The Dollar Defies Gravity–Here’s Why
BOND MARKET RECAP
4/14/2005
June Bonds finished down 0-02 at 112-17, 0-10 off
the high and 0-05 up from the low.
June 10 Yr Treasury Notes finished up 0-050 at
110-125, 0-025 off the high and 0-050 up from the low.
The Treasury market saw slightly bearish
economic information early in the session but instead of weakening prices forged
a slight rally. We suspect that overt weakness in equity prices and an early
rise in the Dollar prompted some buying and with the Treasury auction hanging
over the market we can understand the tight early trading range. However, the
Treasury auction wasn’t exactly an important auction to begin with but given the
post auction price reaction it would seem like some players were positioning for
a negative result and when nothing happened some light buying came into the
market. With equities showing significant weakness one has to cede control of
the Treasury market to the bull camp.
Technical Outlook
BONDS (JUN) 04/15/2005: The market now above the
60-day moving average suggests the longer-term trend has turned up. 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 close over the pivot swing is a somewhat positive
setup. The next upside target is 113-05. The next area of resistance is around
113-00 and 113-05, while 1st support hits today at 112-18 and below there at
112-08.
TNOTES (JUN) 04/15/2005: 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. The market setup is supportive for early
gains with the close over the 1st swing resistance. The next upside target is
110-270. The 9-day RSI over 70 indicates the market is approaching overbought
levels. The next area of resistance is around 110-235 and 110-270, while 1st
support hits today at 110-125 and below there at 110-045.
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STOCK INDICES RECAP
4/14/2005
June S&P finished down 15.5 at 1160.6, 16.5 off
the high and 0.4 up from the low.
June S&P E-Mini closed down 1 at 1159.5. This was
0.5 up from the low and 0.75 off the high.
June Dow closed down 156 at 10253. This was 3 up
from the low and 174 off the high.
As we suggested prior to the close Thursday, the
equity markets were sitting just above extremely critical chart support levels
and the declines Thursday simply triggered long term technical stop loss
selling. The early US numbers were decent but the trade was apparently more
concerned about deteriorating earnings and slower future US growth. Even
comments from President Bush that the US needed an energy strategy to deal with
high oil prices failed to stimulate value hunting buying. Volume figures were
relatively strong Thursday, which would seem to give some added credence to the
downside thrust.
Technical Outlook
S&P 500 (JUN) 04/15/2005: A bearish signal was
triggered on a crossover down in the daily stochastics. Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The close below the 18-day moving average is an indication the
longer-term trend has turned down. There could be some early pressure today
given the market’s negative setup with the close below the 2nd swing support.
The next downside target is 1147.53. The next area of resistance is around
1168.65 and 1181.32, while 1st support hits today at 1151.75 and below there at
1147.53.
SP EMINI (JUN) 04/15/2005: The market broke to a
new contract low. 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 market back below the 18-day moving average
suggests 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 1146.13. The next area of resistance is around 1169.25 and 1183.12,
while 1st support hits today at 1150.75 and below there at 1146.13.
NASDAQ (JUN) 04/15/2005: Momentum studies are
declining, but have fallen to oversold levels. The major trend has turned down
with the cross over back below the 18-day moving average. The market is in a
bearish position with the close below the 2nd swing support number. The next
downside target is now at 1416.25. The 9-day RSI under 30 indicates the market
is approaching oversold levels. The next area of resistance is around 1455.50
and 1478.25, while 1st support hits today at 1424.50 and below there at 1416.25.
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CURRENCY MARKET RECAP
4/14/2005
June US Dollar finished up 59 at 8499, 32 off the
high and 59 up from the low.
June Euro finished down 0.87 at 128.46, 0.07 off
the high and 0.6 up from the low.
June Euro Dollar closed up 0.03 at 96.565. This
was 0.025 up from the low and 0.005 off the high.
June Canadian Dollar closed down 0.24 at 80.6.
This was 0.29 up from the low and 0.14 off the high.
June British Pound finished down 1.23 at 187.6,
0.25 off the high and 0.53 up from the low.
June Swiss closed down 0.86 at 82.78. This was
0.48 up from the low and 0.08 off the high.
June Japanese Yen closed down 0.66 at 92.94. This
was 0.26 up from the low and 0.12 off the high.
