Here’s What Friday’s Payroll Number Could Mean For The Dollar
BOND MARKET RECAP
3/2/2004
Bond traders are becoming increasingly nervous that that Friday’s employment report will show a big payroll surprise. March bonds broke sharply on ideas that the jobs sector is recovering and that Asian Central Banks’ appetite for US Treasuries will be sharply reduced since the Dollar’s upside breakout suggest less need for intervention. Greenspan’s comments hinting that the Fed funds rate may be too low also brought on some concern that interest rates have bottomed.
With little news out until Friday, look for sideways to lower action in March bonds with in a 114 to 112 trading range.
Technical Outlook
BONDS (MAR) 3/3/2004: The close below the 1st swing support could weigh on the market. Near-term resistance for bonds is at 113.26 and then again at 114.18, while swing support hits at 112.17 and below there at 112.00. A positive signal for trend short-term was given on a close over the 9-bar moving average. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 112.00.
T-NOTES(MAR) Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The next downside objective is now at 114.09. The market is in a bearish position with the close below the 2nd swing support 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 115.07 and then again at 115.20, while swing support hits at 114.18 and below there at 114.09. The market’s short-term trend is negative as the close remains below the 9-day moving average.
STOCK INDICES RECAP
3/2/2004
March S&P closed lower Tuesday, but within Monday’s range as traders adjust positions ahead of Friday’s critical employment report. While sentiment is growing that the payroll numbers could be strong for February, stock prices are likely to trade sideways ahead of the number as there is little else to give stocks direction. Greenspan’s comments hinting that the Fed funds rate may be too low also brought on some concern that interest rates have bottomed.
Technical Outlook
S&P500 (MAR) 3/3/2004: The market setup is somewhat negative with the close under the 1st swing support. Underlying support comes in at 1144.40 and 1140.45, with overhead resistance at 1154.40 and 1160.45. The downside crossover of the 9 & 18 bar moving average is a negative signal. Momentum studies are rising from mid-range which could accelerate a move higher if resistance levels are penetrated. The near-term upside objective is at 1160.45.
S&P E-Mini (MAR): A new contract high was made on the rally. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 1160.81. 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 1154.63 and then again at 1160.81, while swing support hits at 1144.38 and below there at 1140.31. The moving average crossover down (9 below 18) indicates a possible developing short-term downtrend.
NASDAQ (MAR) The market could take on a defensive posture with the daily closing price reversal down. A negative signal for trend short-term was given on a close under the 9-bar moving average. The close below the 1st swing support could weigh on the market. The market should run into resistance at 1485.25 and above there at 1502.38 with support at 1461.75 and 1455.38. Stochastics are at mid-range, but trending higher which should reinforce a move higher if resistance levels are taken out. The next upside objective is 1502.38.
MINI DOW (MAR) The downside crossover of the 9 & 18 bar moving average is a negative signal. The market should run into resistance at 10645 and above there at 10720 with support at 10530 and 10490. 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 10490. The market setup is somewhat negative with the close under the 1st swing support. Short-term indicators on the defensive. Consider selling an intraday bounce.
CURRENCY MARKET RECAP
3/2/2004
Bank of Japan intervention triggered an upside breakout in the Dollar suggesting the market has made a major bottom. Recent indicators suggesting that US jobs growth is accelerating which has traders rethinking their view on the Dollar. A strong payroll number Friday will have traders factoring in that US rates have bottomed which would give an advantage to the Dollar. The markets also seemed convinced that the European Central Bank will shift their current view to a more accommodative stance at this week’s meeting, which is drove the euro down sharply and below 1.2250 suggesting that market has put in a major top. The March Yen could test 90 this week as the BOJ looks to have successfully reversed the currency’s trend through intervention.
Technical Outlook
YEN (MAR): A negative signal for trend short-term was given on a close under the 9-bar moving average. The gap lower on the day session chart is bearish and puts the market on the defensive. There could be some early pressure today given the market’s negative setup with the close below the 2nd swing support. Swing resistance is targeted at 91.24 and above there at 91.65, with the yen finding support around 90.50 and below there at 90.17. The market back below the 40-day moving average suggests the longer-term trend could be turning down. Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The next downside objective is 90.17. The market is approaching over sold levels on an RSI reading under 30.
