Here’s Why Copper Was Disappointing Today
BOND MARKET RECAP
1/25/2005
March Bonds closed down 0-25 at 113-30. This was
0-09 up from the low and 0-30 off the high.
March 10 Yr Treasury Notes finished down 0-130 at
111-305, 0-125 off the high and 0-045 up from the low.
The Treasury market managed a little more
aggressive upside track than we would have expected Tuesday and then seemed to
reverse course much more significantly than the numbers would have normally
produced. It is possible that the Fed’s comments about ongoing improvement
employment in the US was behind part of the selling but we also got the sense
around the highs Tuesday that short term technicals were overdone and that
Treasuries were too close to factoring no growth in the US. With the Dollar
showing strength and the US equity market firm for most of the session it made
sense for Treasury longs to bank some profits around a new contract high.
Technical Outlook
BONDS (MAR) 01/26/2005: A new contract high was
made on the rally. Momentum studies are trending higher but have entered
overbought levels. The major trend could be turning up with the close back above
the 18-day moving average. A negative signal was given by the outside day down.
The defensive setup, with the close under the 2nd swing support, could cause
some early weakness. The next upside objective is 115-08. The next area of
resistance is around 114-13 and 115-08, while 1st support hits today at 113-06
and below there at 112-25.
TNOTES (MAR) 01/26/2005: 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 close below the 2nd swing support number puts the
market on the defensive. The near-term upside objective is at 112-175. The next
area of resistance is around 112-055 and 112-175, while 1st support hits today
at 111-200 and below there at 111-140.
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STOCK INDICES RECAP
1/25/2005
March S&P finished up 3.5 at 1169.7, 5.7 off the
high and 1.7 up from the low.
March S&P E-Mini closed up 3.5 at 1169.75. This
was 3.75 up from the low and 5.75 off the high.
March Dow closed up 83 at 10466. This was 56 up
from the low and 44 off the high.
The stock market seemed to get more than a simple
short covering bounce as the initial upward salvo was mostly sparked by early
corporate earnings reports. However, following the 9:00 cst scheduled economic
information the market added to the gains and that suggests a slightly more
optimistic view toward the future. Some traders might have looked at the Fed
dialogue during the session and garnered some confidence from the suggestions
that US employment levels will continue to improve and that inflation will not
be a major issue. It is also possible that some buyers are trying to look beyond
the Iraq election to a possible US troop pullback, but that might be an overly
optimistic viewpoint.
Technical Outlook
S&P 500 (MAR) 01/26/2005: 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.
With the close higher than the pivot swing number, the market is in a slightly
bullish posture. The next downside objective is 1163.30. The next area of
resistance is around 1173.40 and 1178.10, while 1st support hits today at
1166.00 and below there at 1163.30.
SP EMINI (MAR) 01/26/2005: 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. It is a mildly bullish indicator that the market closed over
the pivot swing number. The next downside target is now at 1160.75. The next
area of resistance is around 1174.50 and 1179.75, while 1st support hits today
at 1165.00 and below there at 1160.75.
NASDAQ (MAR) 01/26/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. 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 under the
swing pivot. The next downside target is now at 1480.00. Some caution in
pressing the downside is warranted with the RSI under 30. The next area of
resistance is around 1504.00 and 1516.00, while 1st support hits today at
1486.00 and below there at 1480.00.
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CURRENCY MARKET RECAP
1/25/2005
March US Dollar finished up 80 at 8407, 7 off the
high and 77 up from the low.
March Euro finished down 0.93 at 129.73, 0.79 off
the high and 0.2 up from the low.
March Euro Dollar closed down 0.005 at 97.035.
This was 0.01 up from the low and 0.005 off the high.
March Canadian Dollar closed down 0.82 at 80.85.
This was 0.28 up from the low and 0.6 off the high.
March British Pound finished down 1.73 at 185.76,
1.06 off the high and 0.06 up from the low.
March Swiss closed down 0.74 at 83.92. This was
0.21 up from the low and 0.66 off the high.
March Japanese Yen closed down 1.48 at 96.27.
This was 0.12 up from the low and 0.63 off the high.
Certainly US corporate earnings provided some
lift to the Dollar on Tuesday but we suspect that the better than expected US
economic reports provided an even bigger lift. We suspect that technical buying
was also in play Tuesday, as the Dollar managed to reach the highest level since
November 16th. We also have to wonder if some in the trade are looking beyond
the Iraqi election this weekend and wondering what might happen if the election
is carried out and the disdain for the US “occupation” decreases or if the US
sees a window to pull out some troops. In other words, those that are short the
Dollar are seeing a number of reasons to be concerned.
