Here’s Why Bonds Were Under Pressure

Technical Outlook

#BONDS (SEP) 06/10/04: The swing indicator gave a
moderately negative reading with the close below the 1st support number.
Near-term resistance for bonds is at 104.02 and then again at 104.18, while
swing support hits at 103.04 and below there at 102.22. The market’s close below
the 9-day moving average is an indication the short-term trend remains negative.
Negative momentum studies in the neutral zone will tend to reinforce lower price
action. The next downside target is 102.22. Short-term indicators on the
defensive. Consider selling an intraday bounce.

T-NOTES(SEP) 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 106.28. The market’s close below the 1st swing
support number suggests a moderately negative setup for today. Near-term
resistance for the T-Notes is at 107.24 and then again at 108.01, while swing
support hits at 107.05 and below there at 106.28. The market’s short-term trend
is negative as the close remains below the 9-day moving average. Daily studies
pointing down suggests selling minor rallies.

 

STOCK INDICES RECAP

6/9/2004

The stock market came under liquidation pressure
after a couple weeks of pretty impressive upside action. It is not surprising
that stock prices began to weaken in the face of more aggressive rate hike
assumptions and with the trade expecting to see a hot PPI report and that serves
to intensify the concern off rising rates. The stock market decline was
partially deflated by early weakness in energy prices but in the end energy
prices forged a strong recovery on news that the Iraqi pipeline was attacked
again. Therefore, the concern of rising energy prices is still on the mind of
the market.

Technical Outlook

#S&P500 (SEP) 06/10/04: The market is in a
bearish position with the close below the 2nd swing support number. Underlying
support comes in at 1126.25 and 1123.53, with overhead resistance at 1135.75 and
1142.53. 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 1142.53.

S&P E-Mini (SEP): The outside day down is
somewhat negative. The market could take on a defensive posture with the daily
closing price reversal down. Rising stochastics at overbought levels warrant
some caution for bulls. The next upside objective is 1145.94. 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 the S&P Mini is at 1137.13 and
then again at 1145.94, while swing support hits at 1124.88 and below there at
1121.44. A positive signal for trend short-term was given on a close over the
9-bar moving average.

NASDAQ (SEP) The market’s close above the 9-day
moving average suggests the short-term trend remains positive. The close below
the 2nd swing support number puts the market on the defensive. The market should
run into resistance at 1485.50 and above there at 1500.25 with support at
1464.50 and 1458.25. 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 1458.3.

MINI DOW (SEP) The market’s close above the 9-day
moving average suggests the short-term trend remains positive. The market should
run into resistance at 10396 and above there at 10438 with support at 10328 and
10302. Studies are showing positive momentum, but are now in overbought
territory so some caution is warranted. The next upside target is 10438. The
swing indicator gave a moderately negative reading with the close below the 1st
support number.

 

CURRENCY MARKET RECAP

6/9/2004

The Dollar exploded off ongoing talk about higher
US interest rates and that factor alone seems to be what the market wanted to
see from the US. We also think that persistently lower energy prices removed
some of the macro economic anxiety from the US currency and that fostered short
covering interest. In the end a number of major technical levels were violated
in several currencies and that could result in follow through stop loss activity
in the coming sessions. In conclusion, the moves Wednesday seemed to be too big
to be totally tied to technical action.

Technical Outlook

#CURRENCIES 06/10/04: YEN (SEP): The market’s
close below the 9-day moving average is an indication the short-term trend
remains negative. The outside day down and close below the previous day’s low is
a negative signal. The downside closing price reversal on the daily chart is
somewhat negative. The close below the 2nd swing support number puts the market
on the defensive. Swing resistance is targeted at 91.55 and above there at
92.56, with the yen finding support around 90.16 and below there at 89.78.
Studies are showing positive momentum, but are now in overbought territory so
some caution is warranted. The next upside target is 92.56.

EURO (SEP): 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 1.1925. The market is in a bearish position
with the close below the 2nd swing support number. Swing support for the Euro
comes in at 1.1925, with overhead resistance at 1.2183. The market’s short-term
trend is negative as the close remains below the 9-day moving average. The gap
down on the day session chart is bearish with more selling pressure possible
today.

 

PRECIOUS METALS RECAP

6/9/2004

Expectations for higher US interest rate
following comments by Greenspan this week triggered a sharp rally in the Dollar
and a subsequent sell off in August gold. Higher interest rates make forward
gold sales more attractive and also help to nip rising inflation pressures.
Declining energy prices are also alleviating inflation concerns. While there was
some buying of gold on expectations that the PPI number released Thursday would
be hot, Greenspan’s comments this week would suggest the Fed would be more
aggressive about raising rates if inflation is high so gold longs are exiting.

