Here’s What The Gold And Silver Divergence May Indicate
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BOND MARKET RECAP
9/16/2004
December Bonds closed up 1-08 at 112-15. This was
1-09 up from the low and 0-07 off the high.
December 10 Yr Treasury Notes finished up 0-230
at 113-020, 0-035 off the high and 0-260 up from the low.
The Treasury market surprised the trade
early in the session by paying more attention to the muted inflation readings
than to the smaller than expected increase in weekly initial claims. Reports
that Net foreign purchases of US Treasuries reached $64 billion in July were
seen along with news that June foreign purchases were revised up to $74 billion
from $71 billion and that depicts a weakening of the pace but the overall amount
of buying is significant enough to give bonds and notes underlying support. In
the end, confirmation that inflation remains low was the real driving force as
that further reduces the potential for a rate hike in the next Fed meeting. The
Philly Fed manufacturing Index showed a massive decline around mid session and
that report added another 1/4 point to the rally. Offsetting the weakness in the
Philly Fed readings were improvements in the Philly new orders and employment
figures.
Technical Outlook
BONDS (DEC) 09/17/2004: 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 market has a bullish tilt coming into
today’s trade with the close above the 2nd swing resistance. The near-term
upside objective is at 113-25. The next area of resistance is around 113-10 and
113-25, while 1st support hits today at 111-24 and below there at 110-20.
TNOTES (DEC) 09/17/2004: 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. The outside day up is somewhat positive. Since the close
was above the 2nd swing resistance number, the market’s posture is bullish and
could see more upside follow-through early in the session. The next upside
objective is 113-270. The next area of resistance is around 113-180 and 113-270,
while 1st support hits today at 112-200 and below there at 111-305.
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STOCK INDICES RECAP
9/16/2004
December S&P finished up 3.8 at 1124.6, 2.2 off
the high and 2.8 up from the low.
December S&P E-Mini closed up 3.75 at 1124.5.
This was 3.75 up from the low and 2.5 off the high.
December Dow closed up 18 at 10247. This was 17
up from the low and 33 off the high.
December Dow E-Mini finished up 16 at 10245, 36
off the high and 17 up from the low.
The stock market started out mostly unchanged but
eventually manage to firm up quite significantly into mid session. We suspect
that the lack of significant damage off the hurricane gave the market a relief
rally but with stock prices rising rather surprisingly in the face of a much
softer than expected Philly Fed reading the market has to be given credit. Some
traders suggested that muted inflation readings from the CPI report make it
likely that the Fed will remain on hold in the coming FOMC meeting while others
were buying stocks because of reports that hotel and travel bookings were
showing signs of recovering.
Technical Outlook
S&P 500 (DEC) 09/17/2004: Momentum studies
trending lower from overbought levels is a bearish indicator and would 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 market setup is supportive for
early gains with the close over the 1st swing resistance. The next downside
objective is now at 1119.30. The next area of resistance is around 1126.80 and
1129.30, while 1st support hits today at 1121.80 and below there at 1119.30.
SP EMINI (SEP) 09/17/2004: Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. The market’s close above the 9-day moving average suggests the
short-term trend remains positive. It is a mildly bullish indicator that the
market closed over the pivot swing number. The next downside target is now at
1118.32. The next area of resistance is around 1127.62 and 1129.81, while 1st
support hits today at 1121.88 and below there at 1118.32.
NASDAQ (DEC) 09/17/2004: The daily stochastics
have crossed over down which is a bearish indication. Momentum studies trending
lower from overbought levels is a bearish indicator and would tend to reinforce
lower price action. The close above the 9-day moving average is a positive
short-term indicator for trend. The market has a slightly positive tilt with the
close over the swing pivot. The next downside target is 1409.00. The next area
of resistance is around 1434.00 and 1443.00, while 1st support hits today at
1417.00 and below there at 1409.00.
MINIDOW (DEC) 09/17/2004: Momentum studies are
trending lower from high levels which should accelerate a move lower on a break
below the 1st swing support. The market’s short-term trend is negative as the
close remains below the 9-day moving average. The market tilt is slightly
negative with the close under the pivot. The next downside target is now at
10197. The next area of resistance is around 10271 and 10302, while 1st support
hits today at 10219 and below there at 10197.