Technical Outlook
YEN (MAR) 01/26/2005: The close under the 60-day
moving average indicates the longer-term trend could be turning down. A bearish
signal was triggered on a crossover down in the daily stochastics. Momentum
studies trending lower at mid-range could accelerate a price break if support
levels are broken. 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. 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 now at 95.65. The next area of
resistance is around 96.64 and 97.14, while 1st support hits today at 95.90 and
below there at 95.65.
EURO (MAR) 01/26/2005: A crossover down in the
daily stochastics is a bearish 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 defensive setup, with
the close under the 2nd swing support, could cause some early weakness. The next
downside target is 128.89. The next area of resistance is around 130.22 and
130.86, while 1st support hits today at 129.24 and below there at 128.89.
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PRECIOUS METALS RECAP
1/25/2005
February Gold closed down 5 at 422.1. This was
1.1 up from the low and 3.6 off the high.
March Silver finished down 0.175 at 6.685, 0.105
off the high and 0.005 up from the low.
April Platinum closed down 8.3 at 863.9. This was
4.4 up from the low and 3.1 off the high.
With the US Dollar reaching up to a new level on
the charts another layer of gold and silver longs decided to step out of
position. We also think that better than expected US economic information
prompted some additional liquidation but the bigger question might be is the
Dollar rising in anticipation of a possible US exit strategy in Iraq as that
could really mean a shift in sentiment toward the metals. We are also very
disappointed in the fact that extremely favorable macro economic information
from China failed to inspire hope for increased physical demand for gold and
silver. In other words, the main focus in the market continues to be the Dollar
and the Dollar action is heaping pressure on the gold bulls.
Technical Outlook
SILVER (MAR) 01/26/2005: Positive momentum
studies in the neutral zone will tend to reinforce higher price action. The
cross over and close above the 18-day moving average indicates the longer-term
trend has turned up. The gap lower price action on the day session chart is a
bearish indicator for trend. The defensive setup, with the close under the 2nd
swing support, could cause some early weakness. The next upside objective is
682.0. The next area of resistance is around 674.0 and 682.0, while 1st support
hits today at 663.1 and below there at 660.1.
GOLD (FEB) 01/26/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. 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
market is in a bearish position with the close below the 2nd swing support
number. The next upside objective is 427.4. The next area of resistance is
around 424.4 and 427.4, while 1st support hits today at 419.8 and below there at
418.1.
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COPPER MARKET RECAP
1/25/2005
March Copper finished down 0.10 at 142.90, 0.20
off the high and 1.90 up from the low.
The copper market acted a little disappointing
considering the extremely favorable early news from the Chinese macro economic
situation. Into the US opening the market saw fresh growth readings from China
that improved on the early 2004 growth but more importantly Chinese inflation
readings continued to soften and that might reduce the chance that China will
have to tap the economic breaks. Countervailing the potentially bullish macro
economic readings from China were concerns that Chinese copper demand was set to
decline in 2005. We also think that US copper prices were under some light
selling pressure as a result of a strong rally in the US Dollar.
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ENERGY MARKET RECAP
1/25/2005
March Crude Oil closed up 0.83 at 49.64. This was
1.29 up from the low and 0.11 off the high.
March Heating Oil closed up 2.28 at 140.88. This
was 3.48 up from the low and 0.22 off the high.
March Unleaded Gas finished up 4.11 at 135.94,
0.06 off the high and 4.44 up from the low.
March Natural Gas finished down 0.07 at 6.44,
0.09 off the high and 0.16 up from the low.
March Propane closed down 0.00 at 0.73. This was
equal to the low and equal to the high.
The energy complex traded on both sides of
unchanged but the market did see some selling off the idea that OPEC might be
unable to justify a production cut in the coming meeting. Some traders continue
to think that the lack of a production cut could undermine prices but as long as
the Iraqi election looms we doubt that sellers are going to feel comfortable
attacking the short side of the market. We are a little surprised that Iran
actually suggested that oil prices were too high to justify a cut but the cartel
made sure that the market also saw some hard line talk for later in the spring.
We also suspect that the near term weather outlook was a minor source of selling
pressure during the action Tuesday.
