Is An OPEC Production Hike In The Works?
BOND MARKET RECAP
3/14/2005
March Bonds finished up 0-06 at 110-26, 0-02 off
the high and 0-16 up from the low.
March 10 Yr Treasury Notes finished up 0-035 at
108-265, 0-010 off the high and 0-095 up from the low.
The Treasury market seemed to be caught in
a tight range to open the new week but with the net spec and fund long probably
hitting another new record around the lows Monday morning we can understand the
short covering bounce into the afternoon action. The Bonds could have been
pressured even further Monday morning in the wake of the Kansas City Fed
manufacturing readings as they showed another increase but it was clear that the
market wasn’t that interested in regularly scheduled US economic information. We
do think that the recovery in energy prices and the ongoing concern fostered by
the Algerian Oil Minister concerns (that the US economy was going to be
threatened by recession off ultra high oil prices) helped the bonds mount a
fleeting rally into mid session.
Technical Outlook
BONDS (JUN) 03/15/2005: Momentum studies are
declining, but have fallen to oversold levels. The market back below the 18-day
moving average suggests the longer-term trend could be turning down. The upside
daily closing price reversal gives the market a bullish tilt. The close over the
pivot swing is a somewhat positive setup. The next downside target is 110-00.
The next area of resistance is around 111-08 and 111-15, while 1st support hits
today at 110-17 and below there at 110-00.
TNOTES (JUN) 03/15/2005: The daily stochastics
gave a bullish indicator with a crossover up. Rising from oversold levels, daily
momentum studies would support higher prices, especially on a close above
resistance. The close under the 18-day moving average indicates the longer-term
trend could be turning down. The daily closing price reversal up is a positive
indicator that could support higher prices. The close over the pivot swing is a
somewhat positive setup. The near-term upside objective is at 109-095. Some
caution in pressing the downside is warranted with the RSI under 30. The next
area of resistance is around 109-045 and 109-095, while 1st support hits today
at 108-195 and below there at 108-070.
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STOCK INDICES RECAP
3/14/2005
March S&P finished up 6.7 at 1212.1, 0.4 off the
high and 8.4 up from the low.
March S&P E-Mini closed up 6.5 at 1212. This was
8.25 up from the low and 0.5 off the high.
March Dow closed up 29 at 10842. This was 62 up
from the low and 1 off the high.
Just when it appeared that the slightly lower
energy price action was going to lift equity prices the market was confronted
with a mid day energy price reversal and disconcerting economic comments from
the Fed. Apparently the Fed’s Yellen suggests that some people might be hurt by
rising interest rates, that liquidity might tighten and most importantly that he
had some concern for Real Estate risk. While Yellen also suggested that the US
economy was growing “noticeably” above trend and that measured rate hikes were
still in order the market was apparently unable to sustain the optimism seen
into the early morning action. Giving the market some support early in the
action were favorable readings from the Kansas City Fed Manufacturing Index.
Technical Outlook
S&P 500 (JUN) 03/15/2005: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
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. With the close
higher than the pivot swing number, the market is in a slightly bullish posture.
The next downside objective is 1201.30. The next area of resistance is around
1216.49 and 1218.89, while 1st support hits today at 1207.70 and below there at
1201.30.
SP EMINI (JUN) 03/15/2005: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The cross over and close above the 18-day moving average indicates
the longer-term trend has turned up. With the close higher than the pivot swing
number, the market is in a slightly bullish posture. The next downside objective
is 1201.32. The next area of resistance is around 1216.37 and 1218.81, while 1st
support hits today at 1207.63 and below there at 1201.32.
NASDAQ (JUN) 03/15/2005: Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The market back below the 18-day moving average suggests the longer-term
trend could be turning down. With the close higher than the pivot swing number,
the market is in a slightly bullish posture. The next downside target is
1508.63. The next area of resistance is around 1531.75 and 1535.62, while 1st
support hits today at 1518.25 and below there at 1508.63.
