Has Crude Oil Made A Short-Term Top?

The short-term weather which many traders saw as
bearish failed to pressure the market early as the focus of attention was still
on the possibility that yields in the northern cornbelt will be reduced if there
is an early frost. The slow maturity pace in South Dakota, Minnesota and parts
of northern Iowa was a strong enough force to keep the market in a
short-covering mode early but the late selling was met with very minimal new
buying interest and the market fell sharply under fast-market conditions. The
COT reports on the weekend showed a hefty net short position from speculators
but the buying slowed up and futures collapsed. Talk of lower feed prices in the
southeast helped to pressure and weakness in the wheat added to the bearish
tone. Slow producer selling and firm cash basis levels were seen early but there
is a lack of short-term export news. For the weekly export sales report,
released before the opening, traders are looking for sales near 500,000-800,000
tons as compared with 717,600 tons last week. Support for December corn comes in
at 235 and 232 1/2 with 242 1/4 and 245 1/4 as resistance.

Technical Outlook

SOY COMPLEX RECAP

8/25/2004

September Soybeans finished up 3 1/4 at 623 1/4,
14 1/4 off the high and 6 3/4 up from the low. November Soybeans closed up 6 1/4
at 612 1/2. This was 10 up from the low and 13 1/2 off the high.

December Soymeal closed up 2 at 183.2. This was
3.2 up from the low and 4.1 off the high.

December Soybean Oil finished up 0.24 at 23.76,
0.34 off the high and 0.28 up from the low.

Concerns that the crops in the northern cornbelt
will not mature ahead of the cold weather into the fall helped to provide
another boost to the market early in the session but the market collapsed late
in the day with active long liquidation selling noted. Talk of lower cash meal
values and talk that yields are coming in high for harvest in the delta and in
the southeast were seen as bearish developments. Cash markets for soybeans were
firm with talk of interest from China for US soybeans. The bears were hopeful
that the warm and wet short-term forecast might increase the selling in the pit
but this did not materialize as the market focus is on weather for the
mid-to-late September time frame and not on the short-term trend. More cold
weather in the forecast for central Alberta and western Saskatchewan for the
rest of this week added to the supportive news for the rapeseed market in
Winnipeg which also supported the CBOT oil futures early in the session. For
Thursday’s Census crush report, traders are looking for crush near 115.7 million
bushels, Oil stocks near 1.4 billion pounds and meal stocks near 340,000 tons.
For the weekly export sales report, released before the opening, traders are
looking for soybean sales near 250,000-400,000 tons, meal sales at
60,000-120,000 tons and oil sales near 1,000-5,000 tons. November soybean
support comes in at 597 1/2 and 589 with 612 and 633 as resistance.

Technical Outlook

BEANS (NOV) 08/26/2004: The market now above the
40-day moving average suggests the longer-term trend has turned up. 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.
A positive signal was given by the outside day up. A positive setup occurred
with the close over the 1st swing resistance. The next upside objective is 636
3/4. The next area of resistance is around 624 1/4 and 636 3/4, while 1st
support hits today at 600 3/4 and below there at 590.

MEAL (DEC) 08/26/2004: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The market’s close above the 9-day moving average suggests the
short-term trend remains positive. The upside closing price reversal on the
daily chart is somewhat bullish. A positive setup occurred with the close over
the 1st swing resistance. The next upside objective is 190.7. The next area of
resistance is around 186.8 and 190.7, while 1st support hits today at 179.6 and
below there at 176.2.

BEANOIL (DEC) 08/26/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The market’s short-term trend
is positive on the close above the 9-day moving average. A positive setup
occurred with the close over the 1st swing resistance. The next upside objective
is 24.39. The 9-day RSI over 70 indicates the market is approaching overbought
levels. The next area of resistance is around 24.06 and 24.39, while 1st support
hits today at 23.45 and below there at 23.16.

 

WHEAT MARKET RECAP

8/25/2004

September Wheat finished down 5 1/2 at 306, 10 off the high
and 1 1/2 up from the low. December Wheat closed down 5 1/4 at 319. This was 2
1/2 up from the low and 10 off the high.

