More Legs For This Market?
BOND MARKET RECAP
5/19/2005
June Bonds finished down 0-11 at 115-31, 0-15 off
the high and 0-01 up from the low.
June 10 Yr Treasury Notes finished down 0-100 at
112-040, 0-100 off the high and 0-005 up from the low.
The Treasury market certainly deserved to
rally in the wake of news that seemed to downplay the inflation threat. Adding
to the bullish mentality were suggestions from a large bond fund manager that he
saw no inflation in the foreseeable future. On the other hand, soaring equity
prices and sharply lower oil prices would not seem to be the most supportive
developments for Treasuries over the long term. In short, the reaction rally in
Treasuries was deserved but to add to the big gains posted Wednesday might be
very difficult.
Technical Outlook
BONDS (JUN) 05/20/2005: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The market now above the 18-day moving average suggests the longer-term
trend has turned up. The market tilt is slightly negative with the close under
the pivot. The near-term upside objective is at 116-19. The next area of
resistance is around 116-06 and 116-19, while 1st support hits today at 115-21
and below there at 115-16.
TNOTES (JUN) 05/20/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. 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 near-term upside objective
is at 112-175. The next area of resistance is around 112-090 and 112-175, while
1st support hits today at 111-295 and below there at 111-260.
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STOCK INDICES RECAP
5/19/2005
June S&P finished up 4.7 at 1191.5, 1.1 off the
high and 5.7 up from the low.
June S&P E-Mini closed up 5 at 1191.75. This was
6.5 up from the low and 1 off the high.
June Dow closed up 25 at 10496. This was 51 up
from the low and 11 off the high.
We have to think that the conditions present in
the action Wednesday were the most favorable conditions in the last six months
and that the stock market was easily justified in the sharp run up. The fact
that inflation fears were quelled with a muted CPI report in additional to
another sharp decline in oil prices would seem to give the market some
additional legs. In fact, during the session Wednesday a number of cyclical
stocks showed strength and that also hints at ongoing buying interest ahead.
Even the threat of the hedge fund issue was played down early in the session
Wednesday and to many people that was an all clear signal in its own right.
Technical Outlook
S&P 500 (JUN) 05/20/2005: 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. The close over the pivot
swing is a somewhat positive setup. The near-term upside target is at 1197.15.
The next area of resistance is around 1194.89 and 1197.15, while 1st support
hits today at 1188.10 and below there at 1183.55.
SP EMINI (JUN) 05/20/2005: 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. With the close
higher than the pivot swing number, the market is in a slightly bullish posture.
The near-term upside objective is at 1197.87. The next area of resistance is
around 1195.50 and 1197.87, while 1st support hits today at 1188.00 and below
there at 1182.88.
NASDAQ (JUN) 05/20/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The cross over and close above
the 18-day moving average indicates the longer-term trend has turned up. The
close over the pivot swing is a somewhat positive setup. The near-term upside
target is at 1534.87. The 9-day RSI over 70 indicates the market is approaching
overbought levels. The next area of resistance is around 1531.25 and 1534.87,
while 1st support hits today at 1517.75 and below there at 1507.88.
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CURRENCY MARKET RECAP
5/19/2005
June US Dollar finished up 29 at 8610, 20 off the
high and 29 up from the low.
June Euro finished down 0.36 at 126.48, 0.05 off
the high and 0.35 up from the low.
June Euro Dollar closed down 0.005 at 96.5775.
This was 0.005 up from the low and 0.005 off the high.
June Canadian Dollar closed up 0.1 at 79.45. This
was 0.36 up from the low and 0.03 off the high.
June British Pound finished down 0.5 at 183.3,
0.46 off the high and 0.18 up from the low.
June Swiss closed down 0.26 at 81.98. This was
0.32 up from the low and 0.05 off the high.
June Japanese Yen closed down 0.71 at 93.14. This
was 0.07 up from the low and 0.25 off the high.
Surprisingly the Dollar came under pressure off
the muted inflation report despite the fact that the macro economic outlook was
vastly improved. Even more surprising is the fact that the Dollar weakened
despite significant declines in US energy prices. However, with the tone toward
the Chinese currency float reaching a crescendo it is possible that part of the
weakness in the Dollar on Wednesday was off the idea that the Chinese currency
was set to rise. The most significant reaction in the currency market Wednesday
appeared to be in the Canadian Dollar which continued to show signs of forging a
major bottoming.
Technical Outlook
YEN (JUN) 05/20/2005: Daily stochastics are
trending lower but have declined into oversold territory. The close below the
18-day moving average is an indication the longer-term trend has turned down.
