Here’s Why The Dollar Looks Overbought

Technical Outlook

#BONDS (JUN) 5/12/2004: The market has a slightly
positive tilt with the close over the swing pivot. Near-term resistance for
bonds is at 105.01 and then again at 105.07, while swing support hits at 104.13
and below there at 103.31. A negative signal for trend short-term was given on a
close under the 9-bar moving average. Daily stochastics declining into oversold
territory suggest the selling may be drying up soon. The next downside objective
is 103.31. The market is approaching over sold levels on an RSI reading under
30.

T-NOTES(JUN) The daily stochastics gave a bullish
indicator with a crossover up. The near-term upside objective is at 109.03. With
the close over the 1st swing resistance number, the market is in a moderately
positive position. Near-term resistance for the T-Notes is at 108.32 and then
again at 109.03, while swing support hits at 108.20 and below there at 108.11.
The market’s short-term trend is negative as the close remains below the 9-day
moving average. With a reading under 30, the 9-day RSI is approaching oversold
levels.

 

STOCK INDICES RECAP

5/11/2004

We suspect that the stock market was short
covering or profit taking from shorts as the macro economic case didn’t seem to
improve dramatically from Monday’s close to the opening Tuesday. In fact, one
might even suggest that slightly softer US economic numbers Tuesday morning
could have disappointed would be bulls. Slightly lower energy prices were mostly
offset by disappointing earnings from MCI. In the end it would appear that many
fundamental negatives remain in the backdrop.

Technical Outlook

#S&P500 (JUN) 5/12/2004: Market positioning is
positive with the close over the 1st swing resistance. Underlying support comes
in at 1088.00 and 1084.50, with overhead resistance at 1095.00 and 1098.50. The
close below the 9-day moving average is a negative short-term indicator for
trend. Momentum studies are still bearish, but are now at oversold levels and
will tend to support reversal action if it occurs. The next downside objective
is now at 1084.50.

S&P E-Mini (JUN): The sell-off took the market to
a new contract low. Momentum studies are declining, but have fallen to oversold
levels. The next downside target is 1075.88. 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 1098.50 and then again at 1103.88, while swing
support hits at 1084.50 and below there at 1075.88. The market’s close below the
9-day moving average is an indication the short-term trend remains negative.

NASDAQ (JUN) If yesterday’s gap higher on the day
session chart holds, additional buying could develop this session. A positive
signal for trend short-term was given on a close over the 9-bar moving average.
The market has a bullish tilt coming into today’s trade with the close above the
2nd swing resistance. The market should run into resistance at 1426.00 and above
there at 1434.00 with support at 1408.00 and 1398.00. Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
next downside objective is 1398.00.

MINI DOW (MAR) The close below the 9-day moving
average is a negative short-term indicator for trend. The market should run into
resistance at 10023 and above there at 10061 with support at 9948 and 9911.
Momentum studies are still bearish, but are now at oversold levels and will tend
to support reversal action if it occurs. The next downside target is now at
9911. The close over the pivot swing is a somewhat positive setup. Some caution
in pressing the downside is warranted with the RSI under 30.

 

CURRENCY MARKET RECAP

5/11/2004

The Dollar Index seemed to reach an overbought
technical condition Tuesday after rising to the highest level since November
25th. US economic information was less impressive than the recent pattern and
that seemed to spark some profit taking. For a change the Dollar was unable to
post gains against all major currencies and that might suggest the Greenback is
significantly overbought. With a series of inflation numbers due out in the
coming sessions many are looking for confirmation that the US Fed is indeed
poised to hike interest rates. The trade is heavily dependant on the idea that
the US Fed is primed to hike rates.

