The Main Ongoing Problem In The Oil Sector–It May Not Be What You Think It Is
BOND MARKET RECAP
5/17/2005
June Bonds finished up 0-04 at 115-24, 0-08 off
the high and 0-16 up from the low.
June 10 Yr Treasury Notes finished up 0-030 at
112-025, 0-045 off the high and 0-105 up from the low.
The Treasury market continues to look
beyond the numbers or to spin the numbers into the bull camp. Some would suggest
that the housing numbers were nothing new and that the Industrial production
shortfall was the real surprise of the session Tuesday and that is why the bonds
and notes managed another upside probe. Some traders even spun the inflation
readings into a positive by suggesting that the rise in inflation would keep the
Fed aggressive, which in turn would serve to limit economic optimism. Others in
the trade also suggested that sharply declining food and energy prices since the
March highs means that inflation might be set to come down in future reports and
therefore limiting Treasuries because of inflation is misguided in the coming
months!
Technical Outlook
BONDS (JUN) 05/18/2005: 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 daily closing price
reversal up is a positive indicator that could support higher prices. The market
has a slightly positive tilt with the close over the swing pivot. The next
upside objective is 116-15. The market is approaching overbought levels with an
RSI over 70. The next area of resistance is around 116-04 and 116-15, while 1st
support hits today at 115-11 and below there at 114-28.
TNOTES (JUN) 05/18/2005: Rising stochastics at
overbought levels warrant some caution for bulls. The cross over and close above
the 18-day moving average indicates the longer-term trend has turned up. The
upside daily closing price reversal gives the market a bullish tilt. It is a
mildly bullish indicator that the market closed over the pivot swing number. The
next upside objective is 112-170. The next area of resistance is around 112-105
and 112-170, while 1st support hits today at 111-270 and below there at 111-175.
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STOCK INDICES RECAP
5/17/2005
June S&P finished up 7.9 at 1175, 1 off the high
and 14 up from the low.
June S&P E-Mini closed up 8.5 at 1175.5. This was
14.75 up from the low and 0.75 off the high.
June Dow closed up 83 at 10335. This was 120 up
from the low and 9 off the high.
The stock market was disappointed with the turn
of events Tuesday morning as housing numbers were strong but the Industrial
production readings were soft. However, with the US PPI reading a little hotter
than expected the stock market decided to spin the readings into a bear tilt, as
many traders continue to fear even higher interest rates, even in the face of
slackening economic evidence. Therefore, the attitude in the market place is
mostly bearish despite favorable upgrades of the 2005 outlook by Deere and
Penny’s. Therefore, the market is still generally viewing the glass as half
empty, instead of half full.
Technical Outlook
S&P 500 (JUN) 05/18/2005: The market now above
the 40-day moving average suggests the longer-term trend has turned up. The
daily stochastics have crossed over up which is a bullish indication. 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. Market positioning
is positive with the close over the 1st swing resistance. The next upside
objective is 1186.84. The next area of resistance is around 1182.69 and 1186.84,
while 1st support hits today at 1167.70 and below there at 1156.85.
SP EMINI (JUN) 05/18/2005: The cross over and
close above the 40-day moving average is an indication the longer-term trend has
turned positive. The crossover up in the daily stochastics is a bullish signal.
Positive momentum studies in the neutral zone will tend to reinforce higher
price action. The major trend could be turning up with the close back above the
18-day moving average. Market positioning is positive with the close over the
1st swing resistance. The next upside objective is 1187.50. The next area of
resistance is around 1183.25 and 1187.50, while 1st support hits today at
1167.75 and below there at 1156.50.
NASDAQ (JUN) 05/18/2005: The cross over and close
above the 60-day moving average indicates the longer-term trend has turned up.
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. With the close over the 1st swing resistance number, the market is in
a moderately positive position. The next upside objective is 1512.12. With a
reading over 70, the 9-day RSI is approaching overbought levels. The next area
of resistance is around 1505.75 and 1512.12, while 1st support hits today at
1482.25 and below there at 1465.13.
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CURRENCY MARKET RECAP
5/17/2005
June US Dollar finished up 8 at 8620, 8 off the
high and 26 up from the low.
June Euro finished down 0.18 at 126.27, 0.33 off
the high and 0.08 up from the low.
June Euro Dollar closed down 0.005 at 96.5775.
This was 0.0075 up from the low and 0.005 off the high.
June Canadian Dollar closed up 0.23 at 79.02.
This was 0.43 up from the low and 0.19 off the high.
June British Pound finished down 0.14 at 183.41,
0.47 off the high and 0.06 up from the low.