The close below the 2nd swing support number puts the market on the defensive.
The next downside objective is 92.87. The next area of resistance is around
93.30 and 93.50, while 1st support hits today at 92.98 and below there at 92.87.
EURO (JUN) 05/20/2005: A crossover down in the
daily stochastics is a bearish signal. Daily stochastics declining into oversold
territory suggest the selling may be drying up soon. 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 objective is now at 126.01. The next area of resistance is around
126.68 and 126.80, while 1st support hits today at 126.28 and below there at
126.01.
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PRECIOUS METALS RECAP
5/19/2005
June Gold closed down 1.1 at 420.8. This was 1.3
up from the low and 1.4 off the high.
July Silver finished down 0.065 at 7.14, 0.065
off the high and 0.03 up from the low.
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The gold market managed to shake off periodic
bouts of weakness on Wednesday and that is impressive considering that the
inflation report was mostly bearish. However, a weaker Dollar and a vast
improvement in the macro economic outlook should effectively countervail the
negative residual from the CPI report. The gold did see a negative story that
demand in India was expected to tail off due to the end of the Wedding season
but improvement in the big picture view of the global economy should more than
countervail any geographically concentrated demand slide. Given the sharp rise
in silver and copper prices on Wednesday it would seem that bullish sentiment
toward metals has surfaced again.
Technical Outlook
SILVER (JUL) 05/20/2005: A positive indicator was
given with the upside crossover of the 9 & 18 bar moving average. Momentum
studies are rising from mid-range, which could accelerate a move higher if
resistance levels are penetrated. The cross over and close above the 18-day
moving average indicates the longer-term trend has turned up. The market tilt is
slightly negative with the close under the pivot. The next upside objective is
724.4. The next area of resistance is around 718.8 and 724.4, while 1st support
hits today at 709.3 and below there at 705.4.
GOLD (JUN) 05/20/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
close under the 18-day moving average indicates the longer-term trend could be
turning down. The daily closing price reversal down puts the market on the
defensive. The market’s close below the pivot swing number is a mildly negative
setup. The next downside objective is now at 418.2. The next area of resistance
is around 422.1 and 423.5, while 1st support hits today at 419.5 and below there
at 418.2.
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COPPER MARKET RECAP
5/19/2005
June Copper closed down 1.00 at 141.80. This was
1.00 up from the low and 0.60 off the high.
The copper market extended the upside breakout in
the action Wednesday and almost certainly benefited from the vastly improved
macro economic outlook. We also suspect that weakness in the Dollar provided
some support to copper. With oil prices falling sharply, inflation fears
tempered and US stocks exploding for a big rally we can understand the strength
in copper prices. In fact, a number of key technical areas were regained
Wednesday and that might result in additional follow through fund buying in
copper.
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ENERGY MARKET RECAP
5/19/2005
July Crude Oil closed down 0.39 at 48.74. This
was 0.09 up from the low and 1.11 off the high.
July Heating Oil closed up 1.96 at 138.85. This
was 1.15 up from the low and 2.85 off the high.
July Unleaded Gas finished up 1.17 at 143.05,
2.45 off the high and 1.75 up from the low.
July Natural Gas finished down 0.04 at 6.42, 0.07
off the high and 0.04 up from the low.
July Propane closed down 0.01 at 0.78. This was
equal to the low and equal to the high.
The floor fell out from under the oil market as
the weekly inventory numbers reaffirmed the continued rise in crude oil stocks.
It should also be noted that US refinery rates increased so significantly that
many traders fear even more builds in inventories before the real summer demand
period is ushered in over the coming two weeks. About the only positive in the
weekly inventory reports were indications that the distillate stocks declined as
the EIA recently warned that tightness in the distillate stocks area might be a
sleeper problem this summer.
Technical Outlook
CRUDE OIL (JUL) 05/20/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
close below the 18-day moving average is an indication the longer-term trend has
turned down. The market’s close below the pivot swing number is a mildly
negative setup. The next downside target is now at 47.80. The market is
approaching oversold levels on an RSI reading under 30. The next area of
resistance is around 49.34 and 50.19, while 1st support hits today at 48.14 and
below there at 47.80.
UNLEADED (JUL) 05/20/2005: Daily momentum studies
are on the rise from low levels and should accelerate a move higher on a push
through the 1st swing resistance. The close below the 18-day moving average is
an indication the longer-term trend has turned down. The upside closing price
reversal on the daily chart is somewhat bullish. It is a mildly bullish
indicator that the market closed over the pivot swing number. The near-term
upside objective is at 147.42. The next area of resistance is around 145.15 and
147.42, while 1st support hits today at 140.95 and below there at 139.03.
