Relief Rally In The Dollar. Here’s What We Suspect Happened
BOND MARKET RECAP
2/23/2005
March Bonds finished up 0-06 at 113-27, 0-19 off
the high and 0-10 up from the low.
March 10 Yr Treasury Notes finished up 0-020 at
111-135, 0-115 off the high and 0-080 up from the low.
The Treasury market made a fleeting rally
but then gave up the gains in the close. We are not surprised that the short
covering rally failed to hold as the market saw comments from the US Treasury
that the GDP reading on Thursday might be revised upward. We also think that the
trade quickly managed to discount the muted inflation readings and remained
concerned about the big picture international rotation threat. In fact, until
the Dollar shows persistent strength we suspect that the rotation threat will
continue to weigh on Treasury prices.
Technical Outlook
BONDS (MAR) 02/24/2005: 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. With the close
over the 1st swing resistance number, the market is in a moderately positive
position. The next downside objective is now at 113-02. The next area of
resistance is around 114-14 and 114-29, while 1st support hits today at 113-17
and below there at 113-02.
TNOTES (MAR) 02/24/2005: 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. The upside daily closing price reversal gives the market a
bullish tilt. With the close higher than the pivot swing number, the market is
in a slightly bullish posture. The next downside objective is now at 110-260.
The next area of resistance is around 111-255 and 112-035, while 1st support
hits today at 111-050 and below there at 110-260.
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STOCK INDICES RECAP
2/23/2005
March S&P finished up 8 at 1192.7, 1.1 off the
high and 7.3 up from the low.
March S&P E-Mini closed up 8 at 1192.75. This was
9.25 up from the low and 1.25 off the high.
March Dow closed up 68 at 10686. This was 61 up
from the low and 19 off the high.
The stock market managed to forge some short
covering gains following a much softer than expected US CPI reading. We also
think that the market was emboldened by the fact that the US Treasury Secretary
thinks the US GDP reading on Thursday might be revised upward. The trade was
also lifted by talk of additional buyouts in the transportation sector and
because of the assurances from the OPEC President that the cartel would not
allow oil prices to get out of control. The Fed also supported prices by
indicating that their policy was still accommodative and that future rate
decisions would be made off upcoming data and that led some to conclude that the
next rate hike wasn’t already carved in stone.
Technical Outlook
S&P 500 (MAR) 02/24/2005: The cross over and
close above the 40-day moving average is an indication the longer-term trend has
turned positive. 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 close over
the pivot swing is a somewhat positive setup. The next downside target is
1182.75. The next area of resistance is around 1196.90 and 1199.55, while 1st
support hits today at 1188.50 and below there at 1182.75.
SP EMINI (MAR) 02/24/2005: The cross over and
close above the 40-day moving average is an indication the longer-term trend has
turned positive. Negative momentum studies in the neutral zone will tend to
reinforce lower price action. The close below the 18-day moving average is an
indication the longer-term trend has turned down. The daily closing price
reversal up on the daily chart is somewhat positive. The market has a slightly
positive tilt with the close over the swing pivot. The next downside objective
is 1180.38. The next area of resistance is around 1198.25 and 1201.37, while 1st
support hits today at 1187.75 and below there at 1180.38.
NASDAQ (MAR) 02/24/2005: 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. The market’s close below the pivot
swing number is a mildly negative setup. The next downside target is now at
1485.00. The next area of resistance is around 1509.00 and 1515.00, while 1st
support hits today at 1494.00 and below there at 1485.00.
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CURRENCY MARKET RECAP
2/23/2005
March US Dollar finished up 26 at 8267, 31 off
the high and 24 up from the low.
March Euro finished down 0.29 at 132.35, 0.13 off
the high and 0.46 up from the low.
March Euro Dollar closed up 0.0025 at 97.0075.
This was 0.005 up from the low and 0.0025 off the high.
March Canadian Dollar closed down 0.87 at 80.79.
This was 0.49 up from the low and 0.44 off the high.
March British Pound finished down 0.13 at 190.83,
0.27 off the high and 0.59 up from the low.
March Swiss closed down 0.26 at 86.18. This was
0.39 up from the low and 0.1 off the high.
March Japanese Yen closed down 0.62 at 95.57.
This was 0.32 up from the low and 0.17 off the high.
