How Energy Prices Are Affecting The Dollar

Technical Outlook

BONDS (MAR) 12/18/03: 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. Near-term resistance for bonds is at 110.15 and then again at 110.31, while swing support hits at 109.14 and below there at 108.29. The market’s close above the 9-day moving average suggests the short-term trend remains positive. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 110.31.

T-NOTES(MAR) Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 113.06. It is a mildly bullish indicator that the market closed over the pivot swing number. The major trend is down with the cross over back below the 40-day moving average. Near-term resistance for the T-Notes is at 112.28 and then again at 113.06, while swing support hits at 112.09 and below there at 112.00. The market’s short-term trend is positive on a close above the 9-day moving average.

STOCK INDICES RECAP

12/17/2003

The sharp rise in energy prices and the slide in the Dollar to new lows for the move is beginning to scare some equity investors. In fact, the stock market might need a steady diet of favorable economic reports just to offset some of the outside factors that might be capable of derailing the recovery. Wall Street has been especially sensitive to the rise in energy prices, as Wall Street has been looking for ways to say that the 3rd quarter growth pattern would not be extended into the New Year. Many traders think that the market is still overbought and vulnerable after the big spike up Monday and that is serving to keep many buyers on the sidelines.

Technical Outlook

S&P500 (MAR) 12/18/03: It is a mildly bullish indicator that the market closed over the pivot swing number. Underlying support comes in at 1072.90 and 1067.50, with overhead resistance at 1080.10 and 1081.90. The market’s short-term trend is positive on a close above the 9-day moving average. Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The next downside objective is now at 1067.50.

S&P E-Mini (MAR): The market made a new contract high on the rally. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 1067.56. The market has a slightly positive tilt with the close over the swing pivot. Near-term resistance for the S&P Mini is at 1080.13 and then again at 1082.06, while swing support hits at 1072.88 and below there at 1067.56. A positive signal for trend short-term was given on a close over the 9-bar moving average.

NASDAQ (MAR) The market’s close below the 9-day moving average is an indication the short-term trend remains negative. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The market should run into resistance at 1414.75 and above there at 1420.38 with support at 1398.25 and 1387.38. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 1387.4.

CURRENCY MARKET RECAP

12/17/2003

Another fresh contract low rekindles the idea that little is set to change the direction of the Dollar. The fact that the US is the biggest consumer of energy in the world and energy prices are exploding might actually be adding some selling pressure to the Dollar. The fact that the Dollar didn’t turn back up on the Saddam capture and has now made fresh contract lows simply gives the bears courage to attack the greenback. As suggested before, until concerted intervention is threatened the market is content to allow the Dollar to fall.

Technical Outlook

YEN (MAR): 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. Swing resistance is targeted at 93.49 and above there at 93.68, with the yen finding support around 93.15 and below there at 93.00. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 93.68.

EURO (MAR): Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 1.2448. The market is in a bearish position with the close below the 2nd swing support number. Swing support for the Euro comes in at 1.2270, with overhead resistance at 1.2448. The market’s short-term trend is positive on a close above the 9-day moving average. With a reading over 70, the 9-day RSI is approaching overbought levels. The market’s key reversal down is a bearish signal. The rally brought the market to a new contract high. The gap down on the day session chart is bearish with more selling pressure possible today.

PRECIOUS METALS RECAP

12/17/2003

Maybe it was the upside breakout in energy prices that fostered buying in the gold but the fact that the Dollar fell to a significantly lower level was certainly part of the buying influence. The ability to climb back above $411 and close at a new high should give the market follow through capacity Thursday but only if the Dollar continues down overnight. Maybe the upside breakout in the US Treasury market and the rising energy price situation is ramping up macro economic anxiety and providing gold with additional flight to quality buying. The gold market hasn’t been driven much recently by flight to quality if that in fact is what is fueling the breakout.

