Has The Dollar Bottomed?
BOND MARKET RECAP
1/29/2004
The Treasury market could not shake the negative tilt provided by the recent Fed flap. Even after economic reports came in weaker than expected the bonds refused to show much in the way of fresh long interest. Maybe the expectations of a +4.8% GDP reading for the 4th quarter undermined the bull camp. After all a 4.8% growth rate with no inflation is not a bad economy. We also have to think that the rising Dollar kept the pressure on the Bonds as that means less potential for BOJ buying of Treasuries. It is also clear that the stock market isn’t easily undermined by negative developments and that highlights ongoing improvement in economic sentiment.
Technical Outlook
BONDS (MAR) 1/30/2004: The market tilt is slightly negative with the close under the pivot. Near-term resistance for bonds is at 111.05 and then again at 111.15, while swing support hits at 110.08 and below there at 109.21. A negative signal for trend short-term was given on a close under the 9-bar moving average. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 109.21.
T-NOTES(MAR) Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The next downside objective is now at 112.11. It is a mildly bullish indicator that the market closed over the pivot swing number. The major trend is down with the cross over back below the 40-day moving average. Near-term resistance for the T-Notes is at 113.13 and then again at 113.20, while swing support hits at 112.25 and below there at 112.11. The market’s short-term trend is negative as the close remains below the 9-day moving average.
STOCK INDICES RECAP
1/29/2004
The stock market continues to behave impressively despite a lack of support from the regularly scheduled economic reports. The initial claims did manage to decline but the ongoing claims rose moderately. Furthermore, the Help wanted Index decline 1 point and that means the economy isn’t hot or cold. However, the Dollar is rising sharply and that should serve to pull some foreign investors into the long side of US stocks. The trade is also looking forward to a +4.8% GDP growth rate in the report on Friday and that is a growth rate that is significantly better than most other economic regions. In conclusion, the bulls continue to have a case.
Technical Outlook
S&P500 (MAR) 1/30/2004: It is a slightly negative indicator that the close was under the swing pivot. The upside daily closing price reversal gives the market a bullish tilt. Underlying support comes in at 1123.95 and 1116.23, with overhead resistance at 1136.45 and 1141.23. The close below the 9-day moving average is a negative short-term indicator for trend. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside objective is now at 1116.23.
S&P E-Mini (MAR): A new contract high was made on the rally. The daily closing price reversal up is positive. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 1115.75. It is a slightly negative indicator that the close was lower than the pivot swing number. Near-term resistance for the S&P Mini is at 1136.75 and then again at 1141.75, while swing support hits at 1123.75 and below there at 1115.75. The market’s close below the 9-day moving average is an indication the short-term trend remains negative.
NASDAQ (MAR) The daily closing price reversal up is a positive indicator that could support higher prices. 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 market should run into resistance at 1512.25 and above there at 1520.38 with support at 1485.75 and 1467.38. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 1467.38.
MINI DOW (MAR) The upside daily closing price reversal gives the market a bullish tilt. The close below the 9-day moving average is a negative short-term indicator for trend. The market should run into resistance at 10525 and above there at 10572 with support at 10414 and 10350. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 10350. It is a slightly negative indicator that the close was under the swing pivot.
CURRENCY MARKET RECAP
1/29/2004
The Dollar managed to climb above another series of critical technical levels on the charts and that gives the idea of a major bottom some additional credence. We suspect that the rise in the Dollar this week will make the US GDP reading due out on Friday a little more important as the Euro zone growth is absolutely anemic when compared to the growth in the US. From sentiment in the marketplace it is generally accepted that the US recovery has been very poor even though the US growth surpasses the growth in all large countries (with the exception being China). In retrospect, the economic and interest rate differential was important to currency exchange rates.
Technical Outlook
YEN (MAR): A positive signal for trend short-term was given on a close over the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. Swing resistance is targeted at 94.81 and above there at 95.07, with the yen finding support around 94.27 and below there at 93.99. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 95.07.
EURO (MAR): Momentum studies are still bearish, but are now at oversold levels and will tend to support reversal action if it occurs. The next downside target is now at 1.2281. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing support for the Euro comes in at 1.2281, with overhead resistance at 1.2511. The close below the 9-day moving average is a negative short-term indicator for trend. The close below the 40-day moving average is an indication the longer-term trend is down. More selling pressure is likely given yesterday’s gap lower price action on the day session chart.