The Dollar seemed to defy gravity Thursday as it
forged an upside breakout in the wake of slightly supportive US economic
information but seemed to hold the gains despite a suspicious decline in US
equity prices. While some think that the Dollar is being boosted in a
speculative move ahead of the coming weekend meetings it would not be surprising
to see the market disappointed with the result of the meetings, especially if
the market extends the gains in the action Friday. From a macro economic sense,
the outlook toward the US economy deteriorated and that would seem to make the
rise in the Dollar all the more surprising.
Technical Outlook
YEN (JUN) 04/15/2005: The stochastics indicators
are rising from oversold levels, which is bullish and should support higher
prices. 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 is in a bearish
position with the close below the 2nd swing support number. The next upside
objective is 93.28. The next area of resistance is around 93.13 and 93.28, while
1st support hits today at 92.75 and below there at 92.53.
EURO (JUN) 04/15/2005: 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 gap down on the day session chart is
bearish with more selling pressure possible today. The close below the 1st swing
support could weigh on the market. The near-term upside objective is at 128.99.
The next area of resistance is around 128.79 and 128.99, while 1st support hits
today at 128.13 and below there at 127.66.
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PRECIOUS METALS RECAP
4/14/2005
April Gold closed down 5.3 at 424. This was 0.5
up from the low and 2.2 off the high.
May Silver finished down 0.165 at 7.06, 0.085 off
the high and 0.05 up from the low.
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The gold and silver markets came under aggressive
liquidation pressure off a combination of negatives. First of all the Dollar
managed an upside breakout early in the action and that started the ball
rolling. Secondly, all the metals seemed to become even more aware of the
deteriorating macro economic condition during the action Thursday and with the
US equity market falling to the lowest level of the year, it is possible that
the metals market were actually fearing deflation or a soft landing. In the mean
time the bull camp looks to have little standing and with the COT reports
recently showing an ongoing moderately long spec and fund positioning, it wasn’t
surprising that the market gave way in the face of key chart failures.
Technical Outlook
SILVER (MAY) 04/15/2005: The market back below
the 60-day moving average suggests the longer-term trend could be turning down.
Momentum studies are trending higher from mid-range, which should support a move
higher if resistance levels are penetrated. 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 upside objective is 720.4. The next area of resistance is around 712.8 and
720.4, while 1st support hits today at 699.3 and below there at 693.4.
GOLD (APR) 04/15/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The close under the 18-day moving average indicates the
longer-term trend could be turning down. The gap lower price action on the day
session chart is a bearish indicator for trend. The defensive setup, with the
close under the 2nd swing support, could cause some early weakness. The next
upside target is 427.1. The next area of resistance is around 425.3 and 427.1,
while 1st support hits today at 422.7 and below there at 421.8.
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COPPER MARKET RECAP
4/14/2005
May Copper closed down 3.10 at 142.85. This was
1.85 up from the low and 1.05 off the high.
The copper market forged the second, sharply
lower gap trade in a row Thursday morning but seemingly managed to recoil away
from the lows. Certainly seeing new lows for the year in the stock market and
seeing the Dollar breakout to the upside conspired to add to the selling
pressure. It is also likely that key chart failures prompted long term
liquidation of copper, especially in the wake of seriously deteriorating macro
economic sentiment. With energy prices down, heavy industry stocks under
pressure, steel stocks under pressure and other negative growth indicators
surfacing it is not surprising that copper remains under pressure.
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ENERGY MARKET RECAP
4/14/2005
June Crude Oil closed up 0.65 at 52.78. This was
1.18 up from the low and 0.22 off the high.
June Heating Oil closed up 3.78 at 148.81. This
was 3.61 up from the low and 0.59 off the high.
June Unleaded Gas finished up 1.65 at 153.04,
1.16 off the high and 3.14 up from the low.
June Natural Gas finished up 0.09 at 7.18, 0.04
off the high and 0.18 up from the low.
June Propane closed unchanged at 0.83. This was
0.00 up from the low and equal to the high.
The energy sector showed early weakness but then
recovered despite the ongoing negative economic tilt that was sinking equity
prices to the lowest levels of the year. Surprisingly the stock market is not
getting the type of support from the earnings cycle as was expected at the
beginning of the month and that is making the impact of high oil prices a prime
suspect. On the other hand, Venezuela noted some minor production problems and
that seemed to countervail the potentially damaging revelation by a private
forecasting agency that OPEC April production might have increased by 340,000
barrels per day. From the market action Thursday it would seem like the market
needed to bounce technically or at least take some profits off the recent slide.
