How OPEC Is Affecting Bond Prices

Technical Outlook

BONDS (MAR) 12/5/2003: The market has a slightly positive tilt with the close over the swing pivot. Near-term resistance for bonds is at 107.30 and then again at 108.09, while swing support hits at 107.01 and below there at 106.15. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market now above the 40-day moving average suggests the longer-term trend is up. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 106.15.

T-NOTES(MAR) The upside closing price reversal on the daily chart is somewhat bullish. 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 109.28. With the close over the 1st swing resistance number, the market is in a moderately positive position. Near-term resistance for the T-Notes is at 111.01 and then again at 111.09, while swing support hits at 110.11 and below there at 109.28. The downside crossover (9 below 18) of the moving averages suggests a developing short-term downtrend.

STOCK INDICES RECAP

12/4/2003

The stock market tried to mount a run to new highs but the disappointing US economic numbers and rising energy prices eventually prompted a profit-taking setback in prices. We also have to think that many longs, with profits from the recent run decided to exit positions rather than take the risk of the monthly payroll reports Friday morning. After all, seeing soft initial claims and ongoing claims readings could mean that the monthly numbers could fail to meet expectations. The bulls have a hard enough time fostering sustained buying interest, without being confronted with the type of critical macro economic readings that are scheduled for release Friday morning.

Technical Outlook

S&P500 (DEC) 12/5/2003: The close over the pivot swing is a somewhat positive setup. The upside daily closing price reversal gives the market a bullish tilt. Underlying support comes in at 1065.40 and 1060.40, with overhead resistance at 1072.80 and 1075.20. The close above the 9-day moving average is a positive short-term indicator for trend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside objective is at 1075.20.

S&P E-Mini (DEC): A new contract high was made on the rally. The daily closing price reversal up is positive. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 1075.81. With the close higher than the pivot swing number, the market is in a slightly bullish posture. Near-term resistance for the S&P Mini is at 1073.38 and then again at 1075.81, while swing support hits at 1065.63 and below there at 1060.31. The market’s close above the 9-day moving average suggests the short-term trend remains positive.

NASDAQ (DEC) The daily closing price reversal up is a positive indicator that could support higher prices. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market has a slightly positive tilt with the close over the swing pivot. The market should run into resistance at 1445.00 and above there at 1452.75 with support at 1420.00 and 1402.75. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 1452.75.

CURRENCY MARKET RECAP

12/4/2003

The Dollar ended up showing almost no direction on the session despite US numbers that might have been negative to the greenback. Even the stock market failed to hold gains on the session and that would seem to rekindle the selling interest in the Dollar. While the currency markets haven’t paid much attention to the ebb and flow of US economic information it is possible that the market would pay attention to a disappointing monthly payroll report Friday morning. It is also possible that the trend in the Dollar is still down but seeing the US remove steel sanctions discourages the sellers from pressing the Dollar. The action Wednesday and Thursday appears to be mostly technical balancing.

Technical Outlook

YEN (DEC): A positive signal for trend short-term was given on a close over the 9-bar moving average. The daily closing price reversal up is a positive indicator that could support higher prices. The market has a slightly positive tilt with the close over the swing pivot. Swing resistance is targeted at 92.75 and above there at 92.95, with the yen finding support around 92.27 and below there at 91.99. Stochastics are at mid-range, but trending higher which should reinforce a move higher if resistance levels are taken out. The next upside objective is 92.95.

EURO (DEC): A crossover down in the daily stochastics is a bearish signal. Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The next downside target is now at 1.1965. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing support for the Euro comes in at 1.1965, with overhead resistance at 1.2223. The close above the 9-day moving average is a positive short-term indicator for trend. Follow-through selling is indicated by the key reversal down. The market rallied to a new contract high. More selling pressure is likely given yesterday’s gap lower price action on the day session chart.

PRECIOUS METALS RECAP

12/4/2003

The gold market forged a moderately large range in the action Thursday and then finished slightly lower on the session. The February contract did manage to respect critical psychological support at $400 an ounce. A rather wide trading range, in the Dollar on Thursday, undermined the gold market. Seeing the Dollar show periodic strength simply serves to push gold longs out of the market. The fact that the Dollar managed to pull back above 90.00 made it appear as if the downtrend had been reversed and that also prompted some gold longs to liquidate. Since the gold market continues to see a decline of volume and open interest, in the midst of a technical correction, it would appear as if the bear camp maintains control over the trend.

