The Bottom Line On Oil

Technical Outlook

#BONDS (JUN) 05/17/04: The outside day up and
close above the previous day’s high is a positive signal. The daily closing
price reversal up is positive. Since the close was above the 2nd swing
resistance number, the market’s posture is bullish and could see more upside
follow-through early in the session. Near-term resistance for bonds is at 105.11
and then again at 105.27, while swing support hits at 103.23 and below there at
102.19. The market’s close below the 9-day moving average is an indication the
short-term trend remains negative. The daily stochastics have crossed over up
which is a bullish indication. The next upside target is 105.27.

T-NOTES(JUN) The market’s key reversal up is a
bullish signal. The outside day up is a positive signal. The market was pushed
to a new contract low. The upside closing price reversal on the daily chart is
somewhat bullish. The daily stochastics gave a bullish indicator with a
crossover up. The near-term upside objective is at 109.24. The market’s close
above the 2nd swing resistance number is a bullish indication. Near-term
resistance for the T-Notes is at 109.14 and then again at 109.24, while swing
support hits at 108.10 and below there at 107.16. The market’s short-term trend
is negative as the close remains below the 9-day moving average.

 

STOCK INDICES RECAP

5/14/2004

The stock market managed a surprise short
covering rally and probably mounted the recovery off the fact that interest rate
fears were lowered slightly. We also have to think that some aggressive shorts
simply wanted to take profits as the macro economic and geopolitical outlook
certainly didn’t improve Thursday night! The fact that the CPI wasn’t as hot as
the PPI probably pushed back some estimates on the coming rate hike and stock
traders took that as a positive sign. Some traders might also have been
emboldened by the US statements from Iraq that the US would leave Iraq when the
Iraqi governing Council asked them to leave. In our mind, the discussions of the
US leaving Iraq have to be considered bullish, even if that is unlikely.

Technical Outlook

#S&P500 (JUN) 05/17/04: The market’s close below
the pivot swing number is a mildly negative setup. The upside closing price
reversal on the daily chart is somewhat bullish. Underlying support comes in at
1087.05 and 1079.93, with overhead resistance at 1101.55 and 1108.93. The
market’s short-term trend is negative as the close remains below the 9-day
moving average. 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
near-term upside objective is at 1108.93.

S&P E-Mini (JUN): The daily closing price
reversal up is a positive indicator that could support higher prices. Rising
from over sold levels, daily momentum studies would support higher prices
especially on a close above resistance. The next upside objective is 1110.44.
The market tilt is slightly negative with the close under the pivot. Near-term
resistance for the S&P Mini is at 1102.63 and then again at 1110.44, while swing
support hits at 1086.38 and below there at 1077.94. A negative signal for trend
short-term was given on a close under the 9-bar moving average.

NASDAQ (JUN) The market’s close below the 9-day
moving average is an indication the short-term trend remains negative. The swing
indicator gave a moderately negative reading with the close below the 1st
support number. The market should run into resistance at 1412.25 and above there
at 1430.63 with support at 1384.75 and 1375.63. Short-term indicators on the
defensive. Consider selling an intraday bounce. The daily stochastics have
crossed over down which is a bearish indication. The next downside target is
1375.6.

MINI DOW (JUN) The daily closing price reversal
up is positive. The market’s close below the 9-day moving average is an
indication the short-term trend remains negative. The market should run into
resistance at 10067 and above there at 10134 with support at 9924 and 9848.
Daily stochastics are showing positive momentum from oversold levels which
should reinforce a move higher if near-term resistance is taken out. The next
upside target is 10134. It is a slightly negative indicator that the close was
lower than the pivot swing number.

 

CURRENCY MARKET RECAP

5/14/2004

The Dollar fell back because the US numbers
failed to continue the ultra strong pattern. We also think that a slight
tempering of US inflation threats (because of the less than expected CPI
reading) caused some longs to bank profits in the Dollar and exit. It is also
possible that some longs looked ahead to next weeks economic information didn’t
expect to see ongoing macro economic support for the Dollar and decided to exit.
The biggest gainers against the Dollar were the Euro and the Swiss but that
might have been a function of their oversold status, more than a fundamental
indication of a coming bottom.

