Here’s Why The Energy Market Got Some Support Today
BOND MARKET RECAP
9/27/2004
December Bonds closed up 0-12 at 113-26. This was
0-12 up from the low and 0-07 off the high.
December 10 Yr Treasury Notes finished up 0-075
at 113-140, 0-045 off the high and 0-085 up from the low.
The Treasury market showed almost no
corrective action in response to the much better than expected new homes sales
report and that is because the prior month’s reading was revised lower. With
the US stock faltering, energy prices rising and the macro economic outlook
somewhat fuzzy we can understand the ongoing bullish bias toward Treasury bonds.
With the outlook for earnings on Wall Street deteriorating we can understand the
bonds ability to maintain a bullish outlook.
Technical Outlook
BONDS (DEC) 09/28/2004: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. 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. The near-term upside target is at 114-19. The 9-day RSI over
70 indicates the market is approaching overbought levels. The next area of
resistance is around 114-10 and 114-19, while 1st support hits today at 113-16
and below there at 112-30.
TNOTES (DEC) 09/28/2004: A bullish signal was
given with an upside crossover of the daily stochastics. Rising stochastics at
overbought levels warrant some caution for bulls. The market’s close above the
9-day moving average suggests the short-term trend remains positive. A positive
setup occurred with the close over the 1st swing resistance. The next upside
target is 113-310. The next area of resistance is around 113-250 and 113-310,
while 1st support hits today at 113-075 and below there at 112-275.
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STOCK INDICES RECAP
9/27/2004
December S&P finished down 6.3 at 1105.2, 3.8
off the high and 1.9 up from the low.
December S&P E-Mini closed down 6.25 at
1105.25. This was 2 up from the low and 8.75 off the high.
December Dow closed down 54 at 9993. This was 17
up from the low and 40 off the high.
December Dow E-Mini finished down 55 at 9992, 74
off the high and 15 up from the low.
The stock market faded in the wake of a new
contract high run in crude oil. Surprisingly the market was lifted by news that
new home sales increased by 9.4% in the month of August, probably because the
prior month’s reading was revised lower. In short, another round of new highs
in the energy complex seemed to undermine the economic outlook which wasn’t
that stellar to begin with. With stocks falling to the lowest level since late
August it is clear that the buyers are unwilling to step in and pick up values.
Technical Outlook
S&P 500 (DEC) 09/28/2004: The downside
crossover (9 below 18) of the moving averages suggests a developing short-term
downtrend. Daily stochastics are trending lower but have declined into oversold
territory. A negative signal for trend short-term was given on a close under the
9-bar moving average. 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 1099.98. The next area of resistance is around 1108.05
and 1111.37, while 1st support hits today at 1102.35 and below there at 1099.98.
SP EMINI (DEC) 09/28/2004: The moving average
crossover down (9 below 18) indicates a possible developing short-term
downtrend. Daily stochastics are trending lower but have declined into oversold
territory. A negative signal for trend short-term was given on a close under the
9-bar moving average. The swing indicator gave a moderately negative reading
with the close below the 1st support number. The next downside target is
1096.32. The next area of resistance is around 1110.87 and 1117.81, while 1st
support hits today at 1100.13 and below there at 1096.32.
NASDAQ (DEC) 09/28/2004: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The close below the 9-day moving average is a negative short-term
indicator for trend. The swing indicator gave a moderately negative reading with
the close below the 1st support number. The next downside objective is 1377.75.
The next area of resistance is around 1399.00 and 1407.75, while 1st support
hits today at 1384.00 and below there at 1377.75.
MINIDOW (DEC) 09/28/2004: Daily stochastics are
trending lower but have declined into oversold territory. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. The close below the 1st swing support could weigh on the market. The
next downside objective is now at 9918. The next area of resistance is around
10035 and 10095, while 1st support hits today at 9947 and below there at 9918.
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CURRENCY MARKET RECAP
9/27/2004
December US Dollar finished down 11 at 8848, 24
off the high and 16 up from the low.