PRECIOUS METALS RECAP
1/29/2004
To sum up the action all one has to suggest is that capital and margin liquidation provided the lion share of the washout. When one considers that the fundamental reason for the bull market basically went away in the last several sessions, it is not surprising that the massive spec long position provided the impetus to smash down through several technical support levels on the charts. In fact, considering the magnitude of the spec long in gold and silver it would be foolish to think that the selling could end quickly. In fact, unless the Dollar falls back we have to think that the metals are under the gun until further notice.
Technical Outlook
SILVER (MAR): There could be some early pressure today given the market’s negative setup with the close below the 2nd swing support. Initial support for silver is at 602.5 and below there at 586.8 with resistance likely at 631.9 and 643.5. A negative indicator was given with the downside crossover of the 9 & 18 bar moving average. A bearish signal was triggered on a crossover down in the daily stochastics. The next downside objective is 586.8.
GOLD (APR): Support for gold today comes in near 389.00, while resistance is pegged at 414.20. A crossover down in the daily stochastics is a bearish signal. The next downside target is now at 389.00. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. The close below the 9-day moving average is a negative short-term indicator for trend. The close below the 40-day moving average is an indication the longer-term trend is down. More selling pressure is likely given yesterday’s gap lower price action on the day session chart.
COPPER MARKET RECAP
1/29/2004
The copper market might have declined in sympathy with the decline in gold and silver. The copper market should have seen some selling pressure as the market got wind that Phelps Dodge was planning to restart some idled US operations. The restart in production story was the second restart story of the week and that is an undermine. As of the close the market was sure how the labor negotiations were going but seeing those solved without the threat of strike could give the copper an additional liquidation push. The Chinese did come back buyers on the first day following the holiday but even that interest couldn’t keep prices firm.
ENERGY MARKET RECAP
1/29/2004
The energy market remained weak with the mild weather staring the market in the face next week. We also have to think that a higher Dollar is effectively giving OPEC needed relief from the “reported” revenues losses caused by the weak Dollar. We also have to think that the less than expected weekly natural gas inventory decline added to the negative feeling in the energy market. The crude oil market was carrying a lofty fund long and therefore the break down in prices this week probably caused some stop loss selling in the action Thursday. We also have to think that the market is generally less optimistic toward overall demand growth because of the daily numbers being thrown off by the US economy.
Technical Outlook
CRUDE OIL (MAR): The market setup is somewhat negative with the close under the 1st swing support. Support for crude is keyed on 32.27 and below there at 31.79, with resistance pegged at 33.36 and 33.97. The close below the 9-day moving average is a negative short-term indicator for trend. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 31.79. Short-term indicators on the defensive. Consider selling an intraday bounce.
UNLEADED GAS (MAR): Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 94.68. The market tilt is slightly negative with the close under the pivot. Resistance today is at 99.28, while support should be found around 94.68. A negative signal for trend short-term was given on a close under the 9-bar moving average.
HEATING OIL (MAR):The market setup is somewhat negative with the close under the 1st swing support. Heating oil should encounter support around 89.18, with resistance is at 95.98. Short-term indicators on the defensive. Consider selling an intraday bounce. The close below the 9-day moving average is a negative short-term indicator for trend. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 89.18.
CORN MARKET RECAP
1/29/2004
Corn prices finished mostly mixed after seeing some moderate follow through selling. However, it should be noted that corn did manage to trade on both sides of unchanged during the session. The weekly export sales expectations called for
A range of 600,000 to 900,000 tons which compares to the prior week reading of 999,400 tons. The actual export number was 775,400 tons, which is a middle of the road reading. The fact that the trade was seeing colder and wetter weather for Argentina this week end continued to combine with bird flu concerns to keep the pressure on corn prices.
Technical Outlook
CORN (MAR) 1/30/2004: Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The next downside target is now at 266 . It is a slightly negative indicator that the close was under the swing pivot. Market resistance comes in at 274 1/2 today, with support at 266 . The close below the 9-day moving average is a negative short-term indicator for trend.
