If Oil Falls, Watch Your Bonds…Here’s Why

Technical Outlook

#BONDS (JUN) 06/03/04: It is a slightly negative
indicator that the close was lower than the pivot swing number. Near-term
resistance for bonds is at 105.23 and then again at 106.03, while swing support
hits at 105.07 and below there at 105.03. The market’s close below the 9-day
moving average is an indication the short-term trend remains negative. Positive
momentum studies in the neutral zone will tend to reinforce higher price action.
The next upside target is 106.03.

T-NOTES(JUN) Momentum studies are trending higher
from mid-range which should support a move higher if resistance levels are
penetrated. The near-term upside objective is at 109.25. The market’s close
below the 1st swing support number suggests a moderately negative setup for
today. Near-term resistance for the T-Notes is at 109.16 and then again at
109.25, while swing support hits at 109.04 and below there at 109.01. The
market’s short-term trend is negative as the close remains below the 9-day
moving average.

STOCK INDICES RECAP

6/2/2004

The stock market rallied Wednesday in the face of
sharply lower energy prices and that has been the major issue scaring investors
away from the market. We also think that the stock market is hopeful that
increased efforts to stop terrorism funding in Saudi Arabia might make it more
difficult for terrorist to carry out attacks world wide. While some buyers saw
the energy market weakness as change of pattern many investors are reserving
judgment as there is still the issue of how the US is going to rebuild its
gasoline inventories. The stock market might also have taken comfort in comments
from the Fed Chairman that seemed to reconfirm a slow and gradual rate hike
process ahead. The Fed Chairman said that historical rate rising patterns are
not a good guide for the current situation!

Technical Outlook

#S&P500 (JUN) 06/03/04: It is a mildly bullish
indicator that the market closed over the pivot swing number. Underlying support
comes in at 1120.30 and 1114.25, with overhead resistance at 1130.30 and
1134.25. 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 1134.25.

S&P E-Mini (JUN): Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
1134.69. The market has a slightly positive tilt with the close over the swing
pivot. Near-term resistance for the S&P Mini is at 1130.63 and then again at
1134.69, while swing support hits at 1120.38 and below there at 1114.19. A
positive signal for trend short-term was given on a close over the 9-bar moving
average.

NASDAQ (JUN) The downside closing price reversal
on the daily chart is somewhat negative. The market’s close above the 9-day
moving average suggests the short-term trend remains positive. It is a slightly
negative indicator that the close was lower than the pivot swing number. The
market should run into resistance at 1474.75 and above there at 1484.38 with
support at 1455.25 and 1445.38. Studies are showing positive momentum, but are
now in overbought territory so some caution is warranted. The next upside target
is 1484.4.

MINI DOW (JUN) The market’s close above the 9-day
moving average suggests the short-term trend remains positive. The market should
run into resistance at 10314 and above there at 10351 with support at 10215 and
10153. Studies are showing positive momentum, but are now in overbought
territory so some caution is warranted. The next upside target is 10351. The
cross over and close above the 40-day moving average indicates the longer-term
trend has turned up. A positive setup occurred with the close over the 1st swing
resistance. Short-term indicators suggest buying dips today.

CURRENCY MARKET RECAP

6/2/2004

The Dollar managed to rebound off early lows
Wednesday, probably because the sharp energy price decline or because of the
Saudi moves to restrain terror financing. Seeing energy prices dive sharply has
to reduce the drag on the US economy and lower the anxiety that investors feel
toward the world’s largest energy consumer the US! We are actually surprised
that the Dollar was able to mount a recovery bounce with the US economic report
slate empty and the Fed Chairman once again shooting down the idea of aggressive
US rate hikes. In order for the Dollar to rise, US growth has to ramp up or the
market has to think that US rates are ready to rise and neither of those issues
are probable in the short term.

