Here’s Why The Bears Could Maintain Control Of This Market
BOND MARKET RECAP
5/10/2005
June Bonds finished up 0-19 at 114-20, 0-01 off
the high and 0-16 up from the low.
June 10 Yr Treasury Notes finished up 0-145 at
111-120, 0-005 off the high and 0-105 up from the low.
We were a little surprised that the
Treasury market failed to hold the early gains Tuesday as the uncertainty on the
economy seemed to escalate throughout the session. In addition to talk that the
recent payroll readings might have statistically puffed up the US payroll
readings, the market also saw early strength in energy prices and rumors of a
large hedge fund trading loss. The first leg of the auction seemed to offer
little fresh incentive to the buyers but in general the bulls were able to
maintain control over the market. Additionally an ISM survey actually lowered
its expectations for manufacturing revenues for 2005 but the actual forecasts
were still expecting positive readings the readings were just a little softer
than the forecasts made in December. Growing concerns for Delta airlines might
also serve to add an additional supportive element to Treasuries over the coming
sessions.
Technical Outlook
BONDS (JUN) 05/11/2005: Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
The cross over and close above the 18-day moving average is an indication the
longer-term trend has turned positive. The market has a bullish tilt coming into
today’s trade with the close above the 2nd swing resistance. The next downside
target is now at 113-25. The next area of resistance is around 115-01 and
115-08, while 1st support hits today at 114-10 and below there at 113-25.
TNOTES (JUN) 05/11/2005: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. The cross over and close above the 18-day moving average
is an indication the longer-term trend has turned positive. The market has a
bullish tilt coming into today’s trade with the close above the 2nd swing
resistance. The next downside objective is now at 110-235. The next area of
resistance is around 111-215 and 111-260, while 1st support hits today at
111-045 and below there at 110-235.
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STOCK INDICES RECAP
5/10/2005
June S&P finished down 12.1 at 1166.2, 8.3 off
the high and 2.7 up from the low.
June S&P E-Mini closed down 12.5 at 1165.75. This
was 2.25 up from the low and 12.75 off the high.
June Dow closed down 100 at 10274. This was 32 up
from the low and 71 off the high.
The stock market was simply presented with a long
string of negative developments on Tuesday, with the most significant being the
concern for hedge fund derivative positions. With crude oil prices rising
sharply early in the session, a major US military offensive underway in Iraq and
the market fearful of further technical damage on the charts we suspect that the
bears will maintain control over the market. With oil prices rising again many
traders are beginning to wonder if Delta airlines is on a track for bankruptcy
and that talk also served to push more traders out of stocks. While the hedge
fund flap might be a temporary threat the market can help but dredge up memories
of the LTCM debacle. In short, the outlook for the economy is suspect, oil
prices are firming and the trade is concerned about a capital washout.
Technical Outlook
S&P 500 (JUN) 05/11/2005: The major trend has
turned down with the cross over back below the 40-day moving average. Studies
are showing positive momentum but are now in overbought territory, so some
caution is warranted. The cross over and close above the 18-day moving average
is an indication the longer-term trend has turned positive. The defensive setup,
with the close under the 2nd swing support, could cause some early weakness. The
near-term upside target is at 1178.59. The next area of resistance is around
1171.69 and 1178.59, while 1st support hits today at 1160.70 and below there at
1156.60.
SP EMINI (JUN) 05/11/2005: The major trend has
turned down with the cross over back below the 40-day moving average. 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. There could be some early pressure today given the market’s negative
setup with the close below the 2nd swing support. The next upside target is
1183.37. The next area of resistance is around 1173.25 and 1183.37, while 1st
support hits today at 1158.25 and below there at 1153.38.
NASDAQ (JUN) 05/11/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The cross over and close above
the 18-day moving average indicates the longer-term trend has turned up. The
market’s close below the 1st swing support number suggests a moderately negative
setup for today. The near-term upside objective is at 1468.50. The next area of
resistance is around 1461.00 and 1468.50, while 1st support hits today at
1447.00 and below there at 1440.50.
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CURRENCY MARKET RECAP
5/10/2005
June US Dollar finished down 15 at 8445, 32 off
the high and 7 up from the low.
