Gold Plunges–Here’s Why

BOND MARKET RECAP

11/2/2004

December Bonds closed up 0-04 at 113-08. This was
0-10 up from the low and 0-01 off the high.

December 10 Yr Treasury Notes finished up 0-035
at 113-075, 0-005 off the high and 0-075 up from the low.

The Treasury market came under minimal
pressure early Tuesday in the face of early strength in the US equity market.
However, a decline in the Challenger layoff report could have put more
significant pressure on Treasuries but it was clear that traders were unwilling
to push prices very far in either direction. Slightly weaker energy prices could
also have pressured Treasury prices but again the market really didn’t show much
reaction.

Technical Outlook

BONDS (DEC) 11/03/2004: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. The market’s short-term trend is negative as the close
remains below the 9-day moving average. The daily closing price reversal up on
the daily chart is somewhat positive. It is a mildly bullish indicator that the
market closed over the pivot swing number. The next downside target is 112-25.
The next area of resistance is around 113-17 and 113-22, while 1st support hits
today at 113-03 and below there at 112-25.

TNOTES (DEC) 11/03/2004: Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The market’s short-term trend is negative as the close remains below the
9-day moving average. 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 next downside
target is now at 112-285. The next area of resistance is around 113-140 and
113-180, while 1st support hits today at 113-035 and below there at 112-285.

 

STOCK INDICES RECAP

11/2/2004

December S&P finished down 0.6 at 1130.2, 10.6
off the high and 2.2 up from the low.

December S&P E-Mini closed up 0.25 at 1131. This
was 3.25 up from the low and 10 off the high.

December Dow closed down 14 at 10028. This was 28
up from the low and 97 off the high.

December Dow E-Mini finished down 18 at 10024,
101 off the high and 24 up from the low.

The stock market posted an extremely impressive
rally Tuesday and did so because buyers were speculating on an end to political
tension. However, it might have been a little premature to assume that the
election result will be decided without a legal tussle. Investors were noted
buyers of defensive stocks early Tuesday and that seemed to give the bulls a
head start. Slightly lower energy prices might have given the market another
reason to puff up prices. As in the gold market, we have to wonder if the stock
market was assuming too much, too early on the election front as serious issues
could easily surface before everything is said and done.

Technical Outlook

S&P 500 (DEC) 11/03/2004: The upside crossover (9
above 18) of the moving averages suggests a developing short-term uptrend.
Studies are showing positive momentum but are now in overbought territory, so
some caution is warranted. The market’s short-term trend is positive on the
close above the 9-day moving average. The market could take on a defensive
posture with the daily closing price reversal down. It is a slightly negative
indicator that the close was lower than the pivot swing number. The next upside
objective is 1145.14. The next area of resistance is around 1136.69 and 1145.14,
while 1st support hits today at 1123.90 and below there at 1119.55.

SP EMINI (DEC) 11/03/2004: The upside crossover
(9 above 18) of the moving averages suggests a developing short-term uptrend.
Studies are showing positive momentum but are now in overbought territory, so
some caution is warranted. The close above the 9-day moving average is a
positive short-term indicator for trend. With the close higher than the pivot
swing number, the market is in a slightly bullish posture. The next upside
target is 1145.93. The next area of resistance is around 1137.62 and 1145.93,
while 1st support hits today at 1124.38 and below there at 1119.44.

NASDAQ (DEC) 11/03/2004: The market made a new
contract high on the rally. Studies are showing positive momentum but are now in
overbought territory, so some caution is warranted. A positive signal for trend
short-term was given on a close over the 9-bar moving average. It is a mildly
bullish indicator that the market closed over the pivot swing number. The next
upside target is 1522.25. The next area of resistance is around 1509.50 and
1522.25, while 1st support hits today at 1487.50 and below there at 1478.25.

MINIDOW (DEC) 11/03/2004: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The market’s close above the 9-day moving average
suggests the short-term trend remains positive. The market could take on a
defensive posture with the daily closing price reversal down. It is a slightly
negative indicator that the close was under the swing pivot. The next upside
target is 10168. The next area of resistance is around 10086 and 10168, while
1st support hits today at 9962 and below there at 9919.

 

CURRENCY MARKET RECAP

11/2/2004

December US Dollar finished up 23 at 8557, 11 off
the high and 33 up from the low.

December Euro finished down 0.56 at 126.87, 0.29
off the high and 0.23 up from the low.

December Euro Dollar closed unchanged at 97.655.
This was 0.01 up from the low and 0.005 off the high.

December Canadian Dollar closed down 0.33 at
81.49. This was 0.09 up from the low and 0.21 off the high.

