The Dollar Almost Broke Out. Here’s Why It Didn’t
BOND MARKET RECAP
1/18/2005
March Bonds closed up 0-15 at 113-29. This was
0-23 up from the low and 0-01 off the high.
March 10 Yr Treasury Notes finished up 0-025 at
111-290, 0-005 off the high and 0-095 up from the low.
The Treasury market once again traded on
both sides of unchanged Monday, as prices soared early off soft New York State
Federal Reserve Manufacturing survey readings but then fell back down off
stronger than expected US corporate earnings and a reversal in energy prices.
While several key companies released strong earnings it would not seem like the
outlook for the economy improved that much and in the end the Treasury market
seemed to be able to maintain a mostly bullish tilt. We also suspect that some
players were anticipating a soft CPI reading for Wednesday morning and that
could provide the bonds and notes with some fresh buying. In other words, seeing
the inflation threat downgraded might be cause for some players to discount the
threat of near term Fed action.
Technical Outlook
BONDS (MAR) 01/19/2005: 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. Market
positioning is positive with the close over the 1st swing resistance. The next
upside objective is 114-19. The market is approaching overbought levels with an
RSI over 70. The next area of resistance is around 114-12 and 114-19, while 1st
support hits today at 113-19 and below there at 113-00.
TNOTES (MAR) 01/19/2005: 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
indicates the longer-term trend has turned up. The upside closing price reversal
on the daily chart is somewhat bullish. The close over the pivot swing is a
somewhat positive setup. The next upside target is 112-065. The next area of
resistance is around 112-035 and 112-065, while 1st support hits today at
111-250 and below there at 111-170.
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STOCK INDICES RECAP
1/18/2005
March S&P finished up 12.1 at 1195.9, 1.6 off the
high and 15.1 up from the low.
March S&P E-Mini closed up 12.25 at 1196. This
was 15.5 up from the low and 1.75 off the high.
March Dow closed up 73 at 10620. This was 117 up
from the low and 13 off the high.
The stock market was lifted by a series of
favorable earnings reports and managed the rally after early gains in energy
prices and a much softer than expected New York Fed manufacturing Survey.
Apparently 3M suggested that they were seeing broad based strength across
business lines and with net income rising by 91 cents a share that seemed to
shift overall sentiment toward the market into the bull camp. With energy prices
falling around mid session off reports that OPEC would probably not cut
production in the end of January meeting we can see why buyers floated into the
market on the buy side Monday morning. Bank of America profits were up more than
expected, while Georgia-Pacific profits were disappointing but apparently the
good news outweighed the bad news.
Technical Outlook
S&P 500 (MAR) 01/19/2005: The cross over and
close above the 40-day moving average indicates the longer-term trend has turned
up. The daily stochastics have crossed over up which is a bullish indication.
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.
There could be more upside follow through since the market closed above the 2nd
swing resistance. The near-term upside target is at 1209.22. The next area of
resistance is around 1204.25 and 1209.22, while 1st support hits today at
1187.55 and below there at 1175.83.
SP EMINI (MAR) 01/19/2005: The market now above
the 40-day moving average suggests the longer-term trend has turned up. The
crossover up in the daily stochastics is a bullish signal. The stochastic
indicator is rising from oversold levels, which is bullish and should support
higher prices. The major trend has turned down with the cross over back below
the 18-day moving average. The market’s close above the 2nd swing resistance
number is a bullish indication. The next upside objective is 1209.81. The next
area of resistance is around 1204.62 and 1209.81, while 1st support hits today
at 1187.38 and below there at 1175.32.
NASDAQ (MAR) 01/19/2005: The cross over and close
above the 60-day moving average is an indication the longer-term trend has
turned positive. The daily stochastics gave a bullish indicator with a crossover
up. 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 market back below
the 18-day moving average suggests the longer-term trend could be turning down.
A positive setup occurred with the close over the 1st swing resistance. The
near-term upside objective is at 1596.62. Short-term indicators suggest buying
dips today. The next area of resistance is around 1588.25 and 1596.62, while 1st
support hits today at 1563.75 and below there at 1547.63.
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CURRENCY MARKET RECAP
1/18/2005
March US Dollar finished up 33 at 8346, 27 off
the high and 26 up from the low.
March Euro finished down 0.63 at 130.4, 0.45 off
the high and 0.3 up from the low.
March Euro Dollar closed down 0.005 at 97.025.
This was 0.005 up from the low and 0.01 off the high.
March Canadian Dollar closed down 0.14 at 81.79.
This was 0.14 up from the low and 0.33 off the high.
March British Pound finished down 0.14 at 185.99,
0.77 off the high and 0.25 up from the low.
