Expect Fireworks In The Dollar Tomorrow–Here’s Why
BOND MARKET RECAP
1/6/2005
March Bonds closed up 0-01 at 112-03. This was
0-09 up from the low and 0-09 off the high.
March 10 Yr Treasury Notes finished up 0-025 at
111-155, 0-030 off the high and 0-060 up from the low.
The Treasury market forged a minor rally
Thursday despite the fact that US initial and ongoing claims leaped up
significantly. While some suggested that the claims readings were a seasonal
anomaly the trade still saw some light buying off the readings. We suspect that
sharply higher energy prices provided an additional lift but that the strong
equity market price action countervailed any bullish benefit off the energy
market action. With the extremely critical monthly payroll report due out Friday
morning we assume that many players were unwilling to step into fresh positions.
Technical Outlook
BONDS (MAR) 01/07/2005: A bullish signal was
given with an upside crossover of the daily stochastics. Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The close under the 18-day moving average indicates the
longer-term trend could be turning down. The close over the pivot swing is a
somewhat positive setup. The next upside target is 112-22. The next area of
resistance is around 112-14 and 112-22, while 1st support hits today at 111-29
and below there at 111-19.
TNOTES (MAR) 01/07/2005: 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. With the close higher than the pivot
swing number, the market is in a slightly bullish posture. The next downside
target is now at 111-060. The next area of resistance is around 111-215 and
111-245, while 1st support hits today at 111-125 and below there at 111-060.
STOCK INDICES RECAP
1/6/2005
March S&P finished up 4.9 at 1188.1, 5.5 off the
high and 3.3 up from the low.
March S&P E-Mini closed up 5 at 1188.25. This was
5.5 up from the low and 5.5 off the high.
March Dow closed up 31 at 10618. This was 24 up
from the low and 57 off the high.
March Dow E-Mini finished up 33 at 10620, 57 off
the high and 30 up from the low.
The stock market managed an impressive rally in
the face of discourage initial unemployment claims and a sharp run up in energy
prices. It seemed like bargain hunting buying was in play and with Wal-Mart
posting a decent upgrade in December sales and traders talking up strong last
minute and internet holiday sales we suspect that prices were factoring in a
slightly better holiday season. In the end it was a little surprising that the
market was able to muster buying interest ahead of an extremely critical
economic reading on Friday morning.
Technical Outlook
S&P 500 (MAR) 01/07/2005: The moving average
crossover down (9 below 18) indicates a possible developing short-term
downtrend. 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 target is now at 1179.90.
The next area of resistance is around 1192.60 and 1197.50, while 1st support
hits today at 1183.80 and below there at 1179.90.
SP EMINI (MAR) 01/07/2005: The moving average
crossover down (9 below 18) indicates a possible developing short-term
downtrend. Daily stochastics declining into oversold territory suggest the
selling may be drying up soon. The close below the 18-day moving average is an
indication the longer-term trend has turned down. The market has a slightly
positive tilt with the close over the swing pivot. The next downside objective
is now at 1177.25. The next area of resistance is around 1193.75 and 1199.25,
while 1st support hits today at 1182.75 and below there at 1177.25.
NASDAQ (MAR) 01/07/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. 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 1550.25. The market is
approaching oversold levels on an RSI reading under 30. The next area of
resistance is around 1570.50 and 1582.25, while 1st support hits today at
1554.50 and below there at 1550.25.
MINIDOW (MAR) 01/07/2005: The major trend could
be turning up with the close back above the 40-day moving average. Momentum
studies trending lower at mid-range should accelerate a move lower if support
levels are taken out. The major trend has turned down with the cross over back
below the 18-day moving average. The market has a slightly positive tilt with
the close over the swing pivot. The next downside target is now at 10540. The
next area of resistance is around 10663 and 10713, while 1st support hits today
at 10577 and below there at 10540.
CURRENCY MARKET RECAP
1/6/2005
March US Dollar finished up 59 at 8324, 11 off
the high and 73 up from the low.
March Euro finished down 0.96 at 131.78, 0.48 off
the high and 0.14 up from the low.
March Euro Dollar closed up 0.01 at 97.065. This
was 0.025 up from the low and 0.005 off the high.
March Canadian Dollar closed down 0.64 at 80.92.
This was 0.27 up from the low and 0.41 off the high.
March British Pound finished down 1.01 at 186.65,
0.51 off the high and 0.29 up from the low.
March Swiss closed down 0.4 at 85.4. This was
0.23 up from the low and 0.3 off the high.