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CURRENCY MARKET RECAP
9/16/2004
December US Dollar finished down 41 at 8899, 49
off the high and 3 up from the low.
December Euro finished up 0.33 at 121.82, 0.09
off the high and 0.68 up from the low.
December Euro Dollar closed up 0.025 at 97.825.
This was 0.04 up from the low and 0.015 off the high.
December Canadian Dollar closed up 0.36 at 77.35.
This was 0.29 up from the low and 0.17 off the high.
December British Pound finished up 1.85 at
178.16, 0.04 off the high and 0.86 up from the low.
December Swiss closed up 0.16 at 79.14. This was
0.48 up from the low and 0.16 off the high.
December Japanese Yen closed up 0.39 at 91.7.
This was 0.32 up from the low and 0.04 off the high.
The Dollar came under gradual pressure after a
series of weak US economic numbers were released. Surprisingly the Dollar didn’t
see a bounce off the passing of hurricane Ivan but that is because the market
didn’t really smash the Dollar as the storm threat emerged. Adding to downside
pressure later in the session were extremely disappointing headline figures from
the Philly Fed Index. However, mitigating the downside tilt in the Dollar were
countervailing Philly component readings on new orders and employment. Once
again the biggest gainer against the Dollar was the Pound and that is becoming a
pattern. Traders apparently saw recent UK economic data as a sign that the UK
economy is one of the stronger economies within the G7.
Technical Outlook
YEN (DEC) 09/17/2004: 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 positive on the close above the
9-day moving average. With the close over the 1st swing resistance number, the
market is in a moderately positive position. The next downside target is 91.27.
The next area of resistance is around 91.88 and 91.99, while 1st support hits
today at 91.52 and below there at 91.27.
EURO (DEC) 09/17/2004: The cross over and close
above the 40-day moving average is an indication the longer-term trend has
turned positive. Positive momentum studies in the neutral zone will tend to
reinforce higher price action. The market’s close above the 9-day moving average
suggests the short-term trend remains positive. 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 upside objective is 122.44.
The next area of resistance is around 122.20 and 122.44, while 1st support hits
today at 121.44 and below there at 120.91.
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PRECIOUS METALS RECAP
9/16/2004
December Gold closed down 0.3 at 406.5. This was
2.3 up from the low and 1.3 off the high.
December Silver finished up 0.018 at 6.318, 0.037
off the high and 0.058 up from the low.
October Platinum closed down 8.4 at 842.3. This
was 4.1 up from the low and 5.7 off the high.
Once again gold and silver prices were showing
divergence which could be a sign that the metals lack of dominating theme. With
the Dollar market showing signs of weakening we would have expected gold to show
a little more resilience but that might be a sign that buyers are not fully
interested in the long side of the market. With copper sharply higher and silver
also higher it is clear that gold is the odd man out within the metals complex.
However, until the December Dollar Index manages to slide significantly below
89.00 on a close basis we doubt that gold buyers will enter the market in force.
Technical Outlook
SILVER (DEC) 09/17/2004: The stochastic indicator
is rising from oversold levels, which is bullish and should support higher
prices. The market’s short-term trend is positive on the close above the 9-day
moving average. The market has a slightly positive tilt with the close over the
swing pivot. The next upside objective is 640.8. The next area of resistance is
around 636.6 and 640.8, while 1st support hits today at 627.1 and below there at
621.8.
GOLD (DEC) 09/17/2004: Momentum studies are
rising from mid-range, which could accelerate 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. The close over the pivot swing is a
somewhat positive setup. The near-term upside objective is at 409.8. The next
area of resistance is around 408.2 and 409.8, while 1st support hits today at
404.7 and below there at 402.7.
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COPPER MARKET RECAP
9/16/2004
December Copper finished up 3.00 at 130.15, 0.75
off the high and 0.65 up from the low.
The copper market wasted no time in its effort to
breakout to the upside on Thursday morning with the trade bidding up prices off
the Chinese demand theme. We also suspect that LME exchange comments that seemed
to be discounting the chance that LME stocks would fall to “zero†actually
foster renewed focus on the tightness theme. Supposedly a fund was an aggressive
buying of copper in the London action and that could have been a simple
technical trading signal off the breakout of an extended consolidation pattern.