Technical Outlook
CRUDE OIL (JUN) 04/15/2005: The cross over and
close above the 60-day moving average indicates the longer-term trend has turned
up. Daily stochastics are trending lower but have declined into oversold
territory. The close under the 18-day moving average indicates the longer-term
trend could be turning down. The upside closing price reversal on the daily
chart is somewhat bullish. The market setup is supportive for early gains with
the close over the 1st swing resistance. The next downside objective is 51.14.
The next area of resistance is around 53.48 and 53.94, while 1st support hits
today at 52.08 and below there at 51.14.
UNLEADED (JUN) 04/15/2005: 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 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 now at
148.25. The next area of resistance is around 155.19 and 156.84, while 1st
support hits today at 150.89 and below there at 148.25.
HEATING OIL (JUN) 04/15/2005: The market now
above the 40-day moving average suggests the longer-term trend has turned up.
The downside crossover (9 below 18) of the moving averages suggests a developing
short-term downtrend. 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 market’s close above the 2nd swing
resistance number is a bullish indication. The next downside objective is now at
143.86. The next area of resistance is around 150.91 and 152.25, while 1st
support hits today at 146.71 and below there at 143.86.
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CORN MARKET RECAP
4/14/2005
May Corn finished up 1 3/4 at 207 1/2, 1
1/2 off the high and 2 up from the low. December Corn closed up 1 1/4 at 231
1/2. This was 1 1/4 up from the low and 1 1/2 off the high.
While other grain markets and many other
commodity markets traded lower, corn futures pushed higher on follow-through
technical buying from the strong close yesterday, good export sales and a lack
of producer selling. Funds were noted buyers of near 7000 contracts by
mid-session. The slow producer selling could be a function of focus on planting
and planting preparations with a string of 4-5 days ahead with warmer and drier
weather in the forecast. The slow selling has supported higher basis levels and
is supporting futures today. Weekly export sales came in at 917,500 tonnes as
compared with trade expectations near 800,000-1.0 million tonnes. Cumulative old
crop sales have reached 76.4% of the USDA forecast for the year as compared with
72.3% as the 5-year average for this time of the year. Support for May corn
comes in at 205 3/4 with resistance at 210 1/2 and 212.
Technical Outlook
CORN (MAY) 04/15/2005: The stochastics indicators
are rising from oversold levels, which is bullish and should support higher
prices. The close under the 18-day moving average indicates the longer-term
trend could be turning down. With the close over the 1st swing resistance
number, the market is in a moderately positive position. The near-term upside
objective is at 210 3/4. Short-term indicators suggest buying dips today. The
next area of resistance is around 209 1/4 and 210 3/4, while 1st support hits
today at 205 3/4 and below there at 204.
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SOY COMPLEX RECAP
4/14/2005
May Soybeans finished down 6 1/4 at 617, 9 1/2
off the high and 1 up from the low. November Soybeans closed down 4 at 606. This
was 1 1/2 up from the low and 7 off the high.
May Soymeal closed down 1 at 188.3. This was 0.5
up from the low and 2.9 off the high.
May Soybean Oil finished down 0.13 at 22.42, 0.15
off the high and 0.05 up from the low.
A surge higher in the dollar and aggressive fund
selling in a wide range of commodity markets including the metals helped to
trigger the early weakness in soybeans and fund selling (thought to be long
liquidation) helped to pressure the market later. Fundamental news was mixed as
weekly export sales for soybeans were disappointing but the NOPA crush data was
supportive. The NOPA pegged March crush at 141.8 million bushels as compared
with trade estimates near 135-138 million bushels. Weekly export sales came in
at 272,400 tonnes as compared with trade expectations near 300,000-450,000
tonnes. Cumulative old crop sales have reached 93.6% of the USDA forecast for
the year as compared with 92% as the 5-year average for this time of the year.
Meal sales came in at 78,000 tonnes from expectations at 50,000-125,000 tonnes.
Cumulative old crop sales have reached 84.2% of the USDA forecast for the year
as compared with 76.5% as the 5-year average for this time of the year. Oil
sales were 1800 tonnes from trade expectations at 0-5,000 tonnes. Favorable
weather for planting preparation of the US crop along with bearish
macro-economic factors added to the bearish tone into the close. The market
managed a new high for the week before the 8 cent break off of the highs into
the close. May soybean support comes in at 614 with 624 1/2 as resistance.