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 1.2042. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing support for the Euro comes in at 1.2042, with overhead resistance at 1.2484. 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
3/2/2004
Heavy speculative profit taking drove metals sharply lower Tuesday with some markets giving up all of Monday’s gains and then some. An upside breakout in the dollar suggesting a reversal in trend and strength in world equity markets may have been the triggers behind the speculative liquidation. April platinum looks to have made an island top basis the day session chart. April gold remains in a downtrend and a beak under 390 puts next support at 388.50. With silver facing a record spec net long position, the market was ultra vulnerable to a break. However, May silver could correct back to 645.50 before the market loses its bullish setup.
Technical Outlook
SILVER (MAY): The close below the 1st swing support could weigh on the market. Initial support for silver is at 661.3 and below there at 654.4 with resistance likely at 679.1 and 683.8. A positive signal for trend short-term was given on a close over the 9-bar moving average. A bearish signal was triggered on a crossover down in the daily stochastics. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 654.4.
GOLD (APR): Support for gold today comes in near 386.43, while resistance is pegged at 402.63. 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 386.43. 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.
COPPER MARKET RECAP
3/2/2004
May copper prices broke on profit taking, but the May contract closed off its low and did not even fill the gap from Monday. While the upside breakout in the Dollar is a negative factor, it does not override the fact that physical supplies are dwindling. Therefore, price corrections in this market should be short lived and shallow. The 135 area for the May contract should offer good support and on a further price break over night we would not be surprised to see Asian buying re-emerge.
ENERGY MARKET RECAP
3/2/2004
The energy complex was hit with some light profit taking in crude oil & gasoline following Monday’s price surge although heating oil prices saw more of a break. While the energy complex remains over extended, on-going concerns of tightening supplies have so far prevented any widespread profit taking. The complex is focused on this week’s API stocks report as last week’s report showed a startling drop in the refinery operating rate. Early estimates are calling for a 2 million to 350,000 barrel decline in crude stocks and a 1 million barrel decline in gasoline stocks. Therefore, comments by OPEC’s President that the cartel continues to produce over quota to ensure the world gets the oil it needs, did not seem to ease traders concerns of tight supplies. Also, reports that the civil unrest in Venezuela has not affected oil production had little negative impact on prices. However, if the weekly stocks report does not show supplies tightening and in the absence of any fresh news on supply disruptions, we would think the complex could see a more extensive pullback.
Technical Outlook
CRUDE OIL (APR): The close over the pivot swing is a somewhat positive setup. Support for crude is keyed on 36.39 and below there at 36.12, with resistance pegged at 36.94 and 37.22. The close above the 9-day moving average is a positive short-term indicator for trend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 37.22. The market is becoming somewhat overbought now that the RSI is over 70.
UNLEADED GAS (APR): Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 116.14. The market has a slightly positive tilt with the close over the swing pivot. Resistance today is at 116.14, while support should be found around 112.54. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market is approaching overbought levels with an RSI over 70.
HEATING OIL (APR):It is a slightly negative indicator that the close was under the swing pivot. Heating oil should encounter support around 91.80, with resistance is at 95.60. The close above the 9-day moving average is a positive short-term indicator for trend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 95.60.
CORN MARKET RECAP
3/2/2004
May Corn finished down 7 at 295 3/4, 10 1/2 off the high and 3/4 up from the low. December Corn closed down 4 1/2 at 292. This was 1/2 up from the low and 7 3/4 off the high.
May Rice finished down 0.2 at 9.24, 0.33 off the high and 0.035 up from the low.