March Swiss closed down 0.14 at 84.65. This was
0.27 up from the low and 0.32 off the high.
March Japanese Yen closed down 0.22 at 98.16.
This was 0.52 up from the low and 0.08 off the high.
The Dollar approached an upside breakout early
Tuesday but fell back off that level following a much softer than expected New
York State Manufacturing release. We are a little surprised that the weakness of
the PPI last week and the higher energy prices didn’t undermine the Dollar but
apparently a series of better than expected US corporate earnings seemed to
carry the US stock market and therefore the Dollar to higher price levels.
Dampening the upside tilt in the Dollar were comments from a US Fed member, who
suggested that he didn’t see the weaker Dollar situation as a crisis.
Technical Outlook
YEN (MAR) 01/19/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The cross over and close above the 18-day moving average indicates
the longer-term trend has turned up. It is a slightly negative indicator that
the close was under the swing pivot. The near-term upside objective is at 98.65.
The next area of resistance is around 98.46 and 98.65, while 1st support hits
today at 97.86 and below there at 97.45.
EURO (MAR) 01/19/2005: 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 is in a bearish position with the close below the 2nd
swing support number. The next downside target is 129.69. The next area of
resistance is around 130.77 and 131.18, while 1st support hits today at 130.03
and below there at 129.69.
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PRECIOUS METALS RECAP
1/18/2005
February Gold closed up 0.5 at 423.5. This was
1.8 up from the low and 0.7 off the high.
March Silver finished up 0.06 at 6.655, 0.025 off
the high and 0.065 up from the low.
April Platinum closed up 6.4 at 861.7. This was
4.7 up from the low and 1.3 off the high.
Divergence between the gold and silver markets
continued and that suggests to us that neither the bulls nor the bears control
the metals market. We do think that recent inflation readings undermine the
metals and the fact that the Dollar remains positively poised on the charts has
put the gold market off balance. With the US Fed downplaying the chance of an
international currency crisis, we suspect that more gold longs are becoming
uncomfortable with their positions. Some traders suggest that the March Dollar
will have to come out of a range defined as 83.73 to 92.90 to signal a fresh
wave of sentiment in the gold market.
Technical Outlook
SILVER (MAR) 01/19/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The market back below the 18-day moving average
suggests the longer-term trend could be turning down. The market has a slightly
positive tilt with the close over the swing pivot. The near-term upside target
is at 673.5. The next area of resistance is around 670.0 and 673.5, while 1st
support hits today at 661.1 and below there at 655.5.
GOLD (FEB) 01/19/2005: Daily stochastics are
showing positive momentum from oversold levels, which should reinforce a move
higher if near-term resistance is taken out. The close below the 18-day moving
average is an indication the longer-term trend has turned down. The market has a
slightly positive tilt with the close over the swing pivot. The next upside
objective is 425.7. The next area of resistance is around 424.7 and 425.7, while
1st support hits today at 422.3 and below there at 420.8.
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COPPER MARKET RECAP
1/18/2005
March Copper finished up 0.25 at 140.15, 0.35 off
the high and 2.95 up from the low.
The copper market seemed to be poised to break
down early in the action Monday but managed to right the ship off what appeared
to be commercial or physical buying around the lows. We also think that the
reversal in the energy complex helped to boost macro economic sentiment toward
copper. Others in the trade suggested that the buying around the lows Monday
morning was simple short covering but it was pretty apparent that the 137.50
level was a level that interested buyers in some form or another. We suspect
that volatility in copper will remain quite extensive until the real position of
Chinese physical players is determined for 2005.
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ENERGY MARKET RECAP
1/18/2005
February Crude Oil closed unchanged at 48.38.
This was 0.68 up from the low and 1.12 off the high.
February Heating Oil closed down 0.71 at 134.38.
This was 1.38 up from the low and 5.12 off the high.
February Unleaded Gas finished down 1.42 at
126.19, 4.11 off the high and 1.19 up from the low.
February Natural Gas finished down 0.26 at 6.14,
0.54 off the high and 0.06 up from the low.
February Propane closed up 0.01 at 0.76. This was
equal to the low and 0.01 off the high.
The energy complex started out the session on a
strong note, as the trade was moving to price in global tightness in the wake of
forecasts from the IEA. The IEA suggested that 2005 demand could be every bit as
strong as 2004 and also suggested that the 1st quarter call on OPEC would
increase by 500,000 barrels per day. The IEA also indicated that Non OPEC
production for the month of December was set to decline because of problems in
Canada, Norway and Russia. However, later in the session an OPEC delegate was
reported to have suggested that OPEC might not cut production further with
prices at current high levels and that seemed to totally alter the complexion of
the marketplace.