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CURRENCY MARKET RECAP
3/14/2005
March US Dollar finished up 53 at 8192, 22 off
the high and 68 up from the low.
March Euro finished down 0.88 at 133.96, 0.33 off
the high and 0.32 up from the low.
March Euro Dollar closed down 0.015 at 96.505.
This was 0.005 up from the low and 0.01 off the high.
March Canadian Dollar closed down 0.09 at 83.
This was 0.25 up from the low and 0.12 off the high.
March British Pound finished down 1.19 at 190.46,
0.46 off the high and 0.35 up from the low.
March Swiss closed down 0.72 at 86.71. This was
0.31 up from the low and 0.19 off the high.
March Japanese Yen closed down 0.94 at 96.01.
This was 0.28 up from the low and 0.29 off the high.
The Dollar surprised the trade with a startling
rally and the rally might have been sparked by the recent oversold condition in
the market. Early in the session the market thought that the rally in the Dollar
was inspired by weaker oil prices and rise in equity prices but the Dollar held
the gains into mid session while stocks slid and energy prices recovered. Some
continue to think that some players were rushing to short cover Dollar positions
ahead of some new tax code plan that might eventually serve to repair the US
Budget deficit. Weak economic data from Canada even caused the Canadian to rally
and the Canadian had been one of the better performers against the Dollar. In
the end, it is possible that the hope for an OPEC production cut would serve to
alleviate some of the concern for the US economy and that might have justified
part of the gains in the Dollar on Monday.
Technical Outlook
YEN (JUN) 03/15/2005: The close under the 40-day
moving average indicates the longer-term trend could be turning down. A bearish
signal was triggered on a crossover down in the daily stochastics. Stochastics
trending lower at midrange will tend to reinforce a move lower especially if
support levels are taken out. The major trend has turned down with the cross
over back below the 18-day moving average. The gap lower price action on the day
session chart is a bearish indicator for trend. The market is in a bearish
position with the close below the 2nd swing support number. The next downside
target is now at 95.45. The next area of resistance is around 96.29 and 96.58,
while 1st support hits today at 95.73 and below there at 95.45.
EURO (JUN) 03/15/2005: A crossover down in the
daily stochastics is a bearish signal. 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 below the
1st swing support could weigh on the market. The next downside target is 133.32.
The next area of resistance is around 134.28 and 134.61, while 1st support hits
today at 133.64 and below there at 133.32.
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PRECIOUS METALS RECAP
3/14/2005
April Gold closed down 5.2 at 441.6. This was 0.9
up from the low and 3.4 off the high.
March Silver finished down 0.16 at 7.41, 0.095
off the high and 0.035 up from the low.
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The metals certainly showed their reliance on the
direction of the Dollar in the action Monday. In addition to the sharp rise in
the Dollar, we also suspect that the metals markets were pressured as a result
of the slightly overbought readings in the most recent COT report. Also
hindering silver prices during the late afternoon action were suggestions from
Coeur d’Alene that their silver production rose rather aggressively over last
year! It seemed from the action Monday that silver prices were under slightly
more pressure than gold prices but in the end both market were damaged rather
significantly.
Technical Outlook
SILVER (MAY) 03/15/2005: A bearish signal was
triggered on a crossover down in the daily stochastics. Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The market back below the 18-day moving average suggests the longer-term
trend could be turning down. The close below the 1st swing support could weigh
on the market. The next downside target is now at 729.5. The next area of
resistance is around 747.5 and 755.5, while 1st support hits today at 734.5 and
below there at 729.5.
GOLD (APR) 03/15/2005: The daily stochastics have
crossed over down which is a bearish indication. 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’s close below the 1st swing support number
suggests a moderately negative setup for today. The next downside objective is
now at 438.0. The next area of resistance is around 443.7 and 446.5, while 1st
support hits today at 439.5 and below there at 438.0.