Technical Outlook

#CURRENCIES 5/12/2004: YEN (JUN): A negative
signal for trend short-term was given on a close under the 9-bar moving average.
The market has a slightly positive tilt with the close over the swing pivot.
Swing resistance is targeted at 88.57 and above there at 88.76, with the yen
finding support around 88.05 and below there at 87.72. The market back below the
40-day moving average suggests the longer-term trend could be turning down.
Daily stochastics declining into oversold territory suggest the selling may be
drying up soon. The next downside objective is 87.72. The market is approaching
over sold levels on an RSI reading under 30.

EURO (JUN): 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 1.1752. The defensive setup, with
the close under the 2nd swing support, could cause some early weakness. Swing
support for the Euro comes in at 1.1752, with overhead resistance at 1.1924. 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.

 

PRECIOUS METALS RECAP

5/11/2004

The gold and silver market showed overt weakness
in the face of impressive gains in the industrial metals and that continues to
suggest that the bears are in control. The fact that the Dollar remained strong
solidifies the idea that the Dollar is in an uptrend and that continues to push
some long term bulls out of position. In general many players ended up taking
the action Tuesday as a sing that the straight down action might have run its
course but one still can definitively support the bull case with the typical
fundamental arguments present in the action Tuesday.

Technical Outlook

#P-METALS 5/12/2004: SILVER (JUL): The close
below the 1st swing support could weigh on the market. Initial support for
silver is at 539.8 and below there at 532.4 with resistance likely at 559.9 and
564.8. A negative signal for trend short-term was given on a close under the
9-bar moving average. A bearish signal was triggered on a crossover down in the
daily stochastics. The next downside objective is 532.4. The market is
approaching over sold levels on an RSI reading under 30.

GOLD (JUN): Support for gold today comes in near
372.68, while resistance is pegged at 381.28. Momentum studies are still
bearish, but are now at oversold levels and will tend to support reversal action
if it occurs. The next downside target is now at 372.68. It is a slightly
negative indicator that the close was under the swing pivot. The close below the
9-day moving average is a negative short-term indicator for trend. Some caution
in pressing the downside is warranted with the RSI under 30.

 

COPPER MARKET RECAP

5/11/2004

The copper market showed impressive upside action
Tuesday and part of the buying seemed to be sparked by ideas that the Chinese
were showing signs of long interest. In other words, some physical players see
current prices as attractive, while other short players are simply deciding to
take profits. Stories about China sending copper inventories to Singapore could
have been a major undermine but we mostly ignored. The pit suggested that the
bear camp remains in control until the July manages to regain 120.75.

 

ENERGY MARKET RECAP

5/11/2004

The energy complex saw a number of surprise
supportive developments in the action Tuesday the most important of which might
have been the talk of a coup attempt in Venezuela. The market was also aware of
the ongoing tensions inside Nigeria where Christians and Muslim factions are
embroiled in debate over who was responsible the killings in the March riots.
While some in the market think the gasoline wavier talk was already decided on
the EPA suggested Tuesday morning that they would make the ultimate decision in
a timely manner after considering the appropriate factors. In our mind, the
energy complex was mostly assuming that the waivers would not be granted and
therefore seeing the decision still ahead could be considered slightly negative.

Technical Outlook

#ENERGIES 5/12/2004: CRUDE OIL (JUL): The market
rallied to a new contract high. There could be more upside follow through since
the market closed above the 2nd swing resistance. Support for crude is keyed on
39.35 and below there at 38.42, with resistance pegged at 40.60 and 40.92. 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 target is at 40.92. The market is becoming somewhat overbought
now that the RSI is over 70.

UNLEADED GAS (JUL): A bullish signal was given
with an upside crossover of the daily stochastics. The next upside objective is
131.80. The market setup is supportive for early gains with the close over the
1st swing resistance. Resistance today is at 131.80, while support should be
found around 123.20. The outside day up is somewhat positive. The market made a
new contract high on the rally. The daily closing price reversal up is a
positive indicator that could support higher prices. A positive signal for trend
short-term was given on a close over the 9-bar moving average. The market is
approaching overbought levels with an RSI over 70.