June Swiss closed down 0.13 at 81.88. This was
0.04 up from the low and 0.27 off the high.
June Japanese Yen closed down 0.25 at 93.46. This
was 0.24 up from the low and 0.15 off the high.
The Dollar continued to show corrective action
off the recent highs and that seems to have tempered the bull tilt that
dominated the trade for most of last week. However, with two of three US
scheduled reports this week coming in disappointing and the Dollar mostly unable
to rally off inflationary expectations on Tuesday morning it would certainly
seem like sentiment has shifted. On the other hand, traders are turning equally
negative toward prospects in the Euro zone and that would seem to cushion the
Dollar against near term liquidation forces. It was clear in the action Tuesday
that the weaker than expected US numbers had an overtly negative impact on the
Yen and that was another reason that the Dollar avoided more intense selling.
Technical Outlook
YEN (JUN) 05/18/2005: 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. The market
tilt is slightly negative with the close under the pivot. The next downside
target is now at 93.05. The next area of resistance is around 93.65 and 93.82,
while 1st support hits today at 93.27 and below there at 93.05.
EURO (JUN) 05/18/2005: 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. The daily
closing price reversal down is a negative indicator for prices. It is a slightly
negative indicator that the close was under the swing pivot. The next downside
objective is now at 125.93. Some caution in pressing the downside is warranted
with the RSI under 30. The next area of resistance is around 126.47 and 126.74,
while 1st support hits today at 126.07 and below there at 125.93.
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PRECIOUS METALS RECAP
5/17/2005
June Gold closed up 0.5 at 419.8. This was 0.5 up
from the low and 1.7 off the high.
July Silver finished up 0.087 at 7.045, 0.04 off
the high and 0.065 up from the low.
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Gold prices were surprisingly the under performer
during the action Tuesday, as silver and platinum were at times very strong.
With the Dollar unable to further the recent string of much better than expected
economic readings and the Greenback showing signs of a technical top, we can
understand the wave of light buying interest in the gold market. The silver
market seemed to get concentrated buying and at times seemed to be running stops
on the charts. Therefore, it would seem as if overall sentiment toward the
metals is improving and with Asian and Middle East buyers recently stepping up
to buy it is clear that recent buying interest is spread out geographically.
Technical Outlook
SILVER (JUL) 05/18/2005: A bullish signal was
given with an upside crossover of the daily stochastics. Momentum studies are
trending higher from mid-range, which should support 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. Market positioning is positive with
the close over the 1st swing resistance. The near-term upside target is at
714.4. The next area of resistance is around 709.8 and 714.4, while 1st support
hits today at 699.3 and below there at 693.4.
GOLD (JUN) 05/18/2005: 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 close over the pivot swing is a somewhat positive setup. The next downside
objective is 417.9. The market is approaching oversold levels on an RSI reading
under 30. The next area of resistance is around 420.9 and 422.3, while 1st
support hits today at 418.7 and below there at 417.9.
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COPPER MARKET RECAP
5/17/2005
June Copper closed up 1.05 at 140.85. This was
1.15 up from the low and 0.85 off the high.
Copper prices showed a little more resiliency on
Tuesday as it appeared that some players were making bargain hunting purchases.
However, the copper market probably only got limited support from the strong US
housing starts and permits data because the US Industrial Production numbers was
much softer than expected. We did note generally bullish attitudes throughout
the metals market on Tuesday and that is certainly a change of pace for the
precious metals and the industrial metals complex. With the July copper market
managed to bounce twice off the 133 level it would appear that the market has
found a temporary technical bottom and might be poised to post a short term
technical bounce.
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ENERGY MARKET RECAP
5/17/2005
June Crude Oil closed up 0.36 at 48.97. This was
0.92 up from the low and 0.03 off the high.
June Heating Oil closed up 2.36 at 137.39. This
was 2.69 up from the low and 0.41 off the high.
June Unleaded Gas finished up 3.00 at 143.52,
0.38 off the high and 4.22 up from the low.
June Natural Gas finished up 0.03 at 6.48, 0.07
off the high and 0.07 up from the low.
June Propane closed up 0.00 at 0.79. This was
equal to the low and equal to the high.
After two days of bearish dialogue flowing from
the Saudi Oil Minister the tone of the discussions changed a bit at the US
Department of Energy. Apparently Naimi pointed out to the market on Tuesday that
the main ongoing problem in the oil sector is the lack of US refinery capacity.
The Saudi official also suggested that Non OPEC supply growth was coming in
slower than expected and that seemed to shore up support underneath prices.
