Here’s What Undermined The Broad Market Today
BOND MARKET RECAP
2/3/2005
March Bonds finished down 0-02 at 114-26, 0-01
off the high and 0-15 up from the low.
March 10 Yr Treasury Notes finished down 0-070 at
112-010, 0-030 off the high and 0-055 up from the low.
The Treasury market saw early pressure in
the wake of slightly better than expected initial and ongoing claims readings.
We also think that slightly weaker than expected productivity readings and
slightly higher than expected labor costs prompted some selling but in the end
the market seemed to shake off the aggressive bear tilt. Some traders might have
been exiting recent longs rather than hold through the upcoming monthly payroll
report volatility window. It should also be noted that the first set of data was
bearish and that the second set of data was a little softer and that certainly
pulled in some buyers around the early lows.
Technical Outlook
BONDS (MAR) 02/04/2005: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The market now above the 18-day moving average suggests the longer-term
trend has turned up. The market’s close below the pivot swing number is a mildly
negative setup. The next upside objective is 115-09. The next area of resistance
is around 115-03 and 115-09, while 1st support hits today at 114-18 and below
there at 114-06.
TNOTES (MAR) 02/04/2005: 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 market now above the 18-day moving average suggests the
longer-term trend has turned up. The market setup is somewhat negative with the
close under the 1st swing support. The next downside objective is 111-220.
Short-term indicators on the defensive. Consider selling an intraday bounce. The
next area of resistance is around 112-060 and 112-115, while 1st support hits
today at 111-275 and below there at 111-220.
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STOCK INDICES RECAP
2/3/2005
March S&P finished down 3.6 at 1189.6, 2.1 off
the high and 3.8 up from the low.
March S&P E-Mini closed down 3.75 at 1189.5. This
was 3.75 up from the low and 4 off the high.
March Dow closed up 1 at 10586. This was 44 up
from the low and 9 off the high.
The stock market seemed to run out of steam
Thursday and that is understandable considering magnitude of the recent rally
and the important economic information that is due out Friday morning. However,
the stock market could have been lifted by news that January retail sales
readings were up by 3.6% at the large retailers and the market could have been
lifted by another day of energy price declines. On the other hand, Amazon news
seemed to undermine the broad market and that probably stimulated even more
traders to take profits ahead of the payroll report.
Technical Outlook
S&P 500 (MAR) 02/04/2005: The major trend has
turned down with the cross over back below the 40-day moving average. Momentum
studies are trending higher from mid-range, which should support a move higher
if resistance levels are penetrated. The cross over and close above the 18-day
moving average is an indication the longer-term trend has turned positive. The
close below the 1st swing support could weigh on the market. The near-term
upside target is at 1195.07. The next area of resistance is around 1192.55 and
1195.07, while 1st support hits today at 1186.65 and below there at 1183.28.
SP EMINI (MAR) 02/04/2005: The close below the
40-day moving average is an indication the longer-term trend has turned down.
Momentum studies are rising from mid-range, which could accelerate a move higher
if resistance levels are penetrated. The market now above the 18-day moving
average suggests the longer-term trend has turned up. The close below the 1st
swing support could weigh on the market. The next upside objective is 1197.31.
The next area of resistance is around 1193.37 and 1197.31, while 1st support
hits today at 1185.63 and below there at 1181.82.
NASDAQ (MAR) 02/04/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The close under the 18-day moving average indicates the
longer-term trend could be turning down. The close below the 1st swing support
could weigh on the market. The near-term upside target is at 1530.25. The next
area of resistance is around 1520.50 and 1530.25, while 1st support hits today
at 1502.50 and below there at 1494.25.
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CURRENCY MARKET RECAP
2/3/2005
March US Dollar finished up 48 at 8403, 17 off
the high and 43 up from the low.
March Euro finished down 0.71 at 129.75, 0.34 off
the high and 0.3 up from the low.
March Euro Dollar closed up 0.005 at 97.02. This
was 0.01 up from the low and 0.005 off the high.
March Canadian Dollar closed down 0.26 at 80.54.
This was 0.3 up from the low and 0.22 off the high.
March British Pound finished down 0.48 at 187.75,
0.4 off the high and 0.47 up from the low.
March Swiss closed down 0.76 at 83.33. This was
0.2 up from the low and 0.26 off the high.
March Japanese Yen closed down 0.76 at 95.87.
This was 0.17 up from the low and 0.33 off the high.
