Here’s The Story Behind The Energy Volatility Today

The new contract low after the opening failed to
attract new selling interest from speculators and the turn higher in the other
grains attracted new short-covering. The reversal from a contract low could
provide support. Expectations for an increase in the ending stocks forecast for
Friday’s USDA report, continued export competition from China and a higher than
expected wheat crop in Canada (extra feedwheat) helped to pressure the market to
the lows. In addition, Stats Canada pegged the corn crop at 8.8 million tons as
compared with 8.1 million as the September forecast. South Korea is tendering
for 55,000 tons of optional origin corn and other export news is quiet. For the
weekly export sales report, released before the opening, traders are looking for
sales near 700,000-1.0 million tons as compared with 585,000 tons last week.
Support for March Corn comes in at 201 3/4 and 200 1/2 with resistance at 205
1/2 and 206 1/4.

Technical Outlook

CORN (MAR) 12/09/2004: The market broke to a new
contract low. Rising from oversold levels, daily momentum studies would support
higher prices, especially on a close above resistance. The market’s short-term
trend is negative as the close remains below the 9-day moving average. The
upside daily closing price reversal gives the market a bullish tilt. It is a
slightly negative indicator that the close was under the swing pivot. The
near-term upside target is at 207. The next area of resistance is around 205 3/4
and 207, while 1st support hits today at 202 1/4 and below there at 200 1/4.

 

SOY COMPLEX RECAP

12/8/2004

January Soybeans finished up 7 1/4 at 529 1/4, 3
1/4 off the high and 11 3/4 up from the low. March Soybeans closed up 4 1/2 at
529 1/2. This was 10 1/2 up from the low and 3 off the high.

January Soymeal closed up 2.3 at 158.3. This was
3.6 up from the low and 0.3 off the high.

January Soybean Oil finished down 0.09 at 19.83,
0.25 off the high and 0.06 up from the low.

The sweeping reversal with an outside day up is a
positive technical development which could attract additional short-covering
ahead of the USDA Supply/demand report on Friday. The opening was the lowest
price since November 12th but the market found a lack of new selling interest
from speculators and received some support from the cash market. Gulf basis
levels were steady to higher this morning as a lack of new selling interest from
producers supported a 10 cent pop in the basis yesterday and the ability to hold
those gains today helped support. Taiwan bought 50,000 tons of US soybeans
overnight and there is still talk of interest from China with nothing confirmed.
The commercial buying combined with a slow-down in the spec selling helped
support the strong gains into mid-session. Stats Canada this morning pegged the
Canola crop at 7.7 million tonnes compared with the September forecast of 7.0
million. Soybean production was 3.1 million tonnes as compared with 2.9 million.
January Soybean oil hit new contract lows before turning higher on the session.
For the weekly export sales report, released before the opening, traders are
looking for soybean sales near 450,000-650,000 tons as compared with 407,100
tons last week. With the reversal action, resistance for January soybeans comes
in at 531 1/2 and 534 1/2 with support at 525 and 518.

Technical Outlook

BEANS (JAN) 12/09/2004: 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 daily closing price reversal up is a positive indicator that could
support higher prices. The market setup is supportive for early gains with the
close over the 1st swing resistance. The next downside target is 512 1/4. The
next area of resistance is around 536 3/4 and 542, while 1st support hits today
at 521 3/4 and below there at 512 1/4.

MEAL (JAN) 12/09/2004: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. A positive signal
for trend short-term was given on a close over the 9-bar moving average. The
daily closing price reversal up on the daily chart is somewhat positive. The
market has a slightly positive tilt with the close over the swing pivot. The
next downside target is now at 153.6. The next area of resistance is around
159.9 and 160.9, while 1st support hits today at 156.3 and below there at 153.6.

BEANOIL (JAN) 12/09/2004: The market made a new
contract low on the break. 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 upside daily closing price
reversal gives the market a bullish tilt. The market tilt is slightly negative
with the close under the pivot. The next downside objective is 19.52. The next
area of resistance is around 20.07 and 20.29, while 1st support hits today at
19.69 and below there at 19.52.

 

WHEAT MARKET RECAP

12/8/2004

December Wheat finished up 1/4 at 287 1/4, 1 1/4 off the high
and 3 3/4 up from the low. March Wheat closed up 1 at 300. This was 5 up from
the low and 1 1/2 off the high.

