Here’s Why September Could Be Significant For Oil

It seems that every CBOT grain market blamed some
other markets for spill over weakness on Friday but it was clear that near term
weather was the factor weighing on prices. Not only was the corn market fearful
that near term temps were going to warm enough to mature the crop, but the
Midwest saw significant rain coverage on Thursday and Friday. While some local
areas might not have seen heavy rainfall totals, seeing some rain with cloud
coverage means that the crops will get the most benefit from the rain event. In
fact, the weather map Friday morning almost seemed to have the entire Midwest
under a single cloud. Some floor sources suggested that corn was seeing some
liquidation pressure off spec longs that were built into the market early in the
week but it should be noted that buyers did lift prices in the last 15-20
minutes of trade! Some traders expressed surprise that there still haven’t been
calls for an increase of the US ethanol blend from the Presidential race,
especially with nearby crude prices moving within 60 cents of $50 a barrel.
Support for December corn next week could be seen at 237 1/4 and again down at
the gap of 233 3/4. Resistance for December corn comes in at 243 3/4 and 245.

Technical Outlook

#CORN (DEC) 08/23/04: Momentum studies are
trending higher, but have entered overbought levels. The near-term upside
objective is at 245 1/4. The market’s close above the 2nd swing resistance
number is a bullish indication. Market resistance comes in at 245 1/4 today,
with support at 235 3/4. The market’s short-term trend is positive on a close
above the 9-day moving average.

 

SOY COMPLEX RECAP

8/20/2004

September Soybeans finished down 3 1/2 at 594
3/4, 1 1/4 off the high and 5 1/4 up from the low. November Soybeans closed down
4 1/2 at 585. This was 5 1/2 up from the low and 2 1/2 off the high.

December Soymeal closed down 3.4 at 174.7. This
was 0.4 up from the low and 3.3 off the high.

December Soybean Oil finished up 0.24 at 22.66,
0.22 off the high and 0.49 up from the low.

While it seems like every grain market is blaming
the weakness today on an outside market it would seem that the soybean market is
the leading market and the market making the most downside noise in the early
going. Apparently the near term weather outlook offers enough warmth and enough
moisture to undermine the trade and put the market into a profit taking posture.
With soybeans holding moderately above the August lows and the short term
weather dominating, over long term weather, sellers are holding control over
prices. In fact, interspersed between the slightly warmer temperature outlooks,
is a series of rain events for the coming weekend and for next Tuesday. In
short, the crop conditions tilt and the potential for a quick end to the growing
season are back burner issues. The market seemingly discounted the light frost
damage stories overnight from the Canadian Prairies possibly because the event
was not deemed to be a killing frost. Support in November soybeans comes in at
578 and 575 1/4. Resistance in November is seen at 588 1/2 and 589 1/2.

Technical Outlook

#SOYBEANS (NOV) 08/23/04: It is a slightly
negative indicator that the close was lower than the pivot swing number. The
next area of resistance is around 589 and 592 1/4, while 1st support hits today
at 581 and below there at 576 1/4. 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 592 1/4.

MEAL (DEC): Momentum studies are trending higher
from mid-range which should support a move higher if resistance levels are
penetrated. The near-term upside objective is at 179.1. First resistance comes
in at 176.6, with support at 172.9. The market’s short-term trend is negative as
the close remains below the 9-day moving average. The market’s close below the
1st swing support number suggests a moderately negative setup for today.

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 23.30. A positive setup occurred with
the close over the 1st swing resistance. The outside day up and close above the
previous day’s high is a positive signal. The daily closing price reversal up is
positive. Daily swing resistance is found at 23.02 and above there at 23.30.
Support should be encountered at 22.31 and 21.88. The cross over and close above
the 40-day moving average indicates the longer-term trend has turned up.
Short-term indicators suggest buying dips today.

 

WHEAT MARKET RECAP

8/20/2004

September Wheat finished up 2 1/2 at 312, 1 off the high and 4
1/2 up from the low. December Wheat closed up 1 at 324 1/2. This was 4 1/4 up
from the low and 1 1/2 off the high.