December Euro finished up 0.28 at 122.85, 0.25
off the high and 0.31 up from the low.
December Euro Dollar closed unchanged at 97.7.
This was 0.005 up from the low and 0.02 off the high.
December Canadian Dollar closed up 0.13 at 78.47.
This was 0.2 up from the low and 0.11 off the high.
December British Pound finished up 0.46 at
179.69, 0.16 off the high and 0.29 up from the low.
December Swiss closed up 0.06 at 79.48. This was
0.13 up from the low and 0.24 off the high.
December Japanese Yen closed down 0.45 at 90.2.
This was 0.1 up from the low and 0.22 off the high.
Despite an early attempt to rally, the Dollar
slumped back toward the low of the day, even though new home sales were up
sharply. We would have expected the economic information due out during the
session to have provided support to the Dollar but it is clear that the market
is still overtly concerned about the pace of the US economy. Some traders
suggested that a lull in the pattern of hurricanes hitting the southern United
States might provide the Dollar with temporary support but in order to turn the
economic tide in the Dollar the regularly scheduled economic reports will have
to mount a chain of better than expected reports.
Technical Outlook
YEN (DEC) 09/28/2004: Daily stochastics declining
into oversold territory suggest the selling may be drying up soon. A negative
signal for trend short-term was given on a close under the 9-bar moving average.
The gap lower on the day session chart is bearish and puts the market on the
defensive. 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
89.91. The next area of resistance is around 90.36 and 90.55, while 1st support
hits today at 90.04 and below there at 89.91.
EURO (DEC) 09/28/2004: Momentum studies are
trending higher but have entered overbought levels. A positive signal for trend
short-term was given on a close over the 9-bar moving average. With the close
higher than the pivot swing number, the market is in a slightly bullish posture.
The near-term upside objective is at 123.39. The next area of resistance is
around 123.13 and 123.39, while 1st support hits today at 122.57 and below there
at 122.28.
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PRECIOUS METALS RECAP
9/27/2004
December Gold closed up 1 at 410.7. This was 0.8
up from the low and 1.3 off the high.
December Silver finished up 0.125 at 6.55, 0.02
off the high and 0.14 up from the low.
October Platinum closed up 2.2 at 859.5. This was
4.5 up from the low and 4.5 off the high.
Gold and silver prices were firm Monday despite a
general lack of focus in the US Dollar and that would seem to suggest that the
metals have an additional driving force beyond the Dollar. With silver managing
to climb above a critical psychological resistance point of $6.50 and gold
respecting recent consolidation support on the charts the upward bias remains in
place. Apparently soaring energy prices didn’t deflate gold and silver prices
as was feared in the Asian trade and with flight to quality concerns kicking up
in Iraq, it is possible that gold continues to see consistent daily buying
interest.
Technical Outlook
SILVER (DEC) 09/28/2004: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The close above the 9-day moving average is a
positive short-term indicator for trend. With the close over the 1st swing
resistance number, the market is in a moderately positive position. The
near-term upside target is at 668.0. The next area of resistance is around 663.0
and 668.0, while 1st support hits today at 647.1 and below there at 636.1.
GOLD (DEC) 09/28/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The close above the 9-day
moving average is a positive short-term indicator for trend. The market has a
slightly positive tilt with the close over the swing pivot. The next upside
objective is 412.9. The next area of resistance is around 411.7 and 412.9, while
1st support hits today at 409.7 and below there at 408.8.
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COPPER MARKET RECAP
9/27/2004
December Copper finished up 2.05 at 137.80, 0.30
off the high and 0.90 up from the low.
While copper prices were initially pushed higher
by short covering stories out of Shanghai it is possible that the sharp rise in
US new home sales for August added to the upside momentum. The trade was also
sparked into action because some traders see recent LME warehouse stock declines
as more significant than the recent pace. In other words, the tightness theme
was given even more credence on a number of fronts and with the fundamentals
joining the existing bullish technical track the market was justifiably lifted.
