Hogs Collapse–Here’s Why
BOND MARKET RECAP
4/22/2005
June Bonds finished up 0-18 at 114-00, 0-03 off
the high and 0-10 up from the low.
June 10 Yr Treasury Notes finished up 0-090 at
111-015, 0-015 off the high and 0-065 up from the low.
The Treasury managed early gains despite
the lack of economic reports on Friday morning. We suspect that the combination
of a weaker Dollar and lower equity prices rekindled some macro economic
concern. We suspect that a coupon Pass on Friday morning hinted at a near term
need to add some liquidity and that might point to go along with the idea that
the Fed is slowly acknowledging the soft spot in the US economy. With crude oil
prices rising sharply on Friday morning it certainly isn’t surprising that
concern for the economy returned to the equation and lifted Treasuries back
toward the recent consolidation highs.
Technical Outlook
BONDS (JUN) 04/25/2005: Daily stochastics turning
lower from overbought levels is bearish and will tend to reinforce a downside
break especially if near term support is penetrated. 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 objective
is now at 113-08. The next area of resistance is around 114-10 and 114-17, while
1st support hits today at 113-22 and below there at 113-08.
TNOTES (JUN) 04/25/2005: Momentum studies are
trending lower from high levels which should accelerate a move lower on a break
below the 1st swing support. The major trend could be turning up with the close
back above the 18-day moving average. The market has a slightly positive tilt
with the close over the swing pivot. The next downside target is now at 110-205.
The next area of resistance is around 111-070 and 111-120, while 1st support
hits today at 110-275 and below there at 110-205.
Â
STOCK INDICES RECAP
4/22/2005
June S&P finished down 4.3 at 1157.2, 3.8 off the
high and 13.1 up from the low.
June S&P E-Mini closed down 4.75 at 1156.75. This
was 13 up from the low and 4.5 off the high.
June Dow closed down 38 at 10188. This was 118 up
from the low and 36 off the high.
The stock market performed a little better than
many would have expected especially when one considers that crude oil prices
were up aggressively early in the session and the fact that down volume on the
NYSE was running well ahead of up volume. Even in the face of suggestions from
the Fed that they would continue to hike rates in a measured fashion, the market
showed no noticeable impact from the news, which is a little surprising. On the
other hand, the favorable earnings and the mostly favorable forward guidance
that some sellers were a little hesitant to sell into a market that the day
before had posted one of the most significant single gains in over a year.
Technical Outlook
S&P 500 (JUN) 04/25/2005: Daily stochastics are
showing positive momentum from oversold levels, which should reinforce a move
higher if near term resistance is taken out. 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 under the swing pivot. The near-term
upside target is at 1171.62. The next area of resistance is around 1165.35 and
1171.62, while 1st support hits today at 1148.45 and below there at 1137.83.
SP EMINI (JUN) 04/25/2005: Daily stochastics are
showing positive momentum from oversold levels, which should reinforce a move
higher if near term resistance is taken out. The major trend has turned down
with the cross over back below the 18-day moving average. With the close higher
than the pivot swing number, the market is in a slightly bullish posture. The
next upside objective is 1172.12. The next area of resistance is around 1165.50
and 1172.12, while 1st support hits today at 1148.00 and below there at 1137.13.
NASDAQ (JUN) 04/25/2005: Daily stochastics are
showing positive momentum from oversold levels, which should reinforce a move
higher if near term resistance is taken out. The close under the 18-day moving
average indicates the longer-term trend could be turning down. The market’s
close below the 1st swing support number suggests a moderately negative setup
for today. The near-term upside target is at 1458.25. The next area of
resistance is around 1445.50 and 1458.25, while 1st support hits today at
1418.50 and below there at 1404.25.
Â
CURRENCY MARKET RECAP
4/22/2005
June US Dollar finished down 26 at 8345, 39 off
the high and 14 up from the low.
June Euro finished up 0.11 at 130.81, 0.3 off the
high and 0.28 up from the low.
June Euro Dollar closed up 0.005 at 96.59. This
was 0.01 up from the low and 0.01 off the high.
June Canadian Dollar closed up 0.22 at 81.02.
This was 0.19 up from the low and 0.23 off the high.
June British Pound finished up 0.73 at 191.07,
0.17 off the high and 0.37 up from the low.
June Swiss closed up 0.09 at 84.9. This was 0.25
up from the low and 0.25 off the high.
June Japanese Yen closed up 0.83 at 94.8. This
was 0.31 up from the low and 0.15 off the high.
