Fresh Dollar Shorts Were Discouraged Today–Here’s Why
BOND MARKET RECAP
12/28/2004
March Bonds closed up 0-02 at 111-12. This was
0-18 up from the low and 0-01 off the high.
March 10 Yr Treasury Notes finished down 0-005 at
111-160, 0-010 off the high and 0-110 up from the low.
While Treasury prices softened into the
Consumer Confidence report the magnitude of the improvement in the reading was
quite significant and probably would have put more moderate pressure on prices
if trading activity were closer to normal. With the Consumer Confidence Present
situation reading and the baseline Index both managing close to 10 point gains
it is difficult not to expect an upgrade in the economic outlook. While some
might discount the December readings due to the holiday effect when one
considers the combination of lower energy prices and improved sentiment it is
possible that Treasuries remain under pressure.
Technical Outlook
BONDS (MAR) 12/29/2004: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The close below
the 18-day moving average is an indication the longer-term trend has turned
down. The upside closing price reversal on the daily chart is somewhat bullish.
It is a slightly negative indicator that the close was lower than the pivot
swing number. The next downside target is now at 110-21. The next area of
resistance is around 111-22 and 111-28, while 1st support hits today at 111-03
and below there at 110-21.
TNOTES (MAR) 12/29/2004: Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. 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 111-005.
The next area of resistance is around 111-225 and 111-270, while 1st support
hits today at 111-095 and below there at 111-005.
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STOCK INDICES RECAP
12/28/2004
March S&P finished up 7.2 at 1215.6, 1.1 off the
high and 5.9 up from the low.
March S&P E-Mini closed up 7.5 at 1216. This was
8.25 up from the low and 0.75 off the high.
March Dow closed up 66 at 10866. This was 66 up
from the low and 4 off the high.
March Dow E-Mini finished up 64 at 10864, 6 off
the high and 64 up from the low.
The stock market picked up where it left off
early Monday morning and with the Consumer Confidence report coming in much
stronger than expected there is certainly cause for optimism toward stock
prices. About the only negative in the early going Tuesday was a solid recovery
bounce in energy prices and the partially disappointing weekly chain store
readings for the first four weeks of December. Even the US Dollar saw the
economic information as supportive early Tuesday and the Dollar has been one of
the main vulnerabilities in the last several sessions. In conclusion, the bulls
have reason to cheer and to keep prices firm.
Technical Outlook
S&P 500 (MAR) 12/29/2004: 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. With the
close over the 1st swing resistance number, the market is in a moderately
positive position. The next upside target is 1221.40. The market is becoming
somewhat overbought now that the RSI is over 70. The next area of resistance is
around 1219.10 and 1221.40, while 1st support hits today at 1212.10 and below
there at 1207.40.
SP EMINI (MAR) 12/29/2004: 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 market setup is supportive for early gains
with the close over the 1st swing resistance. The near-term upside objective is
at 1223.12. With a reading over 70, the 9-day RSI is approaching overbought
levels. The next area of resistance is around 1220.50 and 1223.12, while 1st
support hits today at 1211.50 and below there at 1205.13.
NASDAQ (MAR) 12/29/2004: The downside crossover
(9 below 18) of the moving averages suggests a developing short-term downtrend.
The daily stochastics gave a bullish indicator with a crossover up. Momentum
studies are trending higher from mid-range, which should support a move higher
if resistance levels are penetrated. 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 near-term upside
objective is at 1643.87. The next area of resistance is around 1638.75 and
1643.87, while 1st support hits today at 1622.25 and below there at 1610.88.
MINIDOW (MAR) 12/29/2004: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The cross over and close above the 18-day moving average is an
indication the longer-term trend has turned positive. With the close over the
1st swing resistance number, the market is in a moderately positive position.
The near-term upside objective is at 10919. The 9-day RSI over 70 indicates the
market is approaching overbought levels. The next area of resistance is around
10899 and 10919, while 1st support hits today at 10829 and below there at 10780.
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CURRENCY MARKET RECAP
12/28/2004
March US Dollar finished up 2 at 8080, 19 off the
high and 18 up from the low.
March Euro finished down 0.04 at 136.24, 0.3 off
the high and 0.25 up from the low.
March Euro Dollar closed unchanged at 97.09. This
was 0.015 up from the low and 0.005 off the high.