Technical Outlook

#P-METALS 06/10/04: SILVER (SEP): The swing
indicator gave a moderately negative reading with the close below the 1st
support number. Initial support for silver is at 555.7 and below there at 549.9
with resistance likely at 570.8 and 574.7. 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 549.9. Short-term indicators on the defensive. Consider selling an
intraday bounce.

GOLD (AUG): Support for gold today comes in near
380.30, while resistance is pegged at 391.50. 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 380.30. The market is in a bearish position
with the close below the 2nd swing support number. The market’s short-term trend
is negative as the close remains below the 9-day moving average. The major trend
is down with the cross over back below the 40-day moving average. The gap down
on the day session chart is bearish with more selling pressure possible today.

 

COPPER MARKET RECAP

6/9/2004

Copper prices came under additional aggressive
liquidation and many in the trade almost assumed that some Chinese tightening
threat was in play. In fact considering the magnitude of the slide in copper it
is possible that the net spec and fund long was eradicated. The fact that a
Polish company is preparing to ship significant physical supplies of copper into
China also chased a number of longs from the market. The last thing that was
applying the pressure to copper were concerns that US rate hikes might dampen
demand. It is also possible that rising US interest rate talk sparked ideas that
China might follow with hikes.

 

ENERGY MARKET RECAP

6/9/2004

Energy markets traded weaker Wednesday as both
the API and EIA reports showed builds in crude oil and gasoline stocks while the
government report indicated that gas demand fell slightly from the previous
week. API had crude stocks up 2.7 million barrels and gas stocks up 4.7 million
barrels, while the EIA had crude stocks up only 426,000 barrels and gasoline
stocks up 2.15 million barrels. The EIA had gas demand falling to 9.2 million
barrels per day vs 9.2 million the previous week. However, both crude oil and
gasoline closed significantly off their lows since the market remains nervous
that there will be more terrorist attempts on oil facilities in the Middle East.
Both markets are technically oversold and with the long holiday weekend, we
would not be surprised to see a short covering rally in Thursday’s trade.

Technical Outlook

#ENERGIES 06/10/04: CRUDE OIL (AUG): 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. Support for crude
is keyed on 37.12 and below there at 36.21, with resistance pegged at 38.37 and
38.71. The market’s short-term trend is negative as the close remains below the
9-day moving average. Daily stochastics are trending lower, but have declined
into oversold territory. The next downside objective is now at 36.21.

UNLEADED GAS (AUG): Momentum studies are
declining, but have fallen to oversold levels. The next downside target is
110.35. It is a slightly negative indicator that the close was lower than the
pivot swing number. Resistance today is at 118.55, while support should be found
around 110.35. 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.

HEATING OIL (AUG): With the close over the 1st
swing resistance number, the market is in a moderately positive position.
Heating oil should encounter support around 93.97, with resistance is at 101.97.
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 93.97.
The upside closing price reversal on the daily chart is somewhat bullish.

 

CORN MARKET RECAP

6/9/2004

December corn opened at 298 but the move back
over psychological support at 3.00 may have prompted some short-covering ahead
of the report from the USDA for tomorrow morning. Traders look for ending stocks
for the 2003/2004 season at 835 million bushels (range 806-856) from 806 million
last month. The slower shipment pace recently has traders believing that exports
will be revised lower. For the new crop season, traders look for ending stocks
at 745 million bushels (range 702-791) from 741 million last month. While this
would be considered a very bullish ending stocks forecast. Traders believe that
producer will plant an extra 1-3 million acres above the winter prospective
plantings estimate and that average yields could also be adjusted higher if the
weather remains ideal. If planted acreage jumps by 2 million acres and average
yields jump to 148 bu/acre (up 3 from last months USDA estimate), then ending
stocks would come in near 1.2 billion bushels. Weekly export sales, also
released before the opening, are expected to come in near 600,000-900,000 tons
as compared with 688,300 tons last week. December corn support comes in at 300
1/4 and 306 1/2 and 309 1/2 as resistance.

Technical Outlook

#CORN (DEC) 06/10/04: 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 295 3/4. The market’s close above the
2nd swing resistance number is a bullish indication. Market resistance comes in
at 306 3/4 today, with support at 295 3/4. 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. The
upside closing price reversal on the daily chart is somewhat bullish.

