Here’s Why Treasuries Look Good

After moving to the highest level since January
12th, the lower close for March corn and close back below 2.00 leaves the
appearance of a weak technical set-up for Tuesday and follow-through selling.
Strength in the other grains and speculative short-covering continues to provide
support. Ideas that futures are oversold with speculators holding a record net
short position and traditional technical indicators showing oversold readings
helped to trigger some short-covering support early. Gulf basis levels were
steady. South Korea bought 52,500 tons of optional origin corn overnight. Buying
support slowed as March futures ran into key psychological resistance at 2.00.
For the weekly export sales report, released before the opening, traders are
looking for sales near 700,000-900,000 tons as compared with 915,000 tons last
week. Resistance for March corn comes in at 200 3/4 and 202 1/2 with support at
197 1/4 and 195 3/4.

Technical Outlook

CORN (MAR) 01/27/2005: The stochastic indicator
is rising from oversold levels, which is bullish and should support higher
prices. The close under the 18-day moving average indicates the longer-term
trend could be turning down. The downside closing price reversal on the daily
chart is somewhat negative. The market has a slightly positive tilt with the
close over the swing pivot. The near-term upside objective is at 201 1/4. The
next area of resistance is around 199 3/4 and 201 1/4, while 1st support hits
today at 197 3/4 and below there at 197.

 

SOY COMPLEX RECAP

1/26/2005

March Soybeans finished down 3 at 523, 6 1/2 off
the high and 1/2 up from the low. May Soybeans closed down 2 3/4 at 521 1/4.
This was 3/4 up from the low and 4 3/4 off the high.

March Soymeal closed down 0.5 at 157.4. This was
0.3 up from the low and 2.1 off the high.

March Soybean Oil finished down 0.19 at 19.52,
0.22 off the high and 0.02 up from the low.

Commercial bull spreading, firm cash basis
levels, a lack of producer selling and speculative short-covering supported the
bounce in March soybeans to the highest level since January 14th and the lower
close turns the short-term technical picture a bit negative. The outlook for
good weather into the weekend for South America is a limiting factor for the
market but the South America supply bulge fear seems to be concentrated in the
May contract. For Thursday mornings Census crush report, traders are looking for
the December crush pace to come in near 151 million bushels as compared with 152
million in November and 155.8 million bushels in October. Total oil stocks at
the end of December are thought to come in near 1.295 billion pounds as compared
with 1.213 billion at the end of November with meal stocks are thought to come
in near 230,000 tons from 288,400 tons at the end of November. Gulf basis was
steady to higher with a lack of producer selling helping to support. For the
weekly export sales report, released before the opening, traders are looking for
sales near 600,000-800,000 tons for soybeans, 50,000-100,000 tons for meal and
5,000-10,000 tons for oil. Resistance for March soybeans comes in at 525 and 527
1/4 with support at 518 and 515.

Technical Outlook

BEANS (MAR) 01/27/2005: The stochastic indicator
is rising from oversold levels, which is bullish and should support higher
prices. The close under the 18-day moving average indicates the longer-term
trend could be turning down. The daily closing price reversal down puts the
market on the defensive. The market’s close below the pivot swing number is a
mildly negative setup. The near-term upside target is at 531 1/2. The next area
of resistance is around 526 1/2 and 531 1/2, while 1st support hits today at 519
1/2 and below there at 517 1/2.

MEAL (MAR) 01/27/2005: The daily stochastics gave
a bullish indicator with a crossover up. 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
daily closing price reversal down is a negative indicator for prices. It is a
mildly bullish indicator that the market closed over the pivot swing number. The
near-term upside target is at 160.2. The next area of resistance is around 158.6
and 160.2, while 1st support hits today at 156.2 and below there at 155.5.

BEANOIL (MAR) 01/27/2005: Rising from oversold
levels, daily momentum studies would support higher prices, especially on a
close above resistance. The close below the 18-day moving average is an
indication the longer-term trend has turned down. The market’s close below the
1st swing support number suggests a moderately negative setup for today. The
near-term upside objective is at 19.81. The next area of resistance is around
19.64 and 19.81, while 1st support hits today at 19.40 and below there at 19.33.

 

WHEAT MARKET RECAP

1/26/2005

March Wheat finished down 1 3/4 at 295 1/4, 4 1/2 off the high
and 1/4 up from the low. May Wheat closed down 1 1/4 at 303 1/4. This was 1/4 up
from the low and 3 1/2 off the high.