Technical Outlook
CRUDE OIL (MAR) 01/26/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The major trend could be
turning up with the close back above the 18-day moving average. Market
positioning is positive with the close over the 1st swing resistance. The next
upside objective is 50.74. The market is becoming somewhat overbought now that
the RSI is over 70. The next area of resistance is around 50.34 and 50.74, while
1st support hits today at 48.94 and below there at 47.95.
UNLEADED (MAR) 01/26/2005: Momentum studies are
trending higher but have entered overbought levels. The cross over and close
above the 18-day moving average indicates the longer-term trend has turned up.
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. The
next upside objective is 139.34. The market is becoming somewhat overbought now
that the RSI is over 70. The next area of resistance is around 138.19 and
139.34, while 1st support hits today at 133.69 and below there at 130.35.
HEATING OIL (MAR) 01/26/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The major trend could be turning up with the close back above the
18-day moving average. A positive setup occurred with the close over the 1st
swing resistance. The next upside target is 143.76. With a reading over 70, the
9-day RSI is approaching overbought levels. The next area of resistance is
around 142.73 and 143.76, while 1st support hits today at 139.03 and below there
at 136.37.
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CORN MARKET RECAP
1/25/2005
March Corn finished up 1 1/4 at 199, 3/4
off the high and 2 up from the low. May Corn closed up 1 1/2 at 206 3/4. This
was 2 1/4 up from the low and 1/4 off the high.
The market bounced to test the 200 level for
March corn for the second session in a row as short-covering emerged after the
lower opening to support. A move over psychological resistance at 200 could
support increased speculative short-covering. A lack of producer selling has
helped support the market and traders remain nervous with the speculative net
short position at a record high that a minor bullish factor could support a
significant bounce. Rains in the forecast for the weekend for Argentina helped
ease fears of crop damage from recent dryness. South Korea bought 52,500 tonnes
of US corn overnight and two South Korea firms also bought 157,500 tons of
optional origin corn overnight. China corn is thought to be trading under US or
South American corn. Resistance for March corn comes in at 200 3/4 and 202 1/2
with support at 197 1/4 and 195 3/4.
Technical Outlook
CORN (MAR) 01/26/2005: The crossover up in the
daily stochastics is a bullish signal. 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 close below the 18-day moving average is an indication the
longer-term trend has turned down. The upside daily closing price reversal gives
the market a bullish tilt. With the close higher than the pivot swing number,
the market is in a slightly bullish posture. The next upside objective is 201
1/4. The next area of resistance is around 200 1/4 and 201 1/4, while 1st
support hits today at 197 3/4 and below there at 196.
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SOY COMPLEX RECAP
1/25/2005
March Soybeans finished up 6 at 526, 2 off the
high and 10 1/2 up from the low. May Soybeans closed up 3 3/4 at 524. This was 8
1/2 up from the low and 1 1/4 off the high.
March Soymeal closed up 2 at 157.9. This was 3.4
up from the low and 0.5 off the high.
March Soybean Oil finished down 0.03 at 19.71,
0.14 off the high and 0.1 up from the low.
The outside day higher and highest close since
January 13th is a positive technical development. Disappointment that the market
could not follow-through on the bounce yesterday, bearish weather forecasts for
more rains in Brazil and possibly over to the dry areas of Argentina into the
weekend and fears that China may soon switch soybean import demand to Brazil and
away from the US helped trigger the early sell-off. Tight producer holding in
the US and news of a record net short position of the speculator triggered the
bounce as the March contract led the market higher into the mid-session. The
move over last weeks highs for March soybeans yesterday experienced a lack of
follow-through buying and the weak close but the new high today over yesterday’s
highs is seen as supportive and could trigger light short-covering. Basis levels
in the mid-west were firm this morning due to a lack of producer selling with
processors still struggling to source soybeans in spite of the record crop. Even
the bullish weekly export sales news and the friendly export inspection news
from yesterday failed to provide much support as the strong export demand pace
and the aggressive buying from China are both factors which are thought to be
temporary. Resistance for March soybeans comes in at 527 1/4 and 531 3/4 with
support at 518 and 515.
Technical Outlook
BEANS (MAR) 01/26/2005: The daily stochastics
have crossed over up which is a bullish indication. 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 market back below the 18-day moving
average suggests the longer-term trend could be turning down. A positive signal
was given by the outside day up. With the close over the 1st swing resistance
number, the market is in a moderately positive position. The near-term upside
target is at 536 1/4. Consider buying pull-backs since daily studies are
bullish. The next area of resistance is around 532 1/4 and 536 1/4, while 1st
support hits today at 519 3/4 and below there at 511 1/2.
