Here’s What Today’s Market Action Suggests About Friday’s Payroll Number

The highest close in 7 trading sessions for
December corn in spite of good weather conditions leaves the market vulnerable
to further short-covering ahead. The outlook for a bumper crop and rains
overnight across the heart of the cornbelt helped to pressure the market early
but the lack of follow-through to the downside in the past 10 sessions has led
to some short-covering. Continued talk of an 11 billion bushel crop has kept the
supply news bearish as traders brace for next weeks crop production report. A
Commodity brokerage firm (FC Stone) pegged the crop at 10.938 billion bushels as
compared with 10.635 billion posted in the last USDA supply/demand report. Cheap
feedwheat offers from the Black Sea region into the Asia feedgrain market is
seen as a bearish influence for world corn prices. Basis levels are steady and
trade in the cash and futures market is slow. Futures remain oversold basis
traditional technical indicators and basis the recent Commitment-of-Traders
report with options which showed speculators net short over 86,000 contracts.
This has led to some talk of a possible short-covering bounce ahead of the
reports next week as crop estimates near 11 billion bushels have not caused
further deterioration in futures prices. For the weekly export sales report,
released before the opening, traders are looking for corn sales near
650,000-900,000 tons as compared with last weeks sales at 942,300 tons. Support
for December corn comes in at 228 3/4 and 225 1/2 with 233 3/4 and 242 1/2 as
resistance.

Technical Outlook

#CORN (DEC) 08/05/04: Daily momentum studies are
on the rise from low levels and should accelerate a move higher on a push
through the 1st swing resistance. The near-term upside objective is at 235 1/2.
The market’s close above the 2nd swing resistance number is a bullish
indication. Market resistance comes in at 235 1/2 today, with support at 225
1/2. The upside crossover (9 above 18) of the moving averages suggests a
developing short-term uptrend.

 

SOY COMPLEX RECAP

8/4/2004

September Soybeans finished down 7 1/4 at 565
1/2, 14 1/2 off the high and 1/2 up from the low. November Soybeans closed down
10 at 557. This was 1 up from the low and 11 off the high.

August Soymeal closed down 4.2 at 183.8. This was
equal to the low and 4.7 off the high.

August Soybean Oil finished up 0.04 at 21.76,
0.32 off the high and 0.13 up from the low.

November soybeans and December meal moved to new
lows for the week and the lowest level since October for the soybeans. The lack
of a weather threat on the Midwest forecast, hefty rains across Iowa, Illinois
and Indiana overnight and talk of bumper yields helped keep the speculator in a
selling mode today. The lack of deliveries for August soybeans or products this
morning helped support the nearby contracts. In addition, bull spreading from
commercial traders and firm gulf basis levels helped provide some temporary
support to the old crop contracts but the more aggressive selling from
speculators helped turn the market lower into the close. The trade is bracing
for next weeks USDA Crop Production and Supply/Demand reports. A brokerage firm
(FC Stone) pegged the crop at 2.982 billion bushels yesterday and there should
be more estimates released in the days just ahead. This estimate is 42 million
bushels above last months preliminary forecast from the USDA and there are
likely to be forecasts above 3 billion bushels. Overnight news that Taiwan may
take delivery of 58,000 tons of Brazil soybeans which were diverted from China
added to the bearish demand tone this morning as competition with Brazil is on
the rise and the strong US dollar was also seen as a slight negative. Taiwan is
seen as buying more Brazil soybeans in the future with the US share expected to
drop to near 60% from 70% last year. Traditional technical indicators are
showing oversold readings which have supported some short-covering ahead of the
key reports next week. For the weekly export sales report, released before the
opening, traders are looking for soybean sales near 50,000-250,000 tons for
soybeans, 30,000-60,000 tons for meal and 1,000-4,000 tons for oil. November
soybean support comes in at 558 and 549 with 567 and 579 as resistance.

Technical Outlook

#SOYBEANS (NOV) 08/05/04: The swing indicator
gave a moderately negative reading with the close below the 1st support number.
The next area of resistance is around 563 and 571 1/2, while 1st support hits
today at 551 and below there at 547 1/2. The market’s close below the 9-day
moving average is an indication the short-term trend remains negative. Momentum
studies are declining, but have fallen to oversold levels. The next downside
target is 547 1/2. The 9-day RSI under 30 indicates the market is approaching
oversold levels.

MEAL (DEC): Daily stochastics are trending lower,
but have declined into oversold territory. The next downside objective is now at
169.7. First resistance comes in at 173.1, with support at 170.5. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. The market’s close below the 1st swing support number suggests a
moderately negative setup for today. With a reading under 30, the 9-day RSI is
approaching oversold levels.