HEATING OIL (JUL): There could be more upside
follow through since the market closed above the 2nd swing resistance. Heating
oil should encounter support around 97.23, with resistance is at 103.83. 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 target is at 103.83.

 

CORN MARKET RECAP

5/11/2004

New crop futures were supported by uncertainty
ahead of the USDA report and ideas that the market was oversold after a 32 3/4
cent break off of the May 4th highs. Positioning ahead of the reports and
continued long liquidation selling from speculators kept the trade choppy in the
morning. News that the crop is now 84% planted was not a surprise but keeps a
bearish supply tone for the new crop outlook. The 14-year average plantings for
this time of the year is at 61% and the good rains after the active plantings
pace has helped to keep funds in a long liquidation mode. For the 2003/2004
season, traders are looking for ending stocks to come in near 840-860 million
bushels as compared with last months estimate of 856 million bushels. After
major demand revisions last month, traders are looking for the USDA to wait and
see how the short-term demand numbers come in. For the new crop season, traders
will assume that the USDA uses a planted acreage number of 79 million acres even
though traders believe that the actual plantings will be between 80-82 million
acres. Ending stocks are expected to come in near 727 million bushels with a
range of 650-850 million bushels. With a consumption base of near 10.5 billion
bushels for the coming year, it should take an enormous yield and a jump in
planted acres in order to avoid a draw-down in ending stocks. The world numbers
are also expected to be revised higher for ending stocks as traders expect
upward revisions in China stocks for the past several years. Deliveries this
morning were just 22 contracts this morning. Support for December corn is at 291
3/4 and 287 1/2 with resistance at 298 and 302.

Technical Outlook

#CORN (JUL) 5/12/2004: Momentum studies are still
bearish, but are now at oversold levels and will tend to support reversal action
if it occurs. The next downside target is now at 295 2/4. It is a slightly
negative indicator that the close was under the swing pivot. Market resistance
comes in at 301 2/4 today, with support at 295 2/4. The downside crossover of
the 9 & 18 bar moving average is a negative signal. Some caution in pressing the
downside is warranted with the RSI under 30. The upside daily closing price
reversal gives the market a bullish tilt.

 

SOY COMPLEX RECAP

5/11/2004

Positioning ahead of the USDA report for the
morning and a lack of speculative selling interest has supported the small
gains. The USDA Supply/demand report for Wednesday morning before the opening is
expected to show very few changes for the 2003/2004 crop season as ending stocks
are already pegged at 115 million bushels which many traders believe is near
pipeline minimum. If there is a change, the statistics would argue for an
increase in the crush demand and a slight revision lower in ending stocks. For
the new crop 2004/2005 period, traders are looking for ending stocks to come in
near 212 million bushels with a range of forecasts at 150-300 million bushels.
Traders assume that planted acreage will be set at the March intentions report
figure as a downward revision of 1-2 million acres could occur in the June
planted acreage report. For the World supply/demand report, traders are looking
for production to be down by 3-4 million tons in Brazil and 1-2 million in
Argentina. The 4-6 million tons decline will be partially absorbed by a possible
downward revision in China demand. The USDA attaché in Argentina expects
plantings for the 2005/2006 crop season at 14.2 million hectares from 14
million. Production is pegged at 39 million tons from this year’s crop of near
31-35 million tons. No deliveries in meal with only 42 lots for oil this morning
helped provide some support. Palm was higher overnight which added to the
positive tone. July soybean support comes in at 1017 1/2 and 1012 with
resistance at 1029 and 1052 1/2. The next key support for November soybeans
comes in at 745 1/2 with resistance at 757 and 767 1/2.

Technical Outlook

#SOYBEANS (JUL) 05/12/04 The market has a
slightly positive tilt with the close over the swing pivot. The next area of
resistance is around 1028 2/4 and 1033 1/4, while 1st support hits today at 1015
2/4 and below there at 1007 1/4. 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 1033 1/4.