March Canadian Dollar closed up 0.21 at 82.19.
This was 0.43 up from the low and 0.17 off the high.
March British Pound finished down 0.35 at 192.06,
0.98 off the high and 0.33 up from the low.
March Swiss closed up 0.1 at 88.48. This was 0.26
up from the low and 0.2 off the high.
March Japanese Yen closed up 0.09 at 97.55. This
was 0.3 up from the low and 0.08 off the high.
While the Dollar hasn’t been seeing much in the
way of support from the US economic readings, the magnitude of the improvement
in the Consumer Confidence readings has to discourage some fresh shorts in the
Dollar. In fact with two of three Consumer Confidence readings registering 10
point gains it would like the US economy is improving and when one adds in the
significant declines in energy prices the US macro economic differential should
be set to expand its edge over the Euro zone. However, the currency markets have
not paid much attention to the economic numbers and we are not sure what it will
take to turn the tide.
Technical Outlook
YEN (MAR) 12/29/2004: 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. With the close higher than the pivot swing
number, the market is in a slightly bullish posture. The near-term upside target
is at 97.87. The next area of resistance is around 97.74 and 97.87, while 1st
support hits today at 97.36 and below there at 97.12.
EURO (MAR) 12/29/2004: The rally brought the
market to a new contract high. 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 downside closing price
reversal on the daily chart is somewhat negative. The market has a slightly
positive tilt with the close over the swing pivot. The near-term upside target
is at 136.80. The 9-day RSI over 70 indicates the market is approaching
overbought levels. The next area of resistance is around 136.51 and 136.80,
while 1st support hits today at 135.97 and below there at 135.71.
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PRECIOUS METALS RECAP
12/28/2004
February Gold closed down 0.9 at 445.3. This was
1.3 up from the low and 0.9 off the high.
March Silver finished up 0.053 at 7.058, 0.017
off the high and 0.098 up from the low.
January Platinum closed up 0.3 at 875.3. This was
9.8 up from the low and 3.7 off the high.
The gold market exhibited some divergence with
the rest of the metals market and that is usually a sign of weakness. It is also
possible that slightly improved attitudes toward the US economy and in turn the
US Dollar have discouraged the gold bulls. It was clear that the physical or
demand driven metals markets were seeing some support from the higher US equity
market and the improved outlook from the US economic front. However, in the end,
it would be a major shift in attitude for the Dollar to stop going down because
of favorable economic views.
Technical Outlook
SILVER (MAR) 12/29/2004: Rising from oversold
levels, daily momentum studies would support higher prices, especially on a
close above resistance. The close below the 18-day moving average is an
indication the longer-term trend has turned down. The close over the pivot swing
is a somewhat positive setup. The near-term upside objective is at 715.3. The
next area of resistance is around 711.6 and 715.3, while 1st support hits today
at 700.1 and below there at 692.3.
GOLD (FEB) 12/29/2004: 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. The
market’s close below the pivot swing number is a mildly negative setup. The next
upside target is 447.4. The next area of resistance is around 446.4 and 447.4,
while 1st support hits today at 444.2 and below there at 443.0.
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COPPER MARKET RECAP
12/28/2004
March Copper finished up 1.35 at 145.30, 0.30 off
the high and 2.00 up from the low.
The copper once again returned to the 145 level
but seemed to have trouble trading up through that level. We suspect that the
much stronger than expected US Consumer Confidence readings and the sharp rally
in US equity prices helped the copper bulls maintain control but as expected
market conditions continued to thin and in the process that robbed the market of
buying fuel. With the Japanese metals markets closing for the rest of the week
and the London market closed for the day the US market was left to its own
devices and that also discouraged some buyers from entering the fray.
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ENERGY MARKET RECAP
12/28/2004
February Crude Oil closed up 0.45 at 41.77. This
was 0.22 up from the low and 0.55 off the high.
February Heating Oil closed up 1.31 at 123.13.
This was 0.33 up from the low and 2.57 off the high.
February Unleaded Gas finished up 0.72 at 107.68,
2.17 off the high and 0.68 up from the low.
February Natural Gas finished up 0.12 at 6.34,
0.10 off the high and 0.07 up from the low.
February Propane closed down 0.02 at 0.72. This
was 0.00 up from the low and 0.01 off the high.