December British Pound finished up 0.4 at 183.09,
0.33 off the high and 0.16 up from the low.

December Swiss closed down 0.44 at 82.84. This
was 0.21 up from the low and 0.31 off the high.

December Japanese Yen closed up 0.06 at 94.24.
This was 0.08 up from the low and 0.16 off the high.

The Dollar mostly drifted higher during the
action Tuesday as the trade was still in a profit taking mode or a book squaring
mode ahead of the election. However, the US Dollar was helped higher by lower
energy prices and a decline in the Challenger layoff report also helped to lift
the Dollar. However, the Dollar would still seem to have plenty of issues to
hold it back and as of the close Tuesday few could tell if the US election was
going to come out cleanly.

Technical Outlook

YEN (DEC) 11/03/2004: Daily stochastics turning
lower from overbought levels is bearish and will tend to reinforce a downside
break especially if near-term support is penetrated. A positive signal for trend
short-term was given on a close over the 9-bar moving average. The market has a
slightly positive tilt with the close over the swing pivot. The next downside
objective is 94.02. The market is approaching overbought levels with an RSI over
70. The next area of resistance is around 94.36 and 94.50, while 1st support
hits today at 94.12 and below there at 94.02.

EURO (DEC) 11/03/2004: Momentum studies trending
lower from overbought levels is a bearish indicator and would tend to reinforce
lower price action. 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 next
downside objective is 126.37. The next area of resistance is around 127.13 and
127.40, while 1st support hits today at 126.61 and below there at 126.37.

 

PRECIOUS METALS RECAP

11/2/2004

December Gold closed down 7.4 at 420.8. This was
2.8 up from the low and 6 off the high.

December Silver finished down 0.31 at 7.02, 0.235
off the high and 0.1 up from the low.

January Platinum closed down 5.8 at 826.6. This
was 5.4 up from the low and 1.4 off the high.

The gold and silver market led off on the post
election washout that many Press outlets were predicting. We doubt that the
slightly higher US Dollar prompted the washout but we suspect that the sharp
gains in the stock market and the slight weakness in oil prices contributed to
the fund liquidation. Both gold and silver were already holding massive spec and
fund long positions and given the repeated failure on the charts it’s not
surprising that stop loss selling waves were invoked.

Technical Outlook

SILVER (DEC) 11/03/2004: A crossover down in the
daily stochastics is a bearish signal. Momentum studies trending lower at
mid-range could accelerate a price break if support levels are broken. The
market’s short-term trend is negative as the close remains below the 9-day
moving average. The market is in a bearish position with the close below the 2nd
swing support number. The next downside target is now at 671.9. The next area of
resistance is around 718.8 and 738.9, while 1st support hits today at 685.3 and
below there at 671.9.

GOLD (DEC) 11/03/2004: A crossover down in the
daily stochastics is a bearish signal. Negative momentum studies in the neutral
zone will tend to reinforce lower price action. The market’s short-term trend is
negative as the close remains below the 9-day moving average. More selling
pressure is likely given yesterday’s gap lower price action on the day session
chart. The close below the 2nd swing support number puts the market on the
defensive. The next downside target is 412.8. The next area of resistance is
around 425.2 and 430.4, while 1st support hits today at 416.4 and below there at
412.8.

 

COPPER MARKET RECAP

11/2/2004

December Copper finished up 1.30 at 132.05, 0.45
off the high and 1.85 up from the low.

Copper prices continues to hover above the old
consolidation and with talk of a possible strike in Peru, strong equity market
action and slightly lower energy prices we can understand the bullish tilt in
prices. Some copper traders were happy to see the Chinese step up for a
moderately large soybean purchase as that might suggest that the Chinese are
still in a buying mode for other commodities. Seeing better macro economic
prospects ahead might be much easier once the US election flap has passed and
that could be why some fund buyers were drifting back into the long side.

 

ENERGY MARKET RECAP

11/2/2004

December Crude Oil closed down 0.51 at 49.62.
This was 0.07 up from the low and 0.78 off the high.

December Heating Oil closed down 1.54 at 139.22.
This was 0.42 up from the low and 2.18 off the high.

December Unleaded Gas finished down 0.31 at
128.77, 1.63 off the high and 0.17 up from the low.

December Natural Gas finished down 0.15 at 8.57,
0.16 off the high and 0.10 up from the low.

December Propane closed unchanged at 0.90. This
was equal to the low and 0.00 off the high.