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COPPER MARKET RECAP
3/14/2005
March Copper closed down 0.85 at 147.05. This was
1.55 up from the low and 1.25 off the high.
The copper market traded on both sides of
unchanged Monday but seemed to favor the downside. The bull camp might suggest
that the market did pare a large portion of the big losses but when one
considers the magnitude of the spec and fund long in the copper seeing the
market violate chart support should not be considered insignificant. Supporting
copper prices in the action Monday were fresh buyout developments on WMC and
that that type of headline flow has periodically supported flat prices of
copper. Many traders suspect that a sharply higher US Dollar undermined copper
from an arbitrage standing and with the outlook for the US economy uncertain we
can understand the weakness in copper prices in the wake of a COT report that
highlighted a massive spec and fund long position.
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ENERGY MARKET RECAP
3/14/2005
April Crude Oil closed up 0.53 at 55.65. This was
1.39 up from the low and 0.15 off the high.
April Heating Oil closed down 0.25 at 149.82.
This was 3.72 up from the low and 0.68 off the high.
April Unleaded Gas finished down 0.72 at 154.24,
0.96 off the high and 2.14 up from the low.
April Natural Gas finished up 0.35 at 7.24, 0.04
off the high and 0.31 up from the low.
April Propane closed unchanged at 0.86. This was
equal to the low and equal to the high.
The energy complex showed some early signs of
weakness in the wake of bearish OPEC dialogue. In addition to comments from the
Saudi Oil Minister regarding the need for a production hike in the coming
meeting, the energy market was also confronted with dialogue from the Algerian
oil Minister, which in a sense expressed concern for a US recession in the face
of ongoing high oil prices. However, Libya said they were opposed to any
production increase and Iran suggested that the Saudi proposal would not
actually put any more physical oil onto the market. In the end we suspect that
Saudi comments about OPEC having a current 2 million barrel per day production
capacity surplus prompted some players to bank long profits. With slightly more
normal temps in the US, the fear of the spring demand lull looming and the
market overbought it is not surprising that prices displayed back and fill
action on Monday morning.
Technical Outlook
CRUDE OIL (MAY) 03/15/2005: Momentum studies
trending lower from overbought levels is a bearish indicator and would tend to
reinforce lower price action. The market now above the 18-day moving average
suggests the longer-term trend has turned up. The market has a slightly positive
tilt with the close over the swing pivot. The next downside target is 53.80. The
9-day RSI over 70 indicates the market is approaching overbought levels. The
next area of resistance is around 56.42 and 56.88, while 1st support hits today
at 54.88 and below there at 53.80.
UNLEADED (MAY) 03/15/2005: Momentum studies
trending lower from overbought levels is a bearish indicator and would tend to
reinforce lower price action. The cross over and close above the 18-day moving
average is an indication the longer-term trend has turned positive. The market
has a slightly positive tilt with the close over the swing pivot. The next
downside objective is 150.85. The next area of resistance is around 155.79 and
157.04, while 1st support hits today at 152.69 and below there at 150.85.
HEATING OIL (MAY) 03/15/2005: 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. With the close higher than the pivot
swing number, the market is in a slightly bullish posture. The next downside
objective is now at 144.66. With a reading over 70, the 9-day RSI is approaching
overbought levels. The next area of resistance is around 152.02 and 153.46,
while 1st support hits today at 147.62 and below there at 144.66.
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CORN MARKET RECAP
3/14/2005
May Corn finished down 3 3/4 at 221, 2 1/2
off the high and 3/4 up from the low. December Corn closed down 2 1/4 at 242
3/4. This was 1 up from the low and 1 1/4 off the high.
