Here’s Why Bonds Could Rally
BOND MARKET RECAP
10/1/2003
The bond market
surprisingly sagged in the face of mostly supportive US economic information.
Apparently the sharp rise in the US equity market caused some longs to fade from
positions in the Treasuries while others liquidated longs because the new orders
index within the ISM report showed an improvement. However, the breadth of the
numbers released Wednesday should set the bonds up to rally in the coming
sessions. The bonds did appear to recover into the close in anticipation of a
weak initial claims report.
Technical Outlook
BONDS (DEC) 10/02/03:
With the close higher than the pivot swing number, the market is in a slightly
bullish posture. Near-term resistance for bonds is at 112.05 and then again at
112.18, while swing support hits at 111.14 and below there at 111.04. The
market’s close above the 9-day moving average suggests the short-term trend
remains positive. Studies are showing positive momentum, but are now in
overbought territory so some caution is warranted. The next upside target is
112.18.
T-NOTES(DEC) The daily
closing price reversal down puts the market on the defensive. Momentum studies
are trending higher, but have entered overbought levels. The near-term upside
objective is at 115.01. It is a mildly bullish indicator that the market closed
over the pivot swing number. The major trend is down with the cross over back
below the 40-day moving average. Near-term resistance for the T-Notes is at
114.25 and then again at 115.01, while swing support hits at 114.07 and below
there at 113.29. The market’s short-term trend is positive on a close above the
9-day moving average. With a reading over 70, the 9-day RSI is approaching
overbought levels.
STOCK INDICES RECAP
10/1/2003
Regardless of the
reasoning behind the action Wednesday, the stock market did mount an impressive
technical recovery. Some traders suggested that the strong rally resulted from
beginning of the quarter asset allocation. The US economic information released
Wednesday was mixed with the only bright spot of the day coming from a slight up
tick in the new orders index of the ISM. The stock market does have to face the
monthly unemployment report Friday.
Technical Outlook
S&P500 (DEC) 10/02/03:
The market’s close above the 2nd swing resistance number is a bullish
indication. Underlying support comes in at 1006.35 and 991.98, with overhead
resistance at 1026.05 and 1031.38. The market’s short-term trend is positive on
a close above the 9-day moving average. The major trend could be turning up with
the close back above the 40-day moving average. The daily stochastics gave a
bullish indicator with a crossover up. The near-term upside objective is at
1031.38.
S&P E-Mini (DEC): A
bullish signal was given with an upside crossover of the daily stochastics. The
next upside objective is 1033.13. The market has a bullish tilt coming into
today’s trade with the close above the 2nd swing resistance. The market back
below the 40-day moving average suggests the longer-term trend could be turning
down. Near-term resistance for the S&P Mini is at 1027.25 and then again at
1033.13, while swing support hits at 1005.25 and below there at 989.13. A
negative signal for trend short-term was given on a close under the 9-bar moving
average.
NASDAQ
(DEC) The market’s close below the 9-day moving average is an indication the
short-term trend remains negative. A positive setup occurred with the close over
the 1st swing resistance. The market should run into resistance at 1350.00 and
above there at 1360.00 with support at 1318.00 and 1296.00. Momentum studies are
declining, but have fallen to oversold levels. The next downside target is
1296.0. The cross over and close above the 40-day moving average indicates the
longer-term trend has turned up.
CURRENCY MARKET RECAP
10/1/2003
While the Dollar did
manage to hold above the recent contract low during the action Wednesday it did
not show much evidence for a bottom. The economic numbers from the US were weak
but numbers from the Euro zone were also weak leaving a neutral bias. However,
we have to think that the strength in the US equity market discouraged the
sellers in the Dollar Wednesday afternoon. We have to think that the negative US
economic news will resume Thursday and that the stock market might not be
providing the same type of support to the greenback.
Technical Outlook
YEN (DEC): The market’s
close above the 9-day moving average suggests the short-term trend remains
positive. With the close higher than the pivot swing number, the market is in a
slightly bullish posture. Swing resistance is targeted at 90.83 and above there
at 90.96, with the yen finding support around 90.40 and below there at 90.10.
Studies are showing positive momentum, but are now in overbought territory so
some caution is warranted. The next upside target is 90.96. The 9-day RSI over
70 indicates the market is approaching overbought levels.