March Japanese Yen closed down 0.92 at 95.6. This
was 0.11 up from the low and 0.44 off the high.
The Dollar continues to climb the wall or worry,
meaning that it is making gains despite bearish concerns toward the economy. In
addition to the slightly disturbing initial and ongoing claims readings, the US
economy was also confronted with a significant rise in energy prices. In fact,
with the monthly non farm payroll report due out Friday morning one would have
expected the massive gain in initial claims to have upended the Dollar. However,
players continued to short cover ahead of the Friday report and we suspect that
fireworks will be the order of the day tomorrow.
Technical Outlook
YEN (MAR) 01/07/2005: The major trend has turned
down with the cross over back below the 60-day moving average. Stochastics
trending lower at midrange will tend to reinforce a move lower especially if
support levels are taken out. The market back below the 18-day moving average
suggests the longer-term trend could be turning down. The gap lower price action
on the day session chart is a bearish indicator for trend. The close below the
2nd swing support number puts the market on the defensive. The next downside
target is 95.14. The next area of resistance is around 95.87 and 96.23, while
1st support hits today at 95.33 and below there at 95.14.
EURO (MAR) 01/07/2005: 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. The market is in
a bearish position with the close below the 2nd swing support number. The next
downside target is 131.25. The next area of resistance is around 132.09 and
132.48, while 1st support hits today at 131.47 and below there at 131.25.
PRECIOUS METALS RECAP
1/6/2005
February Gold closed down 5.7 at 421.6. This was
0.5 up from the low and 5.4 off the high.
March Silver finished down 0.08 at 6.455, 0.085
off the high and 0.045 up from the low.
April Platinum closed down 7.2 at 845.1. This was
1.6 up from the low and 3.9 off the high.
The continued rise in the US Dollar was simply
too much for the gold market and we suspect that another layer of spec and fund
longs decided to exit rather than risk even more heat following the US payroll
report on Friday morning. We also suspect that a private Brokerage firm forecast
of a base metals top, served to motivate some of the long liquidation Thursday
but some tech players suggest that the gold bull trend isn’t defeated until the
February closes below $406.
Technical Outlook
SILVER (MAR) 01/07/2005: 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. It is a slightly
negative indicator that the close was under the swing pivot. The next downside
objective is 633.5. The next area of resistance is around 652.0 and 659.5, while
1st support hits today at 639.1 and below there at 633.5.
GOLD (FEB) 01/07/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
close below the 18-day moving average is an indication the longer-term trend has
turned down. The close below the 2nd swing support number puts the market on the
defensive. The next downside objective is now at 417.0. The market is
approaching oversold levels on an RSI reading under 30. The next area of
resistance is around 424.5 and 428.7, while 1st support hits today at 418.7 and
below there at 417.0.
COPPER MARKET RECAP
1/6/2005
March Copper finished unchanged at 137.50, 1.00
off the high and 1.40 up from the low.
The copper market showed a two sided trade
Thursday despite slack US economic numbers and a continued rise in the US
Dollar. We suspect that copper will be a little insulated against the macro
economic information on Friday morning but in the event that the US economic
outlook is seriously undermined it is possible that fresh selling could dominate
the action on Friday morning. After all the copper market recently washout out
off fears of Chinese economic slowing and it would not be a positive to add US
concerns into the copper market equation. Given report of Chinese and Japanese
buying around the lows this week we suspect that the coming Shanghai copper
stocks weekly inventory reading will be supportive to copper prices on Friday
morning.
ENERGY MARKET RECAP
1/6/2005
February Crude Oil closed up 2.17 at 45.56. This
was 2.41 up from the low and 0.19 off the high.
February Heating Oil closed up 6.29 at 128.13.
This was 5.63 up from the low and 0.87 off the high.
February Unleaded Gas finished up 5.19 at 122.29,
1.01 off the high and 6.39 up from the low.
February Natural Gas finished up 0.22 at 6.05,
0.02 off the high and 0.29 up from the low.
February Propane closed up 0.01 at 0.70. This was
equal to the low and equal to the high.
Throughout most of the session the Press was
mostly unable to tag the big rally on anything specific but it would seem that
some longer term forecasts are calling for much lower temps beyond January 15th.
Other traders suggested that OPEC was circulating ideas of another 1 million
barrel per day production cut, while others suggested that Saudi Arabia might be
leading off on a January 30th production cut, just as they did into the December
meeting. The weekly natural gas inventory report showed a draw of 151 bcf and
that was mildly supportive to natural gas prices. Also lifting prices Thursday
were suggestions from the US government that US demand would be strong in 2005
and that consumers could expect to pay even higher prices than were seen in
2004.