The overbought condition of the market, a lack of
new buying interest from fund traders and a lack of new buying interest from
major feedgrain importers helped to trigger selling pressures. March corn
expired at noon at 214 1/2 as compared with 194 1/4 as the February lows. There
was only 1 contract delivered this morning. For the weekly export inspections,
released during the session, corn exports came in at 28.9 million bushels as
compared with trade expectations at 32-37 million bushels. Cumulative shipments
have reached 45.5% of the USDA forecast for the season as compared with 50.9% on
average for this time of the year. The Commitment-of-Traders report with
options, released Friday, showed that the small trader was holding a record high
net short position as of March 8th. Support for May corn comes in at 218 1/2
with 229 1/2 as next resistance.
Technical Outlook
CORN (MAY) 03/15/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The market now above the
18-day moving average suggests the longer-term trend has turned up. The close
below the 1st swing support could weigh on the market. The near-term upside
objective is at 224 1/2. The next area of resistance is around 222 1/2 and 224
1/2, while 1st support hits today at 219 1/2 and below there at 218 1/4.
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SOY COMPLEX RECAP
3/14/2005
May Soybeans finished down 6 1/2 at 656, 8 off
the high and 2 3/4 up from the low. November Soybeans closed down 1/2 at 634.
This was 4 up from the low and 2 1/2 off the high.
May Soymeal closed down 4 at 192.0. This was 1.0
up from the low and 4.0 off the high.
March Soybean Oil finished down 0.01 at 23.95,
0.08 off the high and 0.3 up from the low.
Rains in the dry areas of southern Brazil and
Argentina over the weekend helped trigger selling pressures and the surge higher
in the dollar and less concerns for inflation added to the long liquidation
selling. March soybeans expired today at 654 as compared with the February low
at 498 1/2. March soybean oil expired today at 23.95 as compared with the
February low at 1882. March soybean meal expired today at 192.00 as compared
with the February low at 148.10. The NOPA crush report this morning showed the
February crush at 131.1 million bushels as compared with trade expectations at
128-131 million bushels and the January crush at 141.4 million bushels. Oil
stocks were pegged at 1.25 billion pounds as compared with 1.21 billion last
month. Oil yield showed an increase to 11.43 pounds/bushel in February from
11.35 pounds in January. Ideas that futures are overbought after the recent
run-up, weekend rains in Brazil and the upcoming harvest pressures in Brazil and
Argentina are all considered short-term bearish factors. For the weekly export
inspections, released during the session, soybean exports came in at 34.32
million bushels as compared with trade expectations at 18-23 million bushels.
Cumulative shipments have reached 82.3% of the USDA forecast for the season as
compared with 75.2% on average for this time of the year. Support for May
soybeans comes in at 644 1/4 and 637 1/2 with 671 as next resistance.
Technical Outlook
BEANS (MAY) 03/15/2005: The daily stochastics
gave a bearish indicator with a crossover down. 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 cross over and close above
the 18-day moving average is an indication the longer-term trend has turned
positive. It is a slightly negative indicator that the close was lower than the
pivot swing number. The next downside objective is 646 3/4. The market is
approaching overbought levels with an RSI over 70. The next area of resistance
is around 661 1/4 and 668, while 1st support hits today at 650 3/4 and below
there at 646 3/4.
MEAL (MAY) 03/15/2005: Momentum studies are
trending higher but have entered overbought levels. 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 lower than the pivot swing
number. The next upside target is 200.5. The market is becoming somewhat
overbought now that the RSI is over 70. The next area of resistance is around
197.9 and 200.5, while 1st support hits today at 193.4 and below there at 191.4.
BEANOIL (MAY) 03/15/2005: A bearish signal was
triggered on a crossover down in the daily stochastics. 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 cross over and
close above the 18-day moving average is an indication the longer-term trend has
turned positive. The close below the 1st swing support could weigh on the
market. The next downside objective is now at 23.22. The next area of resistance
is around 23.97 and 24.39, while 1st support hits today at 23.39 and below there
at 23.22.
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WHEAT MARKET RECAP
3/14/2005
May Wheat finished down 4 at 354, 3 1/2 off the high and 2 up
from the low. July Wheat closed down 4 1/2 at 361 1/2. This was 2 1/2 up from
the low and 2 3/4 off the high.