 

SOY COMPLEX RECAP

6/9/2004

November opened 7 cents lower on the continued
outlook for favorable weather in the Midwest through the weekend. Improving
basis bids were seen in the country as processors across the heart of the
mid-west are being forced to push bids up in order to attract old crop supplies
which are expected to tighten to the lowest level in 27 years into the end of
the 2003/2004 season. In fact, the average trade estimate for ending stocks for
tomorrow mornings report is at 107 million bushels (range 97-115) from 115
million last month. For the new crop season, traders look for ending stocks at
202 million bushels (range 180-256) from 190 million last month. Ending stocks
in the 1976/77 season came in at 103 million bushels with a 7.2% stocks/usage
ratio. If ending stocks come in at 107 million bushels, the stocks/usage ratio
would come in at 4.3% or lower, depending on the extent of the increase in
usage. While the weather outlook into mid-June is favorable, the market may
decide to hold or build weather premium for the new crop ahead of the critical
weather period for soybeans in August. Weekly export sales, also released before
the opening, are expected to come in near 25,000-50,000 tons for soybeans,
20,000-50,000 tons for meal and 0-5,000 tons for oil. Support for November
soybeans comes in at 677 and 670 with 689 and 694 1/2 as resistance.

Technical Outlook

#SOYBEANS (NOV) 06/10/04: It is a slightly
negative indicator that the close was lower than the pivot swing number. The
next area of resistance is around 683 and 687, while 1st support hits today at
674 1/2 and below there at 670. 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
670.

MEAL (DEC): Daily stochastics are trending lower,
but have declined into oversold territory. The next downside objective is now at
207.5. First resistance comes in at 211.6, with support at 208.4. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. The market’s close below the pivot swing number is a mildly negative
setup.

BEAN OIL (DEC): The market’s close below the
9-day moving average is an indication the short-term trend remains negative. The
daily stochastics have crossed over down which is a bearish indication. The next
downside target is 24.56. It is a slightly negative indicator that the close was
lower than the pivot swing number. The daily closing price reversal up is
positive. Daily swing resistance is found at 25.03 and above there at 25.20.
Support should be encountered at 24.71 and 24.56.

 

WHEAT MARKET RECAP

6/9/2004

News that Egypt bought 120,000 tons of wheat from
France and none from the US in their overnight tender helped to drag the market
lower early in the session. Trader believe that with new crop production in
Europe expected to recover this year from last years drought that competition
for the export tenders could begin to intensify with Europe and Australia more
aggressive sellers. Taiwan bought 42,510 tons of wheat from the US overnight.
The average trade estimate for ending stocks for the 2004/2005 season for the
USDA report in the morning came in at 478 million bushels from 499 million last
month. Winter wheat production is expected to fall to 1.518 billion bushels
(1.497-1.538 range) as compared with 1.550 billion bushels projected last month
and 1.707 billion last year. All wheat production is expected to fall to 2.055
billion bushels (2.027-2.086 range) as compared with 2.080 billion bushels
projected last month and 2.337 billion last year. Weekly export sales, also
released before the opening, are expected to come in near 300,000-400,000 tons
as compared with 248,400 tons last week. July wheat support comes in at 356 3/4
and below there at 351 1/2 with resistance at 361 1/2 and 369 3/4.

Technical Outlook

#WHEAT (DEC) 06/10/04: It is a slightly negative
indicator that the close was lower than the pivot swing number. Look for
near-term support at 379 and below there at 376 1/2, with resistance levels at
384 and 386 1/2. The moving average crossover down (9 below 18) indicates a
possible developing short-term downtrend. Momentum studies are declining, but
have fallen to oversold levels. The next downside target is 376 1/2.

 

LIVE CATTLE RECAP

6/9/2004

August cattle closed near unchanged in choppy,
two-sided trade as the market lacked good reasons to explain the sharp break
yesterday. Talk that the new fast-test for mad cow (which will go into effect
soon with results posted daily) could spit out false positives helped to trigger
the sharp break on Tuesday. Traders are concerned that this might dent trade
psychology before more accurate tests are conducted. A lack of trade in the cash
market added to the choppy trade but higher beef prices helped support the late
charge higher. Higher beef prices have helped support improving profit margins
for the packer. Boxed-beef cut-out values were up $1.84 to $157.30 as compared
with $150.47 last week at this time. Slaughter came in at 127,000 head as
compared with trade expectations at 128,000-130,000 head.

Technical Outlook

#CATTLE (AUG) 06/10/04: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The next downside
target is 87.27. It is a slightly negative indicator that the close was lower
than the pivot swing number. Support should be encountered at 88.32 and below
there at 87.27. Market resistance is at 89.97 and then again at 90.57. 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

6/9/2004

July hogs closed lower for the 4th session in a
row, down 82 on the session to the lowest close for the month of June. Cash
markets were $2.00 lower at Peoria and weakness in the pork cut-out values on
Tuesday afternoon helped pressure. In addition, news that Japan partially lifted
the ban on US poultry could point to a little less pork movement to Japan.
Weekly average weights for Iowa/Minnesota for the week ending June 5th came in
at 264.7 pounds as compared with 263.9 the previous week and 263.1 pounds last
year at this time. Weights typically drop at this time of the year so the jump
could mean that producers may have been slow to market highs in late May and
there could be “extra” pork production ahead. Slaughter came in at 379,000 head
compared with trade estimates at 378,000-385,000 head. The CME 2-day Lean Index
for the period ending June 7th came in at 76.81, up 63 cents from the previous
session but down from 77.06 the previous week.