Technical Outlook
CRUDE OIL (FEB) 01/07/2005: The market now above
the 40-day moving average suggests the longer-term trend has turned up. 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 is an indication the
longer-term trend has turned positive. The market’s close above the 2nd swing
resistance number is a bullish indication. The next upside objective is 47.60.
The next area of resistance is around 46.86 and 47.60, while 1st support hits
today at 44.26 and below there at 42.41.
UNLEADED (FEB) 01/07/2005: The major trend could
be turning up with the close back above the 40-day moving average. 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 is an indication the longer-term trend has turned positive. 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 128.34. The next area of resistance is around 125.99 and
128.34, while 1st support hits today at 118.59 and below there at 113.55.
HEATING OIL (FEB) 01/07/2005: The daily
stochastics gave a bullish indicator with a crossover up. The stochastic
indicator is rising from oversold levels, which is bullish and should support
higher prices. The close below the 18-day moving average is an indication the
longer-term trend has turned down. 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 133.44. The next area of resistance is around 131.38 and
133.44, while 1st support hits today at 124.88 and below there at 120.44.
CORN MARKET RECAP
1/6/2005
March Corn finished up 7 1/4 at 208 3/4,
3/4 off the high and 6 1/4 up from the low. May Corn closed up 6 3/4 at 216.
This was 5 3/4 up from the low and 1 off the high.
Funds were noted buyers of near 3500 contracts
into the mid-session but when funds came in as more aggressive buyers into the
close (likely to reduce part of their huge net short position) there was a lack
of selling interest and the market soared to match the highest close since
November 19th. A slower than expected pace of producer selling and fund
short-covering helped support the bounce back into the December trading range as
the move to contract lows on Tuesday has failed to attract new selling interest.
Ideas that the market is oversold ahead of next weeks final crop production and
supply/demand reports helped support. Weekly export sales for corn came in at
430,600 tons as compared with trade expectations at 400,000-700,000 tons.
Cumulative sales have reached 46% of the USDA forecast for the season as
compared with 47.5% on average for this time of the year. Israel bought 48,000
tons of South American meal overnight. Resistance for March corn comes in at 209
3/4 and 211 3/4 with support at 207 1/2 and 205 1/4.
Technical Outlook
CORN (MAR) 01/07/2005: The market now above the
40-day moving average suggests the longer-term trend has turned up. The daily
stochastics gave a bullish indicator with a crossover up. 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. There could be
more upside follow through since the market closed above the 2nd swing
resistance. The near-term upside objective is at 214 1/4. The next area of
resistance is around 212 1/4 and 214 1/4, while 1st support hits today at 205
1/4 and below there at 200 1/2.
SOY COMPLEX RECAP
1/6/2005
March Soybeans finished up 5 1/2 at 532 1/2, 1
off the high and 6 1/2 up from the low. May Soybeans closed up 5 1/4 at 536 1/4.
This was 5 3/4 up from the low and 3/4 off the high.
March Soymeal closed up 1.7 at 157.6. This was
1.4 up from the low and 0.9 off the high.
March Soybean Oil finished up 0.1 at 20.17, 0.08
off the high and 0.16 up from the low.
The market finished with moderate gains but the
corn and wheat rallies seemed to help reverse the weak action into the
mid-session. The market pushed higher early in the session finding support from
a firm tone in the cash market, a lack of aggressive producer selling, continued
rumors of China buying and a lack of deliveries against the January contract.
The inability to move over Tuesday’s highs contributed to the sell-off to the
lows. While there are reports of more Asia rust in Brazil, there are also
reports of excellent crop conditions which has helped limit the buying support
on technical bounces. Weekly export sales for soybeans came in at 649,200 tons
for the holiday week ending December 30th as compared with trade expectations at
500,000-900,000 tons. Cumulative sales have reached 73.2% of the USDA forecast
for the season as compared with 71.2% on average for this time of the year. Meal
sales came in at 113,700 tons vs. trade expectations at 50,000-100,000 tons.
Cumulative sales have reached 65.1% of the USDA forecast for the season as
compared with 54.5% on average for this time of the year. Oil sales were 6900
tons as compared with 5,000-10,000 expected. Midwest cash basis levels were
steady but winter weather may be slowing producer movement. Meal deliveries were
hefty at 165 contracts with 100 contracts for oil. Resistance for March soybeans
comes in at 535 and 538 1/2 with 530 and 526 1/2 as next support.