June Euro finished up 0.39 at 128.83, 0.18 off
the high and 0.22 up from the low.
June Euro Dollar closed up 0.015 at 96.565. This
was 0.01 up from the low and 0.005 off the high.
June Canadian Dollar closed up 0.09 at 80.88.
This was 0.11 up from the low and 0.05 off the high.
June British Pound finished down 0.03 at 187.95,
0.16 off the high and 0.23 up from the low.
June Swiss closed up 0.34 at 83.42. This was 0.17
up from the low and 0.15 off the high.
June Japanese Yen closed up 0.09 at 95.13. This
was 0.28 up from the low and 0.04 off the high.
The Dollar once again managed to run up to new
highs for the move but also once again slumped back away from the highs. Many
traders think that the upcoming US Trade balance figures prompted a number of
Dollar bulls to bank profits and move to the sidelines. We also think that
consistent strength in energy prices and the threat of US refinery problems is
rekindling specific concern for the US economy in the face of the coming summer
gasoline demand period. With soft enough numbers coming out of the UK to warrant
talk about lower interest rates and the US near term Trade Balance outlook
cloudy, the Euro and Swiss managed to garner favor in the investment flow on
Tuesday. Even with Dollar weakness the Yen was softer and that would seem to
suggest that the near term trend in the Yen remains down.
Technical Outlook
YEN (JUN) 05/11/2005: The major trend could be
turning up with the close back above the 60-day moving average. Stochastics
turning bearish at overbought levels will tend to support lower prices if
support levels are broken. The market now above the 18-day moving average
suggests the longer-term trend has turned up. The upside closing price reversal
on the daily chart is somewhat bullish. It is a mildly bullish indicator that
the market closed over the pivot swing number. The next downside target is now
at 94.75. The next area of resistance is around 95.28 and 95.38, while 1st
support hits today at 94.97 and below there at 94.75.
EURO (JUN) 05/11/2005: Momentum studies are still
bearish but are now at oversold levels and will tend to support reversal action
if it occurs. The market back below the 18-day moving average suggests the
longer-term trend could be turning down. The gap up on the day session chart
gave a bullish indicator and more follow through could be seen this session. The
market’s close above the 2nd swing resistance number is a bullish indication.
The next downside objective is now at 128.42. The next area of resistance is
around 129.03 and 129.22, while 1st support hits today at 128.63 and below there
at 128.42.
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PRECIOUS METALS RECAP
5/10/2005
June Gold closed up 1 at 427.9. This was 0.3 up
from the low and 0.9 off the high.
July Silver finished up 0.035 at 7.115, 0.06 off
the high and 0.055 up from the low.
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The London afternoon fix managed to close $2.20
above the morning fix and we suspect that the slide in the Dollar off the days
high provided some fresh interest in the metals. We also think that rumors of a
major hedge fund trading loss stimulated a little flight to quality talk. Some
buyers were probably moving into long gold and silver positions ahead of the US
Trade Balance report. However, in order to rekindle a more aggressive buying
interest in gold the Dollar might have to fall back below the 84.00 level as the
gold market is still having trouble getting an entrenched bullish theme.
Technical Outlook
SILVER (JUL) 05/11/2005: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The close below the 18-day moving average is an
indication the longer-term trend has turned down. With the close higher than the
pivot swing number, the market is in a slightly bullish posture. The near-term
upside target is at 723.1. The next area of resistance is around 717.3 and
723.1, while 1st support hits today at 705.8 and below there at 700.2.
GOLD (JUN) 05/11/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
close under the 18-day moving average indicates the longer-term trend could be
turning down. Follow through buying looks likely if the market can hold
yesterday’s gap on the day session chart. A positive setup occurred with the
close over the 1st swing resistance. The next downside target is 426.9. The next
area of resistance is around 428.5 and 429.2, while 1st support hits today at
427.3 and below there at 426.9.
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COPPER MARKET RECAP
5/10/2005
June Copper closed up 1.15 at 147.70. This was
1.10 up from the low and 0.20 off the high.