Surprisingly the copper market continues to forge gain off the Chinese supply
tightness even though weekly Shanghai copper stocks haven’t shown declines in
the recent reports. However, the Shanghai copper stocks weekly report is
released every Friday morning and that means the market will soon get another
reading on the situation in China.
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ENERGY MARKET RECAP
9/16/2004
October Crude Oil closed up 0.30 at 43.88. This
was 1.13 up from the low and 0.07 off the high.
October Heating Oil closed up 2.71 at 123.32.
This was 5.72 up from the low and 0.68 off the high.
October Unleaded Gas finished up 1.21 at 122.63,
0.37 off the high and 4.33 up from the low.
October Natural Gas finished down 0.11 at 4.72,
0.03 off the high and 0.20 up from the low.
October Propane closed down 0.02 at 0.76. This
was equal to the low and equal to the high.
The energy market showed signs of weakening early
in the session when it appeared that nothing out of the ordinary was going to
result from the hurricane. However, a large portion of US refineries were closed
due to the storm and some could take a couple days before returning to full
operation. In fact, the biggest threat to restarts might be the lack of power
instead of flood or wind damage. We also think that the recent decline in weekly
crude stocks discourages traders from pressing the short side of the energy
market especially since transportation problems are likely to impact upcoming
inventory readings. Also discouraging declines in energy prices during the
sessions were reports from OPEC that their 2005 call was being revised upward by
420,000 barrels per day. In natural gas the weekly storage of 99 bcf seemed to
weigh on prices and with less support from the regular energy complex the bias
in prices is pointing down.
Technical Outlook
CRUDE OIL (OCT) 09/17/2004: The major trend could
be turning up with the close back above the 40-day moving average. Stochastics
are at mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. A positive signal for trend short-term was
given on a close over the 9-bar moving average. The upside closing price
reversal on the daily chart is somewhat bullish. The market’s close below the
pivot swing number is a mildly negative setup. The near-term upside objective is
at 44.81. The next area of resistance is around 44.48 and 44.81, while 1st
support hits today at 43.28 and below there at 42.42.
UNLEADED (OCT) 09/17/2004: The cross over and
close above the 40-day moving average is an indication the longer-term trend has
turned positive. Momentum studies are rising from mid-range, which could
accelerate a move higher if resistance levels are penetrated. The close above
the 9-day moving average is a positive short-term indicator for trend. The
upside daily closing price reversal gives the market a bullish tilt. The close
over the pivot swing is a somewhat positive setup. The next upside target is
126.34. The next area of resistance is around 124.98 and 126.34, while 1st
support hits today at 120.28 and below there at 116.94.
HEATING OIL (OCT) 09/17/2004: Daily stochastics
have risen into overbought territory which will tend to support reversal action
if it occurs. The market’s short-term trend is positive on the close above the
9-day 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 upside target
is 128.46. The next area of resistance is around 126.52 and 128.46, while 1st
support hits today at 120.12 and below there at 115.66.
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CORN MARKET RECAP
9/16/2004
December Corn finished down 2 1/4 at 216
1/4, 3 1/2 off the high and 1/4 up from the low. March Corn closed down 2 1/4 at
226 1/4. This was 1/4 up from the low and 3 1/4 off the high.
Active fund selling drove the market down to
another new contract low. Rising open interest since September 9th on the break
suggests that funds are pressing the short-side and as of the last COT report,
speculators were still a long way away from an extreme high situation. Funds
were noted sellers of at least 1500 contracts into mid-session. Ideas that the
harvest delays will be only temporary and a lack of follow-through buying
support after the higher opening and strong technical signals yesterday
(reversal from contract lows) led to active fund and speculative selling and a
move to new contract lows. Weekly export sales came in at 1.2077 million tons as
compared with trade expectations of 500,000-700,000 tons and 884,200 tons
necessary each week to reach the USDA projection. Cumulative sales have now
reached 15.7% of the USDA forecast for the season as compared with 18.9% on
average for this time of the year. Weaker mid-west basis levels and continued
talk of higher than expected yields helped to pressure the market as well.