Technical Outlook
BEANS (MAY) 04/15/2005: The close below the
40-day moving average is an indication the longer-term trend has turned down.
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 major trend has
turned down with the cross over back below 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
objective is at 629 1/2. The next area of resistance is around 622 1/4 and 629
1/2, while 1st support hits today at 611 3/4 and below there at 608 3/4.
MEAL (MAY) 04/15/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. 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. It is a slightly negative indicator that
the close was lower than the pivot swing number. The near-term upside objective
is at 192.3. The next area of resistance is around 190.0 and 192.3, while 1st
support hits today at 186.6 and below there at 185.5.
BEANOIL (MAY) 04/15/2005: 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. It is a
slightly negative indicator that the close was under the swing pivot. The next
downside target is 22.25. The next area of resistance is around 22.52 and 22.64,
while 1st support hits today at 22.32 and below there at 22.25.
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WHEAT MARKET RECAP
4/14/2005
May Wheat finished down 1 1/2 at 309, 2 off the high and 1 1/2
up from the low. July Wheat closed down 2 1/4 at 318 1/4. This was 1 3/4 up from
the low and 1 3/4 off the high.
May futures matched last week’s lows before
bouncing into the mid-session in quiet trade. Funds were noted sellers of near
1500 contracts. Excellent weather in the forecast and good crop conditions for
the winter wheat crop has helped keep a bearish tone for the market with July
wheat moving to the lowest level since February 22nd before bouncing back into
the recent trading range into the mid-session. Weekly export sales came in at
418,400 tonnes as compared with trade expectations near 300,000-500,000 tonnes.
Cumulative old crop sales have reached 92.5% of the USDA forecast for the year
as compared with 87.8% as the 5-year average for this time of the year. All but
29,000 tonnes were for the old crop season which helped provide some support. In
addition, Japan bought 150,000 tonnes of wheat at their weekly tender with
85,000 of the total coming from the US. The USDA indicated that China’s
2005/2006 winter wheat crop is set to experience a very good yield due to good
weather over the winter. May wheat resistance comes in at 312 with support at
307 1/2 and 302 1/2.
Technical Outlook
WHEAT (MAY) 04/15/2005: The daily stochastics
have crossed over down which is a bearish indication. Momentum studies are still
bearish but are now at oversold levels and will tend to support reversal action
if it occurs. 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 target is 305 3/4.
Some caution in pressing the downside is warranted with the RSI under 30. The
next area of resistance is around 310 3/4 and 312 1/2, while 1st support hits
today at 307 1/4 and below there at 305 3/4.
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LIVE CATTLE RECAP
4/14/2005
April Live Cattle finished up 0.90 at 89.92, 0.25
off the high and 0.22 up from the low.
May Feeder Cattle closed up 0.45 at 106.25. This
was 0.10 up from the low and 0.50 off the high.
June cattle closed moderately higher on the
session as the discount of futures to cash and a positive tone for the cash
market this week helped to support. Nebraska cattle traded $148 on a dressed
basis which was up $1.00-$4.00 from last week and traders are hopeful that cash
in the panhandle will trade $91 this week which would leave June cattle looking
cheap. Boxed beef cutout values at mid-session were up 11 cents on the day to
$155.51 as compared with $154.61 a week ago. Slaughter came in at 115,000 head
as compared with trade expectations of 116,000-121,000 head.
Technical Outlook
CATTLE (APR) 04/15/2005: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The market now above the 18-day moving average suggests
the longer-term trend has turned up. If yesterday’s gap higher on the day
session chart holds, additional buying could develop this session. 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. The near-term
upside objective is at 90.400. The next area of resistance is around 90.150 and
90.400, while 1st support hits today at 89.700 and below there at 89.470.
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LEAN HOGS RECAP
4/14/2005
April Lean Hogs finished down 0.15 at 69.67, 0.25
off the high and 0.07 up from the low.
May Pork Bellies closed down 2.37 at 85.87. This
was 0.22 up from the low and 2.52 off the high.
June hogs closed slightly lower after the early
collapse to the lowest level since February 15th failed to generate new selling
interest. Cash live hogs were down $.50 to $2.00 lower and collapsing belly
prices helped to pressure. Fears of a slowdown in consumer spending and hefty
pork stocks in cold storage helped to keep sellers active early in the session.
The CME 2-day Lean Hog index for the period ending April 12th came in at 68.72,
up.30 on the day and up from 67.79 last week at this time. Slaughter came in at
395,000 head vs. estimates between 390,000 and 398,000.