While the markets doubts that LME supplies will fall to zero the fact that they
are now falling at a quicker pace certainly spurs on the bulls.
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ENERGY MARKET RECAP
9/27/2004
December Crude Oil closed up 0.85 at 48.93. This
was 0.53 up from the low and 0.07 off the high.
December Heating Oil closed up 1.13 at 137.54.
This was 1.09 up from the low and 0.31 off the high.
December Unleaded Gas finished up 1.23 at 131.07,
equal to the high and 1.37 up from the low.
December Natural Gas finished down 0.10 at 6.71,
0.05 off the high and 0.03 up from the low.
December Propane closed up 0.01 at 0.84. This was
equal to the low and equal to the high.
The energy complex started the session out firmly
bid off speculative interest that seemed to be focused on a test of $50.00 in
nearby crude prices. According to private forecasts OPEC September output
increased by 600,000 barrels per day to stand at 30.5 million barrels per day
and that could have been seen as a negative if the bull camp weren’t so
entrenched in its track. However, it was clear that energy prices were getting
some additional support from Nigerian labor Union tensions and from the fact
that the Nigerian Oil Company is seeing a battle on the distribution of oil
revenues!
Technical Outlook
CRUDE OIL (DEC) 09/28/2004: Rising stochastics at
overbought levels warrant some caution for bulls. A positive signal for trend
short-term was given on a close over the 9-bar moving average. If yesterday’s
gap higher on the day session chart holds, additional buying could develop this
session. The market has a bullish tilt coming into today’s trade with the close
above the 2nd swing resistance. The next upside target is 49.41. With a reading
over 70, the 9-day RSI is approaching overbought levels. The next area of
resistance is around 49.23 and 49.41, while 1st support hits today at 48.63 and
below there at 48.22.
UNLEADED (DEC) 09/28/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The market’s close above the
9-day moving average suggests the short-term trend remains positive. With the
close higher than the pivot swing number, the market is in a slightly bullish
posture. The near-term upside objective is at 132.09. The 9-day RSI over 70
indicates the market is approaching overbought levels. The next area of
resistance is around 131.75 and 132.09, while 1st support hits today at 130.39
and below there at 129.36.
HEATING OIL (DEC) 09/28/2004: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. A positive signal for trend short-term was given on a close over the
9-bar moving average. The close over the pivot swing is a somewhat positive
setup. The near-term upside target is at 138.74. With a reading over 70, the
9-day RSI is approaching overbought levels. The next area of resistance is
around 138.24 and 138.74, while 1st support hits today at 136.84 and below there
at 135.95.
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CORN MARKET RECAP
9/27/2004
December Corn finished up 2 1/2 at 207 3/4,
3 1/4 off the high and 3 up from the low. March Corn closed up 2 at 218 1/4.
This was 2 3/4 up from the low and 2 off the high.
The market pushed to a new contract low for the
12th session in a row before experiencing a surge in short-covering and move
above Friday’s highs and even above Thursday’s highs with stops activated at
each level. Weekly export inspections came in at 41.9 million bushels as
compared with 24-30 million expected. Cumulative inspections have reached 103
million bushels for the new crop season as compared with 114.8 million last year
at this point. With the market detecting ongoing dry weather in Argentina (that
is reportedly delaying planting) it is also possible that corn saw some short
covering off the weather. It was suggested that the funds were seen buying as
much as 5,000 contracts by mid session and so there is some evidence of short
covering. The market might also have noted dwindling Chinese fall corn export
figures and that surprisingly comes despite the fact that the Chinese corn crop
looks to be in good shape. The weekly crop progress report, released this
afternoon, is expected to show harvest above 20% complete as compared with 9%
last week. The trade will also be interested to see the extent of the crops in
the northern cornbelt, which have matured enough to avoid crop damage from a
freeze. While there is still no season ending freeze in the forecast this week,
two cool fronts should bring in some colder air to the north into the weekend.