Demand concerns helped to push the market lower
early in the session but the strength in the other grains and some light
concerns with too much rain in areas which are prepared for more harvest (such
as the UK, Germany and North Dakota) helped to provide a boost. News that Egypt
passed on their buying tender this morning because “prices were not suitable”
helped to trigger the early break. In addition, CBOT prices were further
depressed on news that China buyers switched 140,000 tons of soft red wheat to
spring wheat. Failure to hold minor support on the correction this week leaves
the chart pattern bearish with the appearance of a bear flag or a continuation
of the downtrend. The next downside swing objective off of this pattern would be
299 3/4 basis the December futures. For the weekly export sales report, released
before the opening, traders are looking for sales near 300,000-500,000 tons as
compared with 743,200 tons last week. Support for December wheat comes in at 311
3/4 with resistance at 321 and 323 3/4.

Technical Outlook

WHEAT (DEC) 08/26/2004: 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.
The swing indicator gave a moderately negative reading with the close below the
1st support number. The next upside objective is 333 1/4. The next area of
resistance is around 325 1/4 and 333 1/4, while 1st support hits today at 312
3/4 and below there at 308 1/2.

 

LIVE CATTLE RECAP

8/25/2004

October Live Cattle closed down 0.40 at 83.55. This was 0.25
up from the low and 0.82 off the high.

October Feeder Cattle finished down 0.42 at 110.22, 0.77 off
the high and 0.32 up from the low.

After gapping to the lowest price since May 6th,
the October managed to trade higher on the session but the pork strength was not
enough to support increased buying and the market closed lower for the 8th
session in a row. There was still no trade on the week for cash cattle in the
panhandle with bids at $81.00 and offers at $86-87. Traders feel that cash might
trade as low as $84.00 this week as compared with $87.00 last week. Unlike the
hog market, funds were holding a hefty net long position in cattle coming into
the week and there is still no sign that the long liquidation mode is complete.
Boxed beef cutout values (600-750 choice) were down 4 cents at mid-session to
$140.36 from $140.06 last week at this time. Other cuts were down 58 cents to up
18 cents.

Technical Outlook

CATTLE (OCT) 08/26/2004: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. 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 82.620. The 9-day RSI under 30
indicates the market is approaching oversold levels. The next area of resistance
is around 84.070 and 84.750, while 1st support hits today at 83.020 and below
there at 82.620.

 

LEAN HOGS RECAP

8/25/2004

October Lean Hogs closed up 0.05 at 63.32. This was 0.82 up
from the low and 0.97 off the high.

February Pork Bellies finished down 0.25 at 92.65, 0.50 off
the high and 0.60 up from the low.

October hogs gapped lower on the session and fell
to as low as 62.50 before the fund selling slowed and futures recovered to trade
sharply higher on the session. The huge discount of futures to the cash market
may have helped to slow the long liquidation selling pressure from the fund
traders which has been the bearish force for the past several days. Cash hogs
were $.50-$1.00 lower which may have contributed to the early weakness. The CME
2-day lean index for the period ending August 23rd was down 32 cents from the
previous session to $75.05 as compared with 79.53 on August 11th. The rate of
decline seems to be slower than expected which helped the October futures bounce
from key support at 62.60. Weekly average weights for Iowa/Minnesota for the
week ending August 21st came in at 260.9 pounds, up 1 pound from the previous
week and up 3 pounds from last year at this time. Heavy weights and active
slaughter pace would suggest that the market may need to absorb a large
production base for the next few weeks.

Technical Outlook

HOGS (OCT) 08/26/2004: Daily stochastics are
trending lower but have declined into oversold territory. A negative signal for
trend short-term was given on a close under the 9-bar moving average. The upside
daily closing price reversal gives the market a bullish tilt. It is a slightly
negative indicator that the close was lower than the pivot swing number. The
next downside target is 61.570. The next area of resistance is around 64.200 and
65.150, while 1st support hits today at 62.420 and below there at 61.570.

 

COCOA MARKET RECAP

8/25/2004

September Cocoa finished down 21 at 1658, 12 off the high and
13 up from the low.