December wheat ended the session in a strong
position to test resistance at the 40-day moving average. The trade is watching
for possible damage to overnight cold temps in Canada possibly affecting the
crop, but there has been no report of damage yet. Crops in Canada are running
2-3 weeks behind schedule and are therefore susceptible to early frost. On the
other hand, if the crops avoid damage, this year could be a bumper crop. Cash
bids for wheat steady this morning and producer sales were light. Recent export
activity has provided a lift to the market, but traders are reminded of strong
production (and competition) expected out of Europe, Russia and Australia and
Canada this year.

Technical Outlook

#WHEAT (DEC) 08/23/04: With the close higher than
the pivot swing number, the market is in a slightly bullish posture. Look for
near-term support at 321 1/2 and below there at 318, with resistance levels at
327 1/4 and 329 1/2. The market’s close above the 9-day moving average suggests
the short-term trend remains positive. Positive momentum studies in the neutral
zone will tend to reinforce higher price action. The next upside target is 329
1/2.

 

LIVE CATTLE RECAP

8/20/2004

October Live Cattle closed down 0.27 at 86.27.
This was 0.10 up from the low and 0.52 off the high.

October Feeder Cattle finished down 0.05 at
113.12, 0.27 off the high and 0.32 up from the low.

October live cattle traded in a quiet, narrow
ranged today inside yesterday’s big down day. The cash cattle market was
reported quiet as well, as traders appeared to be sidelined until after the
release of the Cattle on Feed report this afternoon. There was some light trade
at $87 earlier this week after feedlots had been looking for $88-90. More cattle
were offered, but it appears they will be held over until next week. The boxed
beef cutout this morning was reported $0.90 lower at $140.82. The robust demand
for Labor Day needs seems to have ebbed, although some last minute fill action
could crop up next week. Today’s estimated slaughter came in at 117,000 head
versus expectations of 115,000 to 125,000. The estimated slaughter for the week
is 636,000 versus 643,000 last week and 732,000 a year ago. The Cattle on Feed
Report showed on feed supplies for August 1st at 103 percent of last year versus
an average guess of 102.6 (range 101.8-104). Placements in July were 86 percent
of last year versus 87.6 percent expected (range 83-92) and marketings were 85
percent versus 86.6 percent expected (range 84-89). The report is basically
neutral against expectations but overall friendly to the deferred contracts and
negative to nearby.

Technical Outlook

#CATTLE (OCT) 08/23/04: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The next downside
target is 85.75. It is a slightly negative indicator that the close was lower
than the pivot swing number. Support should be encountered at 85.95 and below
there at 85.75. Market resistance is at 86.57 and then again at 87.00. The
market’s close below the 9-day moving average is an indication the short-term
trend remains negative.

 

LEAN HOGS RECAP

8/20/2004

October Lean Hogs closed up 0.45 at 65.77. This
was 0.32 up from the low and 0.42 off the high.

February Pork Bellies finished up 1.27 at 94.20,
0.50 off the high and 1.45 up from the low.

Cash hogs traded $1 higher in the Midwest as
plants needed hogs for Friday and Saturday slaughter. Packing plants have been
able to take advantage of ample hog supplies this week, escalating slaughter to
near capacity. Daily kills averaged around 400,000 head versus an estimated
capacity of 405,000-415,000. Peoria Hogs were $1.00 higher at $50.00. The CME
lean hog index as of August 18th was 76.30, down 0.69 from the previous session.
Today’s estimated slaughter came in at 377,000 head against expectations of
380,000-385,000. The estimated slaughter for the week is 2,025,000 versus
1,932,000 last week and 1,866,000 a year ago. The monthly Cold Storage report
showed frozen belly stocks as of July 31st at 23.394 million pounds versus
expectations ranging from 24-27 million, 37.1 million on June 30th and 32.1
million July 31, 2003. This was the lowest number for July 31 going back to at
least 1990. The July 2001 reading was 24.566 million. Frozen pork stocks came in
at 370.874 million pounds versus 379.3 million on June 30th and 440.7 million as
of July 31, 2003.

Technical Outlook

#HOGS (OCT) 08/23/04: It is a mildly bullish
indicator that the market closed over the pivot swing number. Resistance levels
comes in at 66.15 and 66.55 today, while support is around 65.40 and then 65.05.
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 65.05.