MEAL (MAR) 01/26/2005: 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.
The daily closing price reversal up on the daily chart is somewhat positive.
Market positioning is positive with the close over the 1st swing resistance. The
next downside objective is now at 153.3. The next area of resistance is around
159.8 and 161.0, while 1st support hits today at 156.0 and below there at 153.3.
BEANOIL (MAR) 01/26/2005: The stochastic
indicator is rising from oversold levels, which is bullish and should support
higher prices. 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 upside target is 19.96. The next area of
resistance is around 19.82 and 19.96, while 1st support hits today at 19.59 and
below there at 19.48.
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WHEAT MARKET RECAP
1/25/2005
March Wheat finished up 1 3/4 at 297, 1 3/4 off the high and 2
up from the low. May Wheat closed up 1 3/4 at 304 1/2. This was 2 up from the
low and 1 off the high.
Chicago wheat held support to close higher but a
new contract low for new crop Kansas City wheat is seen as a potential bearish
factor. Weather in the central plains looks favorable to the hard red winter
wheat crop but the soft red crop in the southern Midwest is going through a
series of freeze/thaw periods which has traders nervous over potential damage.
News that Iraq bought 165,000 tons of US wheat helped provide early support. In
addition, the Philippines bought 100,000 tons of US wheat for March and April
shipment. The weekly export sales report yesterday indicated that cumulative
sales have already reached 78.2% of the USDA forecast for the season as compared
with 69.4% on average for this time of the year. Cash basis is steady/firm and
the markets ability to hold the January 4th lows is seen as supportive. March
wheat support comes in at 295 and 292 1/4 with resistance at 300 1/2 and 302
3/4.
Technical Outlook
WHEAT (MAR) 01/26/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
major trend has turned down with the cross over back below the 18-day moving
average. It is a mildly bullish indicator that the market closed over the pivot
swing number. The next downside objective is 293 1/4. The next area of
resistance is around 298 3/4 and 300 1/2, while 1st support hits today at 295
1/4 and below there at 293 1/4.
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LIVE CATTLE RECAP
1/25/2005
February Live Cattle finished up 0.07 at 88.77,
0.42 off the high and 0.27 up from the low.
January Feeder Cattle closed down 0.05 at 104.50.
This was 0.15 up from the low and 0.05 off the high.
The market pushed higher with the forecast for
wet weather in the plains into the weekend and fears of legal action to halt the
plan to open the border with Canada helping to trigger short-covering. Futures
have been hit with a series of bearish news factors over the past two weeks and
a shift to a more balanced supply and demand outlook helped support the bounce.
Boxed-beef cut-out values were down $.17 to $151.16 at mid-session as compared
with $157.32 one week ago. Lower beef prices could stimulate demand and help
boost the slaughter while a return to muddy feedlot conditions could slow the
available supply of market-ready cattle.
Technical Outlook
CATTLE (FEB) 01/26/2005: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The close under the 18-day moving average indicates the longer-term
trend could be turning down. With the close higher than the pivot swing number,
the market is in a slightly bullish posture. The next downside objective is now
at 88.120. The next area of resistance is around 89.120 and 89.500, while 1st
support hits today at 88.450 and below there at 88.120.
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LEAN HOGS RECAP
1/25/2005
February Lean Hogs finished down 0.35 at 75.07,
0.60 off the high and 0.50 up from the low.
February Pork Bellies closed up 0.47 at 94.15.
This was 0.30 up from the low and 0.50 off the high.
The premium of futures to the cash market helped
to limit the buying and triggered a sell-off late for February hogs. Cash
markets were $1.00 higher at Peoria which supported the early strength but fears
that supplies will be hefty over the near-term combined with the premium helped
trigger the selling. Pork cut-out values were down for the second day in a row
on Monday which caused traders to second guess the recent firm demand tone. The
2-Day Lean index for the period ending January 21st was up.10 to 73.86 as
compared with 72.60 one week previous. The weekly cold storage report, released
after the close, is expected to show an in-movement of 1.5-3.0 million pounds.
Total pork in cold storage from the monthly report yesterday showed stocks near
a 34 year high for this time of the year which also watered-down recent demand
expectations.
Technical Outlook
HOGS (FEB) 01/26/2005: The downside crossover (9
below 18) of the moving averages suggests a developing short-term downtrend.