Technical Outlook

#CURRENCIES 06/03/04: YEN (JUN): 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 91.08 and above there
at 91.26, with the yen finding support around 90.66 and below there at 90.42.
Studies are showing positive momentum, but are now in overbought territory so
some caution is warranted. The next upside target is 91.26.

EURO (JUN): Momentum studies are trending higher,
but have entered overbought levels. The near-term upside objective is at 1.2338.
The market is in a bearish position with the close below the 2nd swing support
number. Swing support for the Euro comes in at 1.2136, with overhead resistance
at 1.2338. The market’s short-term trend is positive on a close above the 9-day
moving average. The gap down on the day session chart is bearish with more
selling pressure possible today.

PRECIOUS METALS RECAP

6/2/2004

The metals markets fell apart during the session
Wednesday and it appeared like something negative was coming out of China as the
copper market was sharply lower and then the rest of the metals weakened. When
the metals saw signs that China might not have to tighten credit policies it
managed a strong recovery off the May lows and that is why we think that big
surprise moves in gold and silver might be tied to the economic outlook for
China. It is also possible that the 50-60 point recovery in the Dollar
undermined the precious metals market. Lastly, it is possible that a massive
slide in energy prices reduced the overall flight to quality benefit in gold and
that caused some longs to exit.

Technical Outlook

#P-METALS 06/03/04: SILVER (JUL): The close below
the 2nd swing support number puts the market on the defensive. Initial support
for silver is at 568.3 and below there at 558.7 with resistance likely at 592.8
and 599.3. The market’s close below the 9-day moving average is an indication
the short-term trend remains negative. The daily stochastics have crossed over
down which is a bearish indication. The next downside target is 558.7.

GOLD (AUG): Support for gold today comes in near
386.50, while resistance is pegged at 400.50. Momentum studies are trending
higher, but have entered overbought levels. The near-term upside objective is at
400.50. The market’s close below the 1st swing support number suggests a
moderately negative setup for today. The market’s short-term trend is positive
on a close above the 9-day moving average. The major trend is down with the
cross over back below the 40-day moving average.

COPPER MARKET RECAP

6/2/2004

The copper market collapsed and did so because
the funds decided to dump positions. We initially thought that something
negative was developing inside China but in the end it seemed like all the
metals were under attack. Reports of rising copper production from Peru (+25.8%)
combined with stories from the prior session of increased Mexican copper
production to undermine the bull case. Keep in mind, the tightness argument is
the main argument in the bull case and with added supply flowing demand has to
rise to maintain or extend the bull case. It is clear that lower energy prices
and an improved macro economic outlook aren’t that beneficial to copper in the
near term and that is also disappointing to the bull case.

ENERGY MARKET RECAP

6/2/2004

Apparently the bull camp couldn’t stand the heat,
as the flurry of promises from OPEC deflated the bull track and probably caused
a stop loss selling binge in the process. With OPEC-10 hinting that they could
lift their production by 700,000 barrels per day quickly and all of OPEC raising
its Quota by 2.5 million barrels per day, the market at least became fearful
that near term supply could be set to rise. A private forecasting firm suggested
that they see June OPEC output rising by 1 million barrels per day over the May
totals and that also pushed some longs to the sidelines. Lastly, the Kuwait Oil
Minister talked about a hypothetical situation where OPEC would step up the
Quota by 2.5 million, with that OPEC-10 production of 700,000 barrels per day
providing the impetus to deflate crude prices by 6-8 Dollars. Therefore, a
significant change is in motion but one has to remember the delayed inventory
reports are due out Thursday morning and they could temper the new found
bearishness.

Technical Outlook

#ENERGIES 06/03/04: CRUDE OIL (AUG): The market
is in a bearish position with the close below the 2nd swing support number.
Support for crude is keyed on 38.88 and below there at 38.29, with resistance
pegged at 40.98 and 42.49. The market’s short-term trend is negative as the
close remains below the 9-day moving average. The daily stochastic’s gave a
bearish indicator with a crossover down. The next downside objective is now at
38.29.