December corn support drops down to 213 1/4 and 210 1/2 with resistance at 219
1/2 and 224.
Technical Outlook
CORN (DEC) 09/17/2004: The market made a new
contract low on the break. 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’s close below
the 1st swing support number suggests a moderately negative setup for today. The
next downside target is 213 1/2. The market is approaching oversold levels on an
RSI reading under 30. The next area of resistance is around 218 and 220 3/4,
while 1st support hits today at 214 1/2 and below there at 213 1/2.
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SOY COMPLEX RECAP
9/16/2004
November Soybeans finished down 9 1/4 at 557 1/4,
16 3/4 off the high and 3/4 up from the low. January Soybeans closed down 9 at
565 1/4. This was 1/4 up from the low and 16 off the high.
December Soymeal closed down 1.5 at 165.7. This
was 0.1 up from the low and 3.8 off the high.
December Soybean Oil finished down 0.69 at 22.18,
1 off the high and 0.03 up from the low.
The lowest close since August 11th for November
soybeans leaves the market vulnerable to more speculative and commercial selling
once the weather clears and harvest activity resumes. Strong export sales news
and weather harvest delays helped to support strong speculative buying early in
the session and a lack of aggressive commercial selling. Rains, sometimes heavy,
spread across the western and northern cornbelt in the past 24 hours to slow
harvest activity and raised some concerns for crop conditions in parts of the
western cornbelt. However, the market seems to be unable to shake the yield
reports of better than expected production and traders feel that while the China
buying has provided some of the recent strength, the demand from China this
season is likely to be down from last year. Weekly export sales came in at
634,900 tons as compared with trade expectations of 350,000-500,000 tons and
404,000 tons necessary each week to reach the USDA projection. Cumulative sales
have now reached 24.5% of the USDA forecast for the season as compared with
23.8% on average for this time of the year. China was a buyer of 165,100 tons
for the week and unknown destination was in for 145,000 tons on the week. Meal
sales were 135,100 tons as compared with trade expectations of 50,000-80,000
tons and oil sales were 7300 tons from 1,000-5,000 expected. Flooding near
Austin Minnesota due to heavy rains of the past few days added to the positive
tone. Short-term resistance for November soybeans comes in at 575 and 577 1/2
with support levels include 552 and 541.
Technical Outlook
BEANS (NOV) 09/17/2004: 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
outside day down is a negative signal. The close below the 2nd swing support
number puts the market on the defensive. The next downside objective is now at
543 3/4. Some caution in pressing the downside is warranted with the RSI under
30. The next area of resistance is around 566 and 578 3/4, while 1st support
hits today at 548 1/2 and below there at 543 3/4.
MEAL (DEC) 09/17/2004: 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’s
close below the 1st swing support number suggests a moderately negative setup
for today. The next downside target is 162.8. The next area of resistance is
around 167.6 and 170.5, while 1st support hits today at 163.8 and below there at
162.8.
BEANOIL (DEC) 09/17/2004: The close under the
40-day moving average indicates the longer-term trend could be turning down.
Daily stochastics declining into oversold territory suggest the selling may be
drying up soon. The market’s close below the 9-day moving average is an
indication the short-term trend remains negative. A negative signal was given by
the outside day down. 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 21.40. The next area of resistance is around 22.69 and
23.45, while 1st support hits today at 21.67 and below there at 21.40.
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WHEAT MARKET RECAP
9/16/2004
December Wheat finished up 1 at 338 1/4, 3 off the high and 6
1/4 up from the low. March Wheat closed up 1 1/4 at 348 3/4. This was 6 1/4 up
from the low and 2 1/4 off the high.
Harvest delays and crop concerns for the Canadian
and northern plains crops helped support the early gains but fears that the
recent gains hurt the US competitiveness on the world market helped trigger the
sell-off with funds noted sellers of near 2000 contracts into mid-session.