The Dollar mostly remained under pressure but
considering the breadth of talk regarding a change in the Chinese currency peg
and the weakness in the US equity market it is a little surprising that the
Dollar was able to discourage aggressive selling. However, while the Dollar,
Euro and Swiss waffled around both sides of unchanged the Yen and the Pound
showed distinctly supportive action throughout the session. The fact that energy
prices firmed aggressively would seem to have presented the US with even more
economic uncertainty ahead. However, for some reason the Dollar seemed to resist
selling pressure as if the inflation threats from early in the week were somehow
supporting the Dollar.
Technical Outlook
YEN (JUN) 04/25/2005: The major trend could be
turning up with the close back above the 40-day moving average. Daily
stochastics have risen into overbought territory which will tend to support
reversal action if it occurs. The cross over and close above the 18-day moving
average indicates 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
next upside objective is 95.22. The next area of resistance is around 95.02 and
95.22, while 1st support hits today at 94.57 and below there at 94.30.
EURO (JUN) 04/25/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The major trend could be
turning up with the close back above the 18-day moving average. The market’s
close below the pivot swing number is a mildly negative setup. The near-term
upside target is at 131.39. The next area of resistance is around 131.10 and
131.39, while 1st support hits today at 130.52 and below there at 130.24.
Â
PRECIOUS METALS RECAP
4/22/2005
June Gold closed up 1.2 at 435.6. This was 0.5 up
from the low and 1.4 off the high.
July Silver finished up 0.059 at 7.321, 0.064 off
the high and 0.031 up from the low.
Â
With the continued slide in the Dollar the gold
and silver markets were able to discount the return of economic anxiety and the
concern that Chinese slowing might result in lower metals demand. We think that
June gold players look upon the 83.38 level in the June Dollar, as a critical
pivot point and seeing the Dollar fall markedly below that level could spark
another wave of fund buying. We also think that weekend talk regarding a
floating Chinese currency will keep the pressure on the Dollar and in turn
underpin gold prices.
Technical Outlook
SILVER (JUL) 04/25/2005: The major trend could be
turning up with the close back above 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 is an indication the longer-term trend has
turned positive. It is a mildly bullish indicator that the market closed over
the pivot swing number. The next upside objective is 742.4. The next area of
resistance is around 736.8 and 742.4, while 1st support hits today at 727.4 and
below there at 723.5.
GOLD (JUN) 04/25/2005: The market now above the
40-day moving average suggests the longer-term trend has turned up. Momentum
studies are trending higher but have entered overbought levels. The cross over
and close above the 18-day moving average is an indication the longer-term trend
has turned positive. It is a mildly bullish indicator that the market closed
over the pivot swing number. The next upside target is 437.7. The next area of
resistance is around 436.5 and 437.7, while 1st support hits today at 434.7 and
below there at 434.0.
Â
COPPER MARKET RECAP
4/22/2005
June Copper closed up 0.45 at 148.70. This was
equal to the low and 0.80 off the high.
Surprisingly the copper market discounted the
sharp rise in LME copper stocks and the partially disappointing action in the US
equity market. However, many traders were focused on the lower production from
Group Mexico in their earnings report, while others were viewing copper as
attractive due to the decline in the Dollar. The copper market seemed to track
along with gold prices and it is pretty clear that copper is undaunted by the
weakness in equity prices and by the potentially devastating pre market
realization of a massive increase in LME copper stocks. In other words, the
market wasn’t overly concerned with the threat of rising supply.
Â
ENERGY MARKET RECAP
4/22/2005
June Crude Oil closed up 1.19 at 55.39. This was
0.99 up from the low and 0.51 off the high.
June Heating Oil closed up 1.26 at 155.06. This
was 1.06 up from the low and 1.04 off the high.
June Unleaded Gas finished up 2.78 at 165.24,
0.76 off the high and 1.94 up from the low.
June Natural Gas finished up 0.16 at 7.27, 0.05
off the high and 0.11 up from the low.
June Propane closed up 0.02 at 0.88. This was
equal to the low and equal to the high.
The energy complex started out firm and then
added significantly to the gains into mid session. Surprisingly the energy
complex managed to rise even in the face of comments from Saudi Arabia that they
had totally disregarded the OPEC production limitation and also managed to
discount the Wall Street Journal article suggesting that the Saudi’s were
pumping vast sums into oil development programs. The market noted a Northern
Iraqi oil pipeline attack and also a series of minor refinery glitches in the
US. The main focus of the bull camp continues to be the prospect of ultra tight
summer gasoline supplies and that seemed to lift the prompt deliveries in the
action on Friday.