UNLEADED GAS (AUG): Negative momentum studies in
the neutral zone will tend to reinforce lower price action. The next downside
target is 120.56. The close below the 2nd swing support number puts the market
on the defensive. Resistance today is at 129.96, while support should be found
around 120.56. The moving average crossover down (9 below 18) indicates a
possible developing short-term downtrend.

HEATING OIL (AUG): The market is in a bearish
position with the close below the 2nd swing support number. Heating oil should
encounter support around 98.16, with resistance is at 107.36. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. The daily stochastic’s gave a bearish indicator with a crossover down.
The next downside objective is now at 98.16.

CORN MARKET RECAP

6/2/2004

Ideas that the market is overbought triggered
some light long liquidation selling shortly after the opening but fears of lost
acres and "less than ideal" weather ahead helped to provide support. December
was supported by talk that damaged acres will probable not be planted to
soybeans because of the late date while long liquidation from small speculators
helped to pressure July corn. Weakness in the basis and some light producer
selling also pressured July. A sharp break in wheat and soybeans has failed to
attract much interest in selling corn. In fact, traders believe that funds could
turn active buyers again on a minor correction from today’s highs. The technical
action remains bullish and seems to be attracting more speculative interest in
corn as December corn gapped the major downtrend channel on the rally yesterday.
In the state by state reports from last nights crop progress reports, the Iowa
report indicated that 5% of the states crop needs to be replanted. This
represents about 620,000 acres in Iowa alone. South Korea is tendering for
105,000 tons of optional origin corn. December corn support comes in at 314 1/4
and 312 with 322 3/4 and 331 as next resistance.

Technical Outlook

#CORN (DEC) 06/03/04: Momentum studies are
trending higher, but have entered overbought levels. The near-term upside
objective is at 324 3/4. The market’s close above the 2nd swing resistance
number is a bullish indication. Market resistance comes in at 324 3/4 today,
with support at 313 3/4. 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.

SOY COMPLEX RECAP

6/2/2004

The lack of new buying interest from fund traders
and some concerns that "problem" corn acreage which may need to be replanted
could move to soybeans helped trigger some light long liquidation after the
higher opening. As a result, November soybeans experienced selling pressures
while December corn remained higher on the session into the close. Agronomist
believe that mid-west soybean yields could drop about 25% of 1 bushel per acre
on average for each day planted past May 20th. Ideas that futures are overbought
after yesterday’s limit-up move and light profit-taking selling added to the
more negative tone into mid-session. The China demand debate continues but there
is some optimism that the "worst" of the demand news from China may be behind up
now. News that Taiwan bought 58,000 tons of Brazil soybeans overnight was seen
as a positive factor for demand. Short-term support for November soybeans comes
in at 715 and 710 with 733 and 749 3/4 as next key resistance.

Technical Outlook

#SOYBEANS (NOV) 06/03/04: The swing indicator
gave a moderately negative reading with the close below the 1st support number.
The next area of resistance is around 727 1/2 and 739 1/4, while 1st support
hits today at 710 1/2 and below there at 705 1/4. The market’s close above the
9-day moving average suggests the short-term trend remains positive. Positive
momentum studies in the neutral zone will tend to reinforce higher price action.
The next upside target is 739 1/4.

MEAL (DEC): Momentum studies are trending higher
from mid-range which should support a move higher if resistance levels are
penetrated. The near-term upside objective is at 234.9. First resistance comes
in at 230.8, with support at 224.8. The market’s short-term trend is positive on
a close above the 9-day moving average. The market’s close below the 1st swing
support number suggests a moderately negative setup for today. The major trend
is down with the cross over back below the 40-day moving average.