Technical Outlook

#HOGS (AUG) 06/10/04: The market’s close below
the pivot swing number is a mildly negative setup. Resistance levels comes in at
75.92 and 76.32 today, while support is around 75.00 and then 74.47. The
market’s short-term trend is negative as the close remains below the 9-day
moving average. 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 74.47.

 

COCOA MARKET RECAP

6/9/2004

September cocoa closed slightly higher with
spread and rollover trading the featured activity ahead of first notice day for
the July contract on June 17th. While there were no new reports of violence,
renewed political unrest in the Ivory Coast is helping to at least put a
temporary floor under cocoa prices. Brazil announced that cocoa grind in May
rose 1.5% from a year ago.

Technical Outlook

COCOA (SEP) 06/10/04 The daily closing price
reversal up is positive. The market tilt is slightly negative with the close
under the pivot. Cocoa should run into resistance at 1382 and above there at
1391 with support at 1360 and 1347. Momentum studies are declining, but have
fallen to oversold levels. The next downside target is 1347.00.

 

COFFEE MARKET RECAP

6/9/2004

September coffee closed sharply higher and filled
a gap left from June 7th as short covering ahead of the long holiday weekend has
been the featured trade. Harvest delays in Brazil are also creating a temporary
tight physical situation in the cash market. The market had sold off hard in
last May/early June on weather condition in Brazil that failed to produce a
frost. However, with another cold front moving in, traders do not want to be
caught short on the possibility that the front may intensify over the weekend
and bring frost. September looks to have found solid support around 83.10, but
we would think damaging weather conditions would need to be seen in Brazil’s
growing areas for the market to sustain higher prices. Weather forecasters in
Brazil forecast the next chance of a damaging from to be around June 24th.
Brazil’s exports of Green coffee in May were down 4.3% from a year ago, and
total coffee exports are down 10% for the year through May compared to a year
ago. Brazil’s government tried to auction 200,000 bags of Arabica coffee from
stocks, but none were sold.

Technical Outlook

COFFEE (SEP) 6/10/04 The outside day up and close
above the previous day’s high is a positive signal. The daily closing price
reversal up is positive. The market has a bullish tilt coming into today’s trade
with the close above the 2nd swing resistance. 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 objective is
now at 82.50. The Coffee contract should run into resistance at 86.50 and above
there at 87.10 with support at 84.2 and 82.50. The market’s short-term trend is
positive on a close above the 9-day moving average.

 

SUGAR MARKET RECAP

6/9/2004

October sugar gapped lower and tested the June
lows before finding support from trade house buyers. Ideas that the market was
oversold and commercial buying helped support the bounce to unchanged on the
session into the close and at the highs of the day. Trade houses are hopeful
that cash market activity will pick-up on a break. Iran seeks 40,000 tons of raw
sugar, half from Australia. Talk that India will eventually be a significant
importer for the new crop season helped provide underlying support. With rain in
the forecast for some of the southern areas of Brazil’s center-south production
area for the weekend, there is concern for more harvest delays into early next
week. The market tested the bottom end of the 7-session consolidation near the
highs but if the rains are not much of an issue early next week, a downside
break-out could be close at hand.

Technical Outlook

#SUGAR (OCT) 06/10/04: The market’s close below
the pivot swing number is a mildly negative setup. Swing resistance comes in at
7.43, with support found at 7.27. The market’s short-term trend is negative as
the close remains below the 9-day moving average. 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 7.27.

 

COTTON MARKET RECAP

6/9/2004

Spread activity and short covering ahead of the
USDA world supply/demand report sent October cotton prices gapping higher and
closing up 85. While traders are not anticipating any major changes, reports
from India suggest planted cotton acreage will be at least 10% higher than the
previous year. While Oct cotton has been on a sharp downtrend pressured by
expectations of rising world supplies and a good start to the US crop, the
market had become oversold and was due for a short covering bounce. However, the
upside looks limited unless the supply situation becomes more bullish. Export
sales estimates for cotton range between 200,000 to 300,000 bales compare to
244,400 bales last week.

Technical Outlook

#COTTON (OCT) 06/10/04: The market’s close below
the 9-day moving average is an indication the short-term trend remains negative.
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. Next
resistance area comes in at 57.65 and then again at 57.93, while support is
targeted at 56.95 and 56.53. Momentum studies are declining, but have fallen to
oversold levels. The next downside target is 56.53. The gap upmove on the day
session chart is a bullish indicator for trend.