BEAN OIL (DEC): The market’s close below the
9-day moving average is an indication the short-term trend remains negative.
Daily stochastics are showing positive momentum from oversold levels which
should reinforce a move higher if near-term resistance is taken out. The next
upside target is 21.57. The swing indicator gave a moderately negative reading
with the close below the 1st support number. The downside closing price reversal
on the daily chart is somewhat negative. Daily swing resistance is found at
21.08 and above there at 21.57. Support should be encountered at 20.35 and
20.11. The 9-day RSI under 30 indicates the market is approaching oversold
levels.

 

WHEAT MARKET RECAP

8/4/2004

September Wheat finished up 1 1/2 at 318 1/2, 2 3/4 off the
high and 4 1/2 up from the low. December Wheat closed up 1 1/2 at 332 3/4. This
was 4 3/4 up from the low and 2 off the high.

The strength in the corn market late in the
session along with trade house and local buying support the bounce into the
close. The market found some early support from news that Egypt bought 60,000
tons of wheat from the US and 60,000 tons from France this morning but the highs
were hit on the opening as the trade is not confident that the US will remain
competitive on the world market if flat prices move higher. In addition, the
jump in the US dollar added to the bearish demand tone. News that the Ukraine Ag
Minister increased the forecast for wheat production to 15-16 million tons from
14-15 million previously was also seen as bearish due to potential export
competition ahead. For the weekly export sales report, released before the
opening, traders are looking for wheat sales near 400,000-600,000 tons as
compared with last weeks sales at 599,200 tons. Technically, the market is
oversold and still operating under the positive influence of the reversal on
Monday with support for December wheat at 328 and 326 1/2 with 338 and 343 1/2
as resistance.

Technical Outlook

#WHEAT (DEC) 08/05/04: With the close higher than
the pivot swing number, the market is in a slightly bullish posture. Look for
near-term support at 329 1/2 and below there at 325 1/2, with resistance levels
at 336 and 338 1/2. The market’s close above the 9-day moving average suggests
the short-term trend remains positive. Daily stochastics are showing positive
momentum from oversold levels which should reinforce a move higher if near-term
resistance is taken out. The next upside target is 338 1/2.

 

LIVE CATTLE RECAP

8/4/2004

October Live Cattle closed up 1.12 at 87.50. This
was 1.45 up from the low and 0.35 off the high.

October Feeder Cattle finished up 2.00 at 112.05,
0.15 off the high and 2.35 up from the low.

News that cattle cash bids of $82.00 from packers
were passed on by feedlots was seen as a positive factor and helped support
sharply higher trade in cattle futures. Ideas that the Tuesday break was
overdone added to the buying support. Boxed-beef cut-out values were down $.96
to $140.50 at mid-session as compared with $142.91 last week at this time.
Slaughter was 127,000 head as compared with trade expectations at 126,000 to
128,000 head. The market pushed to new lows for the week basis October futures
but a lack of new selling interest helped support the higher trade as
short-covering was noted. Mild support comes in at 86.50 for October cattle with
retracement resistance points at 88.20, 88.87 and 89.55. Keep 83.22 as
longer-term downside objective.

Technical Outlook

#CATTLE (OCT) 08/05/04: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The next downside
target is 85.42. With the close higher than the pivot swing number, the market
is in a slightly bullish posture. Support should be encountered at 86.60 and
below there at 85.42. Market resistance is at 88.40 and then again at 89.02. The
daily closing price reversal up is positive. The market’s close below the 9-day
moving average is an indication the short-term trend remains negative.

 

LEAN HOGS RECAP

8/4/2004

October Lean Hogs closed up 0.95 at 70.20. This
was 0.95 up from the low and 0.55 off the high.

February Pork Bellies finished up 1.32 at 96.00,
1.20 off the high and 1.32 up from the low.

The recovery in cattle and ideas that the Tuesday
sell-off was overdone helped support strong gains in hog futures and contract
highs were posted for the August and February contracts. October hogs matched
contract highs and the stiff discount to the cash market was once again seen as
a positive force. While October closed at 70.20, the 2-Day lean Index for the
period ending August 2nd was down 8 cents to 79.34 from 78.71 one week previous.
Slaughter was 384,000 head as compared with trade expectations at 379,000 to
385,000 head which might be seen as a positive development with slaughter at the
high end of expectations for the second day in a row. Producers are seen as
current with marketings and average weights are coming down. Weekly average
weights for Iowa/Minnesota for the week ending July 31st were reported at 259.3
pounds as compared with 260.3 pounds the previous week and 256.9 pounds last
year at this time. Cash markets were steady at Peoria. Support for October hogs
comes in at 69.77 with 71.52 as next upside objective.