MEAL (JUL): Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 332.7. First resistance comes in at 330.8,
with support at 325.2. The close above the 9-day moving average is a positive
short-term indicator for trend. Market positioning is positive with the close
over the 1st swing resistance.

BEAN OIL (JUL): A negative signal for trend
short-term was given on a close under the 9-bar moving average. Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The next downside objective is 32.19. It is a slightly negative
indicator that the close was lower than the pivot swing number. Daily swing
resistance is found at 32.63 and above there at 32.77. Support should be
encountered at 32.34 and 32.19.

 

WHEAT MARKET RECAP

5/11/2004

Traders seem very sensitive to demand news as the
cancellation of an Egypt tender and fears of increased competition ahead helped
to trigger another round of fund selling which is thought to be long liquidation
selling. More rain in the forecast for the plains helped to trigger additional
speculative selling but positioning ahead of the USDA Crop Production and
Supply/demand reports helped to provide some support. For the Crop Production
report for tomorrow morning, the average trade estimate for winter wheat
production is at 1.556 billion bushels (range 1.510-1.665) as compared with last
years crop at 1.707. For all wheat production, the average trade estimate was
2.106 billion bushels (range 2.055-2.252) as compared with last year’s crop at
2.337 billion bushels. For the supply/demand report, traders are looking for
2004/2005 ending stocks at near 514 million bushels (range 460-550) as compared
with 531 million for the 2003/2004 season. For the world report, traders are
looking for a major rebound in production for the coming season but only minor
adjustment in ending stocks as the jump in production will help bring world
production back to near world consumption trends. News that Egypt cancelled
their buying tender for US, French or Australian wheat helped to pressure the
market but news of declining crop conditions helped to provide underlying
support. Winter wheat in good to excellent condition was revised down to 45%
from 48% last week and 55% as the 14-year average. July wheat support levels
include 375 and 359 1/2 with resistance at 385 and 392 1/2.

Technical Outlook

#WHEAT (JUL) 5/12/2004: 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 375 and below
there at 372 3/4, with resistance levels at 382 3/4 and 388 1/4. A negative
signal for trend short-term was given on a close under the 9-bar moving average.
Momentum studies trending lower at mid-range could accelerate a price break if
support levels are broken. The next downside objective is 372 3/4.

 

LIVE CATTLE RECAP

5/11/2004

June cattle closed 77 lower on the session and at
a 6 session low as a lack of new news in the cash market and long liquidation
selling based on overbought ideas helped to pressure. The market is still under
the negative technical influence of the sweeping reversal from a contract high
on May 6th. Cash market bids came in at $85-$87 with offers at $95.00 as
compared with most of the trade last week at $91.00. Boxed-beef cut-out values
were down 13 cents to $160.56 as compared with $160.53 last week at this time.
Slaughter came in at 131,000 head as compared with trade expectations of
128,000-131,000 head. The higher slaughter could indicate stronger than expected
demand from packers into the high demand period ahead.

Technical Outlook

#CATTLE (JUN) 5/12/2004: Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. The next downside objective is 82.77. The market tilt is slightly
negative with the close under the pivot. Support should be encountered at 83.17
and below there at 82.77. Market resistance is at 84.55 and then again at 85.52.
A positive signal for trend short-term was given on a close over the 9-bar
moving average.

 

LEAN HOGS RECAP

5/11/2004

June hogs closed 200 higher on the session and
managed a new contract high with a limit-up close. Higher cash markets (Peoria
up $1.00) and strong pork values of the past week helped support. Slaughter came
in at 367,000 head as compared with expectations at 364,000-372,000 head.
Bellies closed slightly higher and also managed a new all-time high. Traders are
looking for the weekly cold storage report to show unchanged to 500,000 pounds
moving out. The 2-day lean index for the period ending May 7th came in at 76.76,
up 84 cents from the previous session and up from 71.62 at the end of April.