The energy complex was mostly weak with the
exception of unleaded which was mostly positive during the session. Many in the
marketplace continue to think that ultra high prices are dampening demand and
that OPEC is in the process of expanding the supply of light crude and that is
why the sellers are managing to control prices. Expectations for the weekly
inventory report call for another build in crude oil of 2 million barrels, but
the trade is mostly mixed on the potential change in the distillate stock
sector. We have to think that stronger equity prices and the hope that the US
would avoid a significant election controversy gave energy prices some support.

Technical Outlook

CRUDE OIL (DEC) 11/03/2004: The close below the
40-day moving average is an indication the longer-term trend has turned down. A
negative indicator was given with the downside crossover of the 9 & 18 bar
moving average. Daily stochastics are trending lower but have declined into
oversold territory. The close below the 9-day moving average is a negative
short-term indicator for trend. The market tilt is slightly negative with the
close under the pivot. The next downside target is 48.95. The next area of
resistance is around 50.04 and 50.64, while 1st support hits today at 49.20 and
below there at 48.95.

UNLEADED (DEC) 11/03/2004: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The market’s short-term trend is negative as the close
remains below the 9-day moving average. It is a slightly negative indicator that
the close was under the swing pivot. The next downside objective is 127.34. The
next area of resistance is around 129.66 and 130.93, while 1st support hits
today at 127.87 and below there at 127.34.

HEATING OIL (DEC) 11/03/2004: The market back
below the 40-day moving average suggests the longer-term trend could be turning
down. 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. 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. The next downside objective
is now at 137.06. The next area of resistance is around 140.52 and 142.26, while
1st support hits today at 137.92 and below there at 137.06.

 

CORN MARKET RECAP

11/2/2004

December Corn finished down 1/4 at 199 3/4,
1 3/4 off the high and 1/2 up from the low. March Corn closed up 1/4 at 211 1/4.
This was 3/4 up from the low and 1 1/2 off the high.

The market found some early support from the
strength in soybeans but a lack of fuel to support follow-through buying
triggered the weakness into the mid-session. Interior basis levels were weak and
the northwestern cornbelt is dry enough to see continued harvest progress,
especially in Minnesota and Iowa which are farthest behind. Iowa harvest is just
62% complete from 82% normal and Minnesota is now 45% harvested as compared with
95% last year and 84% for the 5-year average. Trade estimates for next weeks
USDA Crop Production report are beginning to hit the market. FC Stone pegged the
crop at 11.573 billion bushels as compared with last months USDA forecast at
11.613 billion. The weekly crop progress report showed the crop was 65%
harvested as compared with trade expectations at 63-65% harvested and compared
with 55% last week. South Korea bought 155,000 tons of optional origin corn.
Support for December corn comes in at 199 and 197 with resistance at 201 1/2 and
203 1/2.

Technical Outlook

CORN (DEC) 11/03/2004: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. A negative signal
for trend short-term was given on a close under the 9-bar moving average. It is
a slightly negative indicator that the close was under the swing pivot. The next
downside target is 198. The next area of resistance is around 200 3/4 and 202
1/4, while 1st support hits today at 198 3/4 and below there at 198.

 

SOY COMPLEX RECAP

11/2/2004

January Soybeans finished up 4 at 525 1/2, 1/2
off the high and 3 1/2 up from the low. March Soybeans closed up 1 1/2 at 529.
This was 2 3/4 up from the low and 1 1/2 off the high.

December Soymeal closed up 1 at 151.1. This was
1.0 up from the low and 0.9 off the high.

December Soybean Oil finished down 0.19 at 20.99,
0.43 off the high and 0.09 up from the low.

Ideas that the market was oversold after Monday’s
break and a lack of new bearish news helped to trigger a bounce in soybeans.
Some new demand and a lack of deliveries along with a firm tone in the cash
market helped to support. November soybeans gained sharply on January as there
was only 1 contract delivered overnight and producer selling remains light.
However, traders feel that once enough soybeans are purchased to fill the
pipeline that prices for 2005 delivery will remain weak. The USDA confirmed that
US exporters sold 180,000 tons of soybeans to China. Rain slowed the harvest
across the central cornbelt and helped provide some psychological support. The
weekly crop progress report showed the crop was 84% complete as compared with
trade expectations of 82-86% and 89% as the 14-year average for this time of the
year. Trade estimates for next weeks USDA Crop Production report are beginning
to hit the market. FC Stone pegged the crop at 3.118 billion bushels as compared
with last months USDA forecast at 3.107 billion. January soybean resistance
comes in at 528 and 530 with support at 521 and 514.