The Dollar managed to reach the highest level
since Mid November in the action Thursday and more importantly it forged most of
the gains after US economic information softened. It did seem like the trade was
posturing for the weekend G7 meeting but it would seem that the docket will be
diversified and that exchange rates will have to share time with African debt
relief. Apparently Dow Jones carried a story Thursday morning that basically
rejected US attempts to get China to move forward with a floating currency. In
the background traders might also have been interested in the Dollar because of
the ultra strong January retail sales readings, while some might have been
speculating on the outcome of the monthly payroll report.
Technical Outlook
YEN (MAR) 02/04/2005: Daily stochastics declining
into oversold territory suggest the selling may be drying up soon. The close
under the 18-day moving average indicates the longer-term trend could be turning
down. 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. The next downside
objective is now at 95.41. The next area of resistance is around 96.11 and
96.40, while 1st support hits today at 95.62 and below there at 95.41.
EURO (MAR) 02/04/2005: Daily stochastics are
showing positive momentum from oversold levels, which should reinforce a move
higher if near term resistance is taken out. The market back below the 18-day
moving average suggests the longer-term trend could be turning down. The gap
down on the day session chart is bearish with more selling pressure possible
today. The market is in a bearish position with the close below the 2nd swing
support number. The next upside objective is 130.40. The next area of resistance
is around 130.07 and 130.40, while 1st support hits today at 129.43 and below
there at 129.12.
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PRECIOUS METALS RECAP
2/3/2005
April Gold closed down 4.5 at 418.5. This was 2.3
up from the low and 0.7 off the high.
March Silver finished down 0.073 at 6.677, 0.028
off the high and 0.087 up from the low.
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The gold market came under pressure in the
morning because of renewed dialogue on IMF gold sales for debt relief. We
suspect that a rally in the Dollar, to the highest level since mid November
added to the selling in gold. As mentioned a number of times over the last week,
the gold market continues to hold a significant spec and fund long position and
the combination of a higher Dollar and the threat of central bank sales is more
than enough news to keep the pressure on gold prices. The silver market seemed
to do a better job of rejecting the early weakness as if closed nearly 10 cents
off the days low.
Technical Outlook
SILVER (MAR) 02/04/2005: Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The market back below the 18-day moving average suggests the longer-term
trend could be turning down. The gap down on the day session chart is bearish
with more selling pressure possible today. The market’s close below the 1st
swing support number suggests a moderately negative setup for today. The next
downside target is 654.8. The next area of resistance is around 673.5 and 677.7,
while 1st support hits today at 662.0 and below there at 654.8.
GOLD (APR) 02/04/2005: The downside crossover of
the 9 & 18 bar moving average is a negative signal. Daily stochastics are
trending lower but have declined into oversold territory. The close under the
18-day moving average indicates the longer-term trend could be turning down. 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 415.1. The 9-day
RSI under 30 indicates the market is approaching oversold levels. The next area
of resistance is around 420.0 and 421.1, while 1st support hits today at 417.0
and below there at 415.1.
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COPPER MARKET RECAP
2/3/2005
March Copper closed down 0.50 at 138.85. This was
3.25 up from the low and 0.35 off the high.
The copper market forged another significant
downside extension but did see what appeared to be value hunting buying and a
“recoil” from the lows into mid session. Some traders suspected that the buying
was Asian buying looking for a bargain and if that proves to be true that could
end up making the lows Thursday pretty solid support. There was a private
forecast for strong copper product demand in 2005 and that could have provided
some of the buying interest. However, the market is still vulnerable due to the
recent pattern of LME stock gains and because of the Friday morning Shanghai
copper stocks report.
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ENERGY MARKET RECAP
2/3/2005
March Crude Oil closed down 0.24 at 46.45. This
was 0.70 up from the low and 0.05 off the high.
March Heating Oil closed down 2.05 at 127.65.
This was 1.35 up from the low and 0.75 off the high.
March Unleaded Gas finished down 2.51 at 126.84,
1.56 off the high and 1.84 up from the low.
March Natural Gas finished down 0.23 at 6.15,
0.23 off the high and 0.07 up from the low.
March Propane closed down 0.02 at 0.71. This was
0.02 up from the low and equal to the high.
The energy complex was mostly weak again Thursday
and with the market expecting to see mild US temps into next week, and another
weekly inventory report passing without a significant winter tightening we can
understand the bullish control over prices. If the market were inclined to look
at the positives, more traders would have embraced the idea that OPEC shipments
in the most recent 4 week period declined by 280,000 barrels per day. Another
potentially bullish development was ignored as the market saw a forecast of the
current OPEC overproduction of only 31,000 barrels per day and that is
significantly lower figure than the market was recently factoring. The natural
gas market came under aggressive liquidation pressure because of the weather and
because the weekly storage report showed a minor up tick in the annual surplus
tally.