BEAN OIL (DEC): The market’s close above the
9-day moving average suggests the short-term trend remains positive. Positive
momentum studies in the neutral zone will tend to reinforce higher price action.
The next upside target is 26.17. The swing indicator gave a moderately negative
reading with the close below the 1st support number. Daily swing resistance is
found at 25.88 and above there at 26.17. Support should be encountered at 25.48
and 25.37.

WHEAT MARKET RECAP

6/2/2004

Talk of mixed export demand and increased
commercial harvest selling pressure from the hard red winter wheat belt helped
to trigger the selling and weak close. In addition, traders believe the market
is in a short-term overbought condition after this weeks sharp gains and that
the weekly crop progress reports bought about no new surprise. News that Taiwan
millers passed on their overnight tender for 42,510 tons helped to sour the
demand tone but Jordan bought 50,000 tons of US wheat which was seen as a
positive development. Rain is expected to slow the hard red harvest later this
week into Texas and Oklahoma. In addition, more rain for the Midwest into the
weekend threatens to cause more problems for the soft red crop. In spite of the
many production and potential yield problems for the winter wheat harvest ahead,
there is still a fear from the bulls that export demand will drop of sharply for
the new crop season due to the expected surge in production. July wheat support
comes in at 373 3/4 (50% correction of May 14th to June 1st rally) and 369 3/4
with resistance at 377 3/4 and 384.

Technical Outlook

#WHEAT (DEC) 06/03/04: The swing indicator gave a
moderately negative reading with the close below the 1st support number. Look
for near-term support at 390 and below there at 387 1/2, with resistance levels
at 399 1/2 and 406 1/2. The moving average crossover up (9 above 18) indicates a
possible developing short-term uptrend. The close under the 40-day moving
average indicates the longer-term trend could be turning down. Positive momentum
studies in the neutral zone will tend to reinforce higher price action. The next
upside target is 406 1/2.

LIVE CATTLE RECAP

6/2/2004

The market soared to new contract highs led by
bullish indications from the cash market. Live cattle traded at $89.00 and
$90.00 in the southern plains as a major packer bid up process in Texas and
Kansas. At noon, boxed beef cutout values were up $3.21 to $150.94 as compared
with $151.28 last week at this time. The jump in beef prices, talk of improved
packer profit margins and the discount of futures to the cash market helped to
support the move to new contract highs. The surge higher in futures helped to
narrow the margin between cash and futures.

Technical Outlook

#CATTLE (AUG) 06/03/04: Studies are showing
positive momentum, but are now in overbought territory so some caution is
warranted. The next upside target is 92.07. 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. Support should be encountered at
88.80 and below there at 87.57. Market resistance is at 91.05 and then again at
92.07. 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.

LEAN HOGS RECAP

6/2/2004

July hogs closed 42 lower on the session and down
115 points from the highs of the day. The weak technical action and high open
interest leaves the market vulnerable to a technical correction after the market
has failed to reach new highs and technical indicators are overbought. Cash
markets were mostly $.50 lower on the session and the CME 2-day Lean Index for
the period ending May 28th was down $1.17 to $78.15 as compared with $82.70 last
week at this time and 76.37 for June futures. The lower close after hitting a
contract high for August hogs adds to the bearish technical developments.

Technical Outlook

#HOGS (JUL) 06/03/04: It is a mildly bullish
indicator that the market closed over the pivot swing number. Resistance levels
comes in at 76.15 and 77.00 today, while support is around 74.50 and then 73.70.
The rally brought the market to a new contract high. The daily closing price
reversal down puts the market on the defensive. 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 77.00.

COCOA MARKET RECAP

6/2/2004

The market opened slightly lower and closed 81
lower for July cocoa as funds were noted sellers after Tuesday’s lows were
penetrated. Long liquidation and new selling from speculators drove the market
into stops which triggered the sharp break as commercial buyers failed to
support the break. Brazil cocoa output jumped 35% to 2.93 million bags for the
2003/2004 season as compared with 2.17 million bags the previous year. Brazil is
the world’s 5th largest producer and the news is not enough to rationalize the
sharp break. Trade focus is still on a possible world production surplus for the
coming year led by solid production from the Ivory Coast.