Technical Outlook

SILVER (MAR): The market tilt is slightly negative with the close under the pivot. Initial support for silver is at 542.2 and below there at 535.1 with resistance likely at 546.1 and 552.2. A positive signal for trend short-term was given on a close over the 9-bar moving average. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 546.1.

GOLD (FEB): Support for gold today comes in near 398.60, while resistance is pegged at 409.00. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 409.00. The swing indicator gave a neutral reading since the market’s close was equal to the pivot number. The close above the 9-day moving average is a positive short-term indicator for trend. The daily closing price reversal down is a negative indicator for prices.

COPPER MARKET RECAP

12/4/2003

The copper market opened slightly lower, attempted a minor rally and then failed in the close. Even with copper seeing signs that the Highland Valley copper talks would be delayed until next year, copper prices didn’t seem to find much buying support off the threat of a labor issue. Furthermore, U.S. economic information on the session was slightly negative to prices, while U.S. equity price action was mostly supportive. However, considering the magnitude of the gains posted this week, a nominal correction is not surprising. When one considers the soft initial claims readings from the U.S. early in the session it is possible that some copper longs simply decided to liquidate, rather than experience the volatility potential of the Friday morning monthly payroll report.

ENERGY MARKET RECAP

12/4/2003

After seeing nondescript price direction early in the session, the crude-oil market managed to close strong. OPEC more than likely prompted the run with statements calling for intense compliance by its members. Countervailing the bullish tilt in prices were statements from OPEC that projected a 2 million barrels per day surplus in the second quarter of 2004. Apparently OPEC will meet in February, instead of the initial March date, because of the fear of a supply glut in early 2004. The natural gas market leaped higher as fund shorts continued to short cover in the face of a larger than expected weekly inventory draw. The 59 bcf draw puts the U.S. storage level at 3.09 trillion cubic feet a level that some consider to be bearish. When one considers the magnitude of the recent rally in natural gas, the small spec position should be bordering on an extensive overbought status. On the other hand, the massive fund short position should be close to flat following the rally this week.

Technical Outlook

CRUDE OIL (JAN): The close over the pivot swing is a somewhat positive setup. Support for crude is keyed on 30.65 and below there at 29.93, with resistance pegged at 31.87 and 32.37. The close above the 9-day moving average is a positive short-term indicator for trend. The crossover up in the daily stochastics is a bullish signal. The near-term upside target is at 32.37.

UNLEADED GAS (JAN): Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 81.63. The market has a slightly positive tilt with the close over the swing pivot. Resistance today is at 89.63, while support should be found around 81.63. A positive signal for trend short-term was given on a close over the 9-bar moving average.

HEATING OIL (JAN): Market positioning is positive with the close over the 1st swing resistance. Heating oil should encounter support around 83.12, with resistance is at 92.12. Short-term indicators suggest buying pullbacks today. The close above the 9-day moving average is a positive short-term indicator for trend. The crossover up in the daily stochastics is a bullish signal. The near-term upside target is at 92.12. The outside day up gives the market a positive tilt. The upside daily closing price reversal gives the market a bullish tilt.

CORN MARKET RECAP

12/4/2003

The March corn market posted a large trading range and then finished well below the prior days close. It would seem that a number of longs are content to bank some profits off the recent rally and move to the sidelines. After seeing expectations for the weekly export sales report of 800,000 to 1,000,000 tons, the actual export tally of 864,400 tons was slightly bearish to prices. However, against the disappointing export sales readings, the trade did see a 100,000 ton sale of corn to Egypt and that served to temper the selling interest. However, it almost seems like the trade is preparing to liquidate open interest and take prices back down to the late November consolidation.

Technical Outlook

CORN (MAR) 12/5/2003: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 255 1/4. The market setup is somewhat negative with the close under the 1st swing support. Market resistance comes in at 255 1/4 today, with support at 244 3/4. The close above the 9-day moving average is a positive short-term indicator for trend. The daily closing price reversal down is a negative indicator for prices.