Technical Outlook
CRUDE OIL (FEB) 01/19/2005: 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. The market has a slightly positive tilt with the close over the
swing pivot. The near-term upside target is at 50.29. The market is approaching
overbought levels with an RSI over 70. The next area of resistance is around
49.28 and 50.29, while 1st support hits today at 47.48 and below there at 46.69.
UNLEADED (FEB) 01/19/2005: 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
could take on a defensive posture with the daily closing price reversal down. It
is a slightly negative indicator that the close was lower than the pivot swing
number. The near-term upside objective is at 132.22. The next area of resistance
is around 128.84 and 132.22, while 1st support hits today at 123.54 and below
there at 121.62.
HEATING OIL (FEB) 01/19/2005: The moving average
crossover up (9 above 18) indicates a possible developing short-term uptrend.
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. The downside closing price reversal on the daily chart is somewhat
negative. The market tilt is slightly negative with the close under the pivot.
The near-term upside objective is at 141.81. The next area of resistance is
around 137.63 and 141.81, while 1st support hits today at 131.13 and below there
at 128.82.
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CORN MARKET RECAP
1/18/2005
March Corn finished down 1 1/4 at 196, 1
1/4 off the high and 1/2 up from the low. May Corn closed down 1 1/4 at 203 1/2.
This was 3/4 up from the low and 1 off the high.
Fears of continued selling from China on the
world export market and talk of a bumper crop in South America after weekend
rains helped to pressure the market lower. China has cut export prices and
Argentina is also competitive on the world market. Taiwan, who usually tenders
for US corn tendered for 40,000-60,000 tons of US or Argentina corn. South Korea
bought 52,500 tons of optional origin corn. Weekly export inspections, released
during the trading session came in at 27.7 million bushels as compared with
trade expectations of 23-28 million. Cumulative shipments have reached 33.3% of
the USDA forecast for the season as compared with 36.6% on average for this time
of the year. Weekly exports need to average 40.57 million bushels for the rest
of the marketing year to reach the USDA projection. Resistance for March corn
comes in at 198 1/2 and 199 1/2 with 194 and 191 as next support.
Technical Outlook
CORN (MAR) 01/19/2005: The market broke to a new
contract low. Daily stochastics are trending lower but have declined into
oversold territory. The market back below the 18-day moving average suggests the
longer-term trend could be turning down. The market’s close below the 1st swing
support number suggests a moderately negative setup for today. The next downside
target is now at 194 1/2. Some caution in pressing the downside is warranted
with the RSI under 30. The next area of resistance is around 196 3/4 and 197
3/4, while 1st support hits today at 195 1/4 and below there at 194 1/2.
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SOY COMPLEX RECAP
1/18/2005
March Soybeans finished down 6 at 513 1/2, 5 1/2
off the high and 1 up from the low. May Soybeans closed down 6 1/2 at 516 1/4.
This was 1/4 up from the low and 5 3/4 off the high.
March Soymeal closed down 1.1 at 153.7. This was
1.7 up from the low and 0.5 off the high.
March Soybean Oil finished down 0.19 at 19.44,
0.29 off the high and 0.03 up from the low.
Rains of 1-2 inches in the driest areas of Brazil
over the weekend helped to pressure the market with more and more talk of a
record South American crop harvest soon. The market bounced off of the low to
reach Friday’s lows before more fund selling emerged to push the market lower
into late in the session. Funds were noted sellers of near 2000 soybean
contracts into the mid-session and near 4500 meal. Weakness in CIF values at the
gulf added to the bearish tone. Weekly export inspections, released during the
trading session came in at 26.68 million bushels as compared with trade
expectations of 24-29 million. Cumulative shipments have reached 58.1% of the
USDA forecast for the season as compared with 52.1% on average for this time of
the year. Weekly exports need to average 12.89 million bushels for the rest of
the marketing year to reach the USDA projection. There were deliveries of 63
soybeans, 69 oil and 25 meal against the January contracts this morning. The
close under 531 on Friday could signal a resumption of the downtrend with 486
3/4 as next technical swing count for another leg down. Resistance for March
soybeans comes in at 519 and 524 1/2 with support at 510 (contract lows) and
then 500 1/2.
Technical Outlook
BEANS (MAR) 01/19/2005: Daily stochastics are
trending lower but have declined into oversold territory. The major trend has
turned down with the cross over back below the 18-day moving average. The close
below the 1st swing support could weigh on the market. The next downside
objective is now at 508 1/4. The next area of resistance is around 516 3/4 and
521, while 1st support hits today at 510 1/4 and below there at 508 1/4.