SOY COMPLEX RECAP
1/29/2004
While the soybean market might have sent off a technical sign of a bottoming we are not sure if the fundamental tilt offered anything to the bulls that they can expect to use in the coming sessions. After seeing expectations for the weekly
Export sales of 400,000 to 600,000 tons the actual reading of -129,000 tons is certainly a negative. In the end the soybeans saw a two sided trade that just happened to end up in positive ground. We also have to think that weather is more bearish than positive for the soybeans. Maybe the sharply rising Dollar is discouraging Chinese purchases of US beans. A lack of developments leaves the market without direction but the news that Pakistan has bird flue under control is a potential positive.
Technical Outlook
SOYBEANS (MAR) 01/30/04 The daily closing price reversal up is a positive indicator that could support higher prices. The market tilt is slightly negative with the close under the pivot. The next area of resistance is around 816 and 822 1/2, while 1st support hits today at 802 and below there at 794 1/2. A negative signal for trend short-term was given on a close under the 9-bar moving average. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 794 1/2.
MEAL (MAR): Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 248.1. First resistance comes in at 254.0, with support at 250.3. The close below the 9-day moving average is a negative short-term indicator for trend. It is a slightly negative indicator that the close was under the swing pivot.
BEAN OIL (MAR): A negative signal for trend short-term was given on a close under the 9-bar moving average. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 28.60. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The daily closing price reversal up is a positive indicator that could support higher prices. Daily swing resistance is found at 29.30 and above there at 29.52. Support should be encountered at 28.84 and 28.60.
WHEAT MARKET RECAP
1/29/2004
After seeing export sales estimates for wheat of 300,000 to 500,000 tons the actual reading of 580,600 tons is a slight positive even if that reading is significantly below the prior week’s reading. The idea that the US wheat is becoming less competitive because of the Dollar has been rising is certainly a consideration but the most recent export sales figure is well above the pace needed to reach the USDA projection. The trade was reporting more interest in European wheat as a result of the Dollar and that undermines the US market.
Technical Outlook
WHEAT (MAR) 1/30/2004: The market setup is supportive for early gains with the close over the 1st swing resistance. Expect near-term support around 376 and below there at 370 3/4, with resistance levels at 384 and 386 3/4. A negative signal for trend short-term was given on a close under the 9-bar moving average. Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The next downside objective is 370 3/4.
LIVE CATTLE RECAP
1/29/2004
April cattle continued to sell off sharply as cash cattle traded sharply. Cash trade was seen at $80 per cwt which was $5 to $6 lower than week ago sales. Boxed beef cut out value fell $1.95 to $138.81. Also, packer profit margins fell further in to the red at nearly a negative $67 per head vs a positive $15.95 last week. With cold artic cold weather gripping the east coast, traders feared a dip in retail demand for beef. April cattle’s next support is around 72.07.
Technical Outlook
CATTLE (APR) 1/30/2004: Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 71.52. The close below the 1st swing support could weigh on the market. Bearish daily studies indicate selling minor rallies this session. Support should be encountered at 71.92 and below there at 71.52. Market resistance is at 73.37 and then again at 74.42. A negative signal for trend short-term was given on a close under the 9-bar moving average.
LEAN HOGS RECAP
1/29/2004
February hogs moved to the highest level since December 1st before closing lower on the session. The reversal, and weakening packer profit margins could trigger some long liquidation selling as traders are nervous that the slow producer marketings due to cold weather will come to an end when the weather clears. Fears of lower cash trade when the weather clears helped trigger early weakness in April hogs but the market managed to close 10 points higher on the session. The CME 2-day lean index for the period ending January 27th came in at $57.19, up $.54 on the day and up from $51.74 on January 16th. There continues to be growing optimism that US pork exports will be rising in response to the Asian bird flu, especially since the US dollar make imports look cheaper. If there is new export business, it should show up in the form of higher pork cut-out values but the weakness in loins over the past few sessions has the trade nervous that when producer marketings pick-up, pork values will decline further and drag cash lower.
Technical Outlook
HOGS (APR) 1/30/2004: The close over the pivot swing is a somewhat positive setup. Resistance levels comes in at 58.22 and 58.52 today, while support is around 57.47 and then 57.02. The close above the 9-day moving average is a positive short-term indicator for trend. The crossover up in the daily stochastics is a bullish signal. The near-term upside target is at 58.52.