The Dollar saw a relief rally on Wednesday that
inspired by a softer than expected CPI reading, lower energy prices and a
slightly stronger US equity market. We also suspect that the Dollar was lifted
by comments from the US Treasury Secretary, who suggested that the Thursday
morning GDP might be revised higher due to the favorable exchange rate. However,
the Secretary had to reiterate that the US is for a strong Dollar, partly
because it would seem that he thinks a low Dollar helps the economy. It should
also be noted that both the Euro zone and the Japanese released disappointing
numbers overnight and that could also have inspired the Dollar to short cover.
Technical Outlook
YEN (MAR) 02/24/2005: Momentum studies are rising
from mid-range, which could accelerate a move higher if resistance levels are
penetrated. The market back below the 18-day moving average suggests 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 market is in a bearish
position with the close below the 2nd swing support number. The near-term upside
objective is at 96.02. The next area of resistance is around 95.81 and 96.02,
while 1st support hits today at 95.33 and below there at 95.05.
EURO (MAR) 02/24/2005: 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 market’s
close below the pivot swing number is a mildly negative setup. The next upside
objective is 132.85. With a reading over 70, the 9-day RSI is approaching
overbought levels. The next area of resistance is around 132.64 and 132.85,
while 1st support hits today at 132.06 and below there at 131.68.
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PRECIOUS METALS RECAP
2/23/2005
April Gold closed up 0.3 at 436.1. This was 3.1
up from the low and 0.9 off the high.
March Silver finished down 0.077 at 7.443, 0.047
off the high and 0.168 up from the low.
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The metals showed some choppy action Wednesday
and with the Dollar moderately higher, energy prices weaker, the CPI soft and US
equity prices firmer we aren’t surprised with the minor bout of selling.
However, the metals have to be a little disappointed with the fact that
inflationary pressures were not being passed along from the wholesale level to
consumer level. Furthermore, while inflation wasn’t a dominating component of
the recent rally in gold and silver is was part of the bull equation. In fact,
now that CPI disappointed the trade it could take a slide below 82.35 just to
temper the profit taking mentality in gold.
Technical Outlook
SILVER (MAR) 02/24/2005: Momentum studies are
trending higher but have entered overbought levels. 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 upside target is 762.8. The market is becoming somewhat
overbought now that the RSI is over 70. The next area of resistance is around
755.1 and 762.8, while 1st support hits today at 733.6 and below there at 719.8.
GOLD (APR) 02/24/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The market now above the 18-day moving average suggests the
longer-term trend has turned up. The close over the pivot swing is a somewhat
positive setup. The near-term upside objective is at 439.5. The market is
becoming somewhat overbought now that the RSI is over 70. The next area of
resistance is around 438.1 and 439.5, while 1st support hits today at 434.1 and
below there at 431.6.
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COPPER MARKET RECAP
2/23/2005
March Copper closed up 1.05 at 150.00. This was
2.60 up from the low and 0.20 off the high.
The copper market managed to reverse early
selling and might have done so off a delayed reaction to the overnight LME stock
decline, higher US equity prices and talk that funds were buying both aluminum
and copper. In other words, the industrial and macro economic tilt toward copper
improved from the prior session and that seemed to allow the market to recover
even in the face of a stronger Dollar. Traders should be sure to monitor the
overnight LME copper stocks change as a string of decline on the order seen last
night could certainly give the bull camp a renewed vigor.
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ENERGY MARKET RECAP
2/23/2005
April Crude Oil closed down 0.25 at 51.17. This
was 0.29 up from the low and 0.43 off the high.
March Heating Oil closed up 4.29 at 148.31. This
was 5.81 up from the low and 0.44 off the high.
March Unleaded Gas finished up 0.25 at 131.14,
0.86 off the high and 2.34 up from the low.
March Natural Gas finished up 0.21 at 6.31, 0.03
off the high and 0.27 up from the low.
March Propane closed up 0.00 at 0.79. This was
equal to the low and equal to the high.
The copper market tried to take out the prior
day’s highs but in the end could not muster sustained buying interest. We would
not have been surprised to see copper rise to new contract highs, especially
since daily LME stocks managed one of the largest overnight declines in months
and the macro economic condition was much more conducive to gains than in the
action Tuesday. The Press continues to suggest that fund buyers are interested
players and that could be why the market managed to hold so close to the highs
during the action Wednesday. We continue to think that copper needs to see
better economic activity or distinct Chinese physical demand to drive above the
recent high of 150.20.
Technical Outlook
CRUDE OIL (APR) 02/24/2005: 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
mildly bullish indicator that the market closed over the pivot swing number. The
near-term upside target is at 51.92. With a reading over 70, the 9-day RSI is
approaching overbought levels. The next area of resistance is around 51.52 and
51.92, while 1st support hits today at 50.81 and below there at 50.49.