Technical Outlook

#CURRENCIES 05/17/04: YEN (JUN): The market’s
close below the 9-day moving average is an indication the short-term trend
remains negative. The daily closing price reversal up is positive. A positive
setup occurred with the close over the 1st swing resistance. Swing resistance is
targeted at 88.00 and above there at 88.30, with the yen finding support around
87.25 and below there at 86.80. The close under the 40-day moving average
indicates the longer-term trend could be turning down. Momentum studies are
declining, but have fallen to oversold levels. The next downside target is
86.80. The 9-day RSI under 30 indicates the market is approaching oversold
levels.

EURO (JUN): Daily stochastics are trending lower,
but have declined into oversold territory. The next downside objective is now at
1.1735. The market is in a bearish position with the close below the 2nd swing
support number. Swing support for the Euro comes in at 1.1735, with overhead
resistance at 1.1969. The market’s short-term trend is negative as the close
remains below the 9-day moving average. The major trend is down with the cross
over back below the 40-day moving average. The gap down on the day session chart
is bearish with more selling pressure possible today.

 

PRECIOUS METALS RECAP

5/14/2004

The gold and silver markets showed some divergent
action Friday as the silver was stronger than gold. However, neither market
showed much early in the session in the face of the slightly weaker US Dollar.
The reason the Dollar slide didn’t give the gold a bigger lift was that few
players think the Dollar up trend has come to an end! It seemed like some longs
were willing to get into the market because of the weekend and the potential for
some type of terrorist threat that could take place. Some players we afraid that
the COT report to be released after the close was going to show a large number
of longs hanging onto positions and that simply discourages fresh buying in the
precious metals.

Technical Outlook

#P-METALS 05/17/04: SILVER (JUL): Since the close
was above the 2nd swing resistance number, the market’s posture is bullish and
could see more upside follow-through early in the session. Initial support for
silver is at 563.3 and below there at 550.2 with resistance likely at 571.1 and
582.3. The market’s close below the 9-day moving average is an indication the
short-term trend remains negative. The daily stochastics have crossed over up
which is a bullish indication. The next upside target is 571.1.

GOLD (AUG): Support for gold today comes in near
374.48, while resistance is pegged at 380.68. Daily stochastics are trending
lower, but have declined into oversold territory. The next downside objective is
now at 374.48. It is a mildly bullish indicator that the market closed over the
pivot swing number. The market’s short-term trend is negative as the close
remains below the 9-day moving average.

 

COPPER MARKET RECAP

5/14/2004

The copper market was slightly weaker but managed
to respect consolidation support. The fact that the US equity market wasn’t
under as much pressure, combined with slightly lower interest rate fears was a
minor positive but the market is still fretting over the future of Chinese
demand. News that a Canadian copper producer was not going to be able to meet
obligations was seen only as a minor and temporarily supportive development. We
still see the copper market as vulnerable to more losses unless the Chinese
outlook manages to improve in the coming sessions. In looking at the COT report
data it is clear that copper isn’t technically vulnerable to small spec and fund
selling and that should allow copper to downplay some of the negative technical
news.

 

ENERGY MARKET RECAP

5/14/2004

The energy complex started out slightly firmer
ran to new contract highs, pulled back into mid session but showed enough
strength during the session to confirm that many players are willing to pay up
for longs at lofty historical price levels. During the session the Qatar Oil
Minister suggested that the Saudi attempt to provide more supply to the market
isn’t going to deflate prices as the threat against supply will remain in place
in the face of higher supply flows. According to a Tanker Survey it seems that
OPEC flow might have increased by 700,000 barrels per day in May and that is
negative. However, other reports from the Middle East Economic Survey suggested
that OPEC production actually fell in April by 563,000 barrel per day. In short,
the market is getting information from a number of sources and anxiety looks to
remain very high.

Technical Outlook

#ENERGIES 05/17/04: CRUDE OIL (JUL): The rally
brought the market to a new contract high. It is a mildly bullish indicator that
the market closed over the pivot swing number. Support for crude is keyed on
40.95 and below there at 40.50, with resistance pegged at 41.65 and 41.90. The
market’s short-term trend is positive on a close above the 9-day moving average.
Momentum studies are trending higher, but have entered overbought levels. The
near-term upside objective is at 41.90. With a reading over 70, the 9-day RSI is
approaching overbought levels.