Technical Outlook
HOGS (APR) 04/15/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. 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 objective is 70.020. The next area of resistance is around 69.820 and
70.020, while 1st support hits today at 69.520 and below there at 69.400.
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COCOA MARKET RECAP
4/14/2005
July Cocoa finished down 38 at 1543, 33 off the
high and 8 up from the low.
Cocoa prices fell back away from levels that
recently bordered on an upside breakout on the charts. However, given the
aggressive washout July cocoa might actually seen some fund and small spec long
liquidation and extend the slide down to the January consolidation lows around
$1,500. We also suspect that the sharply higher Dollar prompted arbitrage
selling in addition to simple macro economic selling. In short, outside markets
might have influenced cocoa more than internal cocoa market fundamentals in the
action Thursday.
Technical Outlook
COCOA (JUL) 04/15/2005: The daily stochastics
gave a bearish indicator with a crossover down. Momentum studies are declining,
but have fallen to oversold levels. The major trend has turned down with the
cross over back below the 18-day moving average. The defensive setup, with the
close under the 2nd swing support, could cause some early weakness. The next
downside objective is 1509. The next area of resistance is around 1563 and 1590,
while 1st support hits today at 1523 and below there at 1509.
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COFFEE MARKET RECAP
4/14/2005
May Coffee closed down 3.55 at 111.05. This was
0.55 up from the low and 2.95 off the high.
The strong dollar and continued long liquidation
selling from speculators triggered the sharp break in coffee with the July
contract down 355 on the session and down to the lowest level since February
4th. The fund activity continues to be the driving force of the market while the
fundamental set-up appears bullish into the May 15th to July 15th time frame.
The Vietnam production outlook is more uncertain with dry weather and stressful
weather in parts of Brazil could also be impacting production. It appears that
the second production estimate of the year will be released on April 22nd. The
December forecast was 30.7-33.0 million bags, down 17% from last year. Trade
houses estimate the Brazil crop between 34-39 million bags but given the recent
weather, Brazil is likely to come back with a steady to slightly smaller
forecast.
Technical Outlook
COFFEE (MAY) 04/15/2005: 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. 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 108.20.
The 9-day RSI under 30 indicates the market is approaching oversold levels. The
next area of resistance is around 112.80 and 115.15, while 1st support hits
today at 109.35 and below there at 108.20.
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SUGAR MARKET RECAP
4/14/2005
May Sugar closed down 0.19 at 8.15. This was
equal to the low and 0.22 off the high.
The sugar market wasn’t immune to the broad based
selling in the commodity markets. Furthermore, we suspect that in addition to
fund and small spec long liquidation that sugar was also negatively influenced
by sagging macro economic fears. With the London market making a significant low
ahead of the US action it was not surprising that prices eventually came under
aggressive liquidation pressure. Even in the face of news of lower sugar
loadings in Brazil the sugar market slid to the lowest level in the July
contract since last September.
Technical Outlook
SUGAR (MAY) 04/15/2005: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The market back below the 18-day moving average suggests
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 objective is
now at 7.99. The 9-day RSI under 30 indicates the market is approaching oversold
levels. The next area of resistance is around 8.26 and 8.42, while 1st support
hits today at 8.04 and below there at 7.99.
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COTTON MARKET RECAP
4/14/2005
May Cotton finished up 0.92 at 52.14, 0.36 off
the high and 1.09 up from the low.
The cotton market pushed moderately higher on the
session in spite of weakness in a wide range of commodity markets as trade house
buyers were active; especially in the May contract. Talk of a major commercial
stopper for the May contract helped to support. In addition, strong sales added
to the positive tone. Weekly export sales came in at 262,200 bales as compared
with trade expectations near 150,000-200,000 bales. Cumulative old crop sales
have reached 92.8% of the USDA forecast for the year as compared with 99.4% as
the 5-year average for this time of the year. Shipments came in at 339,400
bales.
Technical Outlook
COTTON (MAY) 04/15/2005: The cross over and close
above the 40-day moving average indicates the longer-term trend has turned up.
Stochastics trending lower at midrange will tend to reinforce a move lower
especially if support levels are taken out. The major trend has turned down with
the cross over back below 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 now at 50.51. The next area of resistance is around
52.86 and 53.40, while 1st support hits today at 51.42 and below there at 50.51.