UNLEADED (APR) 02/24/2005: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. 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 next upside target is 145.41. The next
area of resistance is around 144.32 and 145.41, while 1st support hits today at
141.52 and below there at 139.81.
HEATING OIL (APR) 02/24/2005: Momentum studies
are trending higher but have entered overbought levels. The cross over and close
above the 18-day moving average is an indication the longer-term trend has
turned positive. With the close over the 1st swing resistance number, the market
is in a moderately positive position. The next upside target is 147.25. With a
reading over 70, the 9-day RSI is approaching overbought levels. The next area
of resistance is around 145.91 and 147.25, while 1st support hits today at
141.31 and below there at 138.06.
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CORN MARKET RECAP
2/23/2005
May Corn finished down 1 1/2 at 213 3/4,
1/2 off the high and 1 1/4 up from the low. December Corn closed down 1 1/2 at
235 1/2. This was 3/4 up from the low and 1/2 off the high.
A set-back in soybeans and ideas that futures are
technically overbought helped trigger some early selling pressure but strength
in wheat and some concerns that the weather rally may not be complete helped
limit the selling. In addition, traders are fearful of trading ahead of the
funds who were massive buyers on the session yesterday. Volume for corn for
yesterday’s session hit a record high of 301,177 contracts and while March open
interest was down nearly 23,000 contracts on the session, total open interest
was down just 1200 contracts. This suggests that the massive buying effort by
the funds yesterday may have been more than just short-covering. The USDA
announced a sale of 141,000 tons of US corn to Mexico. South Korea bought 55,000
tons of optional origin corn overnight which traders believe will go to China. A
weak basis market in the Midwest suggests a pick-up in producer selling on the
rally. Support for May corn moves up to 211 1/2 and 209 1/2 with resistance at
216 3/4 and 223.
Technical Outlook
CORN (MAY) 02/24/2005: 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. It is a slightly negative
indicator that the close was lower than the pivot swing number. The near-term
upside target is at 215 1/4. The next area of resistance is around 214 1/2 and
215 1/4, while 1st support hits today at 213 and below there at 212.
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SOY COMPLEX RECAP
2/23/2005
May Soybeans finished down 1/2 at 582 1/2, 1 1/2
off the high and 8 1/2 up from the low. November Soybeans closed down 4 1/2 at
591 1/2. This was 6 1/2 up from the low and 1 1/2 off the high.
May Soymeal closed down 3 at 172.5. This was 1.7
up from the low and 0.7 off the high.
March Soybean Oil finished down 0.02 at 21.73,
0.1 off the high and 0.43 up from the low.
The market experienced a technical set-back early
in the session on the outlook for scattered rains in Brazil and on ideas that
the market is overbought after an 87 1/2 run off of the February 7th lows.
Volume for soybeans for yesterday’s session hit a record high 185,755 contracts
which is not a big surprise but an increase in open interest on the rally is a
bit of a surprise. If funds were still in a short-covering mode, open interest
would have declined so the news is slightly supportive. Scattered showers are in
the forecast for late this week and into the weekend but traders are still
concerned with areas which receive little or no rain in the days just ahead as
stressful temperatures and dry soils have traders looking for lower production.
The selling dried up late in the day and futures managed to close near the highs
of the day and well above the opening which is a supportive development. Midwest
basis levels are lower due to increased producer selling on the rally. Taiwan
bought 60,000 tons of US soybeans overnight and passed on a second tender for
40,000-60,000 tons. Resistance for May soybeans comes in at 583 and 598 with
support at 567 and 562.
Technical Outlook
BEANS (MAY) 02/24/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The market now above the 18-day moving average suggests 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 near-term upside
objective is at 590 3/4. The market is becoming somewhat overbought now that the
RSI is over 70. The next area of resistance is around 587 1/2 and 590 3/4, while
1st support hits today at 577 1/2 and below there at 570 3/4.
MEAL (MAY) 02/24/2005: Momentum studies are
trending higher but have entered overbought levels. 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 lower than the pivot swing number. The
next upside objective is 175.9. With a reading over 70, the 9-day RSI is
approaching overbought levels. The next area of resistance is around 175.0 and
175.9, while 1st support hits today at 172.8 and below there at 171.4.
