Metals Under Pressure — Here’s Why…

Good weather in the forecast for the next week
with a warming trend into the weekend helped alleviate fears of a hefty drop in
yields due to cold weather and contributed to the active speculative selling.
The warmer weather in the northern sections of the cornbelt should allow the
crops in Minnesota, South Dakota and northern Iowa to make progress towards
maturity. Tonight’s weekly crop progress reports from these states will give
traders a better feel for the progress in this area. Traders continue to attempt
to determine if losses in the north will be offset by improved yield potential
due to good weather in the central cornbelt. Weekly export inspections came in
at 29.8 million bushels as compared with trade expectations for 33-38 million
bushels. Asia demand seemed slow over the weekend. The weather looks favorable
to good filling out of the ears in the central cornbelt and the race against
time is still a factor for crops in the north. December corn support comes in at
225 and then 217 1/4 with resistance at 232 3/4 and 235.

Technical Outlook

CORN (DEC) 09/08/2004: A negative indicator was
given with the downside crossover of the 9 & 18 bar moving average. Negative
momentum studies in the neutral zone will tend to reinforce lower price action.
The close below the 9-day moving average is a negative short-term indicator for
trend. 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 objective is
223. The next area of resistance is around 228 1/4 and 230 1/4, while 1st
support hits today at 224 3/4 and below there at 223.

 

SOY COMPLEX RECAP

9/7/2004

November Soybeans finished down 28 3/4 at 583
1/2, 10 1/2 off the high and 4 1/2 up from the low. January Soybeans closed down
27 1/2 at 591. This was 4 up from the low and 8 1/2 off the high.

December Soymeal closed down 3.6 at 168.7. This
was 5.7 up from the low and 0.7 off the high.

December Soybean Oil finished down 1.46 at 23.97,
0.96 off the high and 0.12 up from the low.

The warm weather outlook into early next week
along with China demand concerns triggered active speculative selling early in
the session. Some concerns for a Canadian frost in the Canola areas last night
and talk of too much rain for the southeast crop failed to provide much support
and after last weeks strong gains, oil was under heavy selling pressures. Some
agronomist thought that the frost was not as severe as the August 20th frost and
many plants might be a little hardier by now. Canola futures in Winnipeg were
down sharply as well which added to the bearish tone. More bird flu problems in
Malaysia and Newcastle disease reported in Indonesia are seen as bearish factors
for world meal consumption. A lack of deliveries was seen as a slightly
supportive factor for September soybeans and products. Weekly export inspections
came in at 3.05 million bushels as compared with trade expectations for
500,000-3.0 million bushels. November soybeans short-term resistance points come
in at 586 and 588 3/4 with 575 and 565 1/2 as support.

Technical Outlook

BEANS (NOV) 09/08/2004: The market back below the
40-day moving average suggests the longer-term trend could be turning down.
Momentum studies trending lower at mid-range could accelerate a price break if
support levels are broken. The market’s close below the 9-day moving average is
an indication the short-term trend remains negative. 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 570. The next
area of resistance is around 591 and 600, while 1st support hits today at 576
and below there at 570.

MEAL (DEC) 09/08/2004: Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
The market’s short-term trend is negative as the close remains below the 9-day
moving average. The gap lower on the day session chart is bearish and puts the
market on the defensive. The market is in a bearish position with the close
below the 2nd swing support number. The next downside objective is now at 161.1.
The next area of resistance is around 171.8 and 173.8, while 1st support hits
today at 165.5 and below there at 161.1.

BEANOIL (DEC) 09/08/2004: Momentum studies are
trending lower from high levels which should accelerate a move lower on a break
below the 1st swing support. The close below the 9-day moving average is a
negative short-term indicator for trend. The gap lower on the day session chart
is bearish and puts the market on the defensive. The market is in a bearish
position with the close below the 2nd swing support number. The next downside
target is 23.10. The next area of resistance is around 24.51 and 25.26, while
1st support hits today at 23.43 and below there at 23.10.