Technical Outlook
CRUDE OIL (JUN) 04/25/2005: The cross over and
close above the 40-day moving average indicates the longer-term trend has turned
up. 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. Follow through buying looks likely if the market can hold yesterday’s
gap on the day session chart. The market has a bullish tilt coming into today’s
trade with the close above the 2nd swing resistance. The next upside objective
is 56.77. The next area of resistance is around 56.13 and 56.77, while 1st
support hits today at 54.64 and below there at 53.77.
UNLEADED (JUN) 04/25/2005: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The market now above the 18-day moving average suggests
the longer-term trend has turned up. The gap upmove on the day session chart is
a bullish indicator for trend. A positive setup occurred with the close over the
1st swing resistance. The next upside objective is 167.64. The next area of
resistance is around 166.59 and 167.64, while 1st support hits today at 163.89
and below there at 162.25.
HEATING OIL (JUN) 04/25/2005: Positive momentum
studies in the neutral zone will tend to reinforce higher price action. The
cross over and close above the 18-day moving average is an indication the
longer-term trend has turned 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 157.15. The next area of resistance is around 156.10 and 157.15,
while 1st support hits today at 154.01 and below there at 152.96.
Â
CORN MARKET RECAP
4/22/2005
July Corn finished down 2 at 217 1/2, 2 off
the high and 1/2 up from the low. December Corn closed down 1 3/4 at 234. This
was 1/2 up from the low and 1 3/4 off the high.
The market pushed lower for much of the day with
a lack of new news to support new speculative buying and a lack of new news to
rationalize the recent move higher. July corn managed to gain 3 cents on the
week with December up 3 3/4 cents for the week. Cold and wet weather moving
across the Midwest from west to east has slowed planting progress. Rains will
persist in the eastern cornbelt this weekend and early next week but the west
looks dry until the middle of next week. A lower US dollar and a steady/firm
basis in the Midwest helped to support. As of last Sunday, the crop was 14%
planted as compared with 18% last year. As of April 25th, 2004 producers had
planted 37% of the corn crop. Support for July corn comes in at 216 1/4 with
resistance at 220 1/4 and 224 1/2.
Technical Outlook
CORN (JUL) 04/25/2005: The close below the 60-day
moving average is an indication the longer-term trend has turned down. Momentum
studies are rising from mid-range, which could accelerate a move higher if
resistance levels are penetrated. The market now above the 18-day moving average
suggests the longer-term trend has turned up. The swing indicator gave a
moderately negative reading with the close below the 1st support number. The
near-term upside objective is at 220 1/4. The next area of resistance is around
218 3/4 and 220 1/4, while 1st support hits today at 216 1/4 and below there at
215 1/2.
Â
SOY COMPLEX RECAP
4/22/2005
July Soybeans finished down 4 3/4 at 640 1/2, 6
1/2 off the high and 2 up from the low. November Soybeans closed down 3 1/2 at
628. This was 3 up from the low and 4 1/4 off the high.
July Soymeal closed down 0.4 at 196.3. This was
0.5 up from the low and 2.2 off the high.
July Soybean Oil finished down 0.25 at 22.93,
0.25 off the high and 0.08 up from the low.
The short-term news is slow at this time of the
year as the US crop outlook is slow to develop with corn planting progress the
key and demand news is generally shifting to South America. Late selling from
speculators drove the market lower on the session but July soybeans managed to
gain 19 cents on the week. Cumulative soybean sales have reached 94.1% of the
USDA forecast for the year, which compares with an average of 92.8% for the past
5 years. China demand is shifting to South America and there is talk that China
buyers are spreading out and deferring deliveries due to near-term surge in
supply in China after active buying in March. Wet and cold weather is expected
to slow the southern Brazil and Argentina harvest and some light frost fears for
double crop Argentina beans has helped provide some support. However, traders
believe the most of the crop has already reached maturity. Producer selling in
the US remains light which has supported steady/firm basis. Tight meal supplies
supported the meal basis and July meal managed to gain $8.30 on the week. July
soybean support comes in at 637 with 653 1/4 as next resistance.
Technical Outlook
BEANS (JUL) 04/25/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The market now above the 18-day moving average suggests the
longer-term trend has turned up. It is a slightly negative indicator that the
close was under the swing pivot. The next upside objective is 650. The next area
of resistance is around 644 3/4 and 650, while 1st support hits today at 636 1/4
and below there at 633 1/4.
