Is This A Short-Term Top In Oil?
BOND MARKET RECAP
3/21/2005
March Bonds finished down 0-06 at 110-18, 0-06
off the high and 0-03 up from the low.
March 10 Yr Treasury Notes finished down 0-010 at
109-010, 0-025 off the high and 0-045 up from the low.
The Treasury market attempted to follow
through on early weakness but then found the resolve to bounce. We suspect that
a sharply higher Dollar caused some recent Treasury shorts to exit as the threat
of ongoing severe international investment rotation away from the US is at least
temporarily reduced. While we suspect that part of the support under the bonds
is misguided support from the idea that the Dollar will continue to be supported
we also think that the massive short spec position in bonds and the ongoing
threat of rising energy prices is a pretty supportive argument. It is also
possible that the market will not get the ultra hot PPI reading that many are
currently expecting and that could be a positive for Treasuries.
Technical Outlook
BONDS (JUN) 03/22/2005: The daily stochastics
have crossed over down which is a bearish indication. Momentum studies are
declining, but have fallen to oversold levels. The close under the 18-day moving
average indicates the longer-term trend could be turning down. It is a slightly
negative indicator that the close was lower than the pivot swing number. The
next downside objective is 110-10. The next area of resistance is around 110-24
and 110-29, while 1st support hits today at 110-15 and below there at 110-10.
TNOTES (JUN) 03/22/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The close under the 18-day moving average indicates the
longer-term trend could be turning down. The market tilt is slightly negative
with the close under the pivot. The next upside target is 109-080. The next area
of resistance is around 109-055 and 109-080, while 1st support hits today at
108-310 and below there at 108-265.
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STOCK INDICES RECAP
3/21/2005
March S&P finished down 4.5 at 1186.3, 6.4 off
the high and 3.6 up from the low.
March S&P E-Mini closed down 4.5 at 1186.25. This
was 3.75 up from the low and 7.25 off the high.
March Dow closed down 54 at 10581. This was 26 up
from the low and 67 off the high.
The stock market forged what appeared to be a
classic big range down reversal which is a little surprising considering that
the market will be confronted with several important and potentially damaging
developments on Tuesday. However, in order for the stock market to shake the
recent weakness it will have to have some reason to alter its overly bearish
fundamental outlook. The most logical source of a fundamental bottoming would
come from sharply lower oil prices but there is nothing specific to suggest that
is in the cards. On the other hand, seeing the OPEC President suggest that
current oil prices are “too high” would seem to create the potential for a near
term top in energies.
Technical Outlook
S&P 500 (JUN) 03/22/2005: 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. It is a slightly negative indicator
that the close was lower than the pivot swing number. The next downside target
is now at 1177.00. The next area of resistance is around 1191.30 and 1197.00,
while 1st support hits today at 1181.30 and below there at 1177.00.
SP EMINI (JUN) 03/22/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
major trend has turned down with the cross over back below the 18-day moving
average. The market tilt is slightly negative with the close under the pivot.
The next downside objective is now at 1176.13. The next area of resistance is
around 1191.75 and 1198.12, while 1st support hits today at 1180.75 and below
there at 1176.13.
NASDAQ (JUN) 03/22/2005: Daily stochastics are
trending lower but have declined into oversold territory. The market back below
the 18-day moving average suggests the longer-term trend could be turning down.
It is a slightly negative indicator that the close was under the swing pivot.
The next downside target is now at 1468.00. The next area of resistance is
around 1499.00 and 1510.00, while 1st support hits today at 1478.00 and below
there at 1468.00.
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CURRENCY MARKET RECAP
3/21/2005
March US Dollar finished up 74 at 8284, 23 off
the high and 79 up from the low.
March Euro finished down 1.35 at 132.03, 0.27 off
the high and 0.37 up from the low.
March Euro Dollar closed down 0.015 at 96.495.
This was 0.005 up from the low and 0.01 off the high.
March Canadian Dollar closed down 0.44 at 82.72.
This was 0.28 up from the low and 0.03 off the high.
March British Pound finished down 2.07 at 189.01,
0.23 off the high and 0.36 up from the low.
March Swiss closed down 0.9 at 85.39. This was
0.29 up from the low and 0.11 off the high.
March Japanese Yen closed down 0.31 at 95.81.
This was 0.37 up from the low and 0.08 off the high.
It would seem that many in the trade are
expecting to see even more aggressive action from the Fed in the coming FOMC
meeting as the outlook for the Dollar seems to have improved dramatically over
the last 5 days without much of an improvement in the US economic numbers. While
there might be other reasons for the recent strength in the US Dollar (than the
expectation for rising US yields) we have to think that the currency markets
will be very sensitive to the US PPI release on Tuesday morning. While slightly
lower energy prices might have provided the Dollar with some strength into mid
session Monday but unless there is a more significant decline in energy prices
we doubt that is behind the rise in the Dollar.
