators
suggest buying pullbacks today. The close above the 9-day moving average is a
positive short-term indicator for trend. Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 111.46. The market rallied to a new contract
high.

 

CORN MARKET RECAP

7/6/2004

December corn closed 4 3/4 cents lower with an
early range of 256 3/4 to 259 1/4. The heavy rains over the weekend are simply
expected to help keep the crop in good condition to excellent through
pollination, even if it turns drier over the next few weeks, as most areas
received 1/2 to 2 1/2 inches. Traders look for crop conditions to improve by
1-2% for the good to excellent category in the weekly crop conditions report for
release after the close Tuesday. The USDA did announce an export sale of 345,000
tons of new crop US corn this morning but the market is simply unwilling to
factor in favorable demand in the face of rising support. Weekly export
inspections came in at 30.1 million bushels as compared with trade expectations
at 29-31 million. Cumulative shipments have reached 1.537 billion bushels as
compared with 1.248 billion last year at this time. The short-term technical
indicators are now showing an oversold condition, but the weekly
Commitment-of-Traders report showed that (as of June 29th) funds were still
holding a hefty net long position. December corn support levels come in at 256
1/2 and 253, with 261 1/2 and 266 as resistance.

Technical Outlook

#CORN (DEC) 7/7/2004: Momentum studies are still
bearish, but are now at oversold levels and will tend to support reversal action
if it occurs. The next downside target is now at 254. The defensive setup, with
the close under the 2nd swing support, could cause some early weakness. Market
resistance comes in at 263 2/4 today, with support at 254. The close below the
9-day moving average is a negative short-term indicator for trend. Some caution
in pressing the downside is warranted with the RSI under 30. More selling
pressure is likely given yesterday’s gap lower price action on the day session
chart.

 

SOY COMPLEX RECAP

7/6/2004

The market continues to see separate trade
direction for old crop and new crop soybeans with old crop being supported by
talk that some mid-west crushers will be forced to shut operations during July
due to scarce supply while new crop November futures remain under pressure from
the perception that the weather will remain favorable for crop conditions. July
soybeans gained more than 40 cents on November and bull spreading supported the
nearby meal with July moving up over $30.00 on the session to new contract
highs. In fact, traders are looking for crop conditions to improve by 1-2% in
the good to excellent category for tonight’s weekly crop conditions report.
Weekly export inspections came in at 4.264 million bushels as compared with
trade expectations at 2-5 million. Cumulative shipments have reached 830.0
million bushels as compared with 933.4 million last year at this time. The 642
1/2 cent level for November soybeans (today’s early low) represents a 50%
correction of the contract low to high rally and may be a key support level.
Support for November soybeans comes in at 646 and 642 1/2 with 669 3/4 and 678
1/4 as resistance.

Technical Outlook

#SOYBEANS (NOV) 07/07/04 The market tilt is
slightly negative with the close under the pivot. The next area of resistance is
around 657 and 660 1/4, while 1st support hits today at 646 2/4 and below there
at 639 1/4. A negative signal for trend short-term was given on a close under
the 9-bar moving average. Daily stochastics declining into oversold territory
suggest the selling may be drying up soon. The next downside objective is 639
1/4.

MEAL (DEC): Momentum studies are still bearish,
but are now at oversold levels and will tend to support reversal action if it
occurs. The next downside target is now at 199.4. The upside daily closing price
reversal gives the market a bullish tilt. First resistance comes in at 206.9,
with support at 202.5. The close below the 9-day moving average is a negative
short-term indicator for trend. It is a slightly negative indicator that the
close was under the swing pivot.

BEAN OIL (DEC): A negative signal for trend
short-term was given on a close under the 9-bar moving average. Daily
stochastics declining into oversold territory suggest the selling may be drying
up soon. The next downside objective is 23.66. It is a slightly negative
indicator that the close was lower than the pivot swing number. Daily swing
resistance is found at 24.31 and above there at 24.46. Support should be
encountered at 23.91 and 23.66.

 

WHEAT MARKET RECAP

7/6/2004

Holding support from Friday’s hook reversal is a
positive technical development and with the short-term oversold condition, the
move and close above Friday’s highs could help attract some technical buying
over the near-term. With harvest selling pressures expected to slowing decline
in the weeks just ahead as producer wrap-up harvest, the focus will begin to
shift to the spring wheat crop conditions and the ability of US exporters to
compete on the world market. Weekly export inspections came in at 21.1 million
bushels as compared with trade expectations at 15-20 million. Cumulative
shipments have reached 83.7 million bushels as compared with 68.2 million last
year at this time. While heavy rains in Kansas overnight helped provide some
psychological support, the Kansas crop is mostly harvested with the harvest in
the hard red winter belt now moving into Nebraska. Support for September wheat
comes in at 339 1/2 with retracement resistance points up at 351 3/4 and 360
1/2.

Technical Outlook

#WHEAT (DEC) 7/7/2004: The market setup is
supportive for early gains with the close over the 1st swing resistance. Expect
near-term support around 354 and below there at 349 2/4, with resistance levels
at 360 and 362. A negative signal for trend short-term was given on a close
under the 9-bar moving average. Rising from over sold levels, daily momentum
studies would support higher prices especially on a close above resistance. The
next upside objective is 362.

 

LIVE CATTLE RECAP

7/6/2004

August live cattle closed 2.30 higher at 87.62
and traded as high as 88.25 during the session. Cattle gapped sharply higher
today on the opening as the market reacted positively to the news released after
the close last Friday that the test results for the second cow retested for mad
cow disease came back negative. Also supportive were ideas that cash cattle
would trade firmer this week after trading mostly $88/cwt last Friday. Offers
today were mostly $90-92 with no bids.