However, Tuesday was a crude oil option expiration date and that could have
temporarily calmed the markets. Also supporting energy prices on Tuesday were
suggestions from OPEC that both the 3rd and 4th quarter call on OPEC were set to
rise by 120,000 and 100,000 barrels per day respectively. Also noted by the
trade Tuesday, was the fact that the call on OPEC has risen for six straight
months.
Technical Outlook
CRUDE OIL (JUN) 05/18/2005: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. 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 next downside objective is 47.80. The next
area of resistance is around 49.44 and 49.69, while 1st support hits today at
48.50 and below there at 47.80.
UNLEADED (JUN) 05/18/2005: 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 market back below the 18-day moving
average suggests the longer-term trend could be turning down. Market positioning
is positive with the close over the 1st swing resistance. The near-term upside
target is at 147.16. The next area of resistance is around 145.82 and 147.16,
while 1st support hits today at 141.22 and below there at 137.96.
HEATING OIL (JUN) 05/18/2005: The daily
stochastics gave a bullish indicator with a crossover up. Daily stochastics are
showing positive momentum from oversold levels, which should reinforce a move
higher if near term resistance is taken out. The market back below the 18-day
moving average suggests the longer-term trend could be turning down. The
market’s close above the 2nd swing resistance number is a bullish indication.
The near-term upside objective is at 139.92. The next area of resistance is
around 138.94 and 139.92, while 1st support hits today at 135.84 and below there
at 133.72.
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CORN MARKET RECAP
5/17/2005
July Corn finished up 1/2 at 207 1/2, 1/4
off the high and 2 up from the low. December Corn closed up 1/4 at 225 1/2. This
was 1 3/4 up from the low and 1/4 off the high.
A drier and more importantly warmer trend in the
weather forecast for the Midwest helped to pressure the market early in the
session but a lack of new selling interest and longer-term yield uncertainty was
enough to support a late rally to the highs of the day. Ideas that the weather
would improve crop conditions and emergence helped trigger the early selling in
soybeans and corn. There is a dry area in central Illinois which could be hurt
by a lack of rain but soggy and cool conditions recently in Iowa has slowed
growth. The crops in Iowa and other key growing areas which have been cool and
wet would likely benefit from a warmer and drier trend in Midwest. While the
weekly crop progress report showed the corn crop was 89% planted as compared
with 79% as the 5-year average, corn emergence was just 41% from 48% as the
5-year average. Extreme weather factors may have erased some of the potential
benefits to an early planted crop. For example, rainfall averaged over 2 inches
in Iowa last week but rainfall in Champaign Illinois so far in May has reached
just.15 inches as compared with a total of 4.8 inches on average for May.
Temperature extremes for Champaign this month have been as low as 28 degrees and
as high as 90 degrees just last week. July corn support comes in at 205 1/4 with
210 3/4 and 213 1/4 as resistance.
Technical Outlook
CORN (JUL) 05/18/2005: The daily stochastics gave
a bullish indicator with a crossover up. Rising from oversold levels, daily
momentum studies would support higher prices, especially on a close above
resistance. The close below the 18-day moving average is an indication the
longer-term trend has turned down. The upside closing price reversal on the
daily chart is somewhat bullish. The close over the pivot swing is a somewhat
positive setup. The near-term upside target is at 209 1/4. The next area of
resistance is around 208 1/2 and 209 1/4, while 1st support hits today at 206
1/2 and below there at 205.
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SOY COMPLEX RECAP
5/17/2005
July Soybeans finished down 2 3/4 at 620 3/4, 1
1/4 off the high and 4 1/4 up from the low. November Soybeans closed down 3/4 at
617 1/2. This was 4 1/2 up from the low and 1/2 off the high.
July Soymeal closed down 0.3 at 193.4. This was
1.3 up from the low and 0.4 off the high.
July Soybean Oil finished down 0.14 at 22.02,
0.06 off the high and 0.16 up from the low.
The call for warmer and drier weather over the
next 10 days helped to pressure the market early as the slow emergence of corn
and soybeans has developed as a potential problem. The warmer weather is thought
to be relatively more beneficial to the crop across the entire Midwest than the
negative crop impact of the dryness across central Illinois. While the weekly
crop progress report showed the soybean crop was 46% planted as compared with
39% as the 5-year average, soybean emergence was just 11% from 14% as the 5-year
average. Dryness in parts of Illinois and Indiana is seen as a potential bullish
force but some rain in the forecast for Wednesday/Thursday has helped ease
dryness concerns. The generally dry Midwest trend is also seen as a negative
factor because planting progress should push ahead at a more rapid pace. Meal
basis levels were weaker in the mid-west as processor stocks have improved after
the recent pick-up in producer selling of soybeans. The sharp drop in Malaysia
palm oil futures overnight added to the negative tone for the soybean oil. While
the higher than expected crush total from the NOPA crush report yesterday helped
support the soybean market, the higher oil stocks data was seen as bearish for
oil. July soybean support comes in at 613 with 627 and 631 3/4 as resistance.