We are very impressed with the action in copper
on Tuesday as the market managed the gains in the face of a sharp slide in
equity prices, a sharp initial rise in energy prices and a slight downgrade on
the Chinese economy off the idea of a rising Yuan. However, a lower Dollar
seemed to spark some value hunting around the 144.25 July low on Tuesday. We
also think that the positive performance in the rest of the metals markets
supported copper as did talk of reduced base metals export rebates in China.
Strength in nickel prices might also have supported copper as some players are
beginning to mitigate their overly bearish long term views toward the sector.
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ENERGY MARKET RECAP
5/10/2005
June Crude Oil closed up 0.04 at 52.07. This was
0.42 up from the low and 1.03 off the high.
June Heating Oil closed up 0.94 at 144.96. This
was 0.86 up from the low and 4.94 off the high.
June Unleaded Gas finished up 2.30 at 151.03,
2.47 off the high and 1.53 up from the low.
June Natural Gas finished up 0.02 at 6.69, 0.15
off the high and 0.02 up from the low.
June Propane closed up 0.00 at 0.82. This was
equal to the low and equal to the high.
An early refinery glitch sent US crude stocks up
sharply and unleaded gas followed aggressively. In fact, unleaded certainly
played catch up and that is partly the result of the ConocoPhillips 250,000
barrel per day refinery issue and partly because the EIA suggested that OPEC
spare capacity was only 900,000 barrels per day. Recently private sources
suggested that Saudi Arabia excess capacity was 1.5 million barrels per day and
therefore the EIA is once again fanning the speculative flames in the energy
complex. The EIA also suggested that gasoline might already have peaked but the
market mostly discounted that prediction. We are a little surprised that
expectations of a 1.5 to 2.0 million barrel rise in weekly crude oil stocks on
Wednesday morning failed to stem the rise in prices but it was clear around mid
day that some longs decided to bank profits ahead of the weekly inventory
reports.
Technical Outlook
CRUDE OIL (JUN) 05/11/2005: Positive momentum
studies in the neutral zone will tend to reinforce higher price action. The
close under the 18-day moving average indicates the longer-term trend could be
turning down. The market has a slightly positive tilt with the close over the
swing pivot. The next upside objective is 53.67. The next area of resistance is
around 52.79 and 53.67, while 1st support hits today at 51.35 and below there at
50.78.
UNLEADED (JUN) 05/11/2005: The daily stochastics
have crossed over up which is a bullish indication. Rising from oversold levels,
daily momentum studies would support higher prices, especially on a close above
resistance. The market back below the 18-day moving average suggests the
longer-term trend could be turning down. The gap up on the day session chart
gave a bullish indicator and more follow through could be seen this session.
Market positioning is positive with the close over the 1st swing resistance. The
next upside target is 155.26. Daily studies suggest buying dips today. The next
area of resistance is around 153.03 and 155.26, while 1st support hits today at
149.03 and below there at 147.27.
HEATING OIL (JUN) 05/11/2005: 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. The market has a slightly positive tilt with the close over the
swing pivot. The next downside target is 140.18. The next area of resistance is
around 147.85 and 151.78, while 1st support hits today at 142.06 and below there
at 140.18.
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CORN MARKET RECAP
5/10/2005
July Corn finished up 1/2 at 208 1/4, 1 1/2
off the high and 3/4 up from the low. December Corn closed unchanged at 225 3/4.
This was 1/4 up from the low and 2 off the high.
Drier than normal weather for the eastern
cornbelt and some forecasts for the dryness to continued through the end of May
helped to support the buying early in the session. However, the buying failed to
pull the market over yesterday’s peak and late selling pushed the market to near
unchanged late in the day. Some traders believe that much of the rain for the
eastern cornbelt will hit in far northern Illinois, Wisconsin and Michigan and
with dry conditions already, northern Indiana crops could get off to a poor
start. Slow emergence in some areas, replanting due to freeze problems and
sloppy conditions in parts of Iowa and Minnesota has left traders believing that
the crop is not off to a very good start and dryness in the east, if it occurs,
could cause worsening conditions. For the USDA supply/demand report on Thursday
morning, traders are looking for 2005/2006 ending stocks near 2.222 billion
bushels (range 2.030-2.416) as compared with old crop ending stocks pegged at
2.215 billion bushels in last months report. Traders are also looking for
another 25-50 million bushel decline in old crop usage and for old crop ending
stocks (2004/2005) to jump to near 2.260 billion bushels from 2.215 billion last
month. South Korea passed on a tender to buy up to 105,000 tonnes of corn and
Taiwan is tendering to buy 54,000-60,000 tonnes of US corn. Support for July
corn comes in at 208 and 205 1/2 with resistance at 211 1/4 and 214.