Negative momentum studies in the neutral zone will tend to reinforce lower price
action. The close below the 18-day moving average is an indication the
longer-term trend has turned down. The market could take on a defensive posture
with the daily closing price reversal down. The market’s close below the 1st
swing support number suggests a moderately negative setup for today. The next
downside objective is 74.020. The next area of resistance is around 75.600 and
76.170, while 1st support hits today at 74.520 and below there at 74.020.
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COCOA MARKET RECAP
1/25/2005
March Cocoa finished up 1 at 1527, 9 off the high
and 9 up from the low.
The cocoa market once again traded on both sides
of unchanged despite the fact that overnight the Press came out with a survey
that seemed to shift the ending stocks tilt more toward the bull camp. Recently
some cocoa market analysts were expecting to see a surplus condition for the
coming crop but that has now shifted to projections of a deficit. Some survey
readings called for a deficit of up to 100,000 tons and that certainly
discourages some of the recent negative tilt that has dominated the marketplace.
We suspect that continued gains in the Dollar are making it difficult to for
cocoa to benefit from an improvement in the fundamentals.
Technical Outlook
COCOA (MAR) 01/26/2005: Momentum studies are
rising from mid-range, which could accelerate 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 over the pivot
swing is a somewhat positive setup. The next upside objective is 1545. The next
area of resistance is around 1536 and 1545, while 1st support hits today at 1518
and below there at 1509.
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COFFEE MARKET RECAP
1/25/2005
March Coffee closed up 1.10 at 105.75. This was
3.45 up from the low and 0.15 off the high.
May coffee closed at the highest level for the
year with active fund and speculative buying helping to support. Vietnam exports
for the first four months of the 2004/2005 season have hit 230,000 tons from
276,000 tons last year, according to the General Statistics Office. Nicaragua
production for the 2004/2005 season is thought to come in at only 843,000 bags,
down 40% from last year due to untimely rains and a lack of crop care. Fund
buying was the primary bullish force for the market.
Technical Outlook
COFFEE (MAR) 01/26/2005: Momentum studies are
trending higher but have entered overbought levels. 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. A positive setup occurred with the
close over the 1st swing resistance. The next upside target is 108.50. The next
area of resistance is around 107.50 and 108.50, while 1st support hits today at
103.95 and below there at 101.35.
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SUGAR MARKET RECAP
1/25/2005
March Sugar closed up 0.08 at 8.98. This was 0.11
up from the low and 0.01 off the high.
May sugar pushed higher on the session for 9 of
the past 10 sessions with talk of improved demand from India and spot demand
from Pakistan helping to keep the tone in the cash market firm. Renewed strength
in the energy complex and continued longer-term talk from many countries to
expand the use of cane-based ethanol to supplement energy needs. While traders
initially believed that Brazil cane-based fuel exports, which surged in 2004,
would slow in 2005, crude oil near $49 has provided some second thoughts about a
slowdown. With good weather in the next few months, the center south crop looks
enormous but there is still some uncertainty for weather and demand looks
certain to grow.
Technical Outlook
SUGAR (MAR) 01/26/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The major trend could be turning up with the
close back above the 18-day moving average. The market has a bullish tilt coming
into today’s trade with the close above the 2nd swing resistance. The next
upside target is 9.07. The next area of resistance is around 9.03 and 9.07,
while 1st support hits today at 8.92 and below there at 8.84.
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COTTON MARKET RECAP
1/25/2005
March Cotton finished up 0.34 at 46.78, 0.02 off
the high and 1.03 up from the low.
The cotton market rebounded right off a critical
moving average on the lows Tuesday and that might inspire some fund short
covering. However, considering the magnitude of the run off the December lows
some traders are not convinced that the technical setup of the cotton market has
been effectively balanced by the nearly 300 point decline to the lows Tuesday.
Some traders think that the market simply couldn’t maintain the lows Tuesday
following the US export sales reading on Monday and the general market idea that
China needs cotton and could be ready to buy.
Technical Outlook
COTTON (MAR) 01/26/2005: Momentum studies
trending lower from overbought levels is a bearish indicator and would tend to
reinforce lower price action. The cross over and close above the 18-day moving
average is an indication the longer-term trend has turned positive. The upside
closing price reversal on the daily chart is somewhat bullish. With the close
higher than the pivot swing number, the market is in a slightly bullish posture.
The next downside objective is now at 45.48. The next area of resistance is
around 47.30 and 47.57, while 1st support hits today at 46.26 and below there at
45.48.