Here’s What The ISM Report Meant For Treasuries

Technical Outlook

#BONDS (JUN) 6/2/2004: There could be some early
pressure today given the market’s negative setup with the close below the 2nd
swing support. Near-term resistance for bonds is at 106.10 and then again at
106.31, while swing support hits at 105.06 and below there at 104.23. A positive
signal for trend short-term was given on a close over the 9-bar moving average.
Rising stochastics at overbought levels warrant some caution for bulls. The next
upside objective is 106.31.

T-NOTES(JUN) Momentum studies are trending higher
from mid-range which should support a move higher if resistance levels are
penetrated. The near-term upside objective is at 110.05. The market’s close
below the pivot swing number is a mildly negative setup. Near-term resistance
for the T-Notes is at 109.28 and then again at 110.05, while swing support hits
at 109.08 and below there at 108.30. The market’s short-term trend is positive
on a close above the 9-day moving average.

 

STOCK INDICES RECAP

6/1/2004

We think that the stock market held together
considering all the negatives it faced Monday morning. In addition to the
sharply higher energy prices and the residual fear off the weekend terrorism
attacks in Saudi Arabia the market also had to weather talk that OPEC might not
be able to take the edge off soaring energy prices. In other words, energy
prices showed almost no sign of weakening even though OPEC actually talked about
scrapping the quota system. The stock market had to be partially happy with the
US economic numbers even if they rekindled rate hike fears as recent US numbers
have been much too weak! In short the stock market deserved to break but could
have come under massive liquidation pressure.

Technical Outlook

#S&P500 (JUN) 6/2/2004: The close over the pivot
swing is a somewhat positive setup. The upside daily closing price reversal
gives the market a bullish tilt. Underlying support comes in at 1116.20 and
1109.35, with overhead resistance at 1126.20 and 1129.35. 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 objective is at 1129.35.

S&P E-Mini (JUN): The daily closing price
reversal up is positive. Studies are showing positive momentum, but are now in
overbought territory so some caution is warranted. The next upside target is
1129.88. With the close higher than the pivot swing number, the market is in a
slightly bullish posture. Near-term resistance for the S&P Mini is at 1126.25
and then again at 1129.88, while swing support hits at 1115.75 and below there
at 1108.88. The market’s close above the 9-day moving average suggests the
short-term trend remains positive.

NASDAQ (JUN) The daily closing price reversal up
is a positive indicator that could support higher prices. A positive signal for
trend short-term was given on a close over the 9-bar moving average. The market
has a slightly positive tilt with the close over the swing pivot. The market
should run into resistance at 1477.75 and above there at 1482.88 with support at
1460.25 and 1447.88. The market is approaching overbought levels with an RSI
over 70. Rising stochastics at overbought levels warrant some caution for bulls.
The next upside objective is 1482.88.

MINI DOW (MAR) The upside daily closing price
reversal gives the market a bullish tilt. Stochastics are rising from over sold
levels which is bullish and should support higher prices. The market should run
into resistance at 10242 and above there at 10267 with support at 10160 and
10103. Daily stochastics have risen into overbought territory which will tend to
support reversal action if it occurs. The near-term upside target is at 10267.
The close over the pivot swing is a somewhat positive setup.

 

CURRENCY MARKET RECAP

6/1/2004

The Dollar managed to recoil away from the lows
but was still mostly weak. We suspect that the Dollar saw short covering into
the news that a new Iraqi leader had been elected. Apparently the market thinks
that handing over control to the Iraqi government will lower the risk to the US.
It is also likely that hotter US numbers and an indication of inflation in the
ISM readings prompted some traders to upgrade the yield potential of US
investments. Seeing a much hotter than expected US construction spending report
also rekindled the idea that the US Fed might still be inclined to hike rates
and that might be especially true in the event that inflation does become a
threat to the US economy.