Technical Outlook
CORN (JUL) 05/11/2005: 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. The close over the pivot swing is a somewhat positive setup. The
next downside target is 206 1/4. The next area of resistance is around 209 1/4
and 210 1/2, while 1st support hits today at 207 1/4 and below there at 206 1/4.
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SOY COMPLEX RECAP
5/10/2005
July Soybeans finished down 3 3/4 at 634, 9 3/4
off the high and 1 up from the low. November Soybeans closed up 1 1/2 at 629.
This was 1 up from the low and 7 off the high.
July Soymeal closed up 0.6 at 193.5. This was 1.2
up from the low and 1.5 off the high.
July Soybean Oil finished down 0.3 at 23.26, 0.44
off the high and 0.01 up from the low.
The market found support for most of the session
from weather uncertainties but fears of a slowdown in China demand and long
liquidation triggered the late sell-off led by the July futures. November
managed to hold onto some of the early gains but July closed lower on the day
and 9 3/4 cents off of the highs. Futures continue to build a weather premium
and overnight weather models which showed the big rain events in the mid-west
for this week moving further north helped to support the higher trade early
today. With two rain systems moving across the Midwest in the next 5 days,
chances of rain are high for heavy rains in the western cornbelt and lighter
rains in the eastern cornbelt. However, some traders believe that the eastern
cornbelt (Illinois, Indiana and Ohio) could miss out on much of the rain if the
system is pulled north to drench Wisconsin and Michigan. The crop is now 26%
planted as compared with trade expectations for 30-40% complete. The 15-year
average for this time of the year is at 21% planted. Traders believe the second
half of May will be relatively dry and warm for the eastern cornbelt and if the
eastern cornbelt misses out on the rains in the next 3-4 days, there is a
general perception that the growing season will be off to a poor start. This has
provided underlying support. For the USDA supply/demand report on Thursday
morning, traders are looking for 2005/2006 ending stocks near 368 million
bushels (range 295-430) as compared with old crop ending stocks pegged at 375
million bushels in last months report. Traders are also looking for another 17
million bushel increase in old crop usage and for old crop ending stocks
(2004/2005) to decline for the third month in a row to near 358 million bushels.
July soybean support comes in at 631 3/4 and 628 with 640 and 644 as resistance.
Technical Outlook
BEANS (JUL) 05/11/2005: The major trend has
turned down with the cross over back below the 40-day moving average.
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. It is a slightly negative
indicator that the close was lower than the pivot swing number. The next upside
target is 646 3/4. The next area of resistance is around 639 1/4 and 646 3/4,
while 1st support hits today at 628 3/4 and below there at 625 1/2.
MEAL (JUL) 05/11/2005: Stochastics trending lower
at midrange will tend to reinforce a move lower especially if support levels are
taken out. The market back below the 18-day moving average suggests the
longer-term trend could be turning down. The daily closing price reversal up on
the daily chart is somewhat positive. The market’s close below the pivot swing
number is a mildly negative setup. The next downside objective is now at 190.9.
The next area of resistance is around 194.8 and 196.2, while 1st support hits
today at 192.2 and below there at 190.9.
BEANOIL (JUL) 05/11/2005: A positive indicator
was given with the upside crossover of the 9 & 18 bar moving average. Momentum
studies are rising from mid-range, which could accelerate a move higher if
resistance levels are penetrated. The major trend could be turning up with the
close back above the 18-day moving average. The market’s close below the 1st
swing support number suggests a moderately negative setup for today. The
near-term upside objective is at 23.81. The next area of resistance is around
23.48 and 23.81, while 1st support hits today at 23.04 and below there at 22.92.