Technical Outlook
BEANS (JUL) 05/18/2005: Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
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 next downside objective is 614 1/2. The next area of resistance is
around 623 1/2 and 625 1/2, while 1st support hits today at 618 and below there
at 614 1/2.
MEAL (JUL) 05/18/2005: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The close below the 18-day moving average is an
indication the longer-term trend has turned down. With the close higher than the
pivot swing number, the market is in a slightly bullish posture. The near-term
upside objective is at 194.8. The next area of resistance is around 194.2 and
194.8, while 1st support hits today at 192.6 and below there at 191.5.
BEANOIL (JUL) 05/18/2005: 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. The close
below the 1st swing support could weigh on the market. The next downside
objective is now at 21.78. The next area of resistance is around 22.12 and
22.21, while 1st support hits today at 21.91 and below there at 21.78.
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WHEAT MARKET RECAP
5/17/2005
July Wheat finished up 3 3/4 at 310, 2 off the high and 3 3/4
up from the low. December Wheat closed up 4 1/4 at 329 1/2. This was 3 1/4 up
from the low and 2 1/2 off the high.
The sharp drop in the winter wheat crop
conditions helped support the market early in the session. For the weekly crop
progress report, the winter wheat crop in good to excellent condition slipped to
just 55% from 59% last week and 63% two weeks ago. Traders were looking for a
1-2% decline. The crop is still better than the 15-year average at 51% for this
time of the year. Crops rated in poor to very poor condition jumped to 12% from
24% last year and 18% as the 15-year average. The extended outlook for the
winter wheat region also calls for hot and dry weather in the southern plains
which might suggest further deterioration in the next two weeks. At a critical
stage of development, the winter wheat crop needs more, not less rain to
maintain yield potential. Slow producer selling has supported a firm basis but
slow export news from the US has kept the demand tone negative. Egypt bought
250,000 tonnes of wheat from Russia which was seen as a bearish force. July
wheat support comes in at 306 1/2 with 316 3/4 and 321 1/4 as resistance.
Technical Outlook
WHEAT (JUL) 05/18/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
close under the 18-day moving average indicates the longer-term trend could be
turning down. There could be more upside follow through since the market closed
above the 2nd swing resistance. The next downside objective is 304. The next
area of resistance is around 312 3/4 and 315 1/4, while 1st support hits today
at 307 1/4 and below there at 304.
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LIVE CATTLE RECAP
5/17/2005
June Live Cattle finished up 0.12 at 87.07, 0.12
off the high and 0.27 up from the low.
May Feeder Cattle closed up 0.42 at 111.92. This
was 0.47 up from the low and 0.07 off the high.
After trading to contract highs for the 4th
session in a row, August cattle failed to add much to the old highs and the
technical condition remains overbought. August Feeder Cattle traded to new
contract highs for the 9th session in a row and this helped provide underlying
support. Cash cattle in the plains were quiet with bids at $85.00-$88.00 and
offers at $93. Last week the market traded at $90-90.50. For the Cattle-on-Feed
report on Friday, traders are looking for On-Feed supplies near 102% (range
100.5-104) with placements near 103% (99-115%) and marketings near 96.8% (range
94-99%). At mid-session, boxed beef cutout values were up $.58 on the day to
$155.73 as compared with $156.61 one week ago. Slaughter came in at 125,000 head
as compared with trade expectations of 118,000-124,000 head.
Technical Outlook
CATTLE (JUN) 05/18/2005: 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 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 upside objective is 87.420. The next area of
resistance is around 87.250 and 87.420, while 1st support hits today at 86.870
and below there at 86.650.
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LEAN HOGS RECAP
5/17/2005
June Lean Hogs finished up 0.20 at 75.90, 0.45
off the high and 0.15 up from the low.
May Pork Bellies closed down 0.60 at 80.60. This
was 1.20 up from the low and 0.10 off the high.
June hogs opened 45 points higher on the session
and held onto a portion of the gains but closed well below the opening. Cash
hogs were mostly $1.00 higher on the session and the market got a boost from the
sharply higher trade in the pork production market on Monday evening. The CME
2-Day Lean Index for the period ending May 13th came in at 76.69 which was down
0.37 from the previous session and down from 78.00 the previous week. Slaughter
came in at 383,000 head as compared with trade expectations of 375,000-390,000
head.