The market found some follow-through support from
the spurt in export business to Iraq and the Philippines announced yesterday and
from ideas that Iraq purchases could increase above the 165,000 tons booked
yesterday. Funds were noted buyers of near 2500 contracts but when the buying
slowed and soybeans moved lower on the session, wheat futures pushed lower on
the session to close near the lows of the day. Midwest cash basis levels are
firm due to talk of slow producer selling. A lack of follow-through selling
after hitting new contract lows for the new crop in Kansas City is seen as a
slightly supportive factor early in the session. Chicago futures are still
operating under the positive technical influence of the January 7th weekly
closing price reversal from a contract low. For new crop July futures, a close
above 314 and especially above 318 1/2 will be necessary to confirm that a low
is in place with 332 1/2 as initial upside resistance. For the weekly export
sales report, released before the opening, traders are looking for sales near
400,000-500,000 tons as compared with 476,800 tons last week. March wheat
support comes in at 295 1/4 and 293 1/2 with 298 and 300 1/2 as next resistance.

Technical Outlook

WHEAT (MAR) 01/27/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
market back below the 18-day moving average suggests the longer-term trend could
be turning down. The market could take on a defensive posture with the daily
closing price reversal down. It is a slightly negative indicator that the close
was lower than the pivot swing number. The next downside objective is now at 291
3/4. The next area of resistance is around 297 1/2 and 301, while 1st support
hits today at 293 and below there at 291 3/4.

 

LIVE CATTLE RECAP

1/26/2005

February Live Cattle finished up 0.35 at 89.12,
0.32 off the high and 0.52 up from the low.

January Feeder Cattle closed down 0.20 at 104.30.
This was 0.10 up from the low and 0.30 off the high.

Ideas that the market is oversold along with some
light concerns for weekend weather in the plains helped support the cattle
market while weakness in pork was seen as a factor to limit the buying support.
In addition, short-covering was seen as shorts remain bearish from a supply
perspective but traders are nervous that potential legal action might trigger
supply surprises. Boxed-beef cut-out values were down $1.61 to $149.27 at
mid-session as compared with $155.52 one week ago. Lower beef prices could
stimulate demand and help boost the slaughter while a return to muddy feedlot
conditions could slow the available supply of market-ready cattle. For the
Cattle Inventory report on Friday, All cattle and calves as of January 1st are
expected to come in near 100.7% of last year (range 100-101). The 2004 calf crop
is expected near 99.4% of last year (range 99-100%).

Technical Outlook

CATTLE (FEB) 01/27/2005: Negative momentum
studies in the neutral zone will tend to reinforce lower price action. The
market back below the 18-day moving average suggests the longer-term trend could
be turning down. It is a mildly bullish indicator that the market closed over
the pivot swing number. The next downside objective is 88.250. The next area of
resistance is around 89.520 and 89.900, while 1st support hits today at 88.720
and below there at 88.250.

 

LEAN HOGS RECAP

1/26/2005

February Lean Hogs finished down 0.50 at 74.57,
1.10 off the high and 0.32 up from the low.

February Pork Bellies closed up 0.37 at 94.52.
This was 0.72 up from the low and 0.27 off the high.

The market pushed sharply lower on the session
led by the April contract as aggressive fund short covering helped to pressure.
Traders look for declining packer profit margins to begin to slow demand for
live inventory and weigh on cash prices. The premium of February to the cash
market added to the bearish tone as the market is beginning to see a possible
period of weaker demand for pork as a possibility due to a sharp decline in beef
prices. The weekly average weights for Iowa/Minnesota for the week ending
January 22nd came in at 268.4 pounds as compared with 268.4 pounds the previous
week and 264.4 pounds last year. The data indicates that producers may have held
back some hogs from the market in late December and early January which could
increase the pork production numbers in the weeks ahead as these heavier weight
hogs move. Weights typically trend down from an early December peak and weights
are just off of record highs established earlier this month. The 2-Day Lean
index for the period ending January 24tht was up.10 to 73.96 as compared with
72.60 one week previous.

Technical Outlook

HOGS (FEB) 01/27/2005: The close below the 40-day
moving average is an indication the longer-term trend has turned down. Momentum
studies trending lower at mid-range could accelerate a price break if support
levels are broken. The close under the 18-day moving average indicates the
longer-term trend could be turning down. The market tilt is slightly negative
with the close under the pivot. The next downside objective is 73.350. The next
area of resistance is around 75.270 and 76.170, while 1st support hits today at
73.870 and below there at 73.350.