Technical Outlook

#CATTLE (AUG) 7/7/2004: Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
The next downside objective is 86.32. The market has a bullish tilt coming into
today’s trade with the close above the 2nd swing resistance. Support should be
encountered at 86.97 and below there at 86.32. Market resistance is at 88.27 and
then again at 88.92. If yesterday’s gap higher on the day session chart holds,
additional buying could develop this session. A positive signal for trend
short-term was given on a close over the 9-bar moving average. The market now
above the 40-day moving average suggests the longer-term trend is up.

 

LEAN HOGS RECAP

7/6/2004

August hogs closed 0.27 lower at 77.65 with a
relatively narrow range of 76.42-77.25. The market may have been disappointed
that the two cows tested for Mad Cow last week showed up negative for the
disease. The Mad Cow threat has been positive for pork exports. Cash hogs are
expected to trade steady to 50 higher tomorrow on packer fill-in after the long
weekend. The 2-day lean index fell for the forth day in a row. The Index for the
period ending July 1st was down 69 cents to 79.71.

Technical Outlook

#HOGS (AUG) 7/7/2004: It is a slightly negative
indicator that the close was under the swing pivot. Resistance levels comes in
at 77.07 and 77.57 today, while support is around 76.25 and then 75.92. The
close above the 9-day moving average is a positive short-term indicator for
trend. Momentum studies are rising from mid-range which could accelerate a move
higher if resistance levels are penetrated. The near-term upside target is at
77.57.

 

COCOA MARKET RECAP

7/6/2004

After the big range down last Friday the cocoa
market rebounded sharply to close above the prior two sessions closing levels.
While the reversal seemed to be more technical than fundamental it does seem
like industry buying gave the market a reason to bottom. Apparently the funds
were big sellers last week and they saw their technical systems reversed with
the rise back above 1,333 in the September contract. With selling drying up it
probably didn’t take much in the way of industry buying to turn the trend around
temporarily.

Technical Outlook

COCOA (SEP) 07/07/04 The market setup is
supportive for early gains with the close over the 1st swing resistance. Cocoa
should run into resistance at 1358 and above there at 1370 with support at 1318
and 1290. Momentum studies are declining, but have fallen to oversold levels.
The next downside target is 1289.50.

 

COFFEE MARKET RECAP

7/6/2004

September coffee managed major gap down and fell
to the lowest level since the December 2003 gap down level. It would seem that
few players are expecting adverse weather from Brazil to alter the speculative
landscape and forge a bottom in prices. Reports that Brazil Green coffee exports
were up 9.5% on the year at 1.71 million bags is simply another reason for the
small spec and fund long to bail out and with the spec long still holding
recently at 17,000 contracts it is possible that coffee still has some long
liquidation left in play.

Technical Outlook

COFFEE (SEP) 7/7/04 The gap lower price action on
the day session chart is a bearish indicator for trend. The close below the 1st
swing support could weigh on the market. The 9-day RSI under 30 indicates the
market is approaching oversold levels. Momentum studies are declining, but have
fallen to oversold levels. The next downside objective is now at 69.80. The
Coffee contract should run into resistance at 71.40 and above there at 72.00
with support at 70.3 and 69.80. The market’s short-term trend is negative as the
close remains below the 9-day moving average.

 

SUGAR MARKET RECAP

7/6/2004

October sugar gapped higher on Tuesday after the
long holiday weekend as fund and spec traders continue to buy aggressively on
expectations that Russia and India will be substantial sugar importers, although
no significant buying from these two countries has been seen yet. The new
speculative buying easily absorbed producer selling from Brazil and Thailand and
futures prices have been rallying despite the availability of physical sugar
from Brazil. Continued strength in the energy sector is also bullish. The COT
report with options showed both the funds and specs increasing their net long
position. With the market rallying strongly after the COT report was measured,
the combined net spec long position should now be closing in on the record net
long position level making the market vulnerable to profit taking.

Technical Outlook

#SUGAR (OCT) 7/7/2004: The market rallied to a
new contract high. Follow through buying looks likely if the market can hold
yesterday’s gap on the day session chart. Market positioning is positive with
the close over the 1st swing resistance. Swing resistance comes in at 8.29, with
support found at 7.97. The close above the 9-day moving average is a positive
short-term indicator for trend. Daily stochastics have risen into overbought
territory which will tend to support reversal action if it occurs. The near-term
upside target is at 8.29. The market is becoming somewhat overbought now that
the RSI is over 70.

 

COTTON MARKET RECAP

7/6/2004

December cotton closed slightly higher but did
not manage to avoid another fresh contract low probe. Adding to the negative
basis were reports that India weather conditions were becoming even more
conducive to favorable production with the start of the Monsoon. About the most
favorable development the bulls can point to is the fact that volume is becoming
thin as fewer and fewer players want to sell cotton at such deflated prices and
in the face of overdone technical readings. However, it would not seem like the
fundamental or technical tilt of the market is set to change anytime soon.

Technical Outlook

#COTTON (OCT) 7/7/2004: A negative signal for
trend short-term was given on a close under the 9-bar moving average. The market
tilt is slightly negative with the close under the pivot. Next resistance area
comes in at 49.94 and then again at 50.17, while support is targeted at 49.04
and 48.37. Daily stochastics declining into oversold territory suggest the
selling may be drying up soon. The next downside objective is 48.37. The market
is approaching over sold levels on an RSI reading under 30. The market made a
new contract low on the break. The daily closing price reversal up is a positive
indicator that could support higher