Here’s Why Gold Took A Hit

Technical Outlook

BONDS (MAR) 1/16/2004: The market has a slightly positive tilt with the close over the swing pivot. Near-term resistance for bonds is at 113.09 and then again at 113.16, while swing support hits at 112.15 and below there at 111.28. A positive indicator was given with the upside crossover of the 9 & 18 bar moving average. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 113.16. The market is approaching overbought levels with an RSI over 70.

T-NOTES(MAR) 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 115.09. 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 114.32 and then again at 115.09, while swing support hits at 114.10 and below there at 113.30. 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

1/15/04

The stock market continues to get surprise benefits and the numbers released Thursday were supportive enough that merger mania managed to spark a buying wave and push the S&P into new high ground. The stock market was also cheered on by a firmer Dollar and surprisingly weak energy prices. Another primary issue that allows the bulls to run were improvements in the initial and ongoing claims data. In the end, investors were seen moving into sectors they thought might participate in upcoming mergers with the economic improvement a secondary and less important factor.

Technical Outlook

S&P500 (MAR) 1/16/2004: The close over the pivot swing is a somewhat positive setup. Underlying support comes in at 1126.35 and 1118.03, with overhead resistance at 1139.65 and 1144.63. The close above the 9-day moving average is a positive short-term indicator for trend. The crossover up in the daily stochastics is a bullish signal. The near-term upside objective is at 1144.63. The market is becoming somewhat overbought now that the RSI is over 70.

S&P E-Mini (MAR): A new contract high was made on the rally. A bullish signal was given with an upside crossover of the daily stochastics. The next upside target is 1145.00. With the close higher than the pivot swing number, the market is in a slightly bullish posture. Near-term resistance for the S&P Mini is at 1140.00 and then again at 1145.00, while swing support hits at 1126.50 and below there at 1118.00. The market’s close above the 9-day moving average suggests the short-term trend remains positive. The 9-day RSI over 70 indicates the market is approaching overbought levels.

NASDAQ (MAR) The market made a new contract high on the rally. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market has a slightly positive tilt with the close over the swing pivot. The market should run into resistance at 1553.75 and above there at 1567.38 with support at 1521.25 and 1502.38. The market is approaching overbought levels with an RSI over 70. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 1502.38.

CURRENCY MARKET RECAP

1/15/04

The Dollar has managed to climb above a series of critical down trend resistance lines with its recent strength. Perhaps the biggest element driving the Dollar up is the forecast by a US Fed member that the US economy would grow by 4% to 5% in the coming quarters. In other words, the US economy looks a lot stronger than the Euro zone economy. Furthermore, we also have to think that critical chart failures in the Canadian, Pound and Euro will result in follow through selling in those currencies in the sessions ahead.

Technical Outlook

YEN (MAR): A negative signal for trend short-term was given on a close under the 9-bar moving average. The close below the 1st swing support could weigh on the market. Swing resistance is targeted at 94.39 and above there at 94.61, with the yen finding support around 94.09 and below there at 94.01. A bearish signal was triggered on a crossover down in the daily stochastics. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 94.01. Bearish daily studies indicate selling minor rallies this session.

EURO (MAR): Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 1.2498. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing support for the Euro comes in at 1.2498, with overhead resistance at 1.2648. The close below the 9-day moving average is a negative short-term indicator for trend. More selling pressure is likely given yesterday’s gap lower price action on the day session chart.

PRECIOUS METALS RECAP

1/15/04

When one combines a massively long small spec and fund position, with a critical fundamental change it is not surprising to see a wholesale liquidation. We suspect that the market saw a capital or margin inspired washout but when one sees the performance in the Dollar it is no surprise that many weak handed longs exited. The silver managed to hold up relative well but should continue to be undermined by the gold action in the coming sessions. Near term support in April gold is $405 while silver support is seen at $416.

Technical Outlook

SILVER (MAR): There could be some early pressure today given the market’s negative setup with the close below the 2nd swing support. Initial support for silver is at 613.1 and below there at 607.8 with resistance likely at 625.9 and 629.6. A negative signal for trend short-term was given on a close under the 9-bar moving average. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 607.8. The gap lower on the day session chart is bearish and puts the market on the defensive.

GOLD (APR): Support for gold today comes in near 402.73, while resistance is pegged at 420.53. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 402.73. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. The close below the 9-day moving average is a negative short-term indicator for trend. The close below the 40-day moving average is an indication the longer-term trend is down. More selling pressure is likely given yesterday’s gap lower price action on the day session chart.

COPPER MARKET RECAP

1/15/04

The copper market is lucky to have avoided more aggressive selling in the action Thursday. With the Asian economies showing a little concern over the bird flu issue and the Canadian mine conflict failing to see a notice of strike intention there were more reasons to exit longs than to hold only longs. We also have to add that the copper market was significantly long and the sharp decline in the gold market seemed to undermine sentiment. Furthermore, we also have to think that a rise in the Dollar is making US copper supplies a little less attractive to foreign buyers.