May corn took out the previous 4 days range before closing sharply lower as massive fund selling developed into the close due to weakness in the soybean complex. News that South Korea bought 315,000 tons of optional origin corn overnight and news that Taiwan bought 56,000 tons of US corn overnight helped provide underlying support to the market and a move to new 6 1/2 year highs into the mid-session as strength in soybeans helped support renewed buying in corn. In addition, the Philippines indicate that they will likely tender for 350,000 tons of corn before early April. Cash basis levels were steady and there was talk that China had recently lifted their offers on the export market in spite of recent news that China had issued export licenses for 1.4 million tons of corn. Deliveries against the March contract came in at 1144 contracts this morning with receivers scattered among many firms. Sell-stops were activated under 3.00 which added to the long liquidation selling late in the session. The reversal from a contract high could attract follow-through technical selling on Wednesday.
Technical Outlook
CORN (MAY) 3/3/2004: The daily stochastic’s gave a bearish indicator with a crossover down. 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 286 3/4. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Market resistance comes in at 309 1/4 today, with support at 286 3/4. The close below the 9-day moving average is a negative short-term indicator for trend. Follow-through selling is indicated by the key reversal down. The outside day down gives the market a bearish tilt. The market rallied to a new contract high. The daily closing price reversal down is a negative indicator for prices.
SOY COMPLEX RECAP
3/2/2004
May Soybeans finished down 29 at 928 1/2, 47 1/2 off the high and 2 1/2 up from the low. November Soybeans closed down 9 3/4 at 740. This was 1 up from the low and 21 off the high.
May Soymeal closed down 4.8 at 281.3. This was 1 up from the low and 10.2 off the high.
May Soybean Oil finished down 1.52 at 33.03, 2.02 off the high and 0.13 up from the low.
May soybeans closed near the low end of a 50 cent range and the key reversal from a 15 1/2 year high could trigger follow-through technical selling on Wednesday. Rumors that China may be canceling US soybean and oil purchases on the books helped trigger the long liquidation wash-out. May oil challenged last weeks lows after nearby futures posted a 19 1/2 year high early in the session. A lack of new news regarding the South American crop situation and ideas that the rains in Argentina should help improve crop conditions ahead of harvest added to the bearish tone. Rains in southern Brazil are also expected to help ease stress in dry areas and helped trigger long liquidation selling as well. Speculators and fund buyers were active on the lower opening and the market quickly soared to new contract and 15 1/2 year highs as selling interest was thin but when the new buying slowed to a trickle and the China rumors began to circulate, aggressive long liquidation set-in to drive oil and soybeans sharply lower into the close. Sharply higher trade at the China exchange overnight was offset by lower trade in palm oil. The market awaits further crop production estimates on the extent of the damage to the Brazil crop. Floor traders saw underlying support today from news that Sparks Companies pegged Brazil production at just 55.75 million tons as compared with the last USDA forecast at 61 million tons. The continued flow of deliveries added to the long liquidation selling early in the session with 218 contracts for soybeans, 262 for meal and 143 for oil.
Technical Outlook
SOYBEANS (MAY) 03/03/04The key reversal down puts the market on the defensive. The outside day down is somewhat negative. The market made a new contract high on the rally. The market could take on a defensive posture with the daily closing price reversal down. There could be some early pressure today given the market’s negative setup with the close below the 2nd swing support. The next area of resistance is around 953 1/2 and 989 3/4, while 1st support hits today at 903 1/2 and below there at 889 3/4. The market’s close on the 9-day moving average is neutral. A bearish signal was triggered on a crossover down in the daily stochastics. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 889 3/4.
MEAL (MAY): A crossover down in the daily stochastics is a bearish signal. 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 272.4. The market rallied to a new contract high. The daily closing price reversal down is a negative indicator for prices. First resistance comes in at 286.9, with support at 275.7. The close above the 9-day moving average is a positive short-term indicator for trend. The market setup is somewhat negative with the close under the 1st swing support.
BEAN OIL (MAY): A negative signal for trend short-term was given on a close under the 9-bar moving average. A bearish signal was triggered on a crossover down in the daily stochastics. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 31.35. The close below the 2nd swing support number puts the market on the defensive. The key reversal down puts the market on the defensive. The outside day down is somewhat negative. The market made a new contract high on the rally. The market could take on a defensive posture with the daily closing price reversal down. Daily swing resistance is found at 34.11 and above there at 35.65. Support should be encountered at 31.96 and 31.35.