Technical Outlook

SILVER (MAR): A positive setup occurred with the close over the 1st swing resistance. Initial support for silver is at 566.6 and below there at 560.8 with resistance likely at 570.1 and 575.1. The market’s close above the 9-day moving average suggests the short-term trend remains positive. The daily stochastics have crossed over up which is a bullish indication. The next upside target is 570.1. The 9-day RSI over 70 indicates the market is approaching overbought levels. The daily closing price reversal up is positive.

GOLD (FEB): Support for gold today comes in near 407.13, while resistance is pegged at 416.13. The daily stochastics gave a bullish indicator with a crossover up. The near-term upside objective is at 416.13. The market’s close above the 2nd swing resistance number is a bullish indication. The market’s short-term trend is positive on a close above the 9-day moving average. With a reading over 70, the 9-day RSI is approaching overbought levels.

COPPER MARKET RECAP

12/17/2003

Some suggest that the failure to hold above $1.00 is a major failure for the copper market but we think that market was simply banking some profits after the headlines discussed the buffer stock holdings of Codelco. Just being reminded that the market does have producer stocks in addition to the exchange stocks is cause to dampen bull sentiment and since the market has forged a breakneck rise since the November lows one has to expect back and fill profit taking. We might also add that recent gains have been fostered by two strikes and solving either one of those strikes could elicit an even more aggressive correction.

ENERGY MARKET RECAP

12/17/2003

The energy market vaulted higher on news that US crude stocks decline moderately at the API and massively at the DOE. In fact, US crude stocks currently within 1 million barrels of the EIA critical pipeline level of 200 million barrels the trade is certainly justified in taking prices higher. In fact, Dow Jones suggested that US crude stocks have declined 21 million barrels in the last 4 weeks! In the end, the demand expectation is having little to do with the recent gains as supply is tight and speculative interests are willing to drive prices up.

Technical Outlook

CRUDE OIL (FEB): The rally brought the market to a new contract high. With the close over the 1st swing resistance number, the market is in a moderately positive position. Support for crude is keyed on 32.98 and below there at 32.56, with resistance pegged at 33.80 and 34.20. The market’s short-term trend is positive on a close above the 9-day moving average. Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 34.20. With a reading over 70, the 9-day RSI is approaching overbought levels.

UNLEADED GAS (FEB): Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 95.20. A positive setup occurred with the close over the 1st swing resistance. Resistance today is at 95.20, while support should be found around 89.80. A new contract high was made on the rally. The market’s close above the 9-day moving average suggests the short-term trend remains positive. The 9-day RSI over 70 indicates the market is approaching overbought levels.

HEATING OIL (FEB):The market’s close above the 2nd swing resistance number is a bullish indication. Heating oil should encounter support around 91.21, with resistance is at 97.41. The market’s short-term trend is positive on a close above the 9-day moving average. Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 97.41. With a reading over 70, the 9-day RSI is approaching overbought levels. The rally brought the market to a new contract high.

CORN MARKET RECAP

12/17/2003

March corn closed 1/2 cent lower with a quiet 2 1/4 cent range as weakness in the wheat market offset some strength in soybeans. The market continues to find underlying support from firm cash markets, active near-term demand and slow producer selling. Some basis weakness at the gulf and ideas that the market is overbought helped trigger light long liquidation selling. Weekly export sales, released before the opening, are expected to come in near 650,000-900,000 tons as compared with 1.037 million tons last week. Traders expect the USDA Hogs and Pigs report at the end of the month to show a significant revision higher in the US hog herd and the average trade estimate for Friday’s USDA December 1st Cattle-on-Feed inventory came in at 105.1% of last year. Both reports could have an impact on the domestic feed usage estimate for the January Supply/demand report.

Technical Outlook

CORN (MAR) 12/18/03: The daily stochastic’s gave a bearish indicator with a crossover down. Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The next downside objective is now at 249 . The market’s close below the pivot swing number is a mildly negative setup. Market resistance comes in at 253 1/2 today, with support at 249 . The upside crossover (9 above 18) of the moving averages suggests a developing short-term uptrend.