Technical Outlook
CRUDE OIL (MAR) 02/04/2005: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. The close below the 18-day moving average is an indication
the longer-term trend has turned down. It is a slightly negative indicator that
the close was lower than the pivot swing number. The next downside objective is
45.54. The next area of resistance is around 46.82 and 47.03, while 1st support
hits today at 46.08 and below there at 45.54.
UNLEADED (MAR) 02/04/2005: Negative momentum
studies in the neutral zone will tend to reinforce lower price action. The major
trend has turned down with the cross over back below the 18-day moving average.
The gap down on the day session chart is bearish with more selling pressure
possible today. The swing indicator gave a moderately negative reading with the
close below the 1st support number. The next downside target is 123.37. The next
area of resistance is around 128.54 and 130.17, while 1st support hits today at
125.14 and below there at 123.37.
HEATING OIL (MAR) 02/04/2005: The close under the
40-day moving average indicates the longer-term trend could be turning down.
Negative momentum studies in the neutral zone will tend to reinforce lower price
action. The close under the 18-day moving average indicates the longer-term
trend could be turning down. More selling pressure is likely given yesterday’s
gap lower price action on the day session chart. The swing indicator gave a
moderately negative reading with the close below the 1st support number. The
next downside objective is 125.40. The next area of resistance is around 128.69
and 129.60, while 1st support hits today at 126.60 and below there at 125.40.
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CORN MARKET RECAP
2/3/2005
March Corn finished down 1/4 at 195, 1/4
off the high and 3/4 up from the low. May Corn closed down 1/4 at 203. This was
3/4 up from the low and 1/4 off the high.
Weak export sales news was partially offset by a
firm tone for the other grain markets and the oversold technical condition. Cash
markets were stable overnight. Weekly export sales came in at just 337,600 tons
as, which was below the low end of trade expectations. Japan was the largest
buyer at 202,600 tons. Cumulative sales have reached 52.6% of the USDA forecast
for the season as compared with 54.7% on average for this time of the year.
Overnight export news was routine with Taiwan buying 60,000 tons of US corn.
March, May and July corn hit new contract lows. Support for March corn comes in
at 194 and 191 with resistance at 196 and 197 3/4.
Technical Outlook
CORN (MAR) 02/04/2005: The sell-off took the
market to a new contract low. Momentum studies are declining, but have fallen to
oversold levels. The close below the 18-day moving average is an indication the
longer-term trend has turned down. The market tilt is slightly negative with the
close under the pivot. The next downside objective is now at 194. The next area
of resistance is around 195 1/2 and 195 3/4, while 1st support hits today at 194
1/2 and below there at 194.
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SOY COMPLEX RECAP
2/3/2005
March Soybeans finished down 3 1/4 at 502, 6 off
the high and 1/2 up from the low. May Soybeans closed down 2 at 504 1/4. This
was 1 1/4 up from the low and 4 1/4 off the high.
March Soymeal closed down 1.5 at 150.7. This was
0.1 up from the low and 2.0 off the high.
March Soybean Oil finished down 0.08 at 18.86,
0.17 off the high and 0.04 up from the low.
Some weakness in cash markets was noted at
interior locations overnight, and positive sales news that helped support some
light short-covering strength on the opening today failed to hold the market
through the session, sending the March contract to new contract lows by the end
of the session. Weekly export sales came in at 570,000 tons for soybeans, which
was just above the upper end of trade expectations. China was the largest buyer
at 243,600 tons for the week and traders believe that China is likely to switch
to South American soybeans soon. Cumulative sales have reached 84.2% of the USDA
forecast for the season as compared with 79.9% on average for this time of the
year. Meal sales were 94,400 tons, which was towards the upper end of trade
expectations. Cumulative sales have reached 67.8% of the USDA forecast for the
season as compared with 64.4% on average for this time of the year. Oil sales
were disappointing, showing net cancellations of 5100 tons as opposed to
expectations of net sales. Cumulative sales have reached 54.1% of the USDA
forecast for the season as compared with 39.9% on average for this time of the
year. The Census Bureau revised oil stocks for the end of December to 1.309
billion pounds from preliminary forecast of 1.29 billion pounds. Resistance for
March soybeans comes in at 509 and 511 3/4 with support at 501.
Technical Outlook
BEANS (MAR) 02/04/2005: The market broke to a new
contract low. Daily stochastics are trending lower but have declined into
oversold territory. The close below the 18-day moving average is an indication
the longer-term trend has turned down. The defensive setup, with the close under
the 2nd swing support, could cause some early weakness. The next downside target
is 497. With a reading under 30, the 9-day RSI is approaching oversold levels.