UNLEADED GAS (JUL): Studies are showing positive
momentum, but are now in overbought territory so some caution is warranted. The
next upside target is 137.11. With the close higher than the pivot swing number,
the market is in a slightly bullish posture. Resistance today is at 137.11,
while support should be found around 133.11. A new contract high was made on the
rally. The market’s close above the 9-day moving average suggests the short-term
trend remains positive. The 9-day RSI over 70 indicates the market is
approaching overbought levels.

HEATING OIL (JUL): It is a mildly bullish
indicator that the market closed over the pivot swing number. Heating oil should
encounter support around 102.73, with resistance is at 105.03. The market’s
short-term trend is positive on a close above the 9-day moving average. Momentum
studies are trending higher, but have entered overbought levels. The near-term
upside objective is at 105.03. With a reading over 70, the 9-day RSI is
approaching overbought levels. The rally brought the market to a new contract
high. The daily closing price reversal down puts the market on the defensive.

 

CORN MARKET RECAP

5/14/2004

The move to the lowest level since February 20th
with funds still thought to own a hefty net long position leaves futures
vulnerable to more speculative long liquidation selling. December corn closed 19
3/4 cents lower on the week. The weather forecast is seen as ideal for a fast
start to the crop which is already 2-3 weeks ahead of a normal schedule. The
market seems to lack the fundamental news to slow the fund liquidation selling
but with tight projections for ending stocks for both the old and new crop, it
may not take much of a shift in the weather pattern to turn the trend up. As a
result, short-covering is possible ahead of the weekend with the idea that the
weather forecast can’t get much better. A collapse in the soybean market and the
strong dollar are also seen as bearish forces. The USDA announced a sale of
120,000 tons of US corn to unknown destination. The May contract expires at noon
with 116 deliveries posted this morning. December corn support comes in at 278
3/4 and 274 3/4 with 287 1/2 and 291 3/4 as short-term resistance.

Technical Outlook

#CORN (JUL) 05/17/04: Daily stochastics are
trending lower, but have declined into oversold territory. The next downside
objective is now at 288 1/2. The market’s close below the 1st swing support
number suggests a moderately negative setup for today. Market resistance comes
in at 295 1/2 today, with support at 288 1/2. The market’s short-term trend is
negative as the close remains below the 9-day moving average. With a reading
under 30, the 9-day RSI is approaching oversold levels.

 

SOY COMPLEX RECAP

5/14/2004

The market seems to lack a demand or a supply
fundamental to slow the long liquidation trend of the fund traders. July
soybeans were down 99 cents on the week after taking out last weeks highs on
Wednesday. May soybeans expired at noon at 969. The weather forecast is near
perfect for the early growth of the crops already planted and the forecast also
includes 1-3 day periods of dry weather between storms in order to allow for
more plantings. In addition, the demand fears persist that China is slowing
their import of many commodities and still in a position to cancel more Brazil
soybean purchases already on the books. China exchange prices were down in
overnight trade. In addition, the crush data this morning suggests that
processors are slowing down usage. The NOPA reported that the soybean crush in
April was 105.37 million bushels as compared with trade expectations of 108-110
million bushels and last months crush of 121.4 million bushels. The lower than
expected crush is seen as a negative factor. While the market was disappointed
that the April monthly crush data was down 14.4% from last year, traders pointed
out that the crush needs to be down near 20% from last year in the months ahead
for the crush to come in near the USDA forecast. April meal exports were pegged
at 121,880 tons as compared with 245,887 tons in March and 356,472 tons last
year. Oil stocks were pegged at 1.214 billion pounds as compared with 1.392
billion in March and 1.692 billion last year. July soybean support points come
in at 925 (50% correction of the February to April rally) and 921 (April lows)
with resistance at 952 3/4 and 959. Support for November soybeans comes in at
710 and 695 3/4 with resistance at 725 and 729.