SOY COMPLEX RECAP

12/17/2003

Soybeans closed 4-5 cents higher on the session in quiet trade as hopes of China buying (current expectation of near 500,000 tons) and a bounce in meal values helped support. The China purchase will likely have a much larger price impact if the sales are for delivery in the first quarter of 2004. While there is a drier period ahead for western Argentina, weather conditions continue to be viewed as favorable for early growth of the projected record crops from South America. Weekly export sales, released before the opening, are expected to come in near 400,000-550,000 tons for soybeans, 50,000-125,000 tons for meal and 4,000-10,000 tons for oil.

Technical Outlook

SOYBEANS (JAN) 12/18/03: With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next area of resistance is around 773 and 777 , while 1st support hits today at 764 and below there at 759 . The market’s close below the 9-day moving average is an indication the short-term trend remains negative. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 759 .

MEAL (JAN): Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The next downside objective is now at 226.1. First resistance comes in at 231.7, with support at 228.2. The market’s short-term trend is negative as the close remains below the 9-day moving average. With the close over the 1st swing resistance number, the market is in a moderately positive position.

BEAN OIL (JAN): The market’s close below the 9-day moving average is an indication the short-term trend remains negative. 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 next downside target is 27.85. With the close higher than the pivot swing number, the market is in a slightly bullish posture. Daily swing resistance is found at 28.32 and above there at 28.47. Support should be encountered at 28.01 and 27.85.

WHEAT MARKET RECAP

12/17/2003

The wheat market closed 3 1/2 lower on the session with choppy, two-sided trade. News that Egypt bought only 60,000 tons from the US and 120,000 tons from Australia helped pressure. In addition, Argentina officials pegged the crop at 12.4 million tons as compared with their last estimate at 11.3-11.8 million tons but in-line with the last USDA estimate at 12.5 million. Talk of possible China business provided underlying support. Weekly export sales, released before the opening, are expected to come in near 500,000-850,000 tons as compared with 464,400 tons last week.

Technical Outlook

WHEAT (MAR) 12/18/03: The downside closing price reversal on the daily chart is somewhat negative. It is a slightly negative indicator that the close was lower than the pivot swing number. Look for near-term support at 382 and below there at 378 1/4, with resistance levels at 390 and 394 1/4. The market’s close below the 9-day moving average is an indication the short-term trend remains negative. Momentum studies are declining, but have fallen to oversold levels. The next downside target is 378 1/4.

LIVE CATTLE RECAP

12/17/2003

February cattle closed slightly higher in quiet trade with talk of weaker cash markets this week and a lack of cash trade keeping a lid on the bounce. There is still no trade in the cash market this week but bids moved up to $92.00 from $90-$91 last week and cash trade last week at $95.00. Boxed-beef cut-out values were down $.16 at mid-session to $157.68. The average trade estimate for Friday’s Cattle-on-Feed report came in at 105.1% (range 103-106) for December 1st on-feed supply. Placements for November were pegged at 99.7% (range 96-104) and marketings were estimates at near 84.7% (range 80.9-95).

Technical Outlook

CATTLE (FEB) 12/18/03: Momentum studies are declining, but have fallen to oversold levels. The next downside target is 88.37. It is a slightly negative indicator that the close was lower than the pivot swing number. Support should be encountered at 89.02 and below there at 88.37. Market resistance is at 90.07 and then again at 90.50. The daily closing price reversal up is positive. The market’s close below the 9-day moving average is an indication the short-term trend remains negative.

LEAN HOGS RECAP

12/17/2003

February hogs closed moderately higher on the session with fairly decent speculative buying on the idea that pork supplies are close to a peak. The market found support from expectations of firm cash into the weekend when packers are anticipating a hefty slaughter and from overflow support from the cattle. The weekly cold storage report released Tuesday night was slightly supportive as well and traders await Thursday’s Monthly report. The CME 2-day Lean Index came in at 49.85 for the period ending December 15th which was down 6 cents from the previous session. Weekly average weights for Iowa/Minnesota came in at 268.1 pounds for the week ending December 13th. This is the highest level on out records which go back to 1988 and the average is up 2.2 pounds from the previous week and up 3.4 pounds from last year. This is a negative set-up ahead of a period when packer demand for market-ready hogs is slowing down for the holiday. The high weights just add to negative tone.