HEATING OIL (JUL) 05/20/2005: 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. A positive setup occurred with the
close over the 1st swing resistance. The near-term upside target is at 143.27.
The next area of resistance is around 140.85 and 143.27, while 1st support hits
today at 136.85 and below there at 135.28.
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CORN MARKET RECAP
5/19/2005
July Corn finished down 1 1/4 at 209 1/2, 2
off the high and 1/4 up from the low. December Corn closed down 1 at 227 3/4.
This was 1/4 up from the low and 1 3/4 off the high.
The forecast for more rain events into next week
after a good rain event overnight helped to pressure the market early but a
generally more bullish macro-economic view on commodity markets along with the
perception that corn is in an oversold condition helped to provide some
underlying support. With overnight rains across the driest areas of the eastern
cornbelt, consolidating yesterday’s gains was seen as a bullish factor but some
traders. Funds were noted buyers of near 1700 contracts which pulled futures
higher into the mid-session before weakness in the other grains contributed to
the close lower and near the lows of the day. Weekly export sales for corn came
in at 854,000 tonnes as compared with 427,000 tonnes necessary each week to
reach the USDA projection and 800,000-1.0 million tonnes expected. Cumulative
sales have reached 85.2% of the USDA forecast for the season as compared with
81.9% as the 5-year average for this time of the year. Basis levels yesterday
afternoon were mixed with some locations down due to increased producer selling
on the rally. July corn support comes in at 208 3/4 with 213 1/4 and 215 3/4 as
next resistance.
Technical Outlook
CORN (JUL) 05/20/2005: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. 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 target is at 212. The next area
of resistance is around 210 1/2 and 212, while 1st support hits today at 208 1/2
and below there at 207 3/4.
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SOY COMPLEX RECAP
5/19/2005
July Soybeans finished down 4 at 629 1/4, 5 1/4
off the high and 3/4 up from the low. November Soybeans closed down 4 1/4 at
626. This was 1/2 up from the low and 6 off the high.
July Soymeal closed down 1 at 195.6. This was 1.0
up from the low and 1.7 off the high.
July Soybean Oil finished down 0.22 at 22.04,
0.18 off the high and 0.03 up from the low.
Less weather concerns across the eastern cornbelt
today seemed to be enough to push soybeans toward the lows of the day into the
close. Selling was noted from US and South American producers on the rally
yesterday which helped pressure the market in overnight trade and so did the
rains which seem to be a little better coverage and amounts than anticipated for
the central and eastern Illinois region. In addition, there is more rain showing
up for the northwestern and then the southeastern cornbelt for next week. Weekly
export sales for soybeans came in at 377,000 tonnes as compared with 73,900
tonnes necessary each week to reach the USDA projection and 150,000-225,000
tonnes expected. Cumulative sales have reached 96.1% of the USDA forecast for
the season as compared with 95.5% as the 5-year average for this time of the
year. Meal sales were 66,600 tonnes from 50,000-75,000 expected and oil sales
were 2,000 tonnes from 2,000-6,000 expected. July soybean support comes in at
627 1/2 and 623 1/2 with 635 and 641 as resistance.
Technical Outlook
BEANS (JUL) 05/20/2005: The close below the
60-day moving average is an indication the longer-term trend has turned down.
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 indicates
the longer-term trend has turned up. It is a slightly negative indicator that
the close was under the swing pivot. The next upside target is 636 1/4. The next
area of resistance is around 632 1/4 and 636 1/4, while 1st support hits today
at 626 1/4 and below there at 624 1/2.
MEAL (JUL) 05/20/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The cross over and close above the 18-day moving average is an
indication the longer-term trend has turned positive. The market tilt is
slightly negative with the close under the pivot. The near-term upside target is
at 198.4. The next area of resistance is around 196.9 and 198.4, while 1st
support hits today at 194.3 and below there at 193.1.
BEANOIL (JUL) 05/20/2005: The downside crossover
(9 below 18) of the moving averages suggests a developing short-term downtrend.
Momentum studies are still bearish but are now at oversold levels and will tend
to support reversal action if it occurs. The close below the 18-day moving
average is an indication the longer-term trend has turned down. The market’s
close below the 1st swing support number suggests a moderately negative setup
for today. The next downside target is 21.87. The next area of resistance is
around 22.14 and 22.28, while 1st support hits today at 21.94 and below there at
21.87.