 

COCOA MARKET RECAP

1/26/2005

March Cocoa finished up 48 at 1575, 8 off the
high and 55 up from the low.

The cocoa market managed a massive upside tilt
and supposedly saw intense fund buying. We suspect that the change in the ending
stocks expectation combined with technical reversal signals on the charts and
that ignited a sharp rally. The Press suggested that the funds bought off a
lower Dollar but we suspect that the commercials bought off a lower Dollar and
the funds bought because the price action signaled a fresh buy. In other words,
the funds went with the flow and the cocoa market might be in position to see a
run up all the way to the $1,600 level.

Technical Outlook

COCOA (MAR) 01/27/2005: The cross over and close
above the 40-day moving average is an indication the longer-term trend has
turned positive. A positive indicator was given with the upside crossover of the
9 & 18 bar moving average. Stochastics are at mid-range but trending higher,
which should reinforce a move higher if resistance 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’s close above the 2nd swing
resistance number is a bullish indication. The next upside objective is 1626.
The next area of resistance is around 1606 and 1626, while 1st support hits
today at 1544 and below there at 1501.

 

COFFEE MARKET RECAP

1/26/2005

March Coffee closed down 0.65 at 105.10. This was
1.10 up from the low and 1.15 off the high.

May coffee closed slightly lower on the session
as the move to the highest level since December 30th failed to attract new
speculative buying. Fears of a short-term overbought condition helped trigger
light speculative long liquidation selling. March futures in London closed at
the highest level since December 29th as the Vietnam harvest may not have been
as large as traders had anticipated. With the solid uptrend in New York,
producer selling out of Central America and Brazil has slowed as producers have
held back some of the 2004/2005 crop for sale at higher prices.

Technical Outlook

COFFEE (MAR) 01/27/2005: 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.
The market could take on a defensive posture with the daily closing price
reversal down. It is a mildly bullish indicator that the market closed over the
pivot swing number. The near-term upside objective is at 107.35. The next area
of resistance is around 106.20 and 107.35, while 1st support hits today at
104.00 and below there at 102.90.

 

SUGAR MARKET RECAP

1/26/2005

March Sugar closed up 0.32 at 9.30. This was 0.30
up from the low and 0.03 off the high.

May sugar closed 29 higher on the session and to
new contract highs while March sugar came within 4 ticks of contract highs.
Funds turned aggressive buyers as the market came close to the January 4th peak
and additional buying occurred from buy-stops above the January highs. London
was also strong with continued talk of near-term demand from India and Pakistan.
Expectations for continued strong demand from the ethanol sector helped support
the market as well. May sugar support comes in at 942 with 969 as next
resistance.

Technical Outlook

SUGAR (MAR) 01/27/2005: The upside crossover (9
above 18) of the moving averages suggests a developing short-term uptrend. Daily
stochastics have risen into overbought territory which will tend to support
reversal action if it occurs. The market now above the 18-day moving average
suggests the longer-term trend has turned up. If yesterday’s gap higher on the
day session chart holds, additional buying could develop this session. 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 near-term
upside target is at 9.56. With a reading over 70, the 9-day RSI is approaching
overbought levels. The next area of resistance is around 9.46 and 9.56, while
1st support hits today at 9.14 and below there at 8.91.

 

COTTON MARKET RECAP

1/26/2005

March Cotton finished unchanged at 46.78, 0.57
off the high and 0.18 up from the low.

The cotton market inched higher in quiet trade as
the market awaits fresh fundamental import or new trade activity for the funds
to help determine the next near-term price direction. For the weekly export
sales report, released before the opening, traders are looking for sales near
200,000-300,000 bales as compared with 348,900 bales last week. The US National
Cotton Council will release its survey of US cotton planting intentions for the
2005 crop on Friday after the close. Traders are looking for a planted acreage
number near 14.24 million acres (range 14-14.4) as compared with 13.76 million
last year.

Technical Outlook

COTTON (MAR) 01/27/2005: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. The market now above the 18-day moving average suggests
the longer-term trend has turned up. The close over the pivot swing is a
somewhat positive setup. The next downside target is 46.13. The next area of
resistance is around 47.15 and 47.62, while 1st support hits today at 46.41 and
below there at 46.13.