The higher close after matching contract lows is
a positive technical development for the market. Funds were noted buyers of near
2000 contracts at mid-session. At the early lows, March wheat matched the
contract lows of December 2nd and the ability to reject lower prices helped
trigger short-covering support. Reports of a likely record crop from India and
continued concerns with the market ability to absorb the bumper world crop
helped pressure the market early. Turkey issued a tender to sell 100,000 tons of
wheat and the market also saw news that French plantings are expected to jump
2.7% for the winter wheat crop as bearish. In addition, States Canada pegged
production at 25.9 million tons as compared with 24.5 million tons as their
September forecast and 24 million tons from last months USDA estimate. The
higher than expected number contributed to the early weakness. Iraq is tendering
for 100,000-150,000 tonnes of hard milling wheat and wants a US supplier to meet
its requirements. There were just 12 contracts delivered this morning with a
strong commercial stopper taking all. For the weekly export sales report,
released before the opening, traders are looking for sales near 300,000-400,000
tons as compared with 336,700 tons last week. Support for March wheat comes in
at 297 and 295 with 303 and 307 as resistance.

Technical Outlook

WHEAT (MAR) 12/09/2004: A crossover down in the
daily stochastics is a bearish signal. 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 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 now at 292 3/4. The next area of resistance is around 303 1/4
and 305 1/2, while 1st support hits today at 296 3/4 and below there at 292 3/4.

 

LIVE CATTLE RECAP

12/8/2004

February Live Cattle closed up 0.80 at 88.05.
This was 1.02 up from the low and 0.12 off the high.

January Feeder Cattle finished up 1.40 at 102.42,
0.07 off the high and 1.57 up from the low.

February cattle found support near 87.00 for the
third session in a row before the solid rally pulled the market to a close over
88.00. The market found support from the lack of trade in the cash market,
higher than expected slaughter pace for Tuesday and talk of low placements onto
feedlots during the month of November. The April contract led the rally to close
102 higher on low placement expectations. Boxed-beef cut-out values at
mid-session were down $1.52 to $146.27 as compared with 148.12 last week at this
time. Slaughter came in at 125,000 head as compared with 119,000-126,000 head
expected.

Technical Outlook

CATTLE (FEB) 12/09/2004: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. A negative signal for trend short-term was given on a close under the
9-bar moving average. A positive setup occurred with the close over the 1st
swing resistance. The next downside objective is now at 86.700. The next area of
resistance is around 88.600 and 88.950, while 1st support hits today at 87.470
and below there at 86.700.

 

LEAN HOGS RECAP

12/8/2004

February Lean Hogs closed down 0.07 at 72.30.
This was 0.67 up from the low and 0.50 off the high.

February Pork Bellies finished down 0.27 at
97.22, 0.37 off the high and 1.07 up from the low.

February hogs gapped lower on the opening to the
lowest level since November 9th before experiencing a 67 point jump off of the
lows to close just slightly lower on the day. Weakness in the live cash market
in the morning along with the sharp sell-off in pork product prices on Tuesday
afternoon contributed to the long liquidation trend for the first half of the
session. However, the stiff discount of futures to the cash market, ideas that
futures are oversold and a slowdown in the fund long liquidation selling
contributed to the firm close. The CME 2-day lean index for the period ending
December 6th was reported at 81.25, up $.25 on the session and up from 77.38
early last week. This leaves February hogs at an 895 point discount to the cash
market as compared with a typical premium of 200-400 points at this time of the
year. Slaughter came in at 402,000 head as compared with 398,000-402,000 head
expected. This is the third session in a row in which slaughter is at the high
end of expectations which is a positive sign for packer demand.

Technical Outlook

HOGS (FEB) 12/09/2004: Momentum studies are still
bearish but are now at oversold levels and will tend to support reversal action
if it occurs. The market’s 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 lower than the pivot swing number. The next downside target is now
at 71.100. The next area of resistance is around 72.870 and 73.420, while 1st
support hits today at 71.720 and below there at 71.100.

 

COCOA MARKET RECAP

12/8/2004

March Cocoa finished down 37 at 1650, 22 off the
high and 12 up from the low.

The sharp reversal in the Dollar pressured the
cocoa market with March cocoa seeing a gap lower price action as speculators
exited positions. The higher Dollar makes US cocoa prices more expensive in the
eyes of foreigners. A lack of fresh political or crop news from the Ivory Coast
had traders focusing on currency movements. However, reports that arrival rates
of cocoa beans to Ivory Coast ports between Oct 1 and Dec 5th are running 17.3%
below last year could provide support to the market once the currency volatility
dies down.