BEANOIL (MAY) 02/24/2005: 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 has a slightly positive tilt with the close over
the swing pivot. The near-term upside target is at 22.33. The 9-day RSI over 70
indicates the market is approaching overbought levels. The next area of
resistance is around 22.17 and 22.33, while 1st support hits today at 21.65 and
below there at 21.29.
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WHEAT MARKET RECAP
2/23/2005
May Wheat finished up 3 3/4 at 324 1/2, 2 off the high and 5
3/4 up from the low. July Wheat closed up 5 1/2 at 331. This was 6 up from the
low and 2 off the high.
While fund traders were quiet in the other
grains, funds were noted buyers of near 7000 contracts in wheat which showed
independent strength from the other grains today and closed at the highest level
since November 19th. Another cols weather surge into the Midwest next week
suggests another freeze/thaw cycle for wheat into early March which might
increase the chances of winter-kill damage in soft red wheat areas of the
southern mid-west. Ideas that technical indicators have reached excessive
overbought levels and a lack of significant weather concerns for the market
helped trigger some light selling early in the session but the intensity of the
surge higher yesterday and a lack of aggressive old crop wheat sales from
producers on the rally helped to provide underlying support. Export news has
been somewhat slow but US exports are still running well ahead of the pace to
reach the USDA projection and rumors of more interest from Iraq and news that
Taiwan will be in the market for 52,040 tons of US wheat on Thursday helped
support. Volume for wheat for yesterday’s session hit a record high at 117,004
contracts and with open interest down just 809 contracts, traders viewed the
active fund buying yesterday as more than just short-covering. May wheat support
comes in at 317 and 314 with 325 1/4 and 332 as next resistance.
Technical Outlook
WHEAT (MAY) 02/24/2005: 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 close over the pivot swing is a somewhat positive
setup. The near-term upside objective is at 331 1/4. The market is becoming
somewhat overbought now that the RSI is over 70. The next area of resistance is
around 328 1/4 and 331 1/4, while 1st support hits today at 320 3/4 and below
there at 316.
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LIVE CATTLE RECAP
2/23/2005
April Live Cattle finished up 0.60 at 86.15,
equal to the high and 0.80 up from the low.
March Feeder Cattle closed up 0.30 at 98.80. This
was 0.40 up from the low and 0.05 off the high.
April cattle closed moderately higher on the
session finding support from the surge higher in pork, bullish cold storage data
and bullish Cattle-of-Feed data from Friday. The USDA news has helped to offset
the bearish developments in the beef market. In addition, the trade anticipates
a steady tone for the cash market this week. Showlists are higher this week than
last week due to the slow sales last week and packer demand for slaughter seems
weak and could weaken further if beef prices continue to drift lower. Boxed-beef
cut-out values at mid-session were up $.04 to $138.71 as compared with $144.70
last week. Slaughter came in at 119,000 head from trade expectations for
116,000-120,000 head.
Technical Outlook
CATTLE (APR) 02/24/2005: 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. The market setup is supportive for
early gains with the close over the 1st swing resistance. The next downside
objective is now at 85.170. The next area of resistance is around 86.520 and
86.750, while 1st support hits today at 85.770 and below there at 85.170.
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LEAN HOGS RECAP
2/23/2005
April Lean Hogs finished up 1.97 at 75.52, 0.02
off the high and 1.67 up from the low.
March Pork Bellies closed up 1.77 at 86.57. This
was 1.57 up from the low and 0.32 off the high.
The market rallied sharply with April bouncing
off of limit up and June and July hogs posting new contract highs. The monthly
cold storage report showed far less pork stocks than anticipated which
insinuates that export demand for US pork was much higher than expected during
January. In addition, the sharp break in the US dollar only adds to the export
demand. The 2-day lean index for the period ending February 21st came in at
68.14, up.50 on the session and up from 67.86 last week. Slaughter came in at
397,000 head from trade expectations for 398,000-401,000 head. Packer profit
margins have declined this week which has slowed demand for slaughter.
Technical Outlook
HOGS (APR) 02/24/2005: The market now above the
60-day moving average suggests the longer-term trend has turned up. Momentum
studies are trending higher from mid-range, which should support 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. There
could be more upside follow through since the market closed above the 2nd swing
resistance. The next upside objective is 76.800. The next area of resistance is
around 76.370 and 76.800, while 1st support hits today at 74.700 and below there
at 73.420.
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COCOA MARKET RECAP
2/23/2005
May Cocoa finished up 18 at 1627, 13 off the high
and 12 up from the low.