Technical Outlook

BEANS (JAN) 11/03/2004: Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
A negative signal for trend short-term was given on a close under the 9-bar
moving average. It is a mildly bullish indicator that the market closed over the
pivot swing number. The next downside target is 520 3/4. The next area of
resistance is around 527 1/2 and 528 3/4, while 1st support hits today at 523
1/2 and below there at 520 3/4.

MEAL (DEC) 11/03/2004: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
close below the 9-day moving average is a negative short-term indicator for
trend. The market has a slightly positive tilt with the close over the swing
pivot. The next downside target is 149.2. The next area of resistance is around
152.0 and 152.9, while 1st support hits today at 150.2 and below there at 149.2.

BEANOIL (DEC) 11/03/2004: The daily stochastics
gave a bearish indicator with a crossover down. Momentum studies trending lower
at mid-range should accelerate a move lower if support levels are taken out. The
close below the 9-day moving average is a negative short-term indicator for
trend. The outside day down and close below the previous day’s low is a negative
signal. The market setup is somewhat negative with the close under the 1st swing
support. The next downside target is now at 20.56. The next area of resistance
is around 21.25 and 21.59, while 1st support hits today at 20.73 and below there
at 20.56.

 

WHEAT MARKET RECAP

11/2/2004

December Wheat finished down 4 at 302 1/4, 6 3/4 off the high
and 1/4 up from the low. March Wheat closed down 4 at 315. This was 1/2 up from
the low and 6 off the high.

Light speculative short-covering helped support
the early bounce but the market seemed to lack follow-through buying interest
and some light fund selling emerged to push futures lower on the day. Aggressive
fund selling has pounded the market lower in the last two trading sessions. The
trade psychology remains weak with talk of absorbing a record world crop and
also talk of improving crop conditions for the freshly planted winter wheat crop
helped to pressure. Crops rated in good to excellent condition came in at 78%
from 76% last week and 49% last year at this time. Producer selling was said to
be light with cash basis levels steady. The Ag Ministry in China indicated that
drought conditions in parts of the southern growing regions has delayed and in
some cases prevented the planting of the winter wheat crop. December wheat
support comes in at 303 and 300 with 308 and 311 1/2 as resistance.

Technical Outlook

WHEAT (DEC) 11/03/2004: Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
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. The next downside target is now at 297. The next area of resistance is
around 305 3/4 and 310 3/4, while 1st support hits today at 298 3/4 and below
there at 297.

 

LIVE CATTLE RECAP

11/2/2004

December Live Cattle closed down 0.20 at 83.75.
This was 0.50 up from the low and 0.42 off the high.

November Feeder Cattle finished down 0.55 at
108.15, 0.65 off the high and 0.10 up from the low.

The cattle market pushed moderately lower on the
session for before finding some light buying support after the move to the
lowest level since Mid-May failed to attract new sellers. Boxed-beef prices were
down $1.87 to $135.94 at mid-session as compared with $143.01 last week at this
time. Traders believe that the steep drop in beef prices and the increase in the
showlist this week could cause cash market to fall $1.00-$2.00 this week after
trading at $85.00 late last week. Offers in the cash market were at
$87.00-$88.00 with packer bids at $81.00.

Technical Outlook

CATTLE (DEC) 11/03/2004: Momentum studies are
declining, but have fallen to oversold levels. The market’s close below the
9-day moving average is an indication the short-term trend remains negative. The
market tilt is slightly negative with the close under the pivot. The next
downside objective is 82.820. With a reading under 30, the 9-day RSI is
approaching oversold levels. The next area of resistance is around 84.200 and
84.650, while 1st support hits today at 83.300 and below there at 82.820.

 

LEAN HOGS RECAP

11/2/2004

December Lean Hogs closed up 0.67 at 69.85. This
was 1.00 up from the low and 0.25 off the high.

February Pork Bellies finished up 0.20 at 98.00,
1.20 off the high and 0.45 up from the low.

A burst in cash hogs prices due to strength in
pork values and stronger packer demand helped support solid early gains and new
contract highs for the February futures. The higher opening failed to attract
new buying support, especially for the February futures but the discount of
futures to cash helped support. Peoria live hog markets were up $2.00 which
supported the early strength. The weekly cold storage report, released this
afternoon, is expected to show an in-movement of 500,000-650,000 pounds of pork
bellies into cold storage. The CME 2-Day Lean Index for the period ending
October 29th was reported at 71.21, up 8 cents from the previous session and up
from 70.26 the previous week.

Technical Outlook

HOGS (DEC) 11/03/2004: Rising stochastics at
overbought levels warrant some caution for bulls. A positive signal for trend
short-term was given on a close over the 9-bar moving average. It is a mildly
bullish indicator that the market closed over the pivot swing number. The next
upside target is 70.900. The next area of resistance is around 70.470 and
70.900, while 1st support hits today at 69.250 and below there at 68.420.