Technical Outlook
BEANS (MAR) 01/07/2005: 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. A positive setup
occurred with the close over the 1st swing resistance. The next downside
objective is 523 3/4. The next area of resistance is around 536 1/4 and 538 1/2,
while 1st support hits today at 528 3/4 and below there at 523 3/4.
MEAL (MAR) 01/07/2005: 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.
The market setup is supportive for early gains with the close over the 1st swing
resistance. The next downside target is now at 155.2. The next area of
resistance is around 158.7 and 159.7, while 1st support hits today at 156.5 and
below there at 155.2.
BEANOIL (MAR) 01/07/2005: 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 close over the pivot swing is a
somewhat positive setup. The next downside objective is now at 19.91. The next
area of resistance is around 20.29 and 20.39, while 1st support hits today at
20.05 and below there at 19.91.
WHEAT MARKET RECAP
1/6/2005
March Wheat finished up 8 1/2 at 308 1/4, 1/4 off the high and
8 1/2 up from the low. May Wheat closed up 8 1/4 at 315 1/2. This was 8 1/2 up
from the low and 1/4 off the high.
The trade did not react to the weak export sales
numbers this morning and the technical action is impressive as the market
continues to recover back into the recent trading range with no follow-through
to the downside on the move to contract lows on Tuesday. Fund buying reached
3500 contracts by mid-session and then aggressive fund buying, even in the
December contract, support the strong close. Weekly export sales for wheat came
in at only 91,800 tons for the holiday week ending December 30th as compared
with trade expectations at 250,000-350,000 tons. This was a new marketing year
low for weekly sales as unknown destination cancelled sales of nearly 200,000
tons. Export shipments were 408,500 tons. Cumulative sales have reached 75.1% of
the USDA forecast for the season as compared with 67.6% on average for this time
of the year. As a result, the door is open for the USDA to raise the export
forecast for next weeks supply/demand report. South Korea is tendering for
19,000 tons of US wheat. March wheat resistance comes in at 311 3/4 and 316 1/2
with support at 304 1/4 and 302.
Technical Outlook
WHEAT (MAR) 01/07/2005: The market now above the
40-day moving average suggests the longer-term trend has turned up. The daily
stochastics gave a bullish indicator with a crossover up. Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The major trend could be turning up with the
close back above the 18-day moving average. The market’s close above the 2nd
swing resistance number is a bullish indication. The near-term upside objective
is at 314 3/4. The next area of resistance is around 312 1/2 and 314 3/4, while
1st support hits today at 304 and below there at 297 1/2.
LIVE CATTLE RECAP
1/6/2005
February Live Cattle closed down 1.05 at 88.35.
This was 0.95 up from the low and 1.42 off the high.
January Feeder Cattle finished down 0.95 at
103.20, 0.90 off the high and 0.60 up from the low.
For the second day in a row, cattle futures
opened higher and closed sharply lower on the day. Tyson announced that it would
temporarily suspend operations at five beef plants and the news helped drive the
market lower on the day as traders have been nervous with the poor packer profit
margins and the news confirmed weak demand from packers. Slaughter has come in
significantly below trade expectations for most of this week. Slaughter was
102,000 head yesterday but bounced to 122,000 head today from expectations at
112,000-120,000 head. Boxed-beef cut-out values were up $.32 cents to $139.55 as
compared with $141.21 one week ago. USDA personal see no need to delay opening
the Canadian border which added to the bearish tone.
Technical Outlook
CATTLE (FEB) 01/07/2005: The market back below
the 60-day moving average suggests the longer-term trend could be turning down.
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 market’s close below the 1st swing support
number suggests a moderately negative setup for today. The next downside
objective is 86.100. The next area of resistance is around 89.520 and 90.820,
while 1st support hits today at 87.170 and below there at 86.100.
LEAN HOGS RECAP
1/6/2005
February Lean Hogs closed up 0.05 at 75.80. This
was 0.90 up from the low and 1.17 off the high.
February Pork Bellies finished up 1.15 at 95.10,
0.60 off the high and 1.37 up from the low.
February hogs closed near unchanged with a 207
point as the bullish cash news clashed with weak cattle prices and a stiff
premium to the cash market. While the weather has slowed producer marketings,
traders are nervous that once the weather clears, selling in the cash market
could intensify. In addition weights are high as it appears that producers held
back hogs in late December to roll some income to 2005. In fact, average weights
for Iowa/Minnesota were at a record high for the last week of the year this past
week. The 2-Day Lean index was up 1.95 to 68.05 as compared with 65.00 last week
at this time. Talk of weak demand for a Saturday slaughter was another factor to
pull the market off of the highs. Slaughter came in at 389,000 head as compared
with trade expectations for 382,000-390,000 head.