The energy market forged a short covering rally
Tuesday mostly because of the extreme oversold status from the prior session. We
also think that some shorts were liquidating positions ahead of the weekly
inventory reports which could easily show some supportive data when one consider
the extreme cold into the Christmas holiday last week. With highs projected in
Chicago expected to reach close to 50 degrees early next week it would seem like
the mild weather continues and that should leave the market vulnerable to more
selling, especially if the weekly inventory reports are not clearly supportive.
Technical Outlook
CRUDE OIL (FEB) 12/29/2004: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. The major trend has turned down with the cross over back
below the 18-day moving average. With the close higher than the pivot swing
number, the market is in a slightly bullish posture. The next downside objective
is 41.09. The next area of resistance is around 42.15 and 42.62, while 1st
support hits today at 41.39 and below there at 41.09.
UNLEADED (FEB) 12/29/2004: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
market back below the 18-day moving average suggests the longer-term trend could
be turning down. It is a slightly negative indicator that the close was lower
than the pivot swing number. The next downside target is now at 105.21. The next
area of resistance is around 109.10 and 110.90, while 1st support hits today at
106.26 and below there at 105.21.
HEATING OIL (FEB) 12/29/2004: Momentum studies
are declining, but have fallen to oversold levels. The market back below the
18-day moving average suggests the longer-term trend could be turning down. It
is a slightly negative indicator that the close was under the swing pivot. The
next downside target is 120.79. The next area of resistance is around 124.58 and
126.59, while 1st support hits today at 121.68 and below there at 120.79.
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CORN MARKET RECAP
12/28/2004
March Corn finished down 1/2 at 207, 1/4
off the high and 1 1/4 up from the low. May Corn closed down 1/4 at 214 3/4.
This was 1 1/4 up from the low and equal to the high.
A lack of new export news or other news to
support short-covering has left futures in a weak posture as the market moved
back toward the center of the recent trading range. Cash basis levels were
steady with a lack of producer selling seen as a supportive factor but there is
some concerns that producer selling will increase into the new tax year next
week. The Commitment-of-Traders report with options, released yesterday
afternoon showed the market in an oversold condition with speculators net short
nearly 135,000 contracts. The buying trend of the large trader was considered
supportive with the net short position of the fund trader within 5% of the
historical peak. Good growing weather in South America added to the more
negative tone. Resistance for March corn comes in at 207 and 208 with support at
204 3/4 and 203 3/4.
Technical Outlook
CORN (MAR) 12/29/2004: 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 below the pivot
swing number is a mildly negative setup. The next upside objective is 208 1/4.
The next area of resistance is around 207 3/4 and 208 1/4, while 1st support
hits today at 206 1/4 and below there at 205 1/4.
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SOY COMPLEX RECAP
12/28/2004
March Soybeans finished down 7 1/4 at 546 3/4, 6
1/2 off the high and 1 1/4 up from the low. May Soybeans closed down 7 1/2 at
551. This was 1/2 up from the low and 6 off the high.
March Soymeal closed down 2.9 at 159.3. This was
0.3 up from the low and 3.7 off the high.
March Soybean Oil finished down 0.16 at 21.32,
0.28 off the high and 0.07 up from the low.
Fears that the bumper crop from South America
will force soybean prices down into early 2005 along with a lack of supportive
news helped trigger the moderate break and move below yesterday’s lows. Volume
was slow in holiday type trade with positioning ahead of the delivery period for
the January soybeans and products a prominent feature. Funds and commercials
were active buyers late yesterday but the market lacked much follow-through to
the upside in overnight trade or early today. Export news is slow and cash basis
levels were steady. Reports of Asia rust in Argentina provided some underlying
support while good growing conditions for most of South America producing
regions helped to pressure. Weak trade action at the China exchange overnight
and fears that China buying could temporarily slow along with fears that US
producer selling could pick-up next week added to the early bearish tone. March
Soybean resistance points come in at 552 and 553 1/2 with support at 542 and 537
1/2.
Technical Outlook
BEANS (MAR) 12/29/2004: 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 close below the 1st swing support could weigh on the
market. The next upside objective is 555 3/4. The next area of resistance is
around 550 1/2 and 555 3/4, while 1st support hits today at 543 and below there
at 540 1/2.