ENERGY MARKET RECAP

1/15/04

The energy complex failed significantly after the market failed to hold recent gains and the outlook for the weather moderated. We have to think that a less than expected weekly natural gas draw highlighted the below average winter demand pattern and that helped foster a technical liquidation. It goes without saying that the crude oil market had a massive spec and fund long position and therefore seeing run away stop loss selling by the longs is not surprising. The mild weather forecast appears to come into play in the January 22nd to January 28th time frame. The natural gas draw was 153 bcf compared to 140 to 210 bcf expected by the trade.

Technical Outlook

CRUDE OIL (MAR): The outside day down gives the market a bearish tilt. The daily closing price reversal down is a negative indicator for prices. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Support for crude is keyed on 31.51 and below there at 30.90, with resistance pegged at 33.56 and 35.00. The close below the 9-day moving average is a negative short-term indicator for trend. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 30.90.

UNLEADED GAS (MAR): Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 87.87. There could be some early pressure today given the market’s negative setup with the close below the 2nd swing support. Resistance today is at 103.47, while support should be found around 87.87. The outside day down is somewhat negative. The market could take on a defensive posture with the daily closing price reversal down. A negative signal for trend short-term was given on a close under the 9-bar moving average.

HEATING OIL (MAR):The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Heating oil should encounter support around 86.48, with resistance is at 99.68. The close below the 9-day moving average is a negative short-term indicator for trend. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 86.48. The outside day down gives the market a bearish tilt. The daily closing price reversal down is a negative indicator for prices.

CORN MARKET RECAP

1/15/04

After export sales expectations called for 600,000 to 800,000 metric tons, the actual reading of 839,300 metric tons was supportive for corn. While the corn market managed a new contract high for the day it failed to hold all of the gains and basically closed at the prior days levels. While hot temps continue in Argentina it would seem that a weekend rain event is possibly in some forecasts and that could dampen bullish sentiment. However, we doubt that the market has had too much long interest in play off the weather in South American so the rain probably won’t make prices slide. Weakness in soybeans also helped pressure corn into the close.

Technical Outlook

CORN (MAR) 1/16/2004: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 273 3/4. There could be more upside follow through since the market closed above the 2nd swing resistance. Market resistance comes in at 273 3/4 today, with support at 263 3/4. The close above the 9-day moving average is a positive short-term indicator for trend. The market is becoming somewhat overbought now that the RSI is over 70. The market rallied to a new contract high.

SOY COMPLEX RECAP

1/15/04

After Soybean export sales expectations of 200,000 to 400,000 metric tons, the actual reading of 586,400 metric tons was partially supportive. However, early in the session the market started out weaker, off concerns that the bird flu disease in Asia might hurt demand for soybeans. The market also saw massive weakness in the Gulf basis of beans, which collapsed and that in turn added pressure to the front month contracts. It also seemed as if some fund longs in soybeans were stepping out of positions after the market failed to maintain prices up around the recent highs.

Technical Outlook

SOYBEANS (MAR) 01/16/04 The market tilt is slightly negative with the close under the pivot. The next area of resistance is around 840 1/2 and 846 1/2, while 1st support hits today at 829 1/2 and below there at 824 1/2. The market’s close on the 9-day moving average is neutral. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 846 1/2. The market is approaching overbought levels with an RSI over 70.

MEAL (MAR): Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 260.8. First resistance comes in at 259.1, with support at 255.2. The close above the 9-day moving average is a positive short-term indicator for trend. It is a slightly negative indicator that the close was under the swing pivot.

BEAN OIL (MAR): A positive signal for trend short-term was given on a close over the 9-bar moving average. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 30.39. It is a slightly negative indicator that the close was lower than the pivot swing number. The daily closing price reversal up is a positive indicator that could support higher prices. Daily swing resistance is found at 30.12 and above there at 30.39. Support should be encountered at 29.63 and 29.41.

WHEAT MARKET RECAP

1/15/04

After Wheat export sales expectations of 400,000 to 700,000 metric tons the actual reading of 494,800 metric tons was disappointing. With the European wheat market seeing some previously purchased wheat being put back onto the market the trade was disappointed with demand. In fact, with a USDA story regarding declining Mideast wheat imports the demand outlook for wheat is more than a little disappointing. Unless Chinese wheat buying rumors return we would expect the bear camp to have control over wheat prices.

Technical Outlook

WHEAT (MAR) 1/16/2004: Bearish daily studies indicate selling minor rallies this session. The close below the 1st swing support could weigh on the market. Expect near-term support around 380 and below there at 376 1/2, with resistance levels at 392 and 400 1/2. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market back below the 40-day moving average suggests the longer-term trend could be turning down. A bearish signal was triggered on a crossover down in the daily stochastics. The next downside objective is 376 1/2.

LIVE CATTLE RECAP

1/15/04

Heavy spreading activity caused a wide divergence in front and back month cattle futures. Feb cattle closed limit up as the market continued to garner support from a firm cash market. Feb futures just got too cheap on the break off the mad cow scare and with US beef consumption not measurably affected, futures are playing catch-up to cash. There is even talk that cash cattle will trade $2 higher next week after trading at $80 this week. However, it was a different story April cattle which closed lower as traders are concerned that Friday’s cattle-on-feed will show a high placements and fed cattle number suggesting more supply is just around the corner.