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WHEAT MARKET RECAP
5/19/2005
July Wheat finished down 5 1/2 at 309 1/2, 8 off the high and
1 1/4 up from the low. December Wheat closed down 6 at 328 3/4. This was 3/4 up
from the low and 8 1/2 off the high.
A continued dry weather forecast trend for the
southern plains and the outlook for hotter temperatures into the weekend helped
support the higher opening but weakness in the other grains and ideas that the
market is overbought after the jump yesterday helped trigger the set-back. Fears
that prices need to stay cheap, or get cheaper for US wheat to get competitive
on the world market helped pressure. Weekly export sales for wheat came in at
302,200 tonnes as compared with 300,000-500,000 tonnes expected. Cumulative
sales have reached 95.8% of the USDA forecast for the season as compared with
92.5% as the 5-year average for this time of the year. Old crop sales were a
cancellation of 213,500 tonnes (negative) while new crop sales were 515,700
tonnes. Cumulative new crop sales have reached 5.9% of the USDA forecast for the
season as compared with 6.9% as the 5-year average for this time of the year.
Dryness in eastern Australia was also seen as a supportive factor. In their
weekly tender, Japan bought 125,000 tonnes of wheat with 100,000 of the total
coming from the US. The EU sold 189,500 tonnes of wheat at their weekly tender
with a maximum 6.50 euro refund which was seen as a neutral price development.
July wheat support comes in at 308 1/4 with 316 and 321 1/4 as resistance.
Technical Outlook
WHEAT (JUL) 05/20/2005: Rising from oversold
levels, daily momentum studies would support higher prices, especially on a
close above resistance. The major trend has turned down with the cross over back
below the 18-day moving average. The market’s close below the 1st swing support
number suggests a moderately negative setup for today. The next upside objective
is 320 1/4. The next area of resistance is around 314 and 320 1/4, while 1st
support hits today at 305 and below there at 302.
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LIVE CATTLE RECAP
5/19/2005
June Live Cattle finished down 0.25 at 85.82,
0.17 off the high and 0.27 up from the low.
May Feeder Cattle closed up 0.15 at 111.75. This
was 0.20 up from the low and 0.10 off the high.
Cattle closed moderately lower on follow-through
technical selling from the collapse on Wednesday and from additional fund
selling. Funds built up a large net long position in recent weeks and ideas of
as near-term peak in demand and continued hefty supply ahead helped pressure. At
mid-session, boxed beef cutout values were up $.15 on the day to $156.88 as
compared with $153.65 one week ago. Slaughter came in at 124,000 head as
compared with trade expectations of 122,000-126,000 head.
Technical Outlook
CATTLE (JUN) 05/20/2005: A crossover down in the
daily stochastics is a bearish signal. Momentum studies trending lower at
mid-range should accelerate a move lower if support levels are taken out. 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 downside objective is 85.370. The next area of resistance is
around 86.050 and 86.250, while 1st support hits today at 85.620 and below there
at 85.370.
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LEAN HOGS RECAP
5/19/2005
June Lean Hogs finished down 0.47 at 73.47, 0.67
off the high and 0.12 up from the low.
May Pork Bellies closed up 0.40 at 80.60. This
was 0.20 up from the low and 0.95 off the high.
The market closed lower after choppy, two-sided
trade early. Cash markets were $1.50 lower at most terminal locations in the
morning which helped pressure the market early. A recovery bounce in bellies
provided some support but the focus of attention is on potentially higher pork
production ahead as hefty weights and slow marketings of the past few weeks has
traders fearful that increased production will saturate demand and then pressure
pork cut-out values. Traders are also fearful of big cold storage supplies for
the monthly cold storage report for release on Friday afternoon. The CME 2-Day
Lean Index for the period ending May 17th came in at 76.47 which was up.06 from
the previous session but down from 78.24 one week ago. Slaughter came in at
383,000 head as compared with trade expectations of 375,000-382,000 head.
Technical Outlook
HOGS (JUN) 05/20/2005: Momentum studies are
declining, but have fallen to oversold levels. The close below the 18-day moving
average is an indication the longer-term trend has turned down. It is a slightly
negative indicator that the close was lower than the pivot swing number. The
next downside objective is 72.820. Some caution in pressing the downside is
warranted with the RSI under 30. The next area of resistance is around 73.870
and 74.400, while 1st support hits today at 73.100 and below there at 72.820.
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COCOA MARKET RECAP
5/19/2005
July Cocoa finished down 7 at 1446, 23 off the
high and 11 up from the low.