Technical Outlook

HOGS (FEB) 12/18/03: It is a mildly bullish indicator that the market closed over the pivot swing number. Resistance levels comes in at 52.75 and 53.05 today, while support is around 51.90 and then 51.35. The market’s short-term trend is negative as the close remains below the 9-day moving average. Daily stochastics are trending lower, but have declined into oversold territory. The next downside objective is now at 51.35.

COCOA MARKET RECAP

12/17/2003

The US cocoa market managed an inside day after a series of big declines and that suggests the market is oversold or is finding some fundamental reason to halt the slide. The market is also expecting the Ivory Coast rebels who left the government to decide soon if they will return to the government positions and that could be a major turning point. If the rebels decide to stay out that could rekindle political anxiety and help support prices against the coming harvest flow. Apparently some traders viewed the low of $1,563 to be a value zone as commercials and spec accounts snapped up longs around the lows.

Technical Outlook

COCOA (MAR)12/18/03 The market has a slightly positive tilt with the close over the swing pivot. Cocoa should run into resistance at 1620 and above there at 1650 with support at 1561 and 1532. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 1532.25.

COFFEE MARKET RECAP

12/17/2003

March coffee saw strong gains on roaster buying and fund short covering as near-term supply tightness rekindles demand. Coffee prices are still relatively cheap compared to earlier this year and with F. O. Licht forecasting a world coffee deficit of 10.1 million bags (production – consumption) for the 2003/04 marketing year, roasters buying interest has perked up. As of December 9th, the funds were net short nearly 7,000 contracts and may have more short covering to do. Next key area of resistance for March coffee is at 66.

Technical Outlook

COFFEE (MAR)12/18/03 The market setup is supportive for early gains with the close over the 1st swing resistance. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside objective is now at 61.85.The Coffee contract should run into resistance at 64.60 and above there at 65.45 with support at 62.8 and 61.85. The market’s short-term trend is negative as the close remains below the 9-day moving average. The major trend could be turning up with the close back above the 40-day moving average.

SUGAR MARKET RECAP

12/17/2003

The market closed near unchanged in quiet trade. The market looks ready to resume the downtrend started on Monday as the cash fundamental news is turning more negative and the technical structure of the market looks vulnerable to a long liquidation sell-off into the end of the year. Cash market buyers are still not too anxious to dive in and extend coverage with a steady flow of news indicating hefty unsold sugar supplies for the current crop season and no sign of trouble with next years Brazil crop. The energy price rally is an outside factor which might encourage some rise in ethanol production in Brazil but there seems to be plenty of cane to go around in Brazil.

Technical Outlook

SUGAR (MAR) 12/18/03: It is a mildly bullish indicator that the market closed over the pivot swing number. Swing resistance comes in at 6.62, with support found at 6.44. The market’s short-term trend is negative as the close remains below the 9-day moving average. Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The next downside objective is now at 6.44.

COTTON MARKET RECAP

12/17/2003

March cotton prices continued to trade in a tight sideways pattern as the market appears to be waiting for fresh news. Thursday’s trade should be influenced by the morning export sales report. The trade is looking for export sales to be about the same as the previous week with estimates between 150,000 to 175,000 bales compared to 150,900 last week. However, shipments could be big since the Chinese have already booked large purchases that should show up in shipments soon. An improving world demand outlook for cotton has yet to help reverse the market’s downtrend. March has near-term resistance at 71 then 72.

Technical Outlook

COTTON (MAR) 12/18/03: 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. Next resistance area comes in at 70.66 and then again at 70.86, while support is targeted at 70.09 and 69.72. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 70.86. ORANGE JUICE (JAN)12/18/03 The market setup is supportive for early gains with the close over the 1st swing resistance. Orange Juice should run into resistance at 67.10 and above there at 67.50 with support at 66.25 and 65.80. The market’s short-term trend is negative as the close remains below the 9-day moving average. Momentum studies are declining, but have fallen to oversold levels. The next downside objective is now at 65.8.