MEAL (MAR) 01/19/2005: Momentum studies are
declining, but have fallen to oversold levels. The market back below the 18-day
moving average suggests the longer-term trend could be turning down. More
selling pressure is likely given yesterday’s gap lower price action on the day
session chart. The market’s close below the pivot swing number is a mildly
negative setup. The next downside target is now at 151.2. The next area of
resistance is around 154.8 and 155.6, while 1st support hits today at 152.6 and
below there at 151.2.
BEANOIL (MAR) 01/19/2005: The market broke to a
new contract low. 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 close below the 1st swing support could weigh on the market. The next
downside target is 19.19. The next area of resistance is around 19.60 and 19.82,
while 1st support hits today at 19.28 and below there at 19.19.
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WHEAT MARKET RECAP
1/18/2005
March Wheat finished down 1 at 296 1/2, 3 1/4 off the high and
1 1/2 up from the low. May Wheat closed down 1 at 304 1/4. This was 1 3/4 up
from the low and 2 3/4 off the high.
The market found initial weakness from the other
grain markets and from news of Egypt buying mostly Argentina and French wheat
over the long weekend. A bounce to test $3 for March wheat was met with renewed
selling interest. Egypt bought 295,000 tons of wheat on the weekend with only
60,000 of the total coming from the US. While the lower US planted acreage is
seen as a potential bullish force this coming year, the lack of a weather
problem from any of the world’s largest producers has kept the supply outlook as
a bearish force. India is expected to produce a crop near 74-75 million tons
this season from 72 million tons last year. Preliminary estimates for German
winter wheat planted acreage shows an increase of 2.2% from last year. Weekly
export inspections, released during the trading session came in at 14.87 million
bushels as compared with trade expectations of 13-18 million. Cumulative
shipments have reached 67.9% of the USDA forecast for the season as compared
with 65.2% on average for this time of the year. Weekly exports need to average
16.1 million bushels for the rest of the marketing year to reach the USDA
projection. Open interest hit another record high on Friday at 201,976
contracts. Funds were noted buyers of near 2500 contracts into the mid-session.
March wheat resistance comes in at 301 3/4 and 303 3/4 with support at 292 1/4
and 284 3/4.
Technical Outlook
WHEAT (MAR) 01/19/2005: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. 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 objective is now at 292
1/4. The next area of resistance is around 298 3/4 and 301 1/2, while 1st
support hits today at 294 1/4 and below there at 292 1/4.
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LIVE CATTLE RECAP
1/18/2005
February Live Cattle finished down 0.20 at 91.12,
0.57 off the high and 0.10 up from the low.
January Feeder Cattle closed up 1.35 at 107.20.
This was 1.00 up from the low and 0.07 off the high.
Cattle closed mixed with February lower and April
higher as more longs were rolled by the funds from February to the April
contract. While the weather looks clear in the plains this week, the market
found a lack of new selling interest due to the firm tone in the beef market.
Traders had been waiting for beef prices to top out but solid gains at
mid-session helped support. Muddy and cold weather is expected to stress feedlot
cattle early this week but a lack of moisture and warmer weather may help
feedlot performance improve. Boxed-beef cut-out values were up $2.33 to $157.25
at mid-session as compared with $150.66 one week ago. Slaughter came in at just
118,000 head as compared with trade expectations of 117,000-124,000 head.
Technical Outlook
CATTLE (FEB) 01/19/2005: 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 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 near-term upside target is at 91.900. The next area of
resistance is around 91.450 and 91.900, while 1st support hits today at 90.800
and below there at 90.570.
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LEAN HOGS RECAP
1/18/2005
February Lean Hogs finished down 1.20 at 75.57,
1.57 off the high and 0.22 up from the low.
February Pork Bellies closed down 2.45 at 93.37.
This was 0.27 up from the low and 2.17 off the high.
February hogs turned sharply lower on the day as
funds were busy rolling longs from February to April and the spread activity
dominated trade for much of the session. The outside day down after making a new
contract high for the April futures followed by a close below the opening is a
potential technical sign of a near-term top. Futures are overbought basis
traditional technical indicators. Cash markets were higher in the western
cornbelt but traders believe that cash will come down this week as the weather
clears and producers move more hogs. The 2-Day Lean index for the period ending
January 14th was up.05 to 72.25 as compared with 71.27 one week previous.
Slaughter came in at 401,000 head as compared with trade expectations of
386,000-400,000 head.