Even the cocoa market seemed to get a lift from
the improved macro economic condition but we suspect that the slide in the
Dollar was the key factor lifting cocoa prices. However, it should also be noted
that cocoa managed the gains despite the presence of origin selling and that
really begins to alter the mostly bearish sentiment of the cocoa market.
However, we are still not seeing much cause to interject a premium into cocoa
prices and that could limit near term gains to simple technical short covering.
Technical Outlook
COCOA (JUL) 05/20/2005: Daily momentum studies
are on the rise from low levels and should accelerate a move higher on a push
through the 1st swing resistance. The close below the 18-day moving average is
an indication the longer-term trend has turned down. The daily closing price
reversal down is a negative indicator for prices. It is a slightly negative
indicator that the close was under the swing pivot. The near-term upside target
is at 1483. The next area of resistance is around 1463 and 1483, while 1st
support hits today at 1429 and below there at 1415.
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COFFEE MARKET RECAP
5/19/2005
July Coffee closed down 1.60 at 116.80. This was
0.30 up from the low and 2.50 off the high.
July coffee closed 160 lower on the session with
futures still in a long liquidation mode. A lower close in London after reaching
a 5 1/2 year peak yesterday helped pressure. The threat of a tropical storm or
possible hurricane into Central America failed to provide any support. The Costa
Rica Coffee Institute indicated a 2004/2005 harvest at 1.909 million bags, down
9.9% from last year. Some colder and rainy weather is in the Brazil forecast for
this weekend and late next week could bring the first cold air mass of the
season into Brazil. While the system does not look cold enough for any damage
fears, it could give the market a psychological boost.
Technical Outlook
COFFEE (JUL) 05/20/2005: 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 swing indicator gave a moderately negative reading with the close
below the 1st support number. The next downside objective is 114.55. The next
area of resistance is around 118.15 and 120.10, while 1st support hits today at
115.40 and below there at 114.55.
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SUGAR MARKET RECAP
5/19/2005
July Sugar closed up 0.13 at 8.53. This was 0.18
up from the low and 0.01 off the high.
With funds already holding a net short position
in sugar, the highest close for October sugar since May 2nd leaves the market
vulnerable to more short-covering on Friday. October closed 8 higher at 859
which is up 34 points from the lows of the month. Solid gains in London sugar
and a more positive tone in the cash market helped support the bounce. A report
to Reuters from the head of the Irish Farmers Association indicated that if the
New European Commission proposal for deeper price cuts over a shorter time
period was implemented that the sugar industry in Ireland would disappear.
Continued talk of possible buying from China this spring along with some mild
weather concerns added to the positive tone. Too dry in Australia and talk that
tropical storm Adrian could make land fall in El Salvador or Guatemala on Friday
as a hurricane helped provide some support.
Technical Outlook
SUGAR (JUL) 05/20/2005: The cross over and close
above the 40-day moving average is an indication the longer-term trend has
turned positive. The daily stochastics gave a bullish indicator with a crossover
up. Momentum studies are rising from mid-range, which could accelerate a move
higher if resistance levels are penetrated. The major trend could be turning up
with the close back above the 18-day moving average. With the close over the 1st
swing resistance number, the market is in a moderately positive position. The
near-term upside target is at 8.67. The next area of resistance is around 8.62
and 8.67, while 1st support hits today at 8.44 and below there at 8.30.
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COTTON MARKET RECAP
5/19/2005
July Cotton finished down 1.65 at 50.15, 1.45 off
the high and 0.05 up from the low.
The cotton market fell sharply with new crop
December falling to the lowest level since late February as long liquidation
from speculators was active. Funds were noted sellers of near 1000 contracts in
futures and also bearish plays in options. Traders are concerned with the
possible repercussions of import quotes on specific textiles and concerned that
China could retaliate with lower US cotton imports. Weekly export sales for
cotton came in at 302,300 bales as compared with trade expectations near 200,000
bales. Cumulative sales have reached 104.7% of the USDA forecast for the season
as compared with 105.4% as the 5-year average for this time of the year. China
was the most active buyer at 167,500 bales with Turkey next at 56,200 bales.
Export shipments were 265,400 bales.
Technical Outlook
COTTON (JUL) 05/20/2005: 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. The close below
the 2nd swing support number puts the market on the defensive. The next downside
target is now at 49.00. With a reading under 30, the 9-day RSI is approaching
oversold levels. The next area of resistance is around 50.90 and 52.00, while
1st support hits today at 49.40 and below there at 49.00.