The cocoa market did manage another new high for
the move in the action Wednesday but ultimately prices weren’t able to hold
above the prior sessions high. While the trade continues to play off the idea of
lower arrivals at the Ivory Coast we are not sure that is definitively
supportive development. We are also a little skeptical that the Ivory Coast
farmers strike is a sustainable bull factor but in the near term it would seem
like the market is content and capable of carving out more minor upside action.
Eventually a 15-20% decline in Ivory Coast arrivals will have to be reconciled
as the result of lower production or significant smuggling through channels
outside of the normal ports.
Technical Outlook
COCOA (MAY) 02/24/2005: The upside crossover (9
above 18) of the moving averages suggests a developing short-term uptrend. Daily
stochastics have risen into overbought territory which will tend to support
reversal action if it occurs. The cross over and close above the 18-day moving
average is an indication the longer-term trend has turned positive. The market
setup is supportive for early gains with the close over the 1st swing
resistance. The near-term upside target is at 1652. The next area of resistance
is around 1639 and 1652, while 1st support hits today at 1615 and below there at
1603.
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COFFEE MARKET RECAP
2/23/2005
May Coffee closed up 6.40 at 123.65. This was
6.55 up from the low and 0.60 off the high.
The coffee market surge higher to a new 5-year
high for the nearby futures with another round of active buying from fund
traders helping to support the move. Some light fears for the developing dry
conditions in parts of Brazil and dryness for the Vietnam crop has helped
provide some support. A lack of much selling interest from producers in the past
week in spite of the higher price added to the positive tone. Roaster buying
interest seemed to have emerged in London which added to the positive tone in
New York. Ivory Coast coffee production for the 2004/2005 season is expected to
fall to near 2.5 million tons from 3.0 million last year.
Technical Outlook
COFFEE (MAY) 02/24/2005: A new contract high was
made on the rally. The daily stochastics gave a bullish indicator with a
crossover up. 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 above
the 2nd swing resistance number is a bullish indication. The near-term upside
target is at 129.30. The market is becoming somewhat overbought now that the RSI
is over 70. The next area of resistance is around 127.20 and 129.30, while 1st
support hits today at 120.10 and below there at 115.05.
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SUGAR MARKET RECAP
2/23/2005
May Sugar closed down 0.07 at 9.30. This was 0.12
up from the low and 0.10 off the high.
May sugar closed 7 lower on the session as there
seems to be a lack of fundamental justification for the jump yesterday except
for some light weather concerns. With small speculators and the combined total
of large and small speculators holding a record high net long position, the lack
of new demand news and the lack of new highs for the market since January 26th
are potential bearish developments. The dry weather trend in northeastern Brazil
helped trigger a slightly smaller cane crop this season and also a fast harvest
with the harvest season ending earlier than normal. The center-south region
represents 85% of the sugar production with harvest of a record high crop
expected to begin in April. This region has also been dry recently which is
beginning to cause some second-guessing on the size of the crop. Russia demand
for sugar imports has been disappointing over the past few years and the
Institute for Agricultural Market Studies in Moscow pegged consumption for 2005
at 5.8 million tons from 5.95 million last year.
Technical Outlook
SUGAR (MAY) 02/24/2005: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The close below
the 18-day moving average is an indication the longer-term trend has turned
down. The daily closing price reversal down puts the market on the defensive.
With the close higher than the pivot swing number, the market is in a slightly
bullish posture. The next downside target is now at 9.08. The next area of
resistance is around 9.41 and 9.51, while 1st support hits today at 9.19 and
below there at 9.08.
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COTTON MARKET RECAP
2/23/2005
May Cotton finished down 0.54 at 48.89, 0.71 off
the high and 0.14 up from the low.
After an early rally to the highest level since
late October, cotton futures closed moderately lower on the session. Ideas that
the market is overbought helped to trigger light long liquidation selling and
the reversal may attract some additional long liquidation selling this week.
Talk that buyers might be more price sensitive if May futures move over 50
helped to rigger some light selling as well. The rise in open interest this week
on the rally is seen as a positive development for the market as fund traders
seem to building a net long position.
Technical Outlook
COTTON (MAY) 02/24/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The market now above the 18-day moving average suggests the
longer-term trend has turned up. The downside closing price reversal on the
daily chart is somewhat negative. It is a slightly negative indicator that the
close was lower than the pivot swing number. The near-term upside target is at
49.88. The market is approaching overbought levels with an RSI over 70. The next
area of resistance is around 49.31 and 49.88, while 1st support hits today at
48.47 and below there at 48.19.