Technical Outlook
HOGS (JUN) 05/18/2005: Momentum studies trending
lower at mid-range should accelerate a move lower if support levels are taken
out. The close under the 18-day moving average indicates the longer-term trend
could be turning down. With the close higher than the pivot swing number, the
market is in a slightly bullish posture. The next downside objective is 75.400.
The next area of resistance is around 76.200 and 76.570, while 1st support hits
today at 75.620 and below there at 75.400.
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COCOA MARKET RECAP
5/17/2005
July Cocoa finished down 13 at 1438, 11 off the
high and 3 up from the low.
The cocoa market failed to hold the prior day’s
gains and would seem to remain mired in a bearish overall posture. Apparently
the market is being presented with origin selling, which would seem to be fairly
negative considering that the origins are selling after a 2 1/2 month decline of
more that $400 a ton! The sellers didn’t even need a Dollar excuse today to
press prices and that is because the threat against supply is low and the demand
function is nondescript. With the French cheering on the Ivory Coast disarmament
effort we suspect that more and more spec longs are turning bearish toward cocoa
prices. In fact, one might even suggest that the forward look from supply is
turning up the heat on the market as crop conditions remain conducive to future
production.
Technical Outlook
COCOA (JUL) 05/18/2005: 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.
It is a slightly negative indicator that the close was under the swing pivot.
The next downside objective is 1426. The next area of resistance is around 1445
and 1454, while 1st support hits today at 1431 and below there at 1426.
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COFFEE MARKET RECAP
5/17/2005
July Coffee closed up 1.95 at 118.20. This was
2.10 up from the low and 0.30 off the high.
July coffee managed to hold on to early gains to
close 195 higher on the session with light roaster buying noted and a lack of
new speculative long liquidation selling. Warm and dry weather in the Brazil
harvest region recently has helped trigger the aggressive fund selling but with
a colder and wetter forecast for the coming weekend, the selling slowed.
Indonesia coffee production is expected to increase by 2.3% to 6.75 million bags
for the 2005/2006 season according to the USDA attaché report. Coffee exports
from Colombia, Mexico, Central America, Peru and the Dominican Republic for May
hit 2.462 million bags, up 2.1%.
Technical Outlook
COFFEE (JUL) 05/18/2005: 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.
With the close higher than the pivot swing number, the market is in a slightly
bullish posture. The next downside objective is now at 115.40. The next area of
resistance is around 119.35 and 120.10, while 1st support hits today at 117.05
and below there at 115.40.
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SUGAR MARKET RECAP
5/17/2005
July Sugar closed down 0.05 at 8.30. This was
0.05 up from the low and 0.05 off the high.
July sugar closed 5 lower on the session in quiet
trade as the market seems to lack much in the way of new demand news to support
and speculators have also shied away from sugar from the long side. In fact, the
last traders report showed that funds are building a larger net short position.
Good weather in Brazil has supported an active harvest season and the record
high production has forced local prices in Brazil to move down. For the new crop
season beginning in October, India production is expected to recovery to near
17.5-18.0 million tonnes from 13 million tonnes this season.
Technical Outlook
SUGAR (JUL) 05/18/2005: 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. It is a slightly negative indicator that the close was under
the swing pivot. The next downside objective is now at 8.20. The next area of
resistance is around 8.35 and 8.40, while 1st support hits today at 8.25 and
below there at 8.20.
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COTTON MARKET RECAP
5/17/2005
July Cotton finished up 0.05 at 52.06, 0.09 off
the high and 1.61 up from the low.
The cotton market pushed moderately lower early
in the session but managed to catch support at the 50% retracement level of the
Dec-May rally at 52.55 for December and bounced into the close. Technically, the
market appears oversold after the recent sharp break and the spike-bottom low
pattern could support increased trade house buying this week. The longer-term
fundamentals look positive for the new crop cotton with a US and world
production deficit anticipated but funds have shied away from the cotton market
due to the overbought condition. The bullishness for the coming year in cotton
is highly dependent on China demand as China import demand is expected to jump
sharply.
Technical Outlook
COTTON (JUL) 05/18/2005: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. The major trend has turned down with the cross over back below the
18-day moving average. The upside daily closing price reversal gives the market
a bullish tilt. It is a slightly negative indicator that the close was under the
swing pivot. The next downside objective is now at 49.98. The next area of
resistance is around 52.91 and 53.38, while 1st support hits today at 51.21 and
below there at 49.98.