WHEAT MARKET RECAP
3/2/2004
May Wheat finished down 3 1/4 at 381 3/4, 4 3/4 off the high and 2 3/4 up from the low. July Wheat closed down 3 at 384 1/2. This was 1 up from the low and 5 off the high.
July Oats closed down 3 1/2 at 162 1/2. This was 1/2 up from the low and 5 1/4 off the high.
May wheat closed near the lower opening with fairly quiet trade as the sharp drop in the other grains failed to influence the wheat market too much. Selling seemed to be slow but steady on the session led by disappointment over the Egypt purchase and from expectations for further rain in the plains this week. Egypt bought 60,000 tons of white wheat from the US overnight and 240,000 tons of Australia wheat. Cash traders indicated that Australia had a significant freight advantage to US wheat in dealings with Egypt. Deliveries against the March contract came in at 1145 contracts this morning but there was some sign of a commercial stopper with one house taking 628 contracts. While crop conditions for the end of February were down from the previous month in Kansas, good rains on the weekend and more in the forecast for this week could support improving crop conditions as the crop breaks from dormancy in March. Southeastern Kansas and Oklahoma are expected to receive heavy rains of several inches late this week while the western and northern parts of Kansas are expected to get some additional moisture which could be trace to 1/3rd of an inch in the far western areas of the state. Deliverable stocks for the CBOT for the week ending February 27th were reported at 1.973 million bushels as compared with 1.983 million last week and 575,000 bushels last year. A sharp drop for March Minneapolis wheat and some talk that China might be slow at shipping the recently purchased wheat form the US added to the bearish tone.
Technical Outlook
WHEAT (MAY) 3/3/2004: The market tilt is slightly negative with the close under the pivot. Expect near-term support around 378 and below there at 374 3/4, with resistance levels at 385 1/2 and 389 3/4. A positive indicator was given with the upside crossover of the 9 & 18 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 374 3/4.
LIVE CATTLE RECAP
3/2/2004
April cattle closed 0.22 lower at 77.57 as the market reacted negatively towards the announcement after the close yesterday that it may take at least two more weeks before Mexico allows US beef into their country. Today’s estimated slaughter came in at 128,000 head versus guesses ranging from 122,000 to 129,000. At noon, boxed beef cutout values were up $1.02 to $138.46 as compared with $130.04 last week at this time. Asking prices for slaughter ready cattle were running $85-$87/cwt versus $82-83 sales seen last week. Bids were down around $80.
Technical Outlook
CATTLE (APR) 3/3/2004: Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 78.32. The market tilt is slightly negative with the close under the pivot. Support should be encountered at 77.22 and below there at 76.87. Market resistance is at 77.95 and then again at 78.32. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market is approaching overbought levels with an RSI over 70.
LEAN HOGS RECAP
3/2/2004
April hogs closed 0.52 higher on the session at 62.82 after reaching a new contract high at 63.17 amid further reports of sharply reduced international meat sales due to bird flu and mad cow disease and strong overseas pork markets as well. Today’s estimated slaughter came in at 385,000 head versus guesses ranging from 385,000 to 388,000. The 2-day Lean index for the period ending February 27th was 61.73, down 0.11 from the previous day. May bellies closed 0.37 lower at 98.70 after reaching a new contract high at 100.25. Estimates for this afternoon’s CME pork belly out-of-town report called for an out movement of 500,000 to 1.0 million pounds versus 837,000 out last week and 862,000 last year.
Technical Outlook
HOGS (APR) 3/3/2004: Market positioning is positive with the close over the 1st swing resistance. Resistance levels comes in at 63.15 and 63.47 today, while support is around 62.52 and then 62.22. The market rallied to a new contract high. The close above the 9-day moving average is a positive short-term indicator for trend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 63.47. With a reading over 70, the 9-day RSI is approaching overbought levels.