EURO (DEC): Momentum
studies are trending higher, but have entered overbought levels. The near-term
upside objective is at 1.1739. The market is in a bearish position with the
close below the 2nd swing support number. Swing support for the Euro comes in at
1.1617, with overhead resistance at 1.1739. The market’s short-term trend is
positive on a close above the 9-day moving average. With a reading over 70, the
9-day RSI is approaching overbought levels. The gap down on the day session
chart is bearish with more selling pressure possible today.
PRECIOUS METALS RECAP
10/1/2003
The gold market failed
to get much support from the weakness in the Dollar Wednesday and that has to be
disconcerting to the bull camp. Maybe the bull camp was put off by the sharp
rise in the US equity market. The fact that silver and gold were down at the
same time that copper was up somewhat confirms the correlation to the macro
economic condition. We have to think that equity prices will be unable to
replicate that kind of favorable action in the coming sessions and that might
allow gold and silver to regain favor.
Technical Outlook
SILVER (DEC): The close
under the 40-day moving average indicates the longer-term trend could be turning
down. It is a slightly negative indicator that the close was lower than the
pivot swing number. Initial support for silver is at 507.5 and below there at
504.5 with resistance likely at 511.1 and 513.5. 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 504.5.
GOLD (DEC): Support for
gold today comes in near 381.83, while resistance is pegged at 388.43. Momentum
studies trending lower at mid-range should accelerate a move lower if support
levels are taken out. The next downside objective is now at 381.83. The market’s
close below the pivot swing number is a mildly negative setup. The market’s
short-term trend is negative as the close remains below the 9-day moving
average.
COPPER MARKET RECAP
10/1/2003
The copper market was
cheered on by the surprising strength in the US equity market, which came
despite the fact that most US economic numbers were soft. We would have expected
a weak ISM report to have pressured the copper market but with the Chinese
market coming back Thursday after a holiday some traders expected the Chinese to
snap up the cheaper prices fostered by the recent weakness. There are some labor
talks underway that could have an impact on copper prices in the coming sessions
so traders should be aware of upcoming volatility.
ENERGY MARKET RECAP
10/1/2003
The weekly inventory
reports showed moderately large builds in gasoline stocks and that prompted a
light amount of profit taking. However, with the refinery-operating rate
declining sharply we have to think that the product markets will be able to find
support rather quickly in the coming sessions. The weather is also showing a
slight warm up in to the coming weekend and that might take away some of the
weather buying. However, longer-term forecasts are calling for a return to cold
weather next week. The Venezuelan Oil Minister suggested that OPEC might want to
raise their banding range to $25 to $32 and that should get the IEA upset enough
to at least talk about releasing some buffer stocks.
Technical Outlook
CRUDE OIL (NOV): It is
a mildly bullish indicator that the market closed over the pivot swing number.
Support for crude is keyed on 29.10 and below there at 28.69, with resistance
pegged at 29.68 and 29.85. 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 29.85.
UNLEADED GAS (NOV):
Positive momentum studies in the neutral zone will tend to reinforce higher
price action. The next upside target is 82.41. With the close higher than the
pivot swing number, the market is in a slightly bullish posture. Resistance
today is at 82.41, while support should be found around 77.61. The market’s
close above the 9-day moving average suggests the short-term trend remains
positive.
HEATING OIL (NOV): It
is a mildly bullish indicator that the market closed over the pivot swing
number. Heating oil should encounter support around 77.43, with resistance is at
81.43. The market’s short-term trend is positive on a close above the 9-day
moving average. The major trend could be turning up with the close back above
the 40-day moving average. Momentum studies are trending higher, but have
entered overbought levels. The near-term upside objective is at 81.43.
CORN MARKET RECAP
10/1/2003
Expectations for the
weekly export sales readings in corn call for 800,000 to 1,000,000 against 1.137
million last week. Corn managed a new low for the move probe Wednesday, but
managed to reject the majority of that decline. In any regard, the market seems
to be fearful of steadily rising yields and remains under the gun by the recent
increase in beginning stocks. In other words, the ending stocks tightness is
being mitigated by feelings of more abundant supply. Some traders think that
some corn could be affected by the coming frost while most others think the
impact will be nil.
Technical Outlook
CORN (DEC) 10/02/03:
Daily stochastics are trending lower, but have declined into oversold territory.
The next downside objective is now at 217 1/2. The market’s close below the
pivot swing number is a mildly negative setup. Market resistance comes in at 222
1/2 today, with support at 217 1/2. The market’s short-term trend is negative as
the close remains below the 9-day moving average. With a reading under 30, the
9-day RSI is approaching oversold levels.