Technical Outlook
YEN (JUN) 03/22/2005: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The market back
below the 18-day moving average suggests the longer-term trend could be turning
down. 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 95.29. The
next area of resistance is around 96.03 and 96.18, while 1st support hits today
at 95.59 and below there at 95.29.
EURO (JUN) 03/22/2005: The close below the 60-day
moving average is an indication the longer-term trend has turned down. Momentum
studies trending lower at mid-range could accelerate a price break if support
levels are broken. The close below the 18-day moving average is an indication
the longer-term trend has turned down. The gap lower price action on the day
session chart is a bearish indicator for trend. The close below the 2nd swing
support number puts the market on the defensive. The next downside objective is
131.37. The next area of resistance is around 132.35 and 132.64, while 1st
support hits today at 131.71 and below there at 131.37.
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PRECIOUS METALS RECAP
3/21/2005
April Gold closed down 8.3 at 431.4. This was 2.2
up from the low and 3.2 off the high.
March Silver finished down 0.285 at 7.112, 0.148
off the high and 0.047 up from the low.
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The metals complex came under aggressive
liquidation pressure after the Dollar rose through several layers of chart
resistance. In fact, it would seem like many players are expecting even more
gains in the Dollar and that has a large portion of the 182,000 longs in gold
and 70,000 longs in silver extremely nervous. It is also possible expectations
of sharply rising US interest rates is serving to mitigate the inflation threat
and that in turn could increase the odds that the global economy falls back into
a recession. In the face of historically high energy prices, an overly
aggressive hike in interest rates could be seen as deflationary by the metals.
In the end, the main impact on gold and silver is the direction of the Dollar
and therefore the slide Monday morning was not all that surprising.
Technical Outlook
SILVER (MAY) 03/22/2005: The close under the
40-day moving average indicates the longer-term trend could be turning down.
Stochastics trending lower at midrange will tend to reinforce a move lower
especially if support levels are taken out. The close under the 18-day moving
average indicates the longer-term trend could be turning down. The gap down on
the day session chart is bearish with more selling pressure possible today. The
close below the 2nd swing support number puts the market on the defensive. The
next downside target is now at 694.3. The next area of resistance is around
721.0 and 733.2, while 1st support hits today at 701.5 and below there at 694.3.
GOLD (APR) 03/22/2005: Momentum studies trending
lower at mid-range should accelerate a move lower if support levels are taken
out. The market back below the 18-day moving average suggests the longer-term
trend could be turning down. More selling pressure is likely given yesterday’s
gap lower price action on the day session chart. The market is in a bearish
position with the close below the 2nd swing support number. The next downside
objective is 426.3. The next area of resistance is around 434.1 and 437.0, while
1st support hits today at 428.7 and below there at 426.3.
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COPPER MARKET RECAP
3/21/2005
March Copper closed down 1.80 at 148.90. This was
1.70 up from the low and 1.20 off the high.
The copper market seemed to be pressured by the
rise in the US Dollar and because of the massive selling pressure being seen in
the precious metals complex. While some funds were reported to be dumping a host
of long commodity positions due to concerns that China was set to hike interest
rates, it would not seem like copper was under intense long liquidation
pressure. Certainly the most recent COT report showed a leveling of the small
spec and fund long position in copper and that could have insulated copper from
the brunt of the potential selling pressure. In short, copper felt the weight of
the rising Dollar and was also undermine by a slight deterioration in the
outlook for the US and global economies.
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ENERGY MARKET RECAP
3/21/2005
April Crude Oil closed up 0.22 at 57.46. This was
0.78 up from the low and 0.17 off the high.
April Heating Oil closed up 0.71 at 155.45. This
was 1.20 up from the low and 0.75 off the high.
April Unleaded Gas finished up 1.68 at 162.55,
0.95 off the high and 1.55 up from the low.
April Natural Gas finished up 0.06 at 7.45, 0.01
off the high and 0.22 up from the low.
April Propane closed down 0.00 at 0.92. This was
equal to the low and equal to the high.
The energy complex began to show some divergence
in the action Monday as crude was weak in the morning action and the products
were strong. Early in the session the OPEC President indicated that they were
looking into the potential of supplying more oil to the market because current
prices were too high. The White House also indicated that they in constant
contract with OPEC regarding oil prices and that could be fostering the idea of
a coming correction in prices. From the weather front there would seem to be a
slight warm up expected next week but current temps are cold enough that late
season prompt demand for heating oil is remaining strong. Considering the amount
of dialogue from OPEC regarding more supply we would not be surprised to see a
promise of more oil before that 10 day March 27th deadline.