MEAL (MAR) 12/29/2004: The close below the 60-day
moving average is an indication the longer-term trend has turned down. The daily
stochastics have crossed over down which is a bearish indication. 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 target is 156.2. The
next area of resistance is around 161.3 and 164.1, while 1st support hits today
at 157.3 and below there at 156.2.
BEANOIL (MAR) 12/29/2004: 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
slightly negative indicator that the close was under the swing pivot. The next
upside objective is 21.72. The next area of resistance is around 21.49 and
21.72, while 1st support hits today at 21.15 and below there at 21.03.
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WHEAT MARKET RECAP
12/28/2004
March Wheat finished unchanged at 305, 1 off the high and 3 up
from the low. May Wheat closed down 1 1/4 at 311 1/4. This was 1 3/4 up from the
low and 1 1/4 off the high.
The improved weather situation for the plains and
the southern Midwest winter wheat growing areas is seen as a bearish factor as
crop conditions for the winter wheat crop remain favorable in the US. In
addition, there is a lack of crop concerns for other key world producers. Export
news was quiet overnight with traders still waiting for news regarding the Iraq
tender. Basis levels were steady with producer selling light. The
Commitment-of-Traders report with options, released yesterday afternoon showed
the market in a bearish set-up but the buying trend of the large trader is
considered supportive. Funds were still net short nearly 31,000 contracts after
reducing the net short by 7214 contracts for the week ending December 21st.
March wheat resistance comes in at 305 and 307 1/2 with support at 303 1/4 and
301 1/4.
Technical Outlook
WHEAT (MAR) 12/29/2004: 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. It is a slightly negative indicator
that the close was lower than the pivot swing number. The next upside objective
is 308 1/2. The next area of resistance is around 307 and 308 1/2, while 1st
support hits today at 303 and below there at 300 1/2.
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LIVE CATTLE RECAP
12/28/2004
February Live Cattle closed down 1.22 at 90.55.
This was 0.02 up from the low and 1.35 off the high.
January Feeder Cattle finished down 0.87 at
104.95, 1.35 off the high and 0.55 up from the low.
February cattle moved higher on the day early in
the session but the lack of new buying to support a contract high triggered a
wave of long liquidation selling to trigger the long liquidation sell-off and
sharply lower trade. Ideas that packer demand will be weak during the first week
of 2005 due to the availability of contracted cattle by packers helped pressure
the market as packers may back away from the cash market. Boxed-beef cut-out
values at mid-session were up $.78 to $144.00 as compared with $138.78 last week
at this time. While traders expect cash markets to trade near $92 this week, up
$2.00 from last week, packer bids emerged at just $87-$88 today which may have
helped trigger the sell-off. Improved weather conditions in the plains added to
the bearish tone.
Technical Outlook
CATTLE (FEB) 12/29/2004: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The cross over and close above the 18-day moving average is an
indication the longer-term trend has turned positive. The defensive setup, with
the close under the 2nd swing support, could cause some early weakness. The next
upside objective is 92.250. The next area of resistance is around 91.220 and
92.250, while 1st support hits today at 89.870 and below there at 89.520.
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LEAN HOGS RECAP
12/28/2004
February Lean Hogs closed down 1.02 at 73.75.
This was 0.35 up from the low and 1.20 off the high.
February Pork Bellies finished down 1.87 at
93.75, 0.75 off the high and 0.35 up from the low.
The cash market was higher this morning but
futures came under selling pressure from weakness in the pork product market
yesterday afternoon and from positioning ahead of the USDA report. Cash hogs
were.50 higher at terminals. The CME 2-day lean index for the period ending
December 23rd was reported at 65.46, down $.92 on the session and down from
71.66 one week ago. The USDA Hogs and Pigs report, release after the close, was
considered bullish with the market called 75 higher on the opening. All Hogs and
Pigs as of December 1st came in at 100% of last year as compared with the
average trade estimate of 101.4% (range 100.1-102). The USDA pegged kept for
Market hogs at 100% of last year as compared with the average trade estimate at
101.5% (range 100.3-102) and Kept for Breeding Supply was pegged at 99% of last
year vs. the trade estimates at 101% (range 98.6-102). In addition, the weekly
cold storage report is expected to show a net increase in belly stocks of near
3.0-4.0 million pounds as compared with 5.989 million pound increase last week.
The surge higher yesterday left futures overbought ahead of the report which
contributed to the weakness today.