SOY COMPLEX RECAP
10/1/2003
The fear of frost
dominated the action again Wednesday with the forecast calling for mid to upper
20’s way down into Illinois and Indiana. In other words, some of the “late
planted” soybeans might be impacted by the cold Wednesday night/ Thursday
morning. In conclusion, the market is battling with the idea that this crop
might be smaller than the prior crop and that prices might have to run to the
psychologically important $7.00. Expectations for the weekly export sales report
called for 300,000 to 450,000 tons compared to 752,000 last week.
Technical Outlook
SOYBEANS (NOV)
10/02/03: A positive setup occurred with the close over the 1st swing
resistance. The next area of resistance is around 692 and 695 1/4, while 1st
support hits today at 682 and below there at 675 1/4. The market’s close above
the 9-day moving average suggests the short-term trend remains positive. The
daily stochastics have crossed over up which is a bullish indication. The next
upside target is 695 1/4. The 9-day RSI over 70 indicates the market is
approaching overbought levels.
MEAL (DEC): Momentum
studies are trending higher, but have entered overbought levels. The near-term
upside objective is at 205.3. First resistance comes in at 204.0, with support
at 201.3. The market’s short-term trend is positive on a close above the 9-day
moving average. It is a mildly bullish indicator that the market closed over the
pivot swing number. With a reading over 70, the 9-day RSI is approaching
overbought levels.
BEAN OIL (DEC): The
market’s close above the 9-day moving average suggests the short-term trend
remains positive. Studies are showing positive momentum, but are now in
overbought territory so some caution is warranted. The next upside target is
25.08. With the close higher than the pivot swing number, the market is in a
slightly bullish posture. A new contract high was made on the rally. Daily swing
resistance is found at 24.93 and above there at 25.08. Support should be
encountered at 24.58 and 24.38. The 9-day RSI over 70 indicates the market is
approaching overbought levels.
WHEAT MARKET RECAP
10/1/2003
December wheat closed 4
cents higher on the session and closed at the highest level since early
September. The continued weakness in the US dollar has the trade more confident
that US wheat will remain competitive on the world market. Hopes of some exports
to Europe due to tightness in feedgrains and the active pace of wheat sales of
the past several weeks which should result in higher cash bids helped support.
Indications that Iraq may buy some US wheat for the first time in years helped
support the market as well. Discussions over a situation where two cargoes of
Canadian wheat to Egypt are being held up due to payment problems helped to keep
buyers cautious. For Friday’s Canadian Wheat crop report, traders are looking
for a Canadian all-wheat production estimate of 21-23.9 million tons. For the
weekly export sales report, released before the opening, traders are looking for
wheat sales to come in near 500,000-700,000 tons from 770,200 tons last week.
Technical Outlook
WHEAT (DEC) 10/02/03:
With the close higher than the pivot swing number, the market is in a slightly
bullish posture. Look for near-term support at 360 1/2 and below there at 355
3/4, with resistance levels at 367 1/2 and 370 1/4. The moving average crossover
up (9 above 18) indicates a possible developing short-term uptrend. Studies are
showing positive momentum, but are now in overbought territory so some caution
is warranted. The next upside target is 370 1/4.
LIVE CATTLE RECAP
10/1/2003
December cattle closed
70 higher on the session and moved to new contract highs as late buying from
fund traders helped drive the market higher and there was a lack of commercial
interest willing to sell due to the stiff discount of futures to the cash
market. Cash cattle were bid at $85-$86 but offers at still at $90. Beef prices
at mid-session were down 84 cents to $159.68 for choice cattle and down 23 cents
to $124.78 16 for select beef. Slaughter was only 119,000 head which brought
week to date slaughter to 371,000 head from 382,000 last week at this time and
395,000 last year at this time.
Technical Outlook
CATTLE (DEC) 10/02/03:
Studies are showing positive momentum, but are now in overbought territory so
some caution is warranted. The next upside target is 86.72. 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. Support should be
encountered at 84.97 and below there at 84.02. Market resistance is at 86.32 and
then again at 86.72. A new contract high was made on the rally. The market’s
close above the 9-day moving average suggests the short-term trend remains
positive.