Technical Outlook
HOGS (FEB) 01/07/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The market now above the 18-day moving average suggests the
longer-term trend has turned up. The daily closing price reversal up is a
positive indicator that could support higher prices. With the close higher than
the pivot swing number, the market is in a slightly bullish posture. The
near-term upside objective is at 77.920. The next area of resistance is around
76.820 and 77.920, while 1st support hits today at 74.770 and below there at
73.800.
COCOA MARKET RECAP
1/6/2005
March Cocoa finished down 12 at 1514, 12 off the
high and 8 up from the low.
More light selling was seen in the cocoa market
on Thursday, and that would seem to leave the trend pointing down. However, some
tech traders are suggesting that the market managed to fill a critical gap on
the charts and that short term technical indicators are now oversold. Certainly
ongoing gains in the US Dollar are negative to cocoa but the fundamental news
impact really hasn’t been that significant in cocoa for at least two weeks. With
the Press reporting stop loss selling by the small spec camp we suspect that the
net spec long position is close to being leveled.
Technical Outlook
COCOA (MAR) 01/07/2005: 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 swing indicator gave a moderately
negative reading with the close below the 1st support number. The next downside
objective is 1495. The next area of resistance is around 1524 and 1535, while
1st support hits today at 1504 and below there at 1495.
COFFEE MARKET RECAP
1/6/2005
March Coffee closed down 1.70 at 96.80. This was
1.20 up from the low and 2.20 off the high.
Funds were noted sellers for the fifth session in
a row and the market closed at the lowest level since December 14th. Talk that
fund traders are shifting away from soft markets and toward other commodity
sectors added to the bearish tone. The lack of much activity in the cash market
has traders nervous over a possible continuation of the liquidation binge until
buyers step foreword to extend coverage. NYBOT certified coffee stocks were up
3,405 bags to 4.518 million bags with 53,721 bags pending review.
Technical Outlook
COFFEE (MAR) 01/07/2005: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The market back below the 18-day moving average suggests 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 target is now at
93.70. The next area of resistance is around 98.50 and 100.45, while 1st support
hits today at 95.15 and below there at 93.70.
SUGAR MARKET RECAP
1/6/2005
March Sugar closed up 0.01 at 8.99. This was 0.11
up from the low and 0.01 off the high.
May sugar experienced good commercial buying
after weak action early in the session and funds came in to support the rally
late. A strong tone to the London market and more talk that India is getting
more active in the raw market helped to support. Processing margins in India are
profitable after the recent uptrend in sugar prices in India and the India Food
Minister released 400,000 tonnes more sugar in the market for Jan-March in order
to try to ease prices. He EU sold 43,000 tons of white sugar at their weekly
tender as compared with trade expectations at 60,000-80,000 tons. May sugar
needs to close over 925 on the week to avoid a weekly key reversal while a close
over 931 would leave 953 as next swing objective.
Technical Outlook
SUGAR (MAR) 01/07/2005: Momentum studies are
trending lower from high levels which should accelerate a move lower on a break
below the 1st swing support. The major trend could be turning up with the close
back above the 18-day moving average. With the close higher than the pivot swing
number, the market is in a slightly bullish posture. The next downside target is
now at 8.85. The next area of resistance is around 9.04 and 9.08, while 1st
support hits today at 8.93 and below there at 8.85.
COTTON MARKET RECAP
1/6/2005
March Cotton finished up 0.19 at 45.81, 0.38 off
the high and 0.30 up from the low.
The market continued to experience a steady flow
of speculative buying and closed higher for the third session in a row.
Follow-through technical buying from the upside break-out this week and plenty
of bullish demand news to absorb at the annual US Beltwide conference this week
helped support the market. Weekly export sales for cotton came in at just
140,300 bales as compared with trade expectations at 200,000-275,000 bales.
Cumulative sales have reached 68.9% of the USDA forecast for the season as
compared with 74.4% on average for this time of the year. Export shipments came
in at 243,400 bales.
Technical Outlook
COTTON (MAR) 01/07/2005: 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. It is a
mildly bullish indicator that the market closed over the pivot swing number. The
next upside objective is 46.51. The next area of resistance is around 46.15 and
46.51, while 1st support hits today at 45.47 and below there at 45.15.