COCOA MARKET RECAP
3/2/2004
May cocoa closed lower and below the market’s 40-day moving average as a lack of fresh news and an upside breakout in the dollar weigh on prices. A higher dollar makes NY cocoa more expensive on the world market and discourages buying. Funds remain net short and there is little reason to be buying cocoa since harvest supplies are available while the Ivory Coast crop looks to be on the higher side of estimates. A Reuters’ news story citing analysts warning of a possible outbreak of Black Pod disease due to a lack of pesticide usage did not seem to impact futures. The trend is down with next support for May at $1,500.
Technical Outlook
COCOA (MAY)03/03/04 The market tilt is slightly negative with the close under the pivot. Cocoa should run into resistance at 1551 and above there at 1579 with support at 1506 and 1489. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 1579.25.
COFFEE MARKET RECAP
3/2/2004
July coffee closed 70 lower on the session and near the low end of a 165 point range as fund buying supported a bounce but there was not enough support from the commercial to prove follow-through buying and commercial sellers remain persistent. Cash traders indicate slow activity as roasters appear to own good futures coverage and there is a lack of urgency at the recent higher price level. Good weather in Brazil and rising stocks at consuming countries (US and Japan) are offsetting the slower export pace from Brazil and the slower export pace from other minor exporters such as Guatemala and El Salvador. CSCE stocks were up 9,267 bags to 4.512 million with 187,213 bags pending review. The surge in “pending” stocks this week suggests rising exchange stocks for the coming week.
Technical Outlook
COFFEE (MAY)3/3/04 The market tilt is slightly negative with the close under the pivot. Daily stochastics are showing positive momentum from oversold levels which should reinforce a move higher if near-term resistance is taken out. The near-term upside objective is at 77.35.The Coffee contract should run into resistance at 76.15 and above there at 77.35 with support at 74.5 and 74.05. The market’s short-term trend is positive on a close above the 9-day moving average.
SUGAR MARKET RECAP
3/2/2004
May sugar closed 8 points lower on the session but managed to hold support at last weeks close. Weakness in other New York soft and metals markets combined with a lack of new news in the cash market helped to trigger the light selling. May sugar in London moved to the highest level since August of 2003 which help provide underlying support. With funds holding a hefty net short position already, new selling was light. Weather seems favorable for Brazil and a little less rain and more sun would be considered favorable weather after recent heavy rains have kept soils moist. Australia sugar production is expected to rise to 5.25 million tons for the 2004/2005 season from 5.02 million this season with exports at 4.12 million from 3.91 million this year, according to government officials.
Technical Outlook
SUGAR (MAY) 3/3/2004: The market setup is somewhat negative with the close under the 1st swing support. Swing resistance comes in at 6.27, with support found at 6.07. The close above the 9-day moving average is a positive short-term indicator for trend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 6.27.
COTTON MARKET RECAP
3/2/2004
May cotton closed 280 lower on the session as the shift in focus to a burdensome supply for next year and active long liquidation selling helped drive the market lower. Speculative selling, thought to be long liquidation, was noted after the gap lower opening. The surge higher in the dollar added to the bearish supply outlook for the coming year to turn the market lower. A lack of confirmation of China buying and slightly lower world values along with the dollar movement was enough to entice recent buyers to move to the sidelines. The close back under the 40-day moving average could attract more long liquidation selling ahead. The Cotlook Cotton Indexes were lower, with the “A” index 0.05 lower at 75.05 and the “B” index 0.10 lower at 73.25
Technical Outlook
COTTON (MAY) 3/3/2004: 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. Next resistance area comes in at 71.92 and then again at 73.59, while support is targeted at 69.55 and 68.85. The market back below the 40-day moving average suggests the longer-term trend could be turning down. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 73.59. The gap lower on the day session chart is bearish and puts the market on the defensive. ORANGE JUICE (MAY)3/3/04 The gap upmove on the day session chart is a bullish indicator for trend. The market has a bullish tilt coming into today’s trade with the close above the 2nd swing resistance. Orange Juice should run into resistance at 64.80 and above there at 65.35 with support at 63.10 and 61.95. The market’s short-term trend is positive on a close above the 9-day moving average. Daily stochastics are showing positive momentum from oversold levels which should reinforce a move higher if near-term resistance is taken out. The near-term upside objective is at 65.35.