Technical Outlook

#CURRENCIES 6/2/2004: YEN (JUN): A positive
signal for trend short-term was given on a close over the 9-bar moving average.
The market could take on a defensive posture with the daily closing price
reversal down. The market tilt is slightly negative with the close under the
pivot. Swing resistance is targeted at 91.00 and above there at 91.76, with the
yen finding support around 89.92 and below there at 89.60. 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 91.76.

EURO (JUN): Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 1.2282. The defensive setup, with the close
under the 2nd swing support, could cause some early weakness. Swing support for
the Euro comes in at 1.2156, with overhead resistance at 1.2282. The close above
the 9-day moving average is a positive short-term indicator for trend. More
selling pressure is likely given yesterday’s gap lower price action on the day
session chart.

 

PRECIOUS METALS RECAP

6/1/2004

The gold market posted an initial strong run but
then faded back into mid session as the Dollar managed to recoil away from its
lows of the session. Talk from GFMS that gold de-hedging continued in the first
quarter to the tune of 2.7 million ounces is a doubling of the prior quarter
hedge lifting and that would seem to suggest that less physical supply of gold
is coming to the market. In other words, the physical fundamental setup is
apparently tightening. Against the backdrop of rising energy and grain prices it
is not impossible to think that inflation could become an issue. In the ISM
readings the trade also noted a significant increase in the prices paid category
and that is another potentially inflationary element.

Technical Outlook

#P-METALS 6/2/2004: SILVER (JUL): The market tilt
is slightly negative with the close under the pivot. Initial support for silver
is at 597.8 and below there at 593.1 with resistance likely at 610.2 and 613.3.
A positive signal for trend short-term was given on a close over the 9-bar
moving average. Rising stochastics at overbought levels warrant some caution for
bulls. The next upside objective is 610.2. The market could take on a defensive
posture with the daily closing price reversal down.

GOLD (AUG): Support for gold today comes in near
390.78, while resistance is pegged at 401.78. Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 401.78. The close over the pivot swing is a
somewhat positive setup. The close above the 9-day moving average is a positive
short-term indicator for trend.

 

COPPER MARKET RECAP

6/1/2004

Copper managed an impressive rally in the face of
rising energy prices, a nondescript day in the Dollar and a generally weaker US
equity market. In other words, the copper market wasn’t the slightest bit
impacted by the negative macro economic condition. Some might suggest that
employment and price readings inside the ISM were really indicative of a strong
economy and that might mean that the macro outlook wasn’t as bad as many feared
in the face of rising energy prices and a slumping stock market.

 

ENERGY MARKET RECAP

6/1/2004

Even though OPEC tossed about the idea of
abandoning the quota system energy prices soared. In other words, the market
really doesn’t think that OPEC can control energy prices and therefore traders
are rushing to factor in future problems. Certainly the weekend Saudi
developments inspired the bull camp but with OPEC unable to discourage
speculation there was little to hold back prices. The Iraqi Oil Minister
suggested that a 2.5 million barrel per day production hike was too much oil it
is clear that OPEC is willing to ride the edge of a severe shortage to even
higher prices.

Technical Outlook

#ENERGIES 6/2/2004: CRUDE OIL (JUL): The market
rallied to a new contract high. Follow through buying looks likely if the market
can hold yesterday’s gap on the day session chart. There could be more upside
follow through since the market closed above the 2nd swing resistance. Support
for crude is keyed on 41.59 and below there at 40.51, with resistance pegged at
43.07 and 43.47. 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 43.47.

UNLEADED GAS (JUL): Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
The next downside objective is 130.00. The market has a bullish tilt coming into
today’s trade with the close above the 2nd swing resistance. Resistance today is
at 139.20, while support should be found around 130.00. If yesterday’s gap
higher on the day session chart holds, additional buying could develop this
session. A positive signal for trend short-term was given on a close over the
9-bar moving average.