LEAN HOGS RECAP
10/1/2003
December hogs closed
132 higher on the session and found strong fund buying support late in the day
along with the surge in cattle. While the cash fundamentals remain weak, the
market is finding some support from the discount of futures to the cash market
and from ideas that producer marketings could slip as harvest gets more active
due to drier weather in the Midwest. The CME 2-day Lean Index was down for the
third session in a row, down 75 points to 59.75. This is still well above the
December futures. Improving packer profit margins helped support ideas that cash
could stabilize. The improved margins, however, are supporting a larger
slaughter. Slaughter came in at 390,000 head which brings the 3-day total to
1.166 million head from 1.097 million last week at this time. Ideas that pork
values have dropped far enough to see improved demand helped support.
Technical Outlook
HOGS (DEC) 10/02/03:
With the close over the 1st swing resistance number, the market is in a
moderately positive position. Resistance levels comes in at 55.97 and 56.60
today, while support is around 53.90 and then 52.45. The market’s short-term
trend is negative as the close remains below the 9-day moving average. The major
trend could be turning up with the close back above the 40-day moving average.
Daily stochastics are trending lower, but have declined into oversold territory.
The next downside objective is now at 52.45.
COCOA MARKET RECAP
10/1/2003
The cocoa market saw
the long camp step to the sidelines possibly because the news from the political
front wasn’t significant enough to keep the weak handed longs in play. Some
players are suggesting that the presence of French troops is discouraging a
return to violence. Even more surprising is the fact that the trade is picking
up some stories of adverse weather conditions in various Ivory Coast growing
regions. In fact, the trade even discounted predictions that flowering has been
less than stellar and could result in lower production 6 months out.
Technical Outlook
COCOA (DEC)10/02/03
Could see some early pressure today given the market’s negative setup with the
close below the 2nd swing support. Cocoa should run into resistance at 1607 and
above there at 1669 with support at 1519 and 1493. Positive momentum studies in
the neutral zone will tend to reinforce higher price action. The next upside
target is 1669.00.
COFFEE MARKET RECAP
10/1/2003
The market managed an
impressive pulse up and came close to getting above a critical chart pivot point
at 66.25 in the December contract. With a 10 day forecast calling for dry
weather in Brazil, the trade reacted bullishly, as the crop needs rain ahead of
flowering. Apparently the rain forecasted for next week was pulled from the
forecast. Limiting the upside is the fact that exports into September 29th were
running moderately ahead of the same time last month. In the near term the
market will be exclusively focused on Brazilian weather and whether or not next
week will be dry!
Technical Outlook
COFFEE (DEC)10/2/03 The
market has a bullish tilt coming into today’s trade with the close above the 2nd
swing resistance. Momentum studies are declining, but have fallen to oversold
levels. The next downside objective is now at 62.40.The Coffee contract should
run into resistance at 66.40 and above there at 67.40 with support at 63.9 and
62.40. The market’s short-term trend is positive on a close above the 9-day
moving average. The major trend could be turning up with the close back above
the 40-day moving average.
SUGAR MARKET RECAP
10/1/2003
The technical rally is
impressive off of the September 18th lows but the foundation of the rally is
short-covering and not new buying. In fact, open interest hit a new low for the
year this week on the rally to the highest level since August. The market
fundamentals appear weak and the bearish action in the spreads suggests the
market is still lacking of fresh news to spark even the appearance of increased
demand. March futures closed unchanged in a quiet inside trading session with a
range of only 7 ticks. Traders were looking for deliveries against October sugar
at near 6000-7000 contracts and actual deliveries were posted at 6,056 lots.
Technical Outlook
SUGAR (MAR) 10/02/03:
It is a mildly bullish indicator that the market closed over the pivot swing
number. Swing resistance comes in at 6.51, with support found at 6.37. 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 6.51.
COTTON MARKET RECAP
10/1/2003
December cotton closed
56 lower on the session as a lack of new market-moving news on the demand front
and improving weather for the US crop helped trigger long liquidation. Traders
are not confident in the demand aspects of the market at the current lofty level
and with the trade looking for a higher production forecast for the October 10th
crop report, longs are taking profits. Weekly export sales, released before the
opening, are expected to come in near 20,000-50,000 bales as compared with
45,600 bales last week. Shipments are expected to come in near 60,000-80,000
bales.
Technical Outlook
COTTON (DEC) 10/02/03:
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 67.90 and then
again at 68.45, while support is targeted at 67.00 and 66.65. The daily
stochastics have crossed over down which is a bearish indication. Daily
stochastics turning lower from overbought levels is bearish and will tend to
reinforce a downside break especially if near-term support is penetrated. The
next downside target is 66.65.