The weak tone for exports and ideas that the
market is in an overbought condition after a 26 cent 2-day surge helped to
trigger light long liquidation selling in the market today. A lack of new fund
buying added to the bearish tone. Weather remains favorable for the winter wheat
crop with snow in the southern plains this week. However, July Kansas City wheat
moved higher in spite of weakness in other old crop months and other wheat
contracts in Chicago and Minneapolis. For the weekly export inspections,
released during the session, wheat exports came in at 13.8 million bushels as
compared with trade expectations at 17-22 million bushels. Cumulative shipments
have reached 81.8% of the USDA forecast for the season as compared with 78.6% on
average for this time of the year. There were 10 deliveries against March wheat
today and the March contract expired at 348 today as compared with the February
4th low of 287. Midwest cash basis levels were steady to weak this morning due
to increased producer selling. May wheat support comes in at 348 3/4 with 362
1/2 as next resistance.
Technical Outlook
WHEAT (MAY) 03/15/2005: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. 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 objective is at 359 3/4. The market is
becoming somewhat overbought now that the RSI is over 70. The next area of
resistance is around 356 3/4 and 359 3/4, while 1st support hits today at 351
1/4 and below there at 349.
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LIVE CATTLE RECAP
3/14/2005
April Live Cattle finished unchanged at 89.10,
0.55 off the high and 0.35 up from the low.
March Feeder Cattle closed up 0.45 at 105.35.
This was 0.95 up from the low and equal to the high.
The cattle market closed mixed with June down and
April cattle closing near unchanged in choppy, two-sided trade. Traders are
waiting for results of the emergency appeal from the National Meat Association
filed late last week on the Montana judge’s decision to block the USDA plan to
open the border to shipments of young cattle. The appeal seeks to protect
packers from imminent economic collapse and the organization will attempt to
convince the Judge to allow the opening of the border soon. It will likely take
until at least early April for the emergency appeal process. Boxed-beef cut-out
values at mid-session were up $.32 to $155.15 as compared with $147.24 last
week. Slaughter came in at 115,000 head from trade expectations for
114,000-120,000 head.
Technical Outlook
CATTLE (APR) 03/15/2005: Negative momentum
studies in the neutral zone will tend to reinforce lower price action. The cross
over and close above the 18-day moving average is an indication the longer-term
trend has turned positive. The market’s close below the pivot swing number is a
mildly negative setup. The next downside target is 88.270. The next area of
resistance is around 89.550 and 90.050, while 1st support hits today at 88.670
and below there at 88.270.
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LEAN HOGS RECAP
3/14/2005
April Lean Hogs finished down 1.80 at 70.57, 2.37
off the high and 0.20 up from the low.
March Pork Bellies closed down 0.40 at 87.60.
This was equal to the low and 1.40 off the high.
The hog market turned sharply lower into the
close with June hogs down the 200 point limit. Poor packer profit margins and
ideas that cash markets could remain under pressure this week helped trigger the
early selling and then the long liquidation selling from fund traders
intensified into the close. The 2-day lean index for the period ending March
10th came in at 74.52, up.51 on the session and up from 71.21 last week at this
time. Slaughter came in at 367,000 head from trade expectations for
373,000-385,000 head. This is the 5th session in a row in which slaughter came
in well below expectations which suggest poor demand from the packer.
Technical Outlook
HOGS (APR) 03/15/2005: A negative indicator was
given with the downside crossover of the 9 & 18 bar moving average. Momentum
studies are still bearish but are now at oversold levels and will tend to
support reversal action if it occurs. 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 downside target
is now at 68.550. The 9-day RSI under 30 indicates the market is approaching
oversold levels. The next area of resistance is around 71.850 and 73.670, while
1st support hits today at 69.300 and below there at 68.550.
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COCOA MARKET RECAP
3/14/2005
May Cocoa finished down 32 at 1772, 28 off the
high and 8 up from the low.