The market is extremely oversold and a higher close today (key reversal) could
attract additional short-covering with speculators net short over 103,000
contracts in Friday’s COT with options report. Support points for December corn
include 206 and 204 1/2 with 212 3/4 and 220 1/4 as resistance.
Technical Outlook
CORN (DEC) 09/28/2004: The crossover up in the
daily stochastics is a bullish signal. Daily stochastics are showing positive
momentum from oversold levels, which should reinforce a move higher if near-term
resistance is taken out. The market’s short-term trend is negative as the close
remains below the 9-day moving average. The outside day up is somewhat positive.
Market positioning is positive with the close over the 1st swing resistance. The
near-term upside objective is at 214. With a reading under 30, the 9-day RSI is
approaching oversold levels. The next area of resistance is around 210 3/4 and
214, while 1st support hits today at 204 3/4 and below there at 201 3/4.
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SOY COMPLEX RECAP
9/27/2004
November Soybeans finished up 7 1/2 at 531, 3 off
the high and 8 1/2 up from the low. January Soybeans closed up 8 at 539 1/4.
This was 8 3/4 up from the low and 2 1/4 off the high.
December Soymeal closed up 1.9 at 161.2. This was
2.2 up from the low and 1.1 off the high.
December Soybean Oil finished up 0.31 at 20.99,
0.06 off the high and 0.41 up from the low.
The reversal and higher close after hitting a
one-year low for November soybeans could attract some technical buying support
but besides the oversold condition of the market, traders await some other news
which might support the market. Traders seem to be hoping for lower yields as
the harvest moves north or possibly some hurricane damage to the North Carolina
crop. Funds were noted buyers of near 2500 contracts by mid-session. The lack of
new speculative selling early in the session after futures hit a new one-year
low in overnight trade helped to support some active short-covering and solid
gains into the mid-session. Weekly export inspections came in at 12.6 million
bushels as compared with 3.0-9.0 million expected. Cumulative inspections have
reached 28.4 million bushels for the new crop season as compared with 22.2
million last year at this point. The weekly crop progress report, released this
afternoon, is expected to show harvest near 20% complete as compared with 8%
last week. The weather for harvest looks favorable for the coming week. The
market looks vulnerable to some short-covering as small speculators were holding
a record net short position in the weekend Commitment-of-Traders report with
options. Resistance for November soybeans comes in near 535 and 552 1/4 with
next support at 524 1/2 and 513 3/4.
Technical Outlook
BEANS (NOV) 09/28/2004: A bullish signal was
given with an upside crossover of the daily stochastics. 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 9-day moving average is a
negative short-term indicator for trend. The daily closing price reversal up is
a positive indicator that could support higher prices. A positive setup occurred
with the close over the 1st swing resistance. The next upside objective is 541.
Some caution in pressing the downside is warranted with the RSI under 30. The
next area of resistance is around 536 3/4 and 541, while 1st support hits today
at 525 1/4 and below there at 518 1/4.
MEAL (DEC) 09/28/2004: 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’s close below the 9-day moving average is an indication
the short-term trend remains negative. The daily closing price reversal up on
the daily chart is somewhat positive. The market setup is supportive for early
gains with the close over the 1st swing resistance. The near-term upside target
is at 164.2. The next area of resistance is around 162.8 and 164.2, while 1st
support hits today at 159.6 and below there at 157.7.
BEANOIL (DEC) 09/28/2004: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The market’s close below the 9-day moving average is an
indication the short-term trend remains negative. The upside closing price
reversal on the daily chart is somewhat bullish. The market has a slightly
positive tilt with the close over the swing pivot. The next downside objective
is 20.44. The market is approaching oversold levels on an RSI reading under 30.
The next area of resistance is around 21.22 and 21.37, while 1st support hits
today at 20.76 and below there at 20.44.
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WHEAT MARKET RECAP
9/27/2004
December Wheat finished down 1 1/4 at 320
1/2, 4 1/2 off the high and 3 1/2 up from the low. March Wheat closed down 1 1/4
at 332 3/4. This was 3 3/4 up from the low and 3 3/4 off the high.