Technical Outlook

COCOA (SEP) 06/03/04 There could be some early
pressure today given the market’s negative setup with the close below the 2nd
swing support. Cocoa should run into resistance at 1402 and above there at 1464
with support at 1317 and 1294. The daily stochastics have crossed over down
which is a bearish indication. The next downside target is 1294.25.

COFFEE MARKET RECAP

6/2/2004

September coffee closed higher on the session in
spite of a lack of cold weather in the forecast in Brazil as the strong cash
market in Brazil and better than expected demand from roasters helped support.
Brazil’s third auction of 200,000 bags which is left over stocks from last
year’s producer put program sold out at firm prices which was seen as a bullish
indicator for short-term demand. Tightness in the cash market out of Brazil is
due to the sharply reduced crop last year but traders expect production to bulge
near 30% this year. There is rain to delay harvest in the forecast through
Thursday but drier weather into the weekend even failed to generate increased
selling pressures. The tight cash market has also caused a slow-down in producer
selling as producers prefer to hold their stocks during the early part of the
cold season. CSCE exchange stocks were up 8653 bags to 4.955 million bags with
102,955 bags pending review.

Technical Outlook

COFFEE (SEP) 6/3/04 The market has a slightly
positive tilt with the close over the swing pivot. The 9-day RSI over 70
indicates the market is approaching overbought levels. Studies are showing
positive momentum, but are now in overbought territory so some caution is
warranted. The near-term upside objective is at 89.55. The Coffee contract
should run into resistance at 87.80 and above there at 89.55 with support at
84.4 and 82.75. The market’s short-term trend is positive on a close above the
9-day moving average.

SUGAR MARKET RECAP

6/2/2004

July sugar closed 18 lower on the session after
hitting contract highs and the reversal leaves a sour tone to the technical
set-up for sugar. The last key reversal from a contract high on April 28th
resulted in a break of 105 points in 10 trading sessions before finding support.
Fears of increasing pressure from the pending Brazil harvest and uncertain
demand outlook combined with a hefty net long position from the speculator
leaves the market vulnerable to a technical correction. The Ukrainian consulting
firm "UkrAgroConsult" cut their sugar beet crop estimate to 15.105 million
tonnes from their previous estimate of 16.537 million tons and their April
forecast of 17.026 million tons. Ukraine harvested 13.3 million tons last year.
Support levels for October sugar include 726, 715 and 703 with 751 as
resistance.

Technical Outlook

#SUGAR (OCT) 06/03/04: The rally brought the
market to a new contract high. The daily closing price reversal down puts the
market on the defensive. The market’s close below the 1st swing support number
suggests a moderately negative setup for today. Swing resistance comes in at
7.73, with support found at 7.09. 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 7.73.

COTTON MARKET RECAP

6/2/2004

December cotton managed a late rally of 123
points off of the lows in order to close just 3 lower on the session but higher
than the opening. Another day of options related speculative selling and news of
a large quantity of July calls sold and puts bought from a major merchant added
to the bearish tone early but the selling slowed late and locals were buyers.
July closed moderately lower on the session and moves to the lowest level since
August of 2002 before the late bounce. New crop conditions still look favorable
with more rain expected this week across the south and even in west Texas.

Technical Outlook

#COTTON (OCT) 06/03/04: The market’s close below
the 9-day moving average is an indication the short-term trend remains negative.
It is a slightly negative indicator that the close was lower than the pivot
swing number. Next resistance area comes in at 59.13 and then again at 60.24,
while support is targeted at 56.88 and 55.74. Momentum studies are declining,
but have fallen to oversold levels. The next downside target is 55.74. The 9-day
RSI under 30 indicates the market is approaching oversold levels. The sell-off
took the market to a new contract low.