Technical Outlook

#SOYBEANS (JUL) 05/17/04: The close below the 2nd
swing support number puts the market on the defensive. The next area of
resistance is around 954 and 986 3/4, while 1st support hits today at 910 1/2
and below there at 899 3/4. The market’s close below the 9-day moving average is
an indication the short-term trend remains negative. Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The next downside
target is 899 3/4.

MEAL (JUL): Momentum studies trending lower at
mid-range should accelerate a move lower if support levels are taken out. The
next downside objective is now at 284.5. First resistance comes in at 307.4,
with support at 290.2. 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. Daily studies pointing down
suggests selling minor rallies. The major trend is down with the cross over back
below the 40-day moving average.

BEAN OIL (JUL): The market’s close below the
9-day moving average is an indication the short-term trend remains negative.
Momentum studies are declining, but have fallen to oversold levels. The next
downside target is 28.88. The close below the 2nd swing support number puts the
market on the defensive. The outside day down and close below the previous day’s
low is a negative signal. The downside closing price reversal on the daily chart
is somewhat negative. Daily swing resistance is found at 30.85 and above there
at 31.88. Support should be encountered at 29.35 and 28.88. The 9-day RSI under
30 indicates the market is approaching oversold levels.

 

WHEAT MARKET RECAP

5/14/2004

The market found support early in the session
from cold weather concerns for the winter wheat crop in Kansas. The collapse in
the soybean market, rains in the forecast for the northern plains next week and
fund selling emerged to drive the market lower with July moving to the lowest
level of the year. The technical action seems bearish with the market gapping
lower to star the week and July wheat closed 44 1/2 cents lower on the week.
Favorable weather in Europe over the past week helped ease fears of a repeat of
last year and would suggest an improved possibility of a bumper crop in Europe
and Eastern Europe this season. Traders will monitor the Commitment-of-Traders
report this afternoon to get a better feel for the extent of the speculative
liquidation in wheat. July wheat resistance points come in at 364 and 369 with
support at 359 1/2 and then 351.

Technical Outlook

#WHEAT (JUL) 05/17/04: The close below the 2nd
swing support number puts the market on the defensive. Look for near-term
support at 350 1/2 and below there at 345 3/4, with resistance levels at 366 and
376 3/4. The moving average crossover down (9 below 18) indicates a possible
developing short-term downtrend. Momentum studies are declining, but have fallen
to oversold levels. The next downside target is 345 3/4. The 9-day RSI under 30
indicates the market is approaching oversold levels.

 

LIVE CATTLE RECAP

5/14/2004

June cattle closed slightly higher on the session
after spending most of the session lower for the 4th session in a row. The steep
discount of futures to the cash market helped to provide support. Boxed-beef
cut-out values were up 25 cents at $158.77 as compared with $159.55 last week at
this time. Slaughter came in at 130,000 head as compared with trade expectations
of 127,000-130,000 head. Beef production for the week was 500.8 million pounds,
about unchanged from last week and down 8.3% from last year.

Technical Outlook

#CATTLE (AUG) 05/17/04: 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 next downside target is
70.82. The swing indicator gave a moderately negative reading with the close
below the 1st support number. Short-term indicators on the defensive. Consider
selling an intraday bounce. Support should be encountered at 71.70 and below
there at 70.82. Market resistance is at 73.10 and then again at 73.62. The
market’s close below the 9-day moving average is an indication the short-term
trend remains negative.

 

LEAN HOGS RECAP

5/14/2004

June hogs inched lower in quiet trade as the
attempted follow-through rally from Thursday’s strong gains failed to attract
new buyers with a steady to $1.00 lower trend at the cash terminals. Some
packers are booked through late next week and other are scrambling to meet
near-term needs. Remember, supply has not been the bullish fuel for this rally.
Demand has remained very strong domestically and Exports surged in March and the
jump in loin prices would suggest more export activity this month. The 2-day
lean index was up $1.09 to $80.04 as compared with $71.62 as of the end of
April. Slaughter came in at 362,000 head as compared with trade expectations at
357,000-370,000 head.