Technical Outlook
HOGS (FEB) 12/29/2004: The upside crossover (9
above 18) of the moving averages suggests a developing short-term uptrend.
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 objective is at 75.500. The next area of resistance is
around 74.520 and 75.500, while 1st support hits today at 73.000 and below there
at 72.420.
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COCOA MARKET RECAP
12/28/2004
March Cocoa finished down 3 at 1561, 27 off the
high and 5 up from the low.
The cocoa market forged an extremely wide trading
range in a period in which many might have expected lackluster holiday type
trade. However, it was clear that the attempt to rally was definitively rejected
and prices preferred to return to the vicinity of the recent consolidation lows.
Either the Press hasn’t been covering the political turmoil at the Ivory Coast
or things have been relatively quiet and that favors the bear camp. With the
Dollar even managing to find support it would seem like the arbitrage support
for cocoa was less than normal on Tuesday and that might have fostered the slide
off the highs.
Technical Outlook
COCOA (MAR) 12/29/2004: 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 daily closing price reversal down is a negative indicator for prices. The
market’s close below the pivot swing number is a mildly negative setup. The next
downside target is now at 1535. The next area of resistance is around 1577 and
1598, while 1st support hits today at 1545 and below there at 1535.
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COFFEE MARKET RECAP
12/28/2004
March Coffee closed up 0.50 at 105.20. This was
1.45 up from the low and 1.05 off the high.
The coffee market forged a rather wild range and
did manage a new low for the move before bouncing into the close. The Press
reported buying by the locals and that probably leaves the 103.75 level as a
critical pivot point zone in the coming sessions. With the recent COT report
putting the small spec and fund long at 50,000 contracts we suspect that the
longs were initially a little concerned about the existing overbought condition
but apparently they weren’t so concerned that they threw in the towel.
Technical Outlook
COFFEE (MAR) 12/29/2004: 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 upside closing price reversal on the daily chart is
somewhat bullish. The market tilt is slightly negative with the close under the
pivot. The near-term upside objective is at 107.55. The next area of resistance
is around 106.40 and 107.55, while 1st support hits today at 103.95 and below
there at 102.60.
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SUGAR MARKET RECAP
12/28/2004
March Sugar closed up 0.03 at 9.02. This was 0.06
up from the low and 0.01 off the high.
March sugar closed 3 higher on the session and at
the highest level since late October which could attract additional technical
support ahead of the long weekend. Fears that long liquidation selling from
speculators who exit ahead of the New Year have subsided. Some producer selling
has been noted on the rally but talk of increased demand from India and other
key importers has helped provide support. Lower freight rates have helped offset
higher flat prices to encourage buyers to extend coverage. A firm tone for
energy markets added to the positive tone.
Technical Outlook
SUGAR (MAR) 12/29/2004: The moving average
crossover up (9 above 18) indicates a possible developing short-term uptrend.
Daily stochastics have risen into overbought territory which will tend to
support reversal action if it occurs. 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 near-term
upside target is at 9.07. The next area of resistance is around 9.05 and 9.07,
while 1st support hits today at 8.99 and below there at 8.94.
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COTTON MARKET RECAP
12/28/2004
March Cotton finished up 1.28 at 44.20, 0.04 off
the high and 1.20 up from the low.
March cotton gapped higher and experienced a
steady flow of speculative buying which was thought to be short-covering.
Failure to break-out to the downside on the probe on Monday left the market in a
short-covering mode ahead of the long holiday weekend which begins with early
closing times for some New York markets on Thursday and all of the commodity
markets will be closed on Friday. The Commitment-of-Traders report with options,
released yesterday afternoon showed the market in a bearish set-up, but the
buying trend of the fund trader is slightly friendly. Funds covered over 5,400
contracts for the week ending December 21st but funds were still net short over
19,000 contracts on the 21st. Certified stocks were up slightly. Talk of strong
demand from China, fears of lower planted acreage in the US and China for next
year and a lack of aggressive selling from producers are factors which have
provided some underlying support.
Technical Outlook
COTTON (MAR) 12/29/2004: The cross over and close
above the 40-day moving average is an indication the longer-term trend has
turned positive. The daily stochastics have crossed over up which is a bullish
indication. 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. 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 near-term upside objective is at 45.15. The next
area of resistance is around 44.82 and 45.15, while 1st support hits today at
43.58 and below there at 42.67.