 

COCOA MARKET RECAP

8/20/2004

September Cocoa finished up 15 at 1713, 17 off
the high and 23 up from the low.

The cocoa market managed a slightly higher close
but didn’t seem to be able to hold all the big gains into the close. We suspect
that the specs and funds were concerned about the magnitude of the potential
spec and fund reading in the COT report after the close. Indonesia reported a
January through July export rise of 21% but the market is focused on tightening
African supply issues and not supply issues from other areas. A 30,000 to 40,000
spec and fund long position is a big spec long position.

Technical Outlook

COCOA (SEP) 08/23/04 The market has a slightly
positive tilt with the close over the swing pivot. Cocoa should run into
resistance at 1733 and above there at 1752 with support at 1693 and 1672.
Positive momentum studies in the neutral zone will tend to reinforce higher
price action. The next upside target is 1751.50.

 

COFFEE MARKET RECAP

8/20/2004

September Coffee closed down 0.55 at 66.55. This
was 0.40 up from the low and 0.65 off the high.

Dec coffee closed lower in a quiet trade
dominated by position rolling ahead of the September contracts first notice day
on Monday. There was little fresh news to push the market beyond Thursday’s
trading range as prices again stabilize after a volatile trading earlier in the
week. While cash dealers in London were talking about quality problems with
Brazilian beans, it had no noticeable impact on futures prices. As of Aug 9th,
Brazil’s coffee harvest was estimated to be around 72% complete vs 85% a year
ago. While a cold front is expected to move through Brazil’s coffee region on
Sunday, no damaging frost or rain is expected and should not interfere with
harvest. With no change in the bearish fundamentals, the path of least
resistance remains down.

Technical Outlook

COFFEE (SEP) 8/23/04 The market tilt is slightly
negative with the close under the pivot. 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 67.65. The Coffee
contract should run into resistance at 67.05 and above there at 67.65 with
support at 66 and 65.55. The market’s short-term trend is negative as the close
remains below the 9-day moving average.

 

SUGAR MARKET RECAP

8/20/2004

October Sugar closed up 0.04 at 7.73. This was
0.10 up from the low and equal to the high.

October sugar closed slightly higher, but within
Thursday’s range. Commercial buying was offset by fund liquidation to keep
prices in a narrow range. Tonight’s COT report could provide the market with
some direction, especially if it shows that a large portion of the huge net fund
and small trader long position has been reduced. Cane crushing was reported to
be beginning in the northeastern region of Brazil with a larger 2004/05 crop
expected. Russian refined white sugar from imported raw for Jan-Aug 18th was
down about a third from the same period last year. Russia had been expected to
be one of the major buyers of sugar this year, but so far purchases have been
small. If the COT report shows a big drop in the net long position, fund traders
may feel more confident about getting long again.

Technical Outlook

#SUGAR (OCT) 08/23/04: It is a mildly bullish
indicator that the market closed over the pivot swing number. Swing resistance
comes in at 7.81, with support found at 7.61. 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 7.61.

 

COTTON MARKET RECAP

8/20/2004

October Cotton finished up 2.97 at 50.80, equal
to the high and 2.80 up from the low.

The cotton market flashed higher Friday and did
so because of long term technical buying and probably ongoing stop loss buying.
The Chinese reported a significant expansion of July cotton imports and that
hints at ongoing strong demand. The Chinese imported 169,841 metric tons in July
of 2004 compared to 83,050 metric tons in 2003. Apparently the cotton market saw
increase spec buying and we would assume that some players are beginning to
question just how big the US crop is and whether or not demand will be strong
enough to eat through that crop. The specs were thought to be buying early and
the funds were thought to be buying late Friday.

Technical Outlook

#COTTON (OCT) 08/23/04: The market’s close above
the 9-day moving average suggests the short-term trend remains positive. 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 52.20 and then again at 52.90, while support is
targeted at 49.40 and 47.30. Studies are showing positive momentum, but are now
in overbought territory so some caution is warranted. The next upside target is
52.90. The 9-day RSI over 70 indicates the market is approaching overbought
levels. The gap upmove on the day session chart is a bullish indicator for
trend.