Technical Outlook

#HOGS (OCT) 08/05/04: With the close over the 1st
swing resistance number, the market is in a moderately positive position.
Resistance levels comes in at 70.95 and 71.60 today, while support is around
69.45 and then 68.60. Consider buying pull-backs since daily studies are
bullish. The market’s short-term trend is positive on a close above the 9-day
moving average. Momentum studies are trending higher, but have entered
overbought levels. The near-term upside objective is at 71.60.

 

COCOA MARKET RECAP

8/4/2004

September Cocoa finished up 4 at 1727, 11 off the
high and 27 up from the low.

The cocoa market extended the string of new
contract high moves in the action Wednesday. Since the London market saw profit
taking that potentially undermined New York but the fact that the specs came in
aggressively on the dip to 1700 shows that traders are still very interested in
picking up longs on breaks. Without signs of heavy rains at the Ivory Coast the
bull camp could be difficult to unseat, regardless of the excessive short term
overbought standing of the market.

Technical Outlook

COCOA (SEP) 08/05/04 The market has a slightly
positive tilt with the close over the swing pivot. Cocoa should run into
resistance at 1746 and above there at 1761 with support at 1708 and 1685. 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 next upside target is 1761.00.

 

COFFEE MARKET RECAP

8/4/2004

September Coffee closed down 0.50 at 66.30. This
was 0.30 up from the low and 0.60 off the high.

The disappointment from the lack of a credible
weather threat leaves coffee in a negative tilt. The fact that small spec
selling is prevalent suggests that the weather liquidation has run to fully run
its course. Even though the coffee market is unlikely to see an actual physical
impact off a freeze later this month one can’t rule out a last ditch attempt to
rally off frost. However, as the specs have found out the punishment for being
long is pretty significant if the crop isn’t actually threatened. Apparently
industry buying was seen around the lows and that seemed to temper the
liquidation pressure. With Brazil selling 99.6% of the auction coffee one might
conclude that there is decent baseline demand but that isn’t an aggressive
bottoming factor.

Technical Outlook

COFFEE (SEP) 8/5/04 The close below the 1st swing
support could weigh on the market. The 9-day RSI under 30 indicates the market
is approaching oversold levels. Momentum studies are declining, but have fallen
to oversold levels. The next downside objective is now at 65.50. The Coffee
contract should run into resistance at 66.80 and above there at 67.30 with
support at 65.9 and 65.50. The market’s short-term trend is negative as the
close remains below the 9-day moving average.

 

SUGAR MARKET RECAP

8/4/2004

October Sugar closed down 0.23 at 8.15. This was
0.07 up from the low and 0.13 off the high.

The gap lower move in October sugar on Wednesday
following Tuesday’s reversal action from contract highs would suggest a further
downside correction in prices. With the combined net position of the large and
small trader close to record levels, the market had become bought out and a
break below 8 cents in the October contract looks likely with support under
there at around 7.92. A rumor that Russia was buying sugar was not enough to
offset fund and speculative sales. News that the World Trade Organization ruled
against European Union sugar subsidies had no visible impact on prices since any
reprimand from the WTO could be drawn out. However, if the WTO ruling is upheld
it could mean that the EU sugar exports could decline by 2 million tones next
year while Brazil exports could rise 10%. The UK’s first sugar beet test this
year showed sugar content rose to 14.7% vs 14.3% a year ago.

Technical Outlook

#SUGAR (OCT) 08/05/04: The gap lower price action
on the day session chart is a bearish indicator for trend. The market is in a
bearish position with the close below the 2nd swing support number. Swing
resistance comes in at 8.37, with support found at 7.97. The upside crossover (9
above 18) of the moving averages suggests a developing short-term uptrend. The
daily stochastic’s gave a bearish indicator with a crossover down. 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
7.97.

 

COTTON MARKET RECAP

8/4/2004

October Cotton finished down 0.51 at 44.95, 0.90
off the high and 0.15 up from the low.

While cotton prices are showing some short
covering interest it would not seem like the trade is seeing any significant
change in the supply outlook. It is certainly possible that shorts are losing
some aggressiveness with cotton down nearly 25 cents since the March highs. The
trade is expecting US weekly export sales figures to bring in a 100,000 to
120,000 bale export figure on Thursday morning but there is little from the
demand front that is expected to cause the market to continue the short covering
bounce. Given the oversold nature of the cotton market it is not surprising that
the market manages to rise. The early July rise was 7 days in duration and the
current rise is only 3 days old.

Technical Outlook

#COTTON (OCT) 08/05/04: The market’s close above
the 9-day moving average suggests the short-term trend remains positive. It is a
slightly negative indicator that the close was lower than the pivot swing
number. Next resistance area comes in at 45.48 and then again at 46.19, while
support is targeted at 44.43 and 44.09. Daily stochastics are showing positive
momentum from oversold levels which should reinforce a move higher if near-term
resistance is taken out. The next upside target is 46.19. The downside closing
price reversal on the daily chart is somewhat negative.