The next area of resistance is around 505 1/4 and 509 3/4, while 1st support
hits today at 498 3/4 and below there at 497.
MEAL (MAR) 02/04/2005: Momentum studies are
declining, but have fallen to oversold levels. The close under the 18-day moving
average indicates the longer-term trend could be turning down. The close below
the 2nd swing support number puts the market on the defensive. The next downside
target is 149.1. The next area of resistance is around 151.7 and 153.2, while
1st support hits today at 149.7 and below there at 149.1.
BEANOIL (MAR) 02/04/2005: The market was pushed
to a new contract low. Momentum studies are still bearish but are now at
oversold levels and will tend to support reversal action if it occurs. The close
below the 18-day moving average is an indication the longer-term trend has
turned down. The market tilt is slightly negative with the close under the
pivot. The next downside target is now at 18.69. Some caution in pressing the
downside is warranted with the RSI under 30. The next area of resistance is
around 18.96 and 19.10, while 1st support hits today at 18.76 and below there at
18.69.
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WHEAT MARKET RECAP
2/3/2005
March Wheat finished up 1 1/2 at 289 3/4, 1 1/4 off the high
and 1 3/4 up from the low. May Wheat closed up 1 3/4 at 298 1/2. This was 2 1/2
up from the low and 1/2 off the high.
Surprisingly strong sales and the ability to hold
support from contract lows helped trigger early strength in the wheat market
today. Weekly export sales came in at 710,300 tons, which was well above trade
expectations. Iraq was the largest buyer at 165,000 tons. Cumulative sales have
reached 82.1% of the USDA forecast for the season as compared with 73.3% on
average for this time of the year. In addition to solid weekly sales, Japan
bought 125,000 tons of wheat at their weekly tender with 85,000 of the total
from the US. As long as Monday’s lows hold, the market is still operating under
the positive influence of the key reversal. A higher close on the week will be
necessary to help confirm a low. March wheat support comes in at 287 1/2 with
resistance at 292 1/4 and 296 3/4.
Technical Outlook
WHEAT (MAR) 02/04/2005: Momentum studies are
declining, but have fallen to oversold levels. The close below the 18-day moving
average is an indication the longer-term trend has turned down. The close over
the pivot swing is a somewhat positive setup. The next downside objective is now
at 286 3/4. The next area of resistance is around 291 1/4 and 292 1/2, while 1st
support hits today at 288 1/4 and below there at 286 3/4.
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LIVE CATTLE RECAP
2/3/2005
April Live Cattle finished unchanged at 88.25,
0.22 off the high and 0.70 up from the low.
March Feeder Cattle closed down 0.15 at 99.80.
This was 0.52 up from the low and 0.35 off the high.
April cattle opened sharply lower today but
managed to close steady on the session. Cash bids for plains cattle were running
at $86 today with offers at $91-92. Last week they traded at $89 and traders
were still looking for a slightly firmer trade this week due to muddy feedlots
and higher volume boxed beef trade earlier this week, but a lower cutout at
midday was disappointing. The Secretary of Agriculture commented that the plan
to reopen the border for Canadian cattle imports was still on track, while a
representative of the US Meat Export Federation stated that June would be the
earliest date that US exports to Japan could resume. Boxed beef cutout values
were down 28 cents into the mid-session to $142.31 as compared with $146.10 last
week at this time. Slaughter came in at 118,000 head versus trade guesses
ranging from 113,000 to 117,000.
Technical Outlook
CATTLE (FEB) 02/04/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The cross over and close above the 18-day
moving average is an indication the longer-term trend has turned positive. The
daily closing price reversal up on the daily chart is somewhat positive. It is a
mildly bullish indicator that the market closed over the pivot swing number. The
next upside objective is 91.770. The next area of resistance is around 91.500
and 91.770, while 1st support hits today at 90.520 and below there at 89.800.
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LEAN HOGS RECAP
2/3/2005
April Lean Hogs finished up 0.07 at 73.20, 0.25
off the high and 0.70 up from the low.
March Pork Bellies closed down 3.00 at 89.20.
This was equal to the low and 2.80 off the high.
After opening sharply low on follow through
selling from yesterday’s limit down close, April and February hogs managed to
close slightly higher on the session on short covering. Slaughter came in at
393,000 head versus trade guesses ranging from 390,000 to 395,000. The CME 2-day
lean index for the period ending January 31st came in 74.86, down 17 cents from
the previous session and up from 74.75 one week previous. US Midwest cash hogs
are expected to trade $1 lower tomorrow.