 

COCOA MARKET RECAP

11/2/2004

December Cocoa finished unchanged at 1453, 14 off
the high and 2 up from the low.

The cocoa market attempted a fleeting bounce but
gave up the gains into the close when it became apparent that the blocking the
port flow wasn’t going to drive prices sharply higher. It would seem like some
producers were inclined to sell into the minor rally Tuesday and that really
would seem to undermine the effort to puff up prices by the blockade. Some
reports are suggesting that there are fewer pods on the trees and that might
begin to rekindle the fears that dryness in the summer months has in fact
reduced the size of the coming crop.

Technical Outlook

COCOA (DEC) 11/03/2004: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The market’s
close below the 9-day moving average is an indication the short-term trend
remains negative. It is a slightly negative indicator that the close was under
the swing pivot. The next downside target is now at 1440. The next area of
resistance is around 1461 and 1472, while 1st support hits today at 1445 and
below there at 1440.

 

COFFEE MARKET RECAP

11/2/2004

December Coffee closed up 1.50 at 75.70. This was
1.80 up from the low and 0.10 off the high.

March coffee closed 150 higher on the session and
at the highs of the day as roaster buying, especially in London as the recent
break to 2-year lows has attracted some increased interest. Vietnam has a
massive harvest just ahead but stocks are tight. The technical action remains
bearish as the market is in a long liquidation mode and speculators were net
long near 14,000 contracts in the last traders report. The drawdown in stocks at
the New York exchange has helped provide some underlying support. Guatemala
exports for the first month of the 2004/2005 marketing year for October was
93,588 bags, down 17.7% from last year. Costa Rica’s 2004/2005 crop is expected
to be just 1.955 million bags from 2.119 million last year.

Technical Outlook

COFFEE (DEC) 11/03/2004: The daily stochastics
gave a bullish indicator with a crossover up. Positive momentum studies in the
neutral zone will tend to reinforce higher price action. A negative signal for
trend short-term was given on a close under the 9-bar moving average. With the
close over the 1st swing resistance number, the market is in a moderately
positive position. The next upside objective is 77.15. The next area of
resistance is around 76.65 and 77.15, while 1st support hits today at 74.80 and
below there at 73.40.

 

SUGAR MARKET RECAP

11/2/2004

March Sugar closed up 0.04 at 8.50. This was 0.05
up from the low and 0.07 off the high.

The market closed slightly lower in choppy in
two-sided trade with an inside trading session. Light trade house and some
speculative buying helped support but futures could not find enough new interest
to break-out of Monday’s range. The lack of new buying from key importers has
left the market in a long liquidation mode for the past few weeks but the
speculative selling dried up for the session. Brazil traders are away for a
holiday which may have kept the trading in cash markets, slow. China production
for the coming year could be negatively impacted by drought conditions
developing in their key growing areas of the south.

Technical Outlook

SUGAR (MAR) 11/03/2004: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The close below the 9-day moving average is a negative
short-term indicator for trend. The close over the pivot swing is a somewhat
positive setup. The next downside objective is 8.39. The next area of resistance
is around 8.55 and 8.62, while 1st support hits today at 8.44 and below there at
8.39.

 

COTTON MARKET RECAP

11/2/2004

December Cotton finished up 1.17 at 45.15, 0.15
off the high and 1.60 up from the low.

The cotton market opened lower but failed to find
new selling interest especially with snow moving into the Texas panhandle and
Lubbock Texas region. The Texas crop has been hit with cool and moist weather
recently which has slowed harvest progress and leaves some increased
possibilities of yield or quality damage. As of Sunday, the Texas crop was only
31% harvested as compared with 47% on average for this time of the year. On top
of potential weather problems in Texas, the market will begin to absorb trade
estimates for next weeks USDA Crop Production and Supply/demand report. The
International Cotton Advisory Committee pegged world cotton production at a
record 24.14 million tonnes, up 630,000 tons from last months estimate. World
demand is pegged at 21.97 million tons which leaves ending stocks at 9.84
million tonnes (45.2 million bales) from last years ending stocks of 7.67
million tonnes (35.24 million bales).

Technical Outlook

COTTON (DEC) 11/03/2004: Momentum studies are
declining, but have fallen to oversold levels. The market’s close below the
9-day moving average is an indication the short-term trend remains negative.
With the close over the 1st swing resistance number, the market is in a
moderately positive position. The next downside target is 43.04. The next area
of resistance is around 46.02 and 46.53, while 1st support hits today at 44.28
and below there at 43.04.