 

WHEAT MARKET RECAP

9/7/2004

December Wheat finished down 1 3/4 at 317 1/4, 3/4 off the
high and 4 3/4 up from the low. March Wheat closed down 1 1/4 at 327 3/4. This
was 4 1/4 up from the low and 3/4 off the high.

The speculative selling was active this morning
in spite of positive export news and what looks to be an extreme oversold
condition. The net short position of the fund trader as of August 31st from the
COT report which includes options was already nearly 22,000 contracts which is
close to a 9 year high. Weakness in the other grains and a good weather forecast
for the week in the spring wheat region added to the early but the market
managed a strong recovery off of the early lows. Egypt bought 230,000 tons of
optional origin wheat over the weekend with half of the purchase to the US. This
shows the US is competitively priced on the world market. In fact, weekly export
inspections, released after the opening, came in at 32.8 million bushels as
compared with trade expectations for 18.0-23.0 million bushels. Cumulative
export inspections have reached 288.9 million bushels as compared with 278.7
million bushels last year at this time. China loaded out another 5.5 million
bushels on the week. Canadian crop areas were hit with the second pre-harvest
frost this season overnight with initial damage thoughts seen as very light and
a less severe frost than August 20th. Australia officials (ABARE) cut their
forecast for wheat production back to 22.25 million tons from a June forecast of
23.25 million tons. Deliveries were reported at 121 contracts this morning.
Support for December wheat comes in at 312 and 309 with 319 1/2 and 321 3/4 as
resistance.

Technical Outlook

WHEAT (DEC) 09/08/2004: The downside crossover (9
below 18) of the moving averages suggests a developing short-term downtrend.
Negative momentum studies in the neutral zone will tend to reinforce lower price
action. 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. The next downside target is now at
310 3/4. The next area of resistance is around 320 and 321 3/4, while 1st
support hits today at 314 1/2 and below there at 310 3/4.

 

LIVE CATTLE RECAP

9/7/2004

October Live Cattle closed down 0.35 at 82.37.
This was 0.32 up from the low and 0.67 off the high.

October Feeder Cattle finished up 0.32 at 106.57,
0.57 off the high and 0.27 up from the low.

October cattle closed slightly lower on the
session and down to the lowest close since April 27th with a noted bout of fund
selling helping to pressure. Cash market tone is steady to lower after last
weeks sharp break in beef prices and the premium structure of the market along
with news that funds are still holding a hefty net long position was seen as
bearish. While there was a weak demand tone due to the hurricane over the
weekend, beef demand could receive a bounce into next week as the “re-stocking”
of both retail and consumer refrigerated and frozen beef stocks could cause a
surge in demand into next week after power is restored to over 3 million
customers who were still out of power on Tuesday. Boxed beef cutout values
(600-750 choice) were up $0.39 on the day at mid-session to $131.44. A week ago
they were trading at $136.10.

Technical Outlook

CATTLE (OCT) 09/08/2004: Momentum studies are
declining, but have fallen to oversold levels. The close below the 9-day moving
average is a negative short-term indicator for trend. The market tilt is
slightly negative with the close under the pivot. The next downside objective is
now at 81.470. Some caution in pressing the downside is warranted with the RSI
under 30. The next area of resistance is around 82.870 and 83.450, while 1st
support hits today at 81.900 and below there at 81.470.

 

LEAN HOGS RECAP

9/7/2004

October Lean Hogs closed down 0.27 at 65.12. This
was 0.07 up from the low and 1.25 off the high.

February Pork Bellies finished down 0.95 at
95.75, 1.35 off the high and 0.55 up from the low.

After spending most of the session higher on the
day, late selling helped push October hogs down 27 points on the day and down
near 120 points off of the highs. On days when the cash market has a steady to
firm tone, futures find support from the discount of futures to the cash market.
The CME 2-day lean index for the period ending September 2nd was down 5 cents
from the previous session to 72.35 as compared with 73.23 one week previous. The
slow pace of the cash decline is seen as supportive. Slaughter came in at
400,000 head as compared with trade expectations ranging from 396,000-400,000
head. Last weeks slaughter was a whopping 2.046 million head and packers are
expected to try to make up for some of the lost time on Monday with a large
slaughter for Saturday.