Technical Outlook
HOGS (FEB) 02/04/2005: Daily stochastics are
trending lower but have declined into oversold territory. The close below the
18-day moving average is an indication the longer-term trend has turned down.
The daily closing price reversal up on the daily chart is somewhat positive. The
market tilt is slightly negative with the close under the pivot. The next
downside objective is now at 70.550. The market is approaching oversold levels
on an RSI reading under 30. The next area of resistance is around 72.250 and
72.520, while 1st support hits today at 71.270 and below there at 70.550.
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COCOA MARKET RECAP
2/3/2005
March Cocoa finished down 9 at 1594, 15 off the
high and 14 up from the low.
The cocoa market seemed to take some profits and
according to some sources the selling was coming from producers or physical
players. We also suspect that the higher Dollar inspired some profit taking and
possibly some fresh selling. We also think that recent rains in key African
growing regions served to truncate or lower the impact of dryness on the mid
crop and that discouraged the trade.
Technical Outlook
COCOA (MAR) 02/04/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The cross over and close above the 18-day moving average indicates
the longer-term trend has turned up. The market’s close below the pivot swing
number is a mildly negative setup. The next upside objective is 1623. The next
area of resistance is around 1608 and 1623, while 1st support hits today at 1580
and below there at 1566.
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COFFEE MARKET RECAP
2/3/2005
March Coffee closed up 0.40 at 105.30. This was
0.80 up from the low and 0.55 off the high.
After a lower probe Thursday May coffee closed
stronger aided by light roaster buying and a lack of producer selling, but
rollover activity limited gains. The March contract’s first notice day is Feb
17th and the March contract still had 62,403 contracts open as of February 2nd.
The market appears to be losing upside momentum as technical indicators are at
overbought levels. However, with world coffee production expected to be lower
this year and more investment money being directed to commodity funds, price
corrections in coffee are likely to be shallow.
Technical Outlook
COFFEE (MAR) 02/04/2005: Momentum studies are
trending higher but have entered overbought levels. The cross over and close
above the 18-day moving average is an indication the longer-term trend has
turned positive. It is a slightly negative indicator that the close was lower
than the pivot swing number. The near-term upside target is at 106.55. The next
area of resistance is around 105.95 and 106.55, while 1st support hits today at
104.65 and below there at 103.90.
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SUGAR MARKET RECAP
2/3/2005
March Sugar closed up 0.13 at 8.94. This was 0.23
up from the low and 0.04 off the high.
The sugar market forged an aggressive early
downside washout that was wholly rejected by the close Thursday. Apparently the
trade or physical players saw value in sugar around the lows Thursday and that
seemed to force some shorts out of position and at the same time probably pulled
in some fresh spec longs. Considering the massive break from the January high to
the recent low, we suspect that the net spec and fund long in sugar was pulled
down toward a more respectable level and that inspired some buying. Surprisingly
the sugar market was able to shake off the news that Russian sugar production
was on the rise and that might have inspired the early slide in prices.
Technical Outlook
SUGAR (MAR) 02/04/2005: The cross over and close
above the 60-day moving average indicates the longer-term trend has turned up.
Negative momentum studies in the neutral zone will tend to reinforce lower price
action. The cross over and close above the 18-day moving average indicates the
longer-term trend has turned up. The outside day up is somewhat positive. The
market setup is supportive for early gains with the close over the 1st swing
resistance. The next downside objective is now at 8.63. The next area of
resistance is around 9.07 and 9.16, while 1st support hits today at 8.81 and
below there at 8.63.
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COTTON MARKET RECAP
2/3/2005
March Cotton finished down 1.15 at 43.12, 1.33
off the high and 0.02 up from the low.
The cotton market failed at near term chart
support early Thursday and seemed to foster more intense stop loss selling as
the session progressed. Export sales came in at 387,100 bales compared to
expectations of 280,000-350,000 bales and that would seem to have been a
positive development. With the market seeing the export sales reading as a new
high for the marketing year it is clear that the market still isn’t in a
position to be supported by the hope for strong demand. In other words, the
cotton market continues to choke on the ramification of large supply and it
could take a series of strong demand readings to turn the tide of the
marketplace.
Technical Outlook
COTTON (MAR) 02/04/2005: The market back below
the 60-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 market back below the 18-day moving average suggests the
longer-term trend could be turning 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 target is 42.10. The next area of resistance is
around 43.79 and 44.79, while 1st support hits today at 42.45 and below there at
42.10.