Technical Outlook
CRUDE OIL (MAY) 03/22/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The cross over and close above the 18-day moving average indicates
the longer-term trend has turned up. It is a mildly bullish indicator that the
market closed over the pivot swing number. The near-term upside objective is at
58.25. With a reading over 70, the 9-day RSI is approaching overbought levels.
The next area of resistance is around 57.93 and 58.25, while 1st support hits
today at 56.99 and below there at 56.36.
UNLEADED (MAY) 03/22/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The cross over and close above the 18-day moving average is an
indication the longer-term trend has turned positive. A positive setup occurred
with the close over the 1st swing resistance. The next upside objective is
164.90. The 9-day RSI over 70 indicates the market is approaching overbought
levels. The next area of resistance is around 163.80 and 164.90, while 1st
support hits today at 161.30 and below there at 159.90.
HEATING OIL (MAY) 03/22/2005: 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 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 153.39. The 9-day RSI over 70
indicates the market is approaching overbought levels. The next area of
resistance is around 156.42 and 157.28, while 1st support hits today at 154.48
and below there at 153.39.
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CORN MARKET RECAP
3/21/2005
May Corn finished down 5 1/4 at 214 1/2, 3
off the high and 1 1/2 up from the low. December Corn closed down 4 1/2 at 238
1/2. This was 2 1/4 up from the low and 1 1/2 off the high.
Fund selling helped pressure the market with
stops activated on the lower opening. Weakness in other grains and ideas that
fund traders are lightening up on long positions in many of the key commodity
markets added to the bearish tone with the sharp rise in the US dollar and news
of more China export activity over the weekend adding to the bearish tone.
Weekend news that China sold more corn to South Korea added to the bearish tone.
The weekend Commitment-of-Traders report with options showed that as of March
15th, funds were holding a net long position of over 52,000 contracts. The
weekly export inspections report, released during the session, showed corn
exports for the week at 26.6 million bushels as compared with trade expectations
at 32-37 million bushels. Cumulative shipments have reached 46.9% of the USDA
forecast for the season as compared with 53% on average for this time of the
year. South Korea will tender for 52,500 tonnes of US corn and Taiwan is
tendering for 56,000 tonnes of US or Argentina corn. A gap lower to start the
week is considered a bearish technical development. The market may find support
at the 50-day moving average at 211 1/4 for May corn with resistance at 217 1/2.
Technical Outlook
CORN (MAY) 03/22/2005: Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
The close under the 18-day moving average indicates the longer-term trend could
be turning down. The gap lower on the day session chart is bearish and puts the
market on the defensive. There could be some early pressure today given the
market’s negative setup with the close below the 2nd swing support. The next
downside objective is now at 210 1/2. The next area of resistance is around 216
3/4 and 219 1/4, while 1st support hits today at 212 1/4 and below there at 210
1/2.
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SOY COMPLEX RECAP
3/21/2005
May Soybeans finished down 22 1/2 at 626 1/2, 20
1/2 off the high and 1 1/2 up from the low. November Soybeans closed down 20 at
606. This was 1 1/2 up from the low and 17 off the high.
May Soymeal closed down 4.8 at 187.3. This was
2.2 up from the low and 3.4 off the high.
May Soybean Oil finished down 1.03 at 22.55, 1.1
off the high and 0.06 up from the low.
Weakness at the China exchange, China demand
concerns and a surge higher in the US dollar helped to pressure the market early
in the session today with funds noted as sellers. Traders view the weather in
Brazil as a less important factor as recent rains in the dry areas of Brazil may
have come too late to impact yield with the growing season coming to an end. In
addition, the advancing harvest is beginning to fill the export pipeline in
Brazil and declining prices could help restrict new soybean exports from the US.
The weekend Commitment-of-Traders report with options showed that as of March
15th, funds were holding a net long position of 31,244 contracts in soybeans,
27,879 contracts in oil and 25,329 contracts in meal. The weekly export
inspections report, released during the session, showed soybean exports for the
week at 19.75 million bushels as compared with trade expectations at 16-24
million bushels. Cumulative shipments have reached 84.3% of the USDA forecast
for the season as compared with 77.6% on average for this time of the year.
Resistance for May soybeans comes in at 644 with 619 as next support.