Technical Outlook
HOGS (FEB) 01/19/2005: The daily stochastics have
crossed over down which is a bearish indication. Momentum studies trending lower
from overbought levels is a bearish indicator and would tend to reinforce lower
price action. The cross over and close above the 18-day moving average is an
indication the longer-term trend has turned positive. The outside day down and
close below the previous day’s low is a negative signal. There could be some
early pressure today given the market’s negative setup with the close below the
2nd swing support. The next downside objective is now at 74.120. The next area
of resistance is around 76.450 and 77.700, while 1st support hits today at
74.670 and below there at 74.120.
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COCOA MARKET RECAP
1/18/2005
March Cocoa finished down 4 at 1496, 11 off the
high and 9 up from the low.
The cocoa market showed little sign of extending
the mostly positive bias present in the cocoa market early last week. Some
suggest that the firmer Dollar is undermining the cocoa market while others
suggest that supply isn’t in a threatening enough position to justify an
extension of the mid January bounce. While arrivals continue to run behind year
ago levels the market just doesn’t seem to be inclined to worry about supply and
demand readings have been mostly muted.
Technical Outlook
COCOA (MAR) 01/19/2005: The stochastic indicator
is rising from oversold levels, which is bullish and should support higher
prices. The major trend has turned down with the cross over back below the
18-day moving average. It is a slightly negative indicator that the close was
under the swing pivot. The near-term upside target is at 1516. The next area of
resistance is around 1506 and 1516, while 1st support hits today at 1486 and
below there at 1477.
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COFFEE MARKET RECAP
1/18/2005
March Coffee closed up 4.30 at 104.40. This was
5.65 up from the low and 0.20 off the high.
The coffee market leaped higher Monday and seemed
to make the sharp run-up off the presence of renewed fund buying. With the
market apparently rushing to raise the general price of coffee to match tighter
fundamentals it would seem like the December highs have become a near term
target. Trade expectations for the monthly Green Coffee stocks report called for
a decline of 50,000 bags to an increase of 100,000 bags, with the total stocks
standing around the 5.166 million bag level. Driving the gains are suggestions
that the Brazilian production is going to be smaller than the prior year and
that the Vietnam crop could be 20%-30% smaller than last year.
Technical Outlook
COFFEE (MAR) 01/19/2005: 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. A positive signal was given by the outside day
up. There could be more upside follow through since the market closed above the
2nd swing resistance. The next upside target is 108.85. The next area of
resistance is around 107.30 and 108.85, while 1st support hits today at 101.50
and below there at 97.20.
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SUGAR MARKET RECAP
1/18/2005
March Sugar closed up 0.01 at 8.84. This was 0.08
up from the low and 0.02 off the high.
The sugar market managed a slight new high for
the move Monday but with the recent COT report showing the sugar to have a net
spec and fund long in excess of 106,000 contracts and the market another 30
ticks above the level where the COT report was measured it is possible that the
spec long is climbing toward the old record of 163,000 contracts long posted
last October. Apparently the trade was seen buying sugar and that means that
both the spec crowd and the funds are providing the buying interest in this
market. Talk about an increase in physical activity is also supporting prices
even though that is a typical development following the protracted holiday/year
end period. The trade particularly noted an additional 500,000 Pakistani sugar
import as a sign of improving physical activity.
Technical Outlook
SUGAR (MAR) 01/19/2005: The daily stochastics
have crossed over up which is a bullish indication. Stochastics are at mid-range
but trending higher, which should reinforce a move higher if resistance levels
are taken out. The major trend has turned down with the cross over back below
the 18-day moving average. The market has a slightly positive tilt with the
close over the swing pivot. The near-term upside target is at 8.92. The next
area of resistance is around 8.88 and 8.92, while 1st support hits today at 8.79
and below there at 8.73.
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COTTON MARKET RECAP
1/18/2005
March Cotton finished up 0.54 at 46.71, 0.09 off
the high and 0.91 up from the low.
Cotton closed higher as a lower opening helped to
attract new trade house buying and the positive price action attracted new fund
buying into the close. Talk of strong demand from Asia this year and in the
coming few years along with continued slow selling pace from producers helped
support renewed fund buying. Certified cotton stocks deliverable against the
NYBOT as of January 14th totaled 58,829 bales from 61,236 bales the previous
session.
Technical Outlook
COTTON (MAR) 01/19/2005: Momentum studies
trending lower from overbought levels is a bearish indicator and would tend to
reinforce lower price action. The major trend could be turning up with the close
back above the 18-day moving average. The market setup is supportive for early
gains with the close over the 1st swing resistance. The next downside objective
is 45.51. The next area of resistance is around 47.21 and 47.50, while 1st
support hits today at 46.21 and below there at 45.51.