However, after trading more than 5 cents lower on the session, the market
managed to move all the way back to higher on the session in spite of continued
weakness in the other grain. Wheat/corn spreading was noted and fund
short-covering helped support the recovery. Weekly export sales came in at
349,700 tons as compared with trade expectations of 400,000-600,000 tons and
335,400 tons necessary each week to reach the USDA projection. Cumulative sales
have now reached 50.9% of the USDA forecast for the season as compared with
37.9% on average for this time of the year. While Japan and Taiwan were routine
buyers on 41,000 tons and 43,000 tons of US wheat overnight, traders were
disappointed to see weak weekly sales and also disappointed to learn that Iraq
bought 800,000 tons of wheat from Australia and that Pakistan bought
100,000-150,000 tons of wheat from Russia. Russia raised their grain crop
production forecast to 76 million tons from the previous forecast of 73-76
million and 67.2 million tons last year. Support for December wheat comes in at
331 and 328 3/4 with 347 1/4 and 351 as next resistance points.
Technical Outlook
WHEAT (DEC) 09/17/2004: 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. The upside daily
closing price reversal gives the market a bullish tilt. With the close higher
than the pivot swing number, the market is in a slightly bullish posture. The
next upside objective is 346 1/2. The next area of resistance is around 342 3/4
and 346 1/2, while 1st support hits today at 333 3/4 and below there at 328 1/4.
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LIVE CATTLE RECAP
9/16/2004
October Live Cattle closed up 0.72 at 86.42. This
was 1.27 up from the low and 0.42 off the high.
October Feeder Cattle finished up 1.07 at 112.55,
0.32 off the high and 1.25 up from the low.
The cattle market pushed sharply higher on the
session led by higher beef prices and expectations that cash cattle would trade
higher on the week after posting trades of $83.00-$83.50 late last week.
Positioning ahead of the Cattle-on-Feed report for Friday and some choppy trade
in pork helped to limit the gains early but renewed optimism that Japan/US beef
problems are coming closer to resolutions and active speculative buying helped
to support the late surge higher. Boxed-beef cutout values (600-750 choice) were
up $.26 on the day at mid-session to $135.21 as compared with $130.488 last week
at this time. The average trade estimate for September 1st on-feed supply is at
103% (range 101-104.3), August placements at 93.5% (range 86-98.1) and August
marketings at 91% (range 87-94.3).
Technical Outlook
CATTLE (OCT) 09/17/2004: 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. A positive signal for trend short-term was given on a
close over the 9-bar moving average. Market positioning is positive with the
close over the 1st swing resistance. The next upside objective is 87.900. The
next area of resistance is around 87.270 and 87.900, while 1st support hits
today at 85.600 and below there at 84.520.
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LEAN HOGS RECAP
9/16/2004
October Lean Hogs closed up 1.35 at 70.00. This
was 1.20 up from the low and 0.57 off the high.
February Pork Bellies finished up 1.35 at 96.07,
0.52 off the high and 1.17 up from the low.
The December futures came close to the upside
swing objective of 68.12 before a major sell-off from the highs into the close.
The surge higher in loins and cash bellies overnight helped to support the
sharply higher trade early in the session and the jump in pork cut-out values
gave packers an incentive to pay-up to move as many hogs as possible through the
pipeline. As a result, cash hogs at Peoria were up $1.50 on the day. The higher
trend in cash hogs and pork product prices is coming at a time when pork
production is historically high and weights are heavier than normal for this
time of the year. Traders suspect that the jump in loin prices could be
associated with an increase in export activity. The CME 2-Day Lean index for the
period ending September 14th was up 64 cents to 72.47 which leaves the Index up
4 cents since the end of August. This has helped support the surge in futures
which were trading at a huge discount to the cash index at the end of August.
Technical Outlook
HOGS (OCT) 09/17/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The close above the 9-day
moving average is a positive short-term indicator for trend. Follow through
buying looks likely if the market can hold yesterday’s gap on the day session
chart. The market’s close above the 2nd swing resistance number is a bullish
indication. The near-term upside target is at 71.600. With a reading over 70,
the 9-day RSI is approaching overbought levels. The next area of resistance is
around 70.870 and 71.600, while 1st support hits today at 69.120 and below there
at 68.070.
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COCOA MARKET RECAP
9/16/2004
December Cocoa finished down 29 at 1453, 17 off
the high and 5 up from the low.