HEATING OIL (JUL): There could be more upside
follow through since the market closed above the 2nd swing resistance. Heating
oil should encounter support around 101.68, with resistance is at 109.48. 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 109.48. The market rallied to a new contract high.
Follow through buying looks likely if the market can hold yesterday’s gap on the
day session chart.

 

CORN MARKET RECAP

6/1/2004

The market experienced significant speculative
buying after the reversal and higher close on Friday and a gap higher opening
after a 3-day weekend on the first day of meteorological summer is also seen as
a bullish technical development. Funds were noted buyers of at least 7000
contracts into the mid-session. The jump on Friday was triggered by concerns
that the rain might limit the number of fields which could be replanted on time
and that the market will not receive the 2 million “extra” acres which the trade
had believed as a strong possibility just a few weeks ago. The potentially lower
planted acreage and lower than expected average yields leaves the market
vulnerable to considerable volatility into the summer as less than perfect
weather puts the market in a position to see production come in below projected
demand for the 2004/2005 season. Ending stocks are already tight and a crop
below 10.5 billion bushels would make the trade nervous. If planted acreage is
80 million bushels, up 1 million from the USDA estimate, and yield comes in at a
new record high 145 bu/acre (last year was 142.2), ending stocks would come in
near 846 million bushels or just 8.1% of usage. If yield is the same as last
year’s record, ending stocks drop to 643 million bushels. Traders look for a
decline in crop conditions in tonight’s report. Weekly export inspections came
in at 32.9 million bushels as compared with trade expectations at 34-38 million.
Cumulative inspections have reached 1.365 billion bushels as compared with 1.097
billion last year at this point. December corn support comes in at 309 3/4 and
302 1/4 with 322 3/4 and 331 as next resistance points.

Technical Outlook

#CORN (JUL) 6/2/2004: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The near-term upside target is at 327 3/4. There could be more upside
follow through since the market closed above the 2nd swing resistance. Market
resistance comes in at 327 3/4 today, with support at 317 3/4. The close above
the 9-day moving average is a positive short-term indicator for trend. The cross
over and close above the 40-day moving average is an indication the longer-term
trend is up. The market is becoming somewhat overbought now that the RSI is over
70. Follow through buying looks likely if the market can hold yesterday’s gap on
the day session chart.

 

SOY COMPLEX RECAP

6/1/2004

More damage is expected after the heavy rains
over the weekend which left fields across Iowa, Illinois and Indiana with plenty
of areas of ponding and concerns now that the ponds will not clear up for
several days. If so, producers would need to replant areas which were underwater
for more than 36 hours. In addition to weather concerns for another round of
heavy rains for the coming weekend, the speculative and fund trade psychology
has turned more bullish with funds seen as active buyers today and for much of
the week. A weekend gap higher opening in the summer, especially after a 3-day
week, is seen as a bullish technical development. In addition, June 1st is
considered the first day of summer by many traders and a sharply higher trade
for today is seen as a “pointer” for trade direction for the summer period
ahead. Traders are looking for tonight’s weekly crop progress report to show
planting progress near 75-80% complete as compared with 67% posted last week.
Weekly export inspections came in at 1.7 million bushels as compared with trade
expectations at 4-6 million. Cumulative inspections have reached 808.6 million
bushels as compared with 955.7 million last year at this point. Taiwan is
tendering for up to 60,000 tons of US or Brazilian soybeans. Short-term support
for November soybeans comes in at 728 and 719 1/2 with 749 3/4 as next key
resistance.

Technical Outlook

#SOYBEANS (JUL) 06/02/04 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.
The next area of resistance is around 870 and 873, while 1st support hits today
at 858 and below there at 849. The market’s close on the 9-day moving average is
neutral. A bullish signal was given with an upside crossover of the daily
stochastics. The next upside objective is 873.