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WHEAT MARKET RECAP
5/10/2005
July Wheat finished up 8 at 321 1/2, 1 1/2 off the high and 6
1/2 up from the low. December Wheat closed up 8 at 339 3/4. This was 6 3/4 up
from the low and 2 3/4 off the high.
Fears of continued poor weather for western
Kansas and Oklahoma and a steady drop in crop conditions has supported active
buying from speculators and the strong close. Winter wheat crops rated in good
to excellent condition fell to 59% this week from 63% last week and 68% the
previous week. This compares with 45% last year and 53% as the 15-year average
for this time of the year. Crops in poor to very poor condition jumped to 11%
from 9% last week and 17% as the 15-year average for this time of the year.
Traders believe that a lack of rain in the next few days in western Kansas could
cause further deteriorating crop conditions as the outlook for warmer and drier
weather for late May is seen as supportive. For the 2005/2006 crop year for the
USDA Supply/Demand report on Thursday morning, traders are looking for ending
stocks to come in near 574 million bushels (range 491-682) as compared with old
crop ending stocks pegged at 541 million bushels in last months report. The rain
forecast for the southwestern winter wheat belt looks to be the primary market
focus over the near-term. July wheat support comes in at 317 with 326 and 329
1/4 as next resistance.
Technical Outlook
WHEAT (JUL) 05/11/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
cross over and close above the 18-day moving average indicates the longer-term
trend has turned up. The market setup is supportive for early gains with the
close over the 1st swing resistance. The next downside objective is now at 312
1/4. The next area of resistance is around 325 1/2 and 328 1/4, while 1st
support hits today at 317 1/2 and below there at 312 1/4.
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LIVE CATTLE RECAP
5/10/2005
June Live Cattle finished up 0.70 at 86.10, 0.10
off the high and 0.75 up from the low.
May Feeder Cattle closed up 0.27 at 111.35. This
was 0.35 up from the low and 0.05 off the high.
June cattle closed 70 higher on the session to
the highest close since April 26th with speculative short-covering helping to
support the market and a late recovery in hogs adding to the positive tone.
Ideas that the June futures have already discounted the downtrend in beef prices
and that weather looks favorable for better retail demand over the near-term
helped support. Talk of possible steady cash markets this week added to the
positive tone with cash at $91.00 yesterday and June futures at 85.40 on the
close yesterday. Boxed-beef cut-out values were down $1.65 at mid session today
to $157.28 as compared with $163.49 one week ago. Slaughter came in at 123,000
head as compared with trade expectations of 122,000-125,000 head.
Technical Outlook
CATTLE (JUN) 05/11/2005: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. The cross over and close above the 18-day moving average
is an indication the longer-term trend has turned 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. The next downside target is
85.100. The next area of resistance is around 86.500 and 86.770, while 1st
support hits today at 85.700 and below there at 85.100.
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LEAN HOGS RECAP
5/10/2005
June Lean Hogs finished up 0.17 at 75.30, 0.10
off the high and 0.75 up from the low.
May Pork Bellies closed down 0.40 at 80.77. This
was 0.72 up from the low and 0.15 off the high.
After a successful test of the April lows, June
hogs closed 17 higher on the session and up 75 points from the lows of the day.
Early weakness came from the cut-back in slaughter at several key plants and a
weaker cash market (down $.50-$1.00) but ideas that pork product prices would
move higher supported the recovery bounce. The CME 2-Day lean Index for the
period ending May 6th came in at 78.00 which was up.74 from the previous session
and up from 72.34 the previous week. Slaughter came in at 321,000 head as
compared with trade expectations of 320,000-332,000 head.
Technical Outlook
HOGS (JUN) 05/11/2005: 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.
It is a slightly negative indicator that the close was lower than the pivot
swing number. The next downside objective is now at 74.300. The next area of
resistance is around 75.700 and 75.970, while 1st support hits today at 74.870
and below there at 74.300.
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COCOA MARKET RECAP
5/10/2005
July Cocoa finished up 8 at 1497, 6 off the high
and 5 up from the low.