Technical Outlook

#HOGS (JUN) 5/12/2004: Market positioning is
positive with the close over the 1st swing resistance. Resistance levels comes
in at 77.12 and 77.45 today, while support is around 75.87 and then 74.95. The
market rallied to a new contract high. Short-term indicators suggest buying
pullbacks today. The close above the 9-day moving average is a positive
short-term indicator for trend. Daily stochastics have risen into overbought
territory which will tend to support reversal action if it occurs. The near-term
upside target is at 77.45.

 

COCOA MARKET RECAP

5/11/2004

The cocoa market showed fleeting signs of
strength Tuesday but in the end failed to hold the majority of the early upside
action. Reports of favorable weather conditions in most African growing regions
continues to weigh on prices but with political tensions still simmering in
Nigeria and the Ivory Coast the market is also having trouble finding fresh
sellers. The soaring Dollar continues to limit the US cocoa market especially
since the Pound saw massive downside action in the action Tuesday.

Technical Outlook

COCOA (JUL) 05/12/04 The market has a slightly
positive tilt with the close over the swing pivot. Cocoa should run into
resistance at 1371 and above there at 1386 with support at 1346 and 1336.
Negative momentum studies in the neutral zone will tend to reinforce lower price
action. The next downside target is 1335.75.

 

COFFEE MARKET RECAP

5/11/2004

July coffee managed another rise Tuesday and
seemed to be poised to breakout to the upside. The Press suggested that specs
were buying into the market ahead of the frost season in Brazil. Normally the
frost season starts in late June and July which means that the current
speculative interest is running well ahead of normal. London traders actually
thought that the presence of colder weather ahead would simply discourage
selling but in the end the interest actually managed to send prices higher.
Brazil report May 1st through the 7th coffee exports of 305,247 bags and that
compares with 326,575 bags last month.

Technical Outlook

COFFEE (JUN) 5/12/04 The market has a slightly
positive tilt with the close over the swing 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 73.85.
The Coffee contract should run into resistance at 73.20 and above there at 73.85
with support at 71.7 and 70.85. The market’s short-term trend is positive on a
close above the 9-day moving average.

 

SUGAR MARKET RECAP

5/11/2004

With almost all of the trade since March 11th
above the July sugar close, the market seems to be still vulnerable to more long
liquidation selling. The market was up 14 points early in the session but there
was no follow-through buying and speculative long liquidation selling emerged to
pressure futures. The International Sugar Organization indicated limited upside
potential for prices this crop season as the world production deficit may not be
as high as first believed. One of the key sources of the production deficit is
from India who has significant buffer stocks while Brazil production from the
center-south region is expected to be near 7% from last years record.

Technical Outlook

#SUGAR (JUL) 5/12/2004: The market setup is
somewhat negative with the close under the 1st swing support. Swing resistance
comes in at 6.59, with support found at 6.09. The close below the 9-day moving
average is a negative short-term indicator for trend. Momentum studies are still
bearish, but are now at oversold levels and will tend to support reversal action
if it occurs. The next downside target is now at 6.09. Short-term indicators on
the defensive. Consider selling an intraday bounce.

 

COTTON MARKET RECAP

5/11/2004

The cotton market gapped lower on the opening,
traded sharply lower and then managed to regain a large portion of the losses
into the close. Some longs might have decided to exit longs rather than hold
through the USDA report where the trade will get a look at the 04/05 crop. Trade
estimates call for 17.8 million bales of production, which is down from the
prior years 18.22 million. To a degree the market is expecting some acres to be
lost to soybeans considering the lofty price of soybeans early this year.

Technical Outlook

#COTTON (JUL) 5/12/2004: A positive signal for
trend short-term was given on a close over the 9-bar moving average. The market
tilt is slightly negative with the close under the pivot. Next resistance area
comes in at 65.30 and then again at 66.15, while support is targeted at 63.00
and 61.55. Rising stochastics at overbought levels warrant some caution for
bulls. The next upside objective is 66.15.