The cocoa market came under pressure again and
this time it violated critical support and stayed down. With the trade reporting
speculative selling by the funds and the small specs and the commercial trade
apparently standing back from the market it would seem that prices are searching
for support and can’t find it. While rain events aren’t the dominating reason
for the declines they seem to be playing a role in the decline. With Ivory Coast
farmers pushing for a guaranteed minimum price, it is possible that the market
is fearing higher future production but that issue is not something that should
impact prices in the short term.

Technical Outlook

COCOA (DEC) 08/26/2004: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The market’s short-term trend is negative as the close remains
below the 9-day moving average. The market’s close below the 1st swing support
number suggests a moderately negative setup for today. The next upside target is
1730. The next area of resistance is around 1696 and 1730, while 1st support
hits today at 1640 and below there at 1617.

 

COFFEE MARKET RECAP

8/25/2004

September Coffee closed up 0.35 at 69.80. This was 0.90 up
from the low and 0.10 off the high.

The coffee market closed slightly higher but did
manage a bigger downside probe in the session. The small spec contingent is
still dominating the action but with volume and open interest declining it would
seem that speculative trading interest in the market is waning and that could
spell even more losses ahead. With the weather playing less and less of a role
in the daily action of coffee, we suspect that a number of specs are set to lose
their bullish resolve as quality problems in Brazil are declining.

Technical Outlook

COFFEE (DEC) 08/26/2004: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. A positive signal for trend short-term was given on a close over the
9-bar moving average. The close over the pivot swing is a somewhat positive
setup. The near-term upside target is at 74.50. The next area of resistance is
around 74.10 and 74.50, while 1st support hits today at 72.95 and below there at
72.15.

 

SUGAR MARKET RECAP

8/25/2004

October Sugar closed up 0.03 at 7.67. This was 0.08 up from
the low and 0.04 off the high.

October sugar closed slightly higher in quiet,
two-sided trade. The close was back into the middle of the recent 8-day trading
range as traders await more fundamental news for direction. Cash business was
thought to be improving on the recent break but this has not been confirmed with
cash dealers. Talk of hurricane damage in Cuba and some light concerns with the
China crop due to typhoon this week helped to prove support on the lower
opening. There was still talk in London of possible India buying and trade
houses helped support the market. Ideas that speculators may not be done
liquidating part of a massive net long position was seen as a limiting factor on
the rally.

Technical Outlook

SUGAR (OCT) 08/26/2004: Daily momentum studies
are on the rise from low levels and should accelerate a move higher on a push
through the 1st swing resistance. A negative signal for trend short-term was
given on a close under the 9-bar moving average. 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 upside
objective is 7.78. The next area of resistance is around 7.73 and 7.78, while
1st support hits today at 7.61 and below there at 7.54.

 

COTTON MARKET RECAP

8/25/2004

October Cotton finished down 0.71 at 50.24, 1.04 off the high
and 0.24 up from the low.

December cotton closed 120 points lower as the
massive speculative short covering move seen over the last 8 sessions may be
close to running its course. The funds were holding a large net short position
as of the last COT report on Aug 17th, but the market is 4.81 cents above where
the last COT report was measured. Therefore, the market should now be more
balanced. The rally in cotton over the past week may have discouraged cash
buyers. Therefore, a strong export sales number above estimates would be
surprising and would likely lead to more short covering with a near-term upside
target at 52.50. For the weekly export sales report, released before the
opening, traders are looking for sales between 50,000-150,000 bales as compared
with 246,300 bales last week and shipments between 100,000 and 130,000 bales vs
244,500 bales last week. While Dec cotton may rally if export sales come in
strong, the forecast for rising world cotton supplies keeps the longer-term
outlook bearish.

Technical Outlook

COTTON (OCT) 08/26/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The market’s short-term trend
is positive on the close above the 9-day moving average. The daily closing price
reversal down puts the market on the defensive. The market’s close below the 1st
swing support number suggests a moderately negative setup for today. The
near-term upside objective is at 51.72. The next area of resistance is around
50.88 and 51.72, while 1st support hits today at 49.60 and below there at 49.16.