The cocoa market managed another fleeting bounce
on Tuesday but we suspect that most of the gains came off the lower Dollar and
that really isn’t the type of development that would seem to be capable of
driving prices up against the recent down trend pattern. It is possible that the
cocoa market benefited from talk that prices have declined enough to discourage
some producers from using the usual inputs and that could leave production
susceptible to lower yields. In fact, Nigerian producers have already suggested
that they may not be able to spray for Black Pod disease and that could provide
a general underpin for prices.
Technical Outlook
COCOA (JUL) 05/11/2005: 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 under the 18-day moving average
indicates the longer-term trend could be turning down. It is a mildly bullish
indicator that the market closed over the pivot swing number. The near-term
upside objective is at 1508. The next area of resistance is around 1502 and
1508, while 1st support hits today at 1492 and below there at 1487.
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COFFEE MARKET RECAP
5/10/2005
July Coffee closed down 2.35 at 121.60. This was
0.50 up from the low and 2.00 off the high.
July coffee closed lower Tuesday as a slow news
day had traders following London’s weak lead. Roaster buying was noted on the
break, but it was not enough to stem the decline so key support at 120 remains
in jeopardy. With hot and dry weather expected for Brazil’s coffee growing
regions, there would seem to be little to hinder harvest this week. The next
cold front is not expected until late May and as of now, it is not expected to
be a frost threat. The market has not yet started to price in a weather premium.
Reuters reported that Brazilian producers are trying to hold on to stocks from
last year’s harvest in “hopes” that they can get a higher price if a weather
premium begins to build so there does not seem to be any significant producer
selling pressure on the market. Mexico’s coffee harvest which began last October
was down 28% through April, 2005 versus same time the previous year. Colombia’s
mid-season harvest looks to be smaller than originally estimated.
Technical Outlook
COFFEE (JUL) 05/11/2005: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The major trend has turned down with the cross over back below the
18-day moving average. The defensive setup, with the close under the 2nd swing
support, could cause some early weakness. The next downside target is now at
119.50. The next area of resistance is around 122.85 and 124.45, while 1st
support hits today at 120.40 and below there at 119.50.
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SUGAR MARKET RECAP
5/10/2005
July Sugar closed up 0.03 at 8.39. This was 0.06
up from the low and 0.08 off the high.
July sugar closed firmer, but prices consolidated
within Monday’s range as trading activity was light as many traders from around
the world were away to attend the Sugar Industry dinner on Wednesday in NY. The
International Sugar Organization projected the 2004/05 world sugar deficit to be
1.98 million tonnes vs 1.55 million tonnes in the 2003/04 season, which was an
upward revision from their February forecast. The ISO forecasted world
production this year at 145.054 million tonnes and consumption at 147.009
million tonnes. Thailand’s 2004/05 production is expected to be down 26% from
last year while production in Cuba, China and Pakistan is also expected to be
lower.
Technical Outlook
SUGAR (JUL) 05/11/2005: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. The market back below the 18-day moving average suggests
the longer-term trend could be turning down. The market has a slightly positive
tilt with the close over the swing pivot. The next downside objective is now at
8.26. The next area of resistance is around 8.45 and 8.53, while 1st support
hits today at 8.32 and below there at 8.26.
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COTTON MARKET RECAP
5/10/2005
July Cotton finished up 0.92 at 55.93, 0.07 off
the high and 0.92 up from the low.
Spec buying led the market higher today as July
futures closed stronger for the third session in a row. Today’s close at 55.93
marked a 4.00 gain in just five sessions since the market put in a spike bottom
last Wednesday. Traders are expecting the cotton to quiet down somewhat tomorrow
in advance of the USDA Supply/Demand and Export Sales reports due to be released
Thursday morning. Despite strong technical action, the moderately long position
held by large and small specs has us concerned that the market could get
overbought quickly. July cotton is approaching the late April consolidation zone
between 54.00 and 57.59, which could prove to be formidable resistance.
Technical Outlook
COTTON (JUL) 05/11/2005: A bullish signal was
given with an upside crossover of the daily stochastics. 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
indicates the longer-term trend has turned up. With the close over the 1st swing
resistance number, the market is in a moderately positive position. The next
upside objective is 56.70. The next area of resistance is around 56.42 and
56.70, while 1st support hits today at 55.44 and below there at 54.73.