Technical Outlook
BEANS (MAY) 03/22/2005: Momentum studies trending
lower at mid-range should accelerate a move lower if support levels are taken
out. The major trend has turned down with the cross over back below the 18-day
moving average. The close below the 2nd swing support number puts the market on
the defensive. The next downside target is now at 609 1/4. The next area of
resistance is around 637 1/2 and 653 1/4, while 1st support hits today at 615
1/2 and below there at 609 1/4.
MEAL (MAY) 03/22/2005: Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
The close under the 18-day moving average indicates the longer-term trend could
be turning down. The defensive setup, with the close under the 2nd swing
support, could cause some early weakness. The next downside target is now at
182.0. The next area of resistance is around 190.1 and 193.2, while 1st support
hits today at 184.5 and below there at 182.0.
BEANOIL (MAY) 03/22/2005: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. The close under the 18-day moving average indicates the
longer-term trend could be turning down. The defensive setup, with the close
under the 2nd swing support, could cause some early weakness. The next downside
objective is 21.65. The next area of resistance is around 23.13 and 23.97, while
1st support hits today at 21.97 and below there at 21.65.
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WHEAT MARKET RECAP
3/21/2005
May Wheat finished down 14 at 342 1/2, 12 1/2 off the high and
2 1/4 up from the low. July Wheat closed down 12 3/4 at 351 1/4. This was 3 1/4
up from the low and 10 3/4 off the high.
Fund selling is more active this morning on
concerns for an overall lightening up trend by major commodity fund traders with
the jump in the dollar and weaker commodity markets across the floor helping to
trigger more speculative selling. Rains moving across much of Kansas and snow in
Nebraska and the Dakotas today was seen as a bearish weather development as crop
conditions for the plains look to start the growing season in excellent shape.
The weekend Commitment-of-Traders report with options showed that as of March
15th, funds were holding a net long position of 31,360 contracts for wheat. The
weekly export inspections report, released during the session, showed wheat
exports for the week at 22.6 million bushels as compared with trade expectations
at 14-19 million bushels. Cumulative shipments have reached 84.1% of the USDA
forecast for the season as compared with 80.1% on average for this time of the
year. May wheat resistance comes in at 354 with 341 1/4 and 332 1/2.
Technical Outlook
WHEAT (MAY) 03/22/2005: Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
The close under the 18-day moving average indicates the longer-term trend could
be turning down. More selling pressure is likely given yesterday’s gap lower
price action on the day session chart. There could be some early pressure today
given the market’s negative setup with the close below the 2nd swing support.
The next downside objective is now at 330 1/2. The next area of resistance is
around 349 3/4 and 359 3/4, while 1st support hits today at 335 1/4 and below
there at 330 1/2.
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LIVE CATTLE RECAP
3/21/2005
April Live Cattle finished up 0.45 at 87.85, 0.05
off the high and 0.55 up from the low.
March Feeder Cattle closed up 0.40 at 106.02.
This was 0.42 up from the low and 0.02 off the high.
No news was considered good news for the cattle
bulls as cattle bounced higher on Monday in the absence of news from the federal
court over the emergency appeal to open the border with Canada. The market found
support from the USDA Cattle-on-Feed report on Friday which showed lower than
expected placements which could support the summer futures contracts if the
border stays closed with Canada. Boxed-beef cut-out values at mid-session were
down $.38 to $155.07 as compared with $155.95 last week. Slaughter came in at
100,000 head as compared with trade expectations at 103,000-108,000 head. Rain
and snow in the southern plains provided some support.
Technical Outlook
CATTLE (APR) 03/22/2005: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. The close under the 18-day moving average indicates the
longer-term trend could be turning down. The close over the pivot swing is a
somewhat positive setup. The next downside target is now at 87.120. The next
area of resistance is around 88.120 and 88.320, while 1st support hits today at
87.550 and below there at 87.120.
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LEAN HOGS RECAP
3/21/2005
April Lean Hogs finished up 0.65 at 71.05, 0.10
off the high and 0.95 up from the low.
March Pork Bellies closed up 3.00 at 90.50. This
was 1.70 up from the low and equal to the high.
The hog market pushed moderately higher on Monday
finding support from the strength in cut-out values on Friday afternoon and from
a lack of news regarding a possible opening of the border for live cattle trade
with Canada. A limit=up move in May bellies ahead of the Monthly Cold Storage
report helped support the positive tone. On Friday, the trade was bearish on
ideas that an increase in cattle could boost beef production by late March.
Slaughter came in at 383,000 head as compared with trade expectations at
375,000-385,000 head. The 2-day lean index for the period ending March 17th came
in at 69.33, down.86 on the session and down from 74.17 last week at this time.
Technical Outlook
HOGS (APR) 03/22/2005: Daily stochastics are
trending lower but have declined into oversold territory. 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 objective is 69.800. The next area of
resistance is around 71.570 and 71.870, while 1st support hits today at 70.550
and below there at 69.800.