Given that cocoa prices fell sharply on Monday
following a major spike up failure on Friday, could mean that the record spec
and fund long position in cocoa is now under a significant liquidation threat.
We also suspect that a sharply higher US Dollar makes some US cocoa positions
look significantly less attractive and that combined with the recent flat price
declines seems to have turned the head of the cocoa market downward. With the
Press noting increased trade selling it would seem like a number of different
sectors have turned bearish toward prices even though the political unrest still
seems to be a viable ongoing bull issue.
Technical Outlook
COCOA (MAY) 03/15/2005: 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 major trend could be
turning up with the close back above the 18-day moving average. The gap lower on
the day session chart is bearish and puts the market on the defensive. The swing
indicator gave a moderately negative reading with the close below the 1st
support number. The next downside objective is 1741. The next area of resistance
is around 1790 and 1813, while 1st support hits today at 1754 and below there at
1741.
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COFFEE MARKET RECAP
3/14/2005
May Coffee closed down 1.95 at 134.70. This was
1.70 up from the low and 4.10 off the high.
The coffee market forged an aggressive profit
taking slide Monday and was certainly in an extensive overbought condition
coming into the session. With the CRB Index falling sharply and a number of
other markets experiencing profit taking it is not surprising that some coffee
funds decided to bank some profits. It is also possible that weekend rains in
Brazil also prompted some selling by the funds and the origins! Finally some
players might have decided to exit longs because of the recent round of retail
prices increases. The last issue that might have undermined coffee prices Monday
were concerns that some Vietnam coffee producers might be forced to default
after selling forward at significantly lower prices.
Technical Outlook
COFFEE (MAY) 03/15/2005: 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 close below
the 1st swing support could weigh on the market. The near-term upside target is
at 141.10. The next area of resistance is around 137.60 and 141.10, while 1st
support hits today at 131.85 and below there at 129.55.
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SUGAR MARKET RECAP
3/14/2005
May Sugar closed up 0.06 at 9.23. This was 0.09
up from the low and 0.06 off the high.
While many other commodity markets seemed to
falter under the ebb and flow of fund trading interest, the sugar market seemed
to hold up despite the setback in the CRB Index. The Press even reported ongoing
buying interest by the funds and specs in the action Monday and that action
seemed to be prompted even without the knowledge of some minor increased cash
sugar market activity. The sugar market is also being supported by the idea that
the dry weather in Brazil might have reduced the cane crop which is positive
because the trade has long expected the Brazil production to be a record. Given
the that COT report actually documented a decline in the size of the fund long
might have inspired some renewed buying in the action Monday, specifically
because the combined small spec and fund long reduction in the COT report was
over 28,000 contracts!
Technical Outlook
SUGAR (MAY) 03/15/2005: The cross over and close
above the 60-day moving average indicates the longer-term trend has turned up.
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 9.37. The next area of resistance is around
9.30 and 9.37, while 1st support hits today at 9.16 and below there at 9.08.
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COTTON MARKET RECAP
3/14/2005
May Cotton finished down 0.54 at 53.11, 0.09 off
the high and 1.31 up from the low.
May cotton closed 54 lower on the session but up
131 from the lows of the day. Long liquidation selling from speculators helped
pressure the market. There was some trade house selling early in the session but
when the selling slowed, the market seemed to lack new selling interest from
speculators. Weakness in other commodity markets and a bounce in the dollar
added to the negative tone. The surge in open interest along with the uptrend is
seen as a positive development but the combined net long position of the small
and large speculator reached a record high at over 50,000 contracts as of March
8th.
Technical Outlook
COTTON (MAY) 03/15/2005: 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. It is a slightly
negative indicator that the close was under the swing pivot. The near-term
upside target is at 54.20. The market is becoming somewhat overbought now that
the RSI is over 70. The next area of resistance is around 53.80 and 54.20, while
1st support hits today at 52.41 and below there at 51.41.