The move lower on the session in spite of a
bounce in corn and soybeans is seen as a bearish development for the Wheat
market with December moving to the lowest level since September 10th. Improving
planting conditions for the winter wheat crop in the plains helped to pressure
the market. Weekly export inspections came in at 31.0 million bushels as
compared with 20-29 million expected and 16.3 million necessary each week to
reach the USDA projection. Of the total, 3.1 million is for China. Cumulative
inspections have reached 363.8 million bushels (38.3% of the USDA forecast for
the season vs. 34.5% as the 5-year average for this time of the year) as
compared with 370.7 million bushels last year at this time. The weekly crop
progress report, released this afternoon, is expected to show harvest near
complete for the spring wheat crop and last weeks moisture in the plains may
have triggered another jump in planting progress. Egypt officials indicated that
they have adequate supplies to last through February after recent purchases. In
Argentina, recent dry weather has stressed the winter wheat crop in the second
and third highest growing provinces and traders are concerned that growth has
been stunted enough to hurt yields. Support for December wheat comes in at 317
and 311 3/4 with 322 1/2 and 326 1/4 as resistance.
Technical Outlook
WHEAT (DEC) 09/28/2004: Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
A negative signal for trend short-term was given on a close under the 9-bar
moving average. It is a slightly negative indicator that the close was under the
swing pivot. The next downside target is now at 312 3/4. The next area of
resistance is around 324 1/2 and 328 3/4, while 1st support hits today at 316
1/2 and below there at 312 3/4.
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LIVE CATTLE RECAP
9/27/2004
December Live Cattle closed down 0.55 at 86.42.
This was 0.07 up from the low and 0.82 off the high.
November Feeder Cattle finished down 1.80 at
109.10, 1.75 off the high and 0.50 up from the low.
The cattle market closed moderately lower with
weakness in the beef market and fears of lower cash market trade this week
helping to trigger more fund long liquidation selling. Hefty weights reported in
last weeks slaughter report and a lack of new news in the Japanese/US
negotiations to reopen beef trade added to the bearish tone. Slaughter came in
at 119,000 head as compared with trade expectations at 118,000 to 122,000 head.
Boxed-beef cutout values (600-750 choice) were up $.12 on the day at mid-session
to $137.52 as compared with $135.44 last week at this time.
Technical Outlook
CATTLE (DEC) 09/28/2004: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The market’s close below the 9-day moving average is an indication
the short-term trend remains negative. The close below the 1st swing support
could weigh on the market. The next downside target is 85.720. The next area of
resistance is around 86.870 and 87.500, while 1st support hits today at 86.000
and below there at 85.720.
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LEAN HOGS RECAP
9/27/2004
December Lean Hogs closed down 2.00 at 68.82.
This was equal to the low and 1.87 off the high.
February Pork Bellies finished down 3.00 at
97.50, 2.85 off the high and equal to the low.
December Hogs closed limit-down with active long
liquidation selling helping to pressure futures in spite of bullish news from
the USDA Hogs and Pigs report on Friday afternoon. The overbought condition of
the market and news that the industry was expanding helped to pressure the
market. The CME 2-Day Lean index for the period ending September 23rd came in at
79.17 which was up $.94 from the previous session. This leaves December hogs at
a significant discount to the cash market. The weight breakdown was support to
the December price outlook as the supply should tighten from 5% over last year
to 1% under last year during the month of October. Slaughter came in at 397,000
head as compared with trade expectations at 396,000-400,000 head.
Technical Outlook
HOGS (DEC) 09/28/2004: A crossover down in the
daily stochastics is a bearish signal. Stochastics turning bearish at overbought
levels will tend to support lower prices if support levels are broken. The close
below the 9-day moving average is a negative short-term indicator for trend.
There could be some early pressure today given the market’s negative setup with
the close below the 2nd swing support. The next downside objective is 67.420.