Technical Outlook

CATTLE (APR) 1/16/2004: Stochastics are at mid-range, but trending higher which should reinforce a move higher if resistance levels are taken out. The next upside objective is 76.87. The market tilt is slightly negative with the close under the pivot. Support should be encountered at 74.85 and below there at 74.45. Market resistance is at 76.05 and then again at 76.87. The market could take on a defensive posture with the daily closing price reversal down. A positive signal for trend short-term was given on a close over the 9-bar moving average.

LEAN HOGS RECAP

1/15/04

April hogs were able to close firmer as prices were supported by strength in front month cattle and a steady to firmer tone in cash market. Short-term technical indicators improved with Thursday’s price action and if April hogs can make a solid push through 57.50, speculators who are net short may begin to more aggressively short cover. However, the up move may be capped if traders adjust positions ahead of the long holiday weekend.

Technical Outlook

HOGS (APR) 1/16/2004: The close over the pivot swing is a somewhat positive setup. Resistance levels comes in at 57.57 and 58.02 today, while support is around 56.52 and then 55.92. The close above the 9-day moving average is a positive short-term indicator for trend. The cross over and close above the 40-day moving average is an indication the longer-term trend is up. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 55.92.

COCOA MARKET RECAP

1/15/04

The cocoa market posted a tighter trading range Thursday as the information flow from the Ivory Coast was thin and the market is being impacted by a recovery in the Dollar. Ongoing origin selling was noted and that should keep the bias in prices pointing down, unless of course there is renewed violence that threatens to slow or halt physical supply flow to the ports.

Technical Outlook

COCOA (MAR)01/16/04 The downside closing price reversal on the daily chart is somewhat negative. The market tilt is slightly negative with the close under the pivot. Cocoa should run into resistance at 1622 and above there at 1643 with support at 1588 and 1575. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 1642.50.

COFFEE MARKET RECAP

1/15/04

March coffee continues to consolidate recent gains as there was enough speculative buying interest to absorb origin sales. With Vietnam thought to have already sold the majority of their 2003/04 crop, origin sales could begin to ease soon and lift a barrio to higher prices. A division of Brazil’s Ag Ministry raised the robusta crop for the 2004/05 season by about 600,000 bags since the growing area in Brazil received significant rain recently easing drought conditions. However, this news did not seem to have much negative impact on prices. The market will be focusing on the December US Green Coffee stock number
With estimates ranging between 5.370-5.828 compared with 5.678 million bags at the end of November. A lower than expected stocks number could entice further fund buying and a push through resistance at 70 cents basis the March contract.

Technical Outlook

COFFEE (MAR)1/16/04 The daily closing price reversal up is positive. The market has a slightly positive tilt with the close over the swing pivot. 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 objective is now at 67.50.The Coffee contract should run into resistance at 70.40 and above there at 70.90 with support at 68.7 and 67.50. The market’s short-term trend is positive on a close above the 9-day moving average.

SUGAR MARKET RECAP

1/15/04

March sugar was smashed lower as fund selling accelerated once the 5.80 level failed to hold. Given today’s break, small traders were also likely forced out of net long positions adding to the downward slide. The continued rise in freight costs keeps potential buyers sidelined while supplies are expected to expand. March sugar should easily take out the December low, while an eventual test of the contract low can not be ruled out.

Technical Outlook

SUGAR (MAR) 1/16/2004: The market setup is somewhat negative with the close under the 1st swing support. Swing resistance comes in at 5.92, with support found at 5.58. The close below the 9-day moving average is a negative short-term indicator for trend. Momentum studies are rising from mid-range which could accelerate a move higher if resistance levels are penetrated. The near-term upside target is at 5.92.

COTTON MARKET RECAP

1/15/04

March cotton closed sharply higher supported by a strong shipments number in the export sales report. While sales of 135,100 bales were in line with expectations, shipments ballooned to 293,600 bales which were sharply higher than the previous week and 63% above the 4 week average. China again took the majority of cotton. The outside day up in March cotton suggests solid buying under the market putting the next upside target at 76 cents.

Technical Outlook

COTTON (MAR) 1/16/2004: A negative signal for trend short-term was given on a close under the 9-bar moving average. The market setup is supportive for early gains with the close over the 1st swing resistance. Next resistance area comes in at 75.89 and then again at 76.90, while support is targeted at 73.09 and 71.30. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 71.30. The outside day up is somewhat positive. The daily closing price reversal up is a positive indicator that could support higher prices. ORANGE JUICE (MAR)1/16/04 The market has a slightly positive tilt with the close over the swing pivot. Orange Juice should run into resistance at 65.90 and above there at 66.20 with support at 65.40 and 65.20. The market’s short-term trend is positive on a close above the 9-day moving average. Daily stochastics are showing positive momentum from oversold levels which should reinforce a move higher if near-term resistance is taken out. The near-term upside objective is at 66.2.