MEAL (JUL): The daily stochastics gave a bullish
indicator with a crossover up. The near-term upside target is at 280.9. Follow
through buying looks likely if the market can hold yesterday’s gap on the day
session chart. First resistance comes in at 278.1, with support at 269.3. The
close below the 9-day moving average is a negative short-term indicator for
trend. There could be more upside follow through since the market closed above
the 2nd swing resistance.

BEAN OIL (JUL): A positive signal for trend
short-term was given on a close over the 9-bar moving average. A bullish signal
was given with an upside crossover of the daily stochastics. The next upside
objective is 30.34. 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. If yesterday’s gap higher on the day session chart holds,
additional buying could develop this session. Daily swing resistance is found at
29.95 and above there at 30.34. Support should be encountered at 29.08 and
28.60.

 

WHEAT MARKET RECAP

6/1/2004

Funds were noted buyers of at least 4500
contracts into the mid-session. Weekly export inspections came in at 21.2
million bushels as compared with trade expectations at 18-20 million. The market
surged higher shortly after the opening with active buying from fund and
speculators with support from weather and from strength in the other grains.
Heavy rains in southern Indiana and Ohio soft red areas and a lack of rain in
western Kansas has helped support. Reports of head scab in fields in
southwestern Indiana added to the bullish tone. Traders await the weekly crop
conditions report tonight and expect lower readings. Many areas of western
Kansas had no rain for the past 8-12 days with total precipitation for May for
Dodge City Kansas at .59 inches. Hays Kansas has had no rain in 12 days with .42
inches for the month. Liberal Kansas had one tenth of an inch for the month.
Taiwan millers are tendering for 42,510 tons of US wheat. July wheat support
moves up to 384 3/4 and 382 3/4 with resistance at 393 1/2 and 402 1/4.

Technical Outlook

#WHEAT (JUL) 6/2/2004: If yesterday’s gap higher
on the day session chart holds, additional buying could develop this session.
The market has a bullish tilt coming into today’s trade with the close above the
2nd swing resistance. Expect near-term support around 381 and below there at
372, with resistance levels at 395 and 400. A positive signal for trend
short-term was given on a close over the 9-bar moving average. 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 400.

 

LIVE CATTLE RECAP

6/1/2004

The cattle market pushed lower in choppy trade
with the surge in grain prices helping to support sharply lower feeder cattle
and a slightly more negative psychology for the cattle market. Traders have high
expectations for the cash market this week with talk of $88.00-$90.00 cash
market this week as compared with most of the trade at $85.00 last week.
Slaughter came in at 129,000 head as compared with expectations at
126,000-132,000 head. At noon, boxed beef cutout values were .50 higher to
$147.28 as compared with $151.52 last week at this time. Traders await cash news
this week but also any indication of retail demand for the past holiday weekend.
If clearance was strong, there should be more fill-in buying from retailers for
boxed-beef this week.

Technical Outlook

#CATTLE (AUG) 6/2/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
89.57. The market tilt is slightly negative with the close under the pivot.
Support should be encountered at 87.22 and below there at 86.67. Market
resistance is at 88.67 and then again at 89.57. A positive signal for trend
short-term was given on a close over the 9-bar moving average.

 

LEAN HOGS RECAP

6/1/2004

July hogs closed 90 higher on the session but 82
points lower than the opening and the highs of the day. The technical action
could be considered slightly negative as the market experienced a successful
test of the contract highs and closed well under the opening price. Active fund
buying and the discount of futures to the cash market helped support but a
weaker tone in the cash market helped to bring on some selling into the middle
of the session. Futures found some support from Friday’s strength in the pork
product prices but the bounce on Friday only partially offset the sharp losses
on the week last week. July bellies closed sharply higher on the session and the
close above 114.90 (now support) leaves 120.35 as next upside swing objective.
Slaughter came in at 390,000 head as compared with expectations at
365,000-377,000 head. The CME 2-day Lean Index for the period ending May 27th
was down $1.27 to $79.33 as compared with $83.35 last week at this time.