SOY COMPLEX RECAP

12/4/2003

Slow export sales and long liquidation selling from ideas of an overbought market contributed to the sharp sell-off in soybeans and the products. News that the Bush Administration was going to lift the steel tariffs was seen as a potentially bullish factor for the market as the action might relieve trade tensions with Europe and with China. However, the official announcement that the tariffs were lifted did not come until after the close. Weekly export sales were only 255,100 tons as compared with 500,000 to 850,000 tons expected and 131,600 tons necessary each week to reach the USDA projection. Cumulative sales have reached 78.4% of the USDA forecast for the season as compared with 54.4% on average for this time of the year. While China was a noted buyer of 190,300 tons for the week, “unknown” destination cancelled sales of 338,600 tons.

Technical Outlook

SOYBEANS (JAN) 12/05/03 The close below the 1st swing support could weigh on the market. The next area of resistance is around 775 1/2 and 784 3/4, while 1st support hits today at 762 and below there at 757 3/4. The market’s close on the 9-day moving average is neutral. Stochastics are at mid-range, but trending higher which should reinforce a move higher if resistance levels are taken out. The next upside objective is 784 3/4.

MEAL (JAN): Momentum studies are rising from mid-range which could accelerate a move higher if resistance levels are penetrated. The near-term upside target is at 234.7. First resistance comes in at 232.5, with support at 229.3. The close above the 9-day moving average is a positive short-term indicator for trend. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. The close below the 40-day moving average is an indication the longer-term trend is down.

BEAN OIL (JAN): A positive signal for trend short-term was given on a close over the 9-bar moving average. A bearish signal was triggered on a crossover down in the daily stochastics. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 26.93. The close below the 2nd swing support number puts the market on the defensive. Daily swing resistance is found at 27.78 and above there at 28.21. Support should be encountered at 27.14 and 26.93.

WHEAT MARKET RECAP

12/4/2003

The outside day down from a contract high and the close which was below the opening and more than 10 cents off of the highs for March wheat leaves the market technically overbought and vulnerable to long liquidation selling. Weekly export sales came in at 891,700 tons as compared with trade expectations at 450,000 to 650,000 tons and 336,400 tons necessary each week to reach the USDA projection. Cumulative sales have reached 69.4% of the USDA projection for the year as compared with 60.7% as normal for this time of the year. There was 442,400 tons from “unknown” destination which traders thought might be an Eastern Europe country or China. The shift in the 6-10 day forecast for next week from warm and dry to cold and wet for the southern plains leaves an opportunity for the dry areas to get some relief if the moisture is far enough north.

Technical Outlook

WHEAT (MAR) 12/5/2003: The market made a new contract high on the rally. The market could take on a defensive posture with the daily closing price reversal down. The close below the 1st swing support could weigh on the market. Expect near-term support around 405 1/2 and below there at 402 1/2, with resistance levels at 416 1/2 and 424 1/2. A positive indicator was given with the upside crossover of the 9 & 18 bar moving average. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 424 1/2.

LIVE CATTLE RECAP

12/4/2003

February cattle closed 132 lower on the session with massive long liquidation from fund traders as one of the key bearish forces for the collapse. Follow-through technical selling from the key reversal this week added to the bearish tone. Cash cattle traded at $100 in the southern plains which is steady against last week but leaves February cattle at an 812 point discount to the cash market. The forecast for a potential storm for late next week in Oklahoma and Texas may help provide underlying support to the trade on Friday if the weather maps help confirm a storm. Boxed-beef cut-out values were down $1.34 to $161.52 as compared with $161.97 last week at this time.

Technical Outlook

CATTLE (FEB) 12/5/2003: A bearish signal was triggered on a crossover down in the daily stochastics. The next downside objective is 90.92. Could see some early pressure today given the market’s negative setup with the close below the 2nd swing support. Support should be encountered at 91.30 and below there at 90.92. Market resistance is at 92.45 and then again at 93.22. The gap lower on the day session chart is bearish and puts the market on the defensive. A negative signal for trend short-term was given on a close under the 9-bar moving average.

LEAN HOGS RECAP

12/4/2003

February hogs closed 120 points lower on the session but up 55 from the lows of the day. Fundamental news remains mostly negative but the 440 point break off of Mondays highs to take out the November lows may have been enough to price-in the extra hogs. Slaughter has been running at near capacity with slaughters above 390,000 head for weeks but the trade continues to believe that numbers will begin to slow soon. Packer profit margins are high which is a positive demand factor and pork cut-out values are up over the past week which is also an indication of improving consumer demand during a period of heavy production. Slaughter was only 381,000 head. With a slaughter plant in Illinois stopping operations late Wednesday and not moving any hogs through the plant today, demand in the cash market is in question for Friday.