Cocoa prices fell back toward critical support
down at $1,450 early in the session, as ongoing precipitation in many Ivory
Coast and Cameroon continued to pressure the bulls. Despite reports of ongoing
physical cocoa bean tightness in the Asian marketplace we would have expected
cocoa to have found support on the charts. Reports of trade selling in London
started the US market off a weak note and that effectively shifted the pendulum
back away from the optimistic stance that existed following the action
Wednesday.
Technical Outlook
COCOA (DEC) 09/17/2004: 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 swing indicator gave a moderately negative reading with the close
below the 1st support number. The next downside objective is 1434. With a
reading under 30, the 9-day RSI is approaching oversold levels. The next area of
resistance is around 1464 and 1478, while 1st support hits today at 1442 and
below there at 1434.
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COFFEE MARKET RECAP
9/16/2004
December Coffee closed up 1.40 at 78.45. This was
2.85 up from the low and 1.05 off the high.
Somebody forgot to tell the coffee pit that the
storm failed to damage the coffee in New Orleans as prices continued to rise
sharply despite the fact that New Orleans avoided the brunt of the storm. Dow
Jones reported roaster buying in London and that set a positive tone for the US
session. We have to think that Roaster buying is going to quickly back away from
lofty prices, especially since supply threats are non existent and prices are
now significantly above the August lows.
Technical Outlook
COFFEE (DEC) 09/17/2004: 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 outside day up is somewhat positive. The market’s
close above the 2nd swing resistance number is a bullish indication. The
near-term upside objective is at 81.85. The market is approaching overbought
levels with an RSI over 70. The next area of resistance is around 80.35 and
81.85, while 1st support hits today at 76.55 and below there at 74.15.
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SUGAR MARKET RECAP
9/16/2004
October Sugar closed down 0.09 at 7.66. This was
0.06 up from the low and 0.04 off the high.
The sugar market continues to show signs of
weakness as prices have been unable to get away from consolidation support.
Early weakness in London sugar seemed to start US sugar out on a negative note
and with reports of more intense fund selling any violation of chart support
could be a major negative for prices. With the market just not getting the type
of physical buying interest expected some players are saying that prices above
850 are proving to be unattractive to commercial buyers. Considering the lofty
status of the small spec and fund long in the last COT report one should not
underestimate the magnitude of an all out liquidation wave.
Technical Outlook
SUGAR (MAR) 09/17/2004: A bearish signal was
triggered on a crossover down in the daily stochastics. 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. The market setup is somewhat negative with the close under
the 1st swing support. The next downside objective is now at 8.45. The next area
of resistance is around 8.57 and 8.61, while 1st support hits today at 8.49 and
below there at 8.45.
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COTTON MARKET RECAP
9/16/2004
October Cotton finished down 2.78 at 48.97, 3.03
off the high and 0.07 up from the low.
The cotton bulls had to be extremely disappointed
with the initial reaction in the marketplace to the storm, even though Ivan is
still expected to dump massive amounts of rain on cotton with open bolls.
However, the pace of Ivan was faster than expected and that could mean that
rainfall amounts are somewhat reduced. It should also be noted that the storm
track was too far East to really impact the brunt of US cotton production. The
weekly export sales readings were disappointing as only 37,000 bales were posted
off expectations of 50,000 to 100,000 bales. Some traders suggested that recent
gains in cotton were unsustainable even if the US crop was reduced off Ivan and
that is because recent USDA reports showed a mountain of cotton supply.
Technical Outlook
COTTON (DEC) 09/17/2004: The market back below
the 40-day moving average suggests the longer-term trend could be turning down.
The downside crossover of the 9 & 18 bar moving average is a negative signal.
Momentum studies are declining, but have fallen to oversold levels. The close
below the 9-day moving average is a negative short-term indicator for trend. The
gap down on the day session chart is bearish with more selling pressure possible
today. The defensive setup, with the close under the 2nd swing support, could
cause some early weakness. The next downside target is now at 45.88. The next
area of resistance is around 48.70 and 50.37, while 1st support hits today at
46.46 and below there at 45.88.
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