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COCOA MARKET RECAP
3/21/2005
May Cocoa finished down 111 at 1733, 97 off the
high and 8 up from the low.
While the trade suggests that the strong Dollar
undermined cocoa we also suspect that a lack of anxious headlines from the Ivory
Coast prompted some profit taking. With the most recent COT report showing a
massive record spec and fund long in cocoa, the Dollar soaring and tensions at
the Ivory Coast holding below the boiling point we can understand a temporary
shift in power away from the bull camp. In short, the cocoa market lived by the
fund buying wave and now might have temporarily died by the fund liquidation
wave.
Technical Outlook
COCOA (MAY) 03/22/2005: A bearish signal was
triggered on a crossover down in the daily stochastics. Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The close below the 18-day moving average is an indication the
longer-term trend has turned down. There could be some early pressure today
given the market’s negative setup with the close below the 2nd swing support.
The next downside target is now at 1651. The next area of resistance is around
1785 and 1860, while 1st support hits today at 1681 and below there at 1651.
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COFFEE MARKET RECAP
3/21/2005
May Coffee closed down 2.55 at 130.65. This was
1.45 up from the low and 2.05 off the high.
The coffee market did a good job in avoiding the
broad based fund selling being seen in many markets on Monday morning. However,
the lack of intense fund selling was even more surprising considering that the
coffee market was a prime benefactor of the fund buying wave over the past two
months. While there were some reports of rain in Brazil we doubt that coffee
prices are taking too much direction from the Brazilian weather. Since the frost
period is still ahead it might be difficult to take coffee down significantly in
the weeks ahead.
Technical Outlook
COFFEE (MAY) 03/22/2005: Daily stochastics
turning lower from overbought levels is bearish and will tend to reinforce a
downside break especially if near term support is penetrated. The market now
above the 18-day moving average suggests the longer-term trend has turned up. It
is a slightly negative indicator that the close was lower than the pivot swing
number. The next downside target is now at 127.35. The next area of resistance
is around 132.40 and 134.30, while 1st support hits today at 128.95 and below
there at 127.35.
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SUGAR MARKET RECAP
3/21/2005
May Sugar closed down 0.27 at 8.76. This was 0.01
up from the low and 0.17 off the high.
The sugar market came under aggressive pressure
Monday with the funds and small specs dumping positions aggressively. Because
many other commodity markets were hit with broad based fund selling we suspect
that sugar was seeing a mass exodus. Fortunately for the bull camp in sugar the
sugar started to give ground late last week and that could have temporarily
diffused the selling activity. Even though the small spec and fund long position
wasn’t a record in the most recent COT report the long was still rather large at
just under 100,000 contracts. The prospect of some increased Russian physical
activity was almost completely lost in the liquidation wave in sugar which
appears to be capable of pushing prices down to the lowest level in 4 months.
Technical Outlook
SUGAR (MAY) 03/22/2005: A bearish signal was
triggered on a crossover down in the daily stochastics. Negative momentum
studies in the neutral zone will tend to reinforce lower price action. The
market back below the 18-day moving average suggests the longer-term trend could
be turning down. More selling pressure is likely given yesterday’s gap lower
price action on the day session chart. The defensive setup, with the close under
the 2nd swing support, could cause some early weakness. The next downside target
is 8.62. The next area of resistance is around 8.85 and 8.98, while 1st support
hits today at 8.67 and below there at 8.62.
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COTTON MARKET RECAP
3/21/2005
May Cotton finished down 0.82 at 50.12, 0.18 off
the high and 1.02 up from the low.
The cotton market saw a big range down extension
in the action Monday and that would seem to give the market follow through
potential. Considering that the cotton spec position in the COT report was at a
record long reading and the market is also expecting to see a slightly higher
supply than was expected around the March highs it might not be surprised to see
May cotton prices slide back toward consolidation support down around 48.00. In
order to avoid large acres in the US it might be necessary for nearby cotton
prices to fall enough to chase some acres toward soybeans and away from cotton.
Just as corn and soybeans appeared to buy acres with the recent rally, cotton
might have to fall in order to avoid a burdensome planting cycle.
Technical Outlook
COTTON (MAY) 03/22/2005: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The market back below the 18-day moving average suggests the
longer-term trend could be turning down. The gap lower price action on the day
session chart is a bearish indicator for trend. The market’s close below the 1st
swing support number suggests a moderately negative setup for today. The next
downside target is now at 48.71. The next area of resistance is around 50.72 and
51.11, while 1st support hits today at 49.52 and below there at 48.71.