Technical Outlook

HOGS (OCT) 09/08/2004: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The close above the 9-day moving average is a
positive short-term indicator for trend. The daily closing price reversal down
puts the market on the defensive. It is a slightly negative indicator that the
close was under the swing pivot. The near-term upside target is at 66.720. The
next area of resistance is around 65.770 and 66.720, while 1st support hits
today at 64.470 and below there at 64.100.

 

COCOA MARKET RECAP

9/7/2004

December Cocoa finished down 92 at 1479, 76 off
the high and 4 up from the low.

A massive range down in cocoa would seem to have
the bull camp on the run. In fact given the last COT report readings we have to
think that a blow out of both fund and small spec longs is well underway. With
continued rainfall in African production areas we can understand the lack of
resolve by the bull camp. Apparently some traders think that the weather pattern
in Africa has turned wetter and that the dryness theme is at least temporarily
put on the back burner.

Technical Outlook

COCOA (DEC) 09/08/2004: Daily stochastics are
trending lower but have declined into oversold territory. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. The market is in a bearish position with the close below the 2nd swing
support number. The next downside objective is 1417. Some caution in pressing
the downside is warranted with the RSI under 30. The next area of resistance is
around 1519 and 1577, while 1st support hits today at 1439 and below there at
1417.

 

COFFEE MARKET RECAP

9/7/2004

December Coffee closed down 1.35 at 70.85. This
was 0.40 up from the low and 1.80 off the high.

The coffee market failed and would seem to be
poised to fall all the way down to consolidation support around the August lows.
With the funds and small specs selling and the commercial buyers mostly covered
it is not surprising that the coffee market found it difficult to find a
countervailing force to all the selling. Despite news of lower coffee exports
from Central America it seems that coffee is set to remove any remaining weather
longs as the threat of frost is becoming less important by the day.

Technical Outlook

COFFEE (DEC) 09/08/2004: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. A negative signal for trend short-term was given on a
close under the 9-bar moving average. The market’s close below the pivot swing
number is a mildly negative setup. The next downside target is 69.05. The next
area of resistance is around 71.95 and 73.40, while 1st support hits today at
69.80 and below there at 69.05.

 

SUGAR MARKET RECAP

9/7/2004

October Sugar closed down 0.24 at 7.89. This was
0.04 up from the low and 0.18 off the high.

After threatening a significant upside extension
last week the sugar market made a very disappointing technical trade following
the extended holiday weekend. Reports of producer selling seemed to prompt fund
selling and with a violation of more technical points on the charts we would not
be surprised to see even more of the large spec and fund long forced to
liquidate. We doubt that sugar saw much in the way of support from the threat of
frost in North America but it is possible that a minimal amount of recent
strength in corn did provide sugar with some support from the sweetener angle.

Technical Outlook

SUGAR (MAR) 09/08/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The market’s short-term trend
is positive on the close above the 9-day moving average. 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
upside objective is 8.72. The next area of resistance is around 8.62 and 8.72,
while 1st support hits today at 8.46 and below there at 8.40.

 

COTTON MARKET RECAP

9/7/2004

October Cotton finished up 1.20 at 52.20, equal
to the high and 4.20 up from the low.

The cotton market showed wild action Tuesday
after showing significant selling early and then exploding off the lows to close
sharply higher. It seems that yet another hurricane threat is on the horizon
with the track supposedly putting the storm into the Gulf instead of Florida.
Therefore, it is clear that traders are concerned that open bolls could be
significantly impacted by a direct hit on production areas and with the heavy
rainfall coming off the recent slow moving storm in Florida heavy rains are on
the markets mind.

Technical Outlook

COTTON (DEC) 09/08/2004: 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’s close
above the 9-day moving average suggests the short-term trend remains positive.
The upside daily closing price reversal gives the market a bullish tilt. With
the close over the 1st swing resistance number, the market is in a moderately
positive position. The next downside target is now at 47.50. The next area of
resistance is around 54.86 and 55.94, while 1st support hits today at 50.64 and
below there at 47.50.