COCOA MARKET RECAP
1/29/2004
The cocoa market managed a slight bounce after several sessions of aggressive selling and that suggests to us that technicals and not fundamentals were behind the action Thursday. However, the market could have been lifted by the talk that arrivals rates have actually started to slow and that would suggest a slightly lower Ivory Coast main crop. So far the market has not factored a lower crop and that type of argument could certainly serve to put some support under the market. However, with the sharply rising US Dollar the US cocoa market has to be slightly undermined and capable of seeing more losses ahead.
Technical Outlook
COCOA (MAR)01/30/04 The market has a slightly positive tilt with the close over the swing pivot. Cocoa should run into resistance at 1549 and above there at 1560 with support at 1526 and 1514. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 1514.25.
COFFEE MARKET RECAP
1/29/2004
March coffee gapped lower on fund profit taking and roll over in to the May contract while origin sales also weighed on prices. The market had become too over extended on the upside and bought out by the funds. The fundamentals for coffee remain positive and this pull back is likely a correction rather than a major top as prices could eventually test 82 cents. Brazil’s government extended the time farmers get to repay debt which could keep 4 million bags of coffee off the market over the next 6 months.
Technical Outlook
COFFEE (MAR)1/30/04 The gap lower price action on the day session chart is a bearish indicator for trend. The close below the 1st swing support could weigh on the market. Daily stochastics turning lower from overbought levels is bearish and will tend to reinforce a downside break especially if near-term support is penetrated. The next downside objective is now at 74.05.The Coffee contract should run into resistance at 75.80 and above there at 76.35 with support at 74.65 and 74.05. The market’s short-term trend is negative as the close remains below the 9-day moving average. Daily studies pointing down suggests selling minor rallies.
SUGAR MARKET RECAP
1/29/2004
The move to a 10-session high was met with good selling from Thailand and Brazil yesterday and the market fell 6 points off of the highs to close unchanged on the session. A short-term jump in cash market activity could provide some temporary support but without a major change in the supply outlook, rallies should be temporary but could be violent. Middle East buyers are becoming more active in the cash market with interest from Egypt, Iran, Iraq, Syria and others. London futures experienced a test of the December highs due to tightness in processed sugar and China. With rising open interest and only 20 trading days left for March futures, short-covering could intensify when resistance points are violated. Trade sentiment remains very bearish and with a little buying spree from China and/or Indonesia next week, shorts are likely to scramble for cover.
Technical Outlook
SUGAR (MAR) 1/30/2004: The close over the pivot swing is a somewhat positive setup. Swing resistance comes in at 6.00, with support found at 5.74. The close above the 9-day moving average is a positive short-term indicator for trend. Momentum studies are rising from mid-range which could accelerate a move higher if resistance levels are penetrated. The near-term upside target is at 6.00.
COTTON MARKET RECAP
1/29/2004
May cotton closed 155 lower on the session but managed to bounce near 130 points off of the lows into the close. After moving to the highest level since November 20th on Monday, May cotton fell 810 points in 4 trading sessions to the lows. Weekly export sales came in at just 59,300 bales for the old crop season as compared with 115,500 bales necessary each week to reach the USDA projection and trade expectations for 100,000-160,000 bales. Cumulative export sales for the season have reached just 73.5% of the USDA forecast for the year as compared with 80.9% on average for this time of the year. Shipments for the week were just 196,200 bales as compared with trade expectations of 300,000-350,000 bales. Shipments need to average near 300,000 bales per week to reach the USDA projection.
Technical Outlook
COTTON (MAR) 1/30/2004: A negative indicator was given with the downside crossover of the 9 & 18 bar moving average. There could be some early pressure today given the market’s negative setup with the close below the 2nd swing support. Next resistance area comes in at 70.08 and then again at 71.76, while support is targeted at 67.24 and 66.08. Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The next downside objective is 66.08. The market is approaching over sold levels on an RSI reading under 30. The gap lower on the day session chart is bearish and puts the market on the defensive. ORANGE JUICE (MAR)1/30/04 The market tilt is slightly negative with the close under the pivot. Orange Juice should run into resistance at 61.55 and above there at 61.95 with support at 61.00 and 60.85. The market’s short-term trend is negative as the close remains below the 9-day moving average. Momentum studies are declining, but have fallen to oversold levels. The next downside objective is now at 60.85.