Technical Outlook

HOGS (FEB) 12/5/2003: The market setup is somewhat negative with the close under the 1st swing support. Resistance levels comes in at 53.92 and 54.82 today, while support is around 52.37 and then 51.72. The close below the 9-day moving average is a negative short-term indicator for trend. Momentum studies are rising from mid-range which could accelerate a move higher if resistance levels are penetrated. The near-term upside target is at 54.82.

COCOA MARKET RECAP

12/4/2003

The March cocoa futures contract nearly gapped higher to start the session Thursday, extended the run to 1,623 but then settled slightly below mid range on the session. Apparently small spec buying was a major feature of the session early and that could make for increased volatility in the sessions ahead. On the other hand, the London cocoa market noted increased fund buying and that suggests buying in both markets Thursday was coming from a number of sources. There were reports of some light origin selling and that probably served to cap the gains and push prices back away from highs of the day. The Ivory Coast’s President apparently met with rebel leaders to discuss disarmament but as of the close Thursday, no agreement had been reached.

Technical Outlook

COCOA (MAR)12/05/03 The market setup is supportive for early gains with the close over the 1st swing resistance. Cocoa should run into resistance at 1621 and above there at 1638 with support at 1588 and 1572. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 1638.25. Short-term indicators suggest buying dips today.

COFFEE MARKET RECAP

12/4/2003

March coffee posted a big range down and closed marked below the prior sessions close despite what seemed to be a bullish crop forecast from the Brazil Ag Minister. Apparently the Brazilian Ag Minister pegged the 2003-2004 crop to 28.46 million bags and the 2004-2005 crop at 34.10 to 37.47 million bags. The prior crop forecast was evidently 5 million bags above the most recent forecast. However, it would not seem like the market gave the new forecast much consideration.

Technical Outlook

COFFEE (MAR)12/5/03 Could see some early pressure today given the market’s negative setup with the close below the 2nd swing support. Daily stochastics are showing positive momentum from oversold levels which should reinforce a move higher if near-term resistance is taken out. The near-term upside objective is at 66.20.The Coffee contract should run into resistance at 65.00 and above there at 66.20 with support at 62.5 and 61.20. The market’s short-term trend is positive on a close above the 9-day moving average.

SUGAR MARKET RECAP

12/4/2003

March sugar is already up 47 points off of the December lows with two “gap higher” openings in a row after today’s sharp rally. This leaves the market in an overbought condition. Funds and trade houses were active buyers on the opening and traders suspect both groups are buying for short-covering purposes. However, open interest is up on the week and was up again for December 3rd by over 9000 contracts to over 200,000 open. While we continue to hear that the rally is merely short-covering, the numbers do not confirm. Rising open interest suggests new buyers and new sellers are entering the market. The data is bullish and suggest that the shorts are still holding tight and that trade houses are fighting the trend and adding to short positions.

Technical Outlook

SUGAR (MAR) 12/5/2003: Follow through buying looks likely if the market can hold yesterday’s gap on the day session chart. There could be more upside follow through since the market closed above the 2nd swing resistance. Swing resistance comes in at 6.80, with support found at 6.58. The close above the 9-day moving average is a positive short-term indicator for trend. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 6.80. The market is becoming somewhat overbought now that the RSI is over 70.

COTTON MARKET RECAP

12/4/2003

March cotton closed 140 lower on the session but well off of the lows of the day as the bearish weekly export sales data helped pressure the market. Weekly export sales came in at 286,600 bales as compared with trade expectations of 500,000-800,000 bales and 120,800 bales necessary each week to reach the USDA projection. China was a noted buyer of just 89,800 bales for the week when traders believed that China was a large buyer recently. The market managed to fill most of the gap left on December 1st. China has so far booked 2.959 million bales of cotton this season as compared with 551,500 bales last year by this time.

Technical Outlook

COTTON (MAR) 12/5/2003: A negative signal for trend short-term was given on a close under the 9-bar moving average. Could see some early pressure today given the market’s negative setup with the close below the 2nd swing support. Next resistance area comes in at 72.21 and then again at 73.20, while support is targeted at 70.26 and 69.30. Stochastics are at mid-range, but trending higher which should reinforce a move higher if resistance levels are taken out. The next upside objective is 73.20. The gap lower on the day session chart is bearish and puts the market on the defensive.