MEAL (JUL) 04/25/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The market now above the 18-day moving average suggests the
longer-term trend has turned up. The daily closing price reversal down puts the
market on the defensive. It is a slightly negative indicator that the close was
under the swing pivot. The near-term upside target is at 199.4. The next area of
resistance is around 197.6 and 199.4, while 1st support hits today at 195.0 and
below there at 194.1.
BEANOIL (JUL) 04/25/2005: The close under the
40-day moving average indicates the longer-term trend could be turning down.
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 23.30. The next area of resistance is around
23.09 and 23.30, while 1st support hits today at 22.77 and below there at 22.65.
Â
WHEAT MARKET RECAP
4/22/2005
July Wheat finished down 1 1/2 at 319 1/4, 2 1/4 off the high
and 1/2 up from the low. December Wheat closed down 2 at 336 1/4. This was 3/4
up from the low and 2 3/4 off the high.
July wheat was down 2 cents on the day but closed
4 1/2 cents higher on the week. The market found some support from concerns with
possible freezing temperatures into the southern plains this weekend but ideas
that the crop is not mature enough to experience any damage left trade choppy to
lower for much of the session. Volume was light and traders await any weather
scares which might develop in the US or other key world producers. There is a
lack of a weather premium for new crop wheat and a lack of a reason for a
premium. Wheat prices were lower in Europe after weekly export awards were just
251,500 tonnes with EU grain exporters hoping to see exports closer to 500,000
per week. A lower US dollar helped provide some underlying support. A lack of
new export news for US exporters and weakness in the other grains helped
pressure the market late. July wheat support comes in at 317 1/2 with 325 3/4 as
next resistance.
Technical Outlook
WHEAT (JUL) 04/25/2005: The stochastics
indicators are rising from oversold levels, which is bullish and should support
higher prices. The close below the 18-day moving average is an indication the
longer-term trend has turned down. It is a slightly negative indicator that the
close was under the swing pivot. The near-term upside target is at 322 1/4. The
next area of resistance is around 320 1/2 and 322 1/4, while 1st support hits
today at 318 and below there at 317.
Â
LIVE CATTLE RECAP
4/22/2005
June Live Cattle finished up 0.27 at 85.72, 0.52
off the high and 0.22 up from the low.
May Feeder Cattle closed up 0.30 at 106.90. This
was 0.40 up from the low and 0.35 off the high.
June cattle traded most of the day moderately
higher but closed just 20 higher and 60 points off of the highs of the day. A
collapse in the pork complex and positioning ahead of the Cattle-of-Feed report
for release this afternoon helped to pressure the market late. Cash cattle were
bid at $94.00 in the southern plains with talk that the showlist cattle which
were left were under-finished cattle and this helped support. Boxed beef cutout
values at mid session were up $.11 to $158.07 as compared with $155.03 one week
ago. The average trade estimates for this afternoon’s Cattle on Feed report are
as follows: On-feed at 102% of last year (range 100.5-103%), Placements at 99.7%
(95-108%) and Marketings at 96.5% (range 95-98%). The results of the report will
help set the tone for next week. Slaughter came in at just 107,000 head as
compared with trade estimates at 109,000-116,000 head.
Technical Outlook
CATTLE (JUN) 04/25/2005: 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. The market has a slightly
positive tilt with the close over the swing pivot. The near-term upside target
is at 86.550. The next area of resistance is around 86.100 and 86.550, while 1st
support hits today at 85.370 and below there at 85.070.
Â
LEAN HOGS RECAP
4/22/2005
June Lean Hogs finished down 1.57 at 75.90, 2.07
off the high and 0.10 up from the low.
May Pork Bellies closed down 2.10 at 81.35. This
was 0.45 up from the low and 2.90 off the high.
June hogs collapsed to close 165 lower on the
session with weak packer profit margins contributing to a slowdown in production
and fears that a slowdown at this time of the year could see hogs back up in the
country quickly. Swift & Co announced a cut-back of 20% in production for next
week which led to ideas of a weaker cash market tone for early next week. With
futures already at a premium to the cash market, a weaker tone for cash next
week trigger speculative and then fund selling late. Slaughter came in at
379,000 head as compared with trade estimates at 375,000-387,000 head. Contract
lows for the 4th day in a row for August bellies added to the bearish tone ahead
of the Cold Storage report from the USDA for release this afternoon. For the
Monthly Cold Storage Report, traders are looking for end of March belly stocks
in the 81.9-83.0 million pounds range as compared with 75.3 million the previous
month and 50.1 million last year.