Technical Outlook

#HOGS (JUL) 6/2/2004: The close over the pivot
swing is a somewhat positive setup. Resistance levels comes in at 76.72 and
77.42 today, while support is around 75.62 and then 75.22. 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 77.42.

 

COCOA MARKET RECAP

6/1/2004

A sharp setback was seen in cocoa as the funds
apparently decided to halt their recent buying spree. We suspect that some funds
actually decided to rebuild their short positions as they have generally stayed
short the cocoa. The presence of origin selling might have given the market
downside impetus but without critical news flowing from the Ivory Coast
political stage the bull camp might be hard pressed to rationalize all the gains
off the May lows.

Technical Outlook

COCOA (JUL) 06/02/04 The close below the 1st
swing support could weigh on the market. Cocoa should run into resistance at
1448 and above there at 1475 with support at 1399 and 1377. Studies are showing
positive momentum, but are now in overbought territory so some caution is
warranted. The next upside target is 1475.25.

 

COFFEE MARKET RECAP

6/1/2004

September coffee had trouble holding the big
gains from last Friday but did manage to close above the prior days lows.
Supposedly the trade noted some origin selling on the session but prices never
manage to get back above the prior days close. The Guatemala May export decline
of 17% is supportive but the main driving force behind the recent coffee action
has been all about Brazilian weather. A forecast for mild temps in Brazil seemed
to push some spec longs to the sidelines but there is some concern that ongoing
wet conditions will hinder the harvest and that serves to mitigate the no frost
liquidation. A for the Brazilian 2004-2005 crop of 42.4 million bags is a 33%
increase to the 2003-2004 crop and that highlights the importance of adverse
weather in the bull case.

Technical Outlook

COFFEE (JUN) 6/2/04 The close below the 1st swing
support could weigh on the market. The 9-day RSI over 70 indicates the market is
approaching overbought levels. Studies are showing positive momentum, but are
now in overbought territory so some caution is warranted. The near-term upside
objective is at 87.45. The Coffee contract should run into resistance at 85.00
and above there at 87.45 with support at 80.9 and 79.25. The market’s short-term
trend is positive on a close above the 9-day moving average.

 

SUGAR MARKET RECAP

6/1/2004

Fund buying pushed July sugar prices higher after
with the market found solid buying interest on the lower open, making for good
technical chart action Friday. Rain delays to Brazil’s centre south sugar
harvest is the key factor supporting sugar prices as fears of huge sugar
supplies are being tempered. High energy prices are also providing underlying
support in that ethanol demand could be on the rise. Closing over 7 cents puts
July sugar in a position to test the April highs. An official from India’s
Indian Sugar Mills Association said that while sugar output could fall by 30%
this crop year, the country does not expect to import any sugar due to high
stocks. This news had little impact because it was already well known.

Technical Outlook

#SUGAR (JUL) 6/2/2004: Market positioning is
positive with the close over the 1st swing resistance. Swing resistance comes in
at 7.43, with support found at 6.91. 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 7.43. The market is becoming somewhat
overbought now that the RSI is over 70.

 

COTTON MARKET RECAP

6/1/2004

A big range down in October and a new contract
low in December cotton suggest that the bear camp still have full control over
prices. Apparently some in the market think that growing condition in cotton are
improving and that condition will remain conducive to production. It also seems
like many traders are expecting to see some soybean acres go to cotton.
According to market sources the trade is seeing almost no long interest on
weakness and that suggests few think a bottom is near in cotton. Even commercial
buyers are unwilling to step into the fray despite 600 point break off the late
April highs.

Technical Outlook

#COTTON (JUL) 6/2/2004: 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 59.89 and
then again at 62.35, while support is targeted at 56.58 and 55.73. Daily
stochastics declining into oversold territory suggest the selling may be drying
up soon. The next downside objective is 55.73. The market is approaching over
sold levels on an RSI reading under 30.