Technical Outlook

COCOA (MAR) 12/09/2004: A positive indicator was
given with the upside crossover of the 9 & 18 bar moving average. Momentum
studies are trending higher from mid-range, which should support a move higher
if resistance levels are penetrated. The market’s close below the 9-day moving
average is an indication the short-term trend remains negative. The gap down on
the day session chart is bearish with more selling pressure possible today. The
market is in a bearish position with the close below the 2nd swing support
number. The next upside objective is 1686. The next area of resistance is around
1667 and 1686, while 1st support hits today at 1633 and below there at 1619.

 

COFFEE MARKET RECAP

12/8/2004

March Coffee closed up 0.65 at 98.05. This was
2.30 up from the low and 2.45 off the high.

The lack of new selling interest on the early
lower trade attracted increased fund buying as the lack of producer selling from
Brazil ahead of the key report on Friday contributed to the solid gains for
March coffee. The mover over 100, however, attracted some trade house selling
and the market closed slightly higher on the session with a range of 475 points.
After a 4-day skid, January futures in London closed sharply higher on the
session which helped support the New York market. Cash trade is slow due to high
freight rates and slow producer selling out of Brazil as Brazil producers seem
reluctant to sell ahead of the report Friday. Producers believe the 2005/2006
crop estimate will come in near 30 million bags while trade houses seem to be
closer to the 35-36 million bag level. Brazil will also release the final crop
estimate for the 2004/2005 season with talk of only minor adjustments from the
August forecast of 38.26 million bags from 28.8 million the previous year.
Private analyst from Brazil Safras e Mercado indicated that the 2005/2006
production should be near 32.9-35.2 million bags.

Technical Outlook

COFFEE (MAR) 12/09/2004: Momentum studies
trending lower from overbought levels is a bearish indicator and would tend to
reinforce lower price action. The market’s close above the 9-day moving average
suggests the short-term trend remains positive. A positive signal was given by
the outside day up. The market has a slightly positive tilt with the close over
the swing pivot. The next downside target is 93.35. The 9-day RSI over 70
indicates the market is approaching overbought levels. The next area of
resistance is around 100.40 and 102.80, while 1st support hits today at 95.70
and below there at 93.35.

 

SUGAR MARKET RECAP

12/8/2004

March Sugar closed up 0.04 at 8.74. This was 0.11
up from the low and 0.07 off the high.

Speculative long liquidation selling pushed March
sugar sharply lower early in the session to the lowest level since November 15th
with follow-through technical selling (long liquidation) helping to pressure
futures. However, trade house buying supported a surge higher on news of
increased cash business and the market managed to close higher on the day and up
11 off of the lows. In spite of expectations of a lower trend, both sugar and
ethanol prices in Brazil have firmed up over the past week. In addition, India
bought 100,000-120,000 tonnes of raw sugar in the cash market for prompt
shipment and Libya bought 113,000 tonnes of white sugar. India is the world’s
largest sugar consumer and back to back short crops have the trade nervous over
increased import activity into 2005.

Technical Outlook

SUGAR (MAR) 12/09/2004: 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 daily closing price reversal up on the daily chart is somewhat
positive. It is a slightly negative indicator that the close was under the swing
pivot. The next downside target is now at 8.55. The next area of resistance is
around 8.83 and 8.91, while 1st support hits today at 8.65 and below there at
8.55.

 

COTTON MARKET RECAP

12/8/2004

March Cotton finished down 0.59 at 42.60, 0.35
off the high and 0.10 up from the low.

March cotton opened lower and continued to fall
showing no follow-through technical buying after the reversal on Monday and
higher trade on Tuesday. This leaves the market near the low end of the recent
1-month trading range ahead of the USDA supply/demand report for Friday. Traders
are nervous that Friday’s Supply/demand report could show a record world
production forecast of more than 111.72 million bales from last month as a
decline for China production could be more than offset by increases for Pakistan
and India. On the other hand, traders are hopeful the world demand will remain
strong and could be revised higher with higher energy prices encouraging less
synthetic fiber demand and more cotton. Certified cotton stocks which are
deliverable against the exchange continue to rise over the past few weeks and as
of December 7th reached 94,034 bales from 91,848 bales the previous session and
from 63,619 bales on November 16th. For the weekly export sales report, released
before the opening, traders are looking for sales near 150,000-200,000 bales as
compared with 237,500 bales last week.

Technical Outlook

COTTON (MAR) 12/09/2004: Momentum studies
trending lower at mid-range should accelerate a move lower 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 market setup is somewhat negative with the close
under the 1st swing support. The next downside objective is 42.22. The next area
of resistance is around 42.82 and 43.11, while 1st support hits today at 42.38
and below there at 42.22.