Technical Outlook

#HOGS (JUL) 05/17/04: The market’s close below
the 1st swing support number suggests a moderately negative setup for today.
Resistance levels comes in at 75.35 and 76.10 today, while support is around
73.80 and then 73.00. Daily studies pointing down suggests selling minor
rallies. The market’s short-term trend is negative as the close remains below
the 9-day moving average. Momentum studies are trending lower from high levels
which should accelerate a move lower on a break below the 1st swing support. The
next downside objective is now at 73.00.

 

COCOA MARKET RECAP

5/14/2004

The cocoa market failed to hold close in support
on the charts and saw another liquidation wave during the action Friday.
Apparently the funds are content in holding shorts and it is possible that they
are waiting on even more contract lows. Given the selling this week it is clear
that most players are willing to be short and the industry buyers aren’t that
interested in buying. Furthermore, a slightly weaker Dollar Friday probably
cushioned the downside slide in the cocoa.

Technical Outlook

COCOA (JUL) 05/17/04 The sell-off took the market
to a new contract low. There could be some early pressure today given the
market’s negative setup with the close below the 2nd swing support. Cocoa should
run into resistance at 1331 and above there at 1341 with support at 1313 and
1305. The 9-day RSI under 30 indicates the market is approaching oversold
levels. Momentum studies are declining, but have fallen to oversold levels. The
next downside target is 1304.50.

 

COFFEE MARKET RECAP

5/14/2004

The coffee market managed a minor gain on the
session and managed a decent rally on the week. The coffee market continues to
hover in the upper half of the last months trading range partly because of
recent spec buying that is apparently pre-positioning for weather later this
summer. The market might have been seeing some support from news that heavy
rains continue in Brazil and in some areas that rain comes right into the
beginning of harvest. Slightly lower temps might have prompted some spec buying
but the low temps are not cold enough to expect a freeze.

Technical Outlook

COFFEE (JUN) 5/17/04 The market has a slightly
positive tilt with the close over the swing pivot. Daily stochastics are showing
positive momentum from oversold levels which should reinforce a move higher if
near-term resistance is taken out. The near-term upside objective is at 73.15.
The Coffee contract should run into resistance at 72.65 and above there at 73.15
with support at 71.6 and 71.05. The market’s short-term trend is positive on a
close above the 9-day moving average.

 

SUGAR MARKET RECAP

5/14/2004

July sugar closed 4 higher on the session but
down 24 points on the week to 635. The lack of buying interest from suspected
strong importers like Russia, India and China helped to trigger the long
liquidation selling on the week. Traders will monitor the Commitment-of-Traders
report this afternoon to get a better feeling for the extent of the liquidation
which occurred. Tunisia bought 28,000 tons of white sugar which helped provide
some support to London. In addition, French officials indicate that planted
acreage to beets this year should be down 8% from last year. Internal prices in
China softened on the week which added to the bearish tone. Dry conditions in
Brazil look favorable for the maturing crop just ahead of harvest.

Technical Outlook

#SUGAR (JUL) 05/17/04: It is a mildly bullish
indicator that the market closed over the pivot swing number. Swing resistance
comes in at 6.51, with support found at 6.21. The market’s short-term trend is
negative as the close remains below the 9-day moving average. Daily stochastics
are trending lower, but have declined into oversold territory. The next downside
objective is now at 6.21.

 

COTTON MARKET RECAP

5/14/2004

December cotton close slightly higher but saw
some aggressive selling early in the session. While some contracts might have
managed a higher close the cotton still finished down on the week. Cotton saw
some small spec buying early in the session but with the growing areas seeing
heavy rains it would seem like the start of the 2004 season is conducive to
production. The big question that remains for cotton is what kind of planted
figure will be seen with soybean and corn prices looking so attractive early in
the planting window. The Step 2 export sales impact might kick in next week and
that could be lending support to cotton in the face of negative Chinese news.

Technical Outlook

#COTTON (JUL) 05/17/04: The market’s close above
the 9-day moving average suggests the short-term trend remains positive. With
the close higher than the pivot swing number, the market is in a slightly
bullish posture. Next resistance area comes in at 66.24 and then again at 67.49,
while support is targeted at 63.70 and 62.41. Studies are showing positive
momentum, but are now in overbought territory so some caution is warranted. The
next upside target is 67.49. The downside closing price reversal on the daily
chart is somewhat negative.