The next area of resistance is around 69.750 and 71.150, while 1st support hits
today at 67.900 and below there at 67.420.
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COCOA MARKET RECAP
9/27/2004
December Cocoa finished down 3 at 1455, 13 off
the high and 5 up from the low.
Despite talk about the Nigerian harvest showing
signs of black pod disease in certain areas of the country the cocoa market
showed no sign of bouncing. Very far off the lows posted last Friday. Reports of
light professional buying from London offered very little additional support to
cocoa prices which are generally being undermined by the potential near term
flow of physical cocoa. However, the trade isn’t exactly poised to attack the
short side into harvest for fear that some dryness problems might be discovered.
Technical Outlook
COCOA (DEC) 09/28/2004: The stochastic indicator
is rising from oversold levels, which is bullish and should support higher
prices. The close below the 9-day moving average is a negative short-term
indicator for trend. It is a slightly negative indicator that the close was
under the swing pivot. The next upside target is 1475. The next area of
resistance is around 1464 and 1475, while 1st support hits today at 1446 and
below there at 1439.
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COFFEE MARKET RECAP
9/27/2004
December Coffee closed up 3.00 at 86.00. This was
2.70 up from the low and 0.40 off the high.
The coffee market exploded and did so in the wake
of strong gains in cotton and sugar which might suggest that the funds were
buying a host of soft or exotic commodities. Certainly the threat of dryness in
Brazil and the hang over from the prior year’s bumper crop fueled long
speculation but with the forecasts calling for rain later in the week the big
upward thrust seems premature. The funds were noted buyers along with the trade
and we suspect that the small traders were pulled into the fray by the series of
upside resistance violations on the charts.
Technical Outlook
COFFEE (DEC) 09/28/2004: A bullish signal was
given with an upside crossover of the daily stochastics. Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. A positive signal for trend short-term was given on a close over the
9-bar moving average. There could be more upside follow through since the market
closed above the 2nd swing resistance. The next upside objective is 88.50. The
market is approaching overbought levels with an RSI over 70. The next area of
resistance is around 87.50 and 88.50, while 1st support hits today at 84.45 and
below there at 82.35.
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SUGAR MARKET RECAP
9/27/2004
October Sugar closed up 0.46 at 8.25. This was
0.39 up from the low and equal to the high.
Finally the market saw signs of increased
physical demand as India stepped forward with a 25,000 to 40,000 ton purchase.
The market had been waiting on increased demand and it also appears that trade
or commercial buying came into the market on Monday morning. The massive upside
adjustment Monday could easily spark follow through stop loss buying especially
considering the weakness early in the month of September. The sugar is also
anticipating increased physical interest from the Middle East and the rally
Monday might have seen those buyers step up and chase prices.
Technical Outlook
SUGAR (MAR) 09/28/2004: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The close above the 9-day moving average is a positive short-term
indicator for trend. 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 target is 9.31. The next area of resistance is
around 9.20 and 9.31, while 1st support hits today at 8.85 and below there at
8.59.
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COTTON MARKET RECAP
9/27/2004
October Cotton finished up 0.90 at 50.30, 1.20
off the high and 0.30 up from the low.
In what appeared to be a delayed reaction,
December cotton soared higher on concerns that some cotton was impacted by
recent rains. However, most of the adverse impact has been limited to the
Eastern portion of the growing region but after the negative reaction last
Friday it was clear that some buyers were interested in picking up some value.
Because many areas in the East were already flooded by previous storms the
market was concerned that flooding and not just rain on open bolls might serve
to reduce the crop. It is also possible that less than stellar crop conditions
in parts of Texas (where is also becoming a little too wet) might have provided
some short covering inventive in the cotton market.
Technical Outlook
COTTON (DEC) 09/28/2004: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The market’s short-term trend is negative as the close
remains below the 9-day moving average. Market positioning is positive with the
close over the 1st swing resistance. The next downside objective is 45.94. The
next area of resistance is around 49.26 and 50.79, while 1st support hits today
at 46.84 and below there at 45.94.