Technical Outlook
HOGS (JUN) 04/25/2005: A crossover down in the
daily stochastics is a bearish signal. Daily stochastics declining into oversold
territory suggest the selling may be drying up soon. The major trend has turned
down with the cross over back below the 18-day moving average. The market is in
a bearish position with the close below the 2nd swing support number. The next
downside objective is 74.220. The next area of resistance is around 76.970 and
78.550, while 1st support hits today at 74.820 and below there at 74.220.
Â
COCOA MARKET RECAP
4/22/2005
July Cocoa finished down 32 at 1506, 9 off the
high and 13 up from the low.
July cocoa prices gapped lower Friday coming
under pressure from heavy fund and producer selling which started in the London
market and spilled over to the NY session. Few production problems in the Ivory
Coast for the mid-crop while the peace accord moving forward is taking the
anxiety factor out of futures prices. Next support for July cocoa is
$1,475.Ivory Cost farmers are trying to hold off on selling the 2004/05 mid-crop
since prices have fallen sharply over the last month. Rising production costs
could lower Nigeria’s 2004/05 mid-cocoa crop and 2005/06 main crop. Farmers do
not have the money to pay for fertilizers and pesticides before the rainy season
starts in May.
Technical Outlook
COCOA (JUL) 04/25/2005: Daily stochastics are
showing positive momentum from oversold levels, which should reinforce a move
higher if near term resistance is taken out. The major trend has turned down
with the cross over back below the 18-day moving average. More selling pressure
is likely given yesterday’s gap lower price action on the day session chart. The
market is in a bearish position with the close below the 2nd swing support
number. The near-term upside target is at 1527. Some caution in pressing the
downside is warranted with the RSI under 30. The next area of resistance is
around 1517 and 1527, while 1st support hits today at 1495 and below there at
1483.
Â
COFFEE MARKET RECAP
4/22/2005
July Coffee closed up 5.05 at 127.80. This was
6.90 up from the low and 1.70 off the high.
July coffee closed 505 higher on the session and
up 1215 points for the week as funds were aggressive buyers ahead of a Brazil’s
2nd crop estimate for the 2005/2006 season. Brazil officials pegged the crop at
32.46 million bags, up slightly from the 31.87 million bag estimate in December
and still below most analysts’ expectations. Production for 2004/2005 came in at
38.6 million bags Arabica production for this coming season is now pegged at
23.3 million bags which is up 800,000 bags from the December forecast but down
7.8 million bags from this season. Funds were active buyers in London and then
New York to support the solid gains.
Technical Outlook
COFFEE (JUL) 04/25/2005: The major trend could be
turning up with the close back above the 60-day moving average. Momentum studies
are trending higher from mid-range, which should support 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. The outside day up
and close above the previous day’s high is a positive signal. 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
objective is at 135.05. The next area of resistance is around 132.05 and 135.05,
while 1st support hits today at 123.50 and below there at 117.95.
Â
SUGAR MARKET RECAP
4/22/2005
July Sugar closed down 0.06 at 8.37. This was
0.06 up from the low and 0.06 off the high.
July sugar came under pressure Friday as traders
adjusted positions before the May contract’s first notice day on May 2nd.
However, trade buying helped to limit losses. More selling pressure is expected
next week with the July contract possibly testing support between 8.20 and 8.13.
However, the longer-term outlook for sugar is positive as a major trade house
has forecasted that demand from India, Russia and China will more than offset
increased production from Brazil.
Technical Outlook
SUGAR (JUL) 04/25/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The close under the 18-day moving average indicates the
longer-term trend could be turning down. The close below the 2nd swing support
number puts the market on the defensive. The next upside objective is 8.49. The
next area of resistance is around 8.43 and 8.49, while 1st support hits today at
8.31 and below there at 8.25.
Â
COTTON MARKET RECAP
4/22/2005
July Cotton finished down 0.32 at 54.12, 0.28 off
the high and 0.37 up from the low.
July cotton came under pressure Friday as traders
adjust positions before the May contract’s first notice day on April 25th. The
latest COT report with options as of April 12th showed the Non-commercial
traders were holding a net long position in cotton of 40,212 contracts, less
than 5,000 below the record net long position in this category, making the
market vulnerable to selling pressure if support levels are violated. Despite
the lower trade Friday, July cotton has been trading in a defined range recently
between 56 and 52 cents, as better than expected export sales and market
sentiment that demand for cotton will remain strong (from China) seems to be
offsetting the forecast for higher world supplies.
Technical Outlook
COTTON (JUL) 04/25/2005: 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. It is a slightly negative
indicator that the close was under the swing pivot. The near-term upside target
is at 54.74. The next area of resistance is around 54.44 and 54.74, while 1st
support hits today at 53.80 and below there at 53.45.