The Market Rallied Despite Higher Oil–Here’s Why
BOND MARKET RECAP
4/19/2005
June Bonds finished up 0-17 at 114-13, 0-06 off
the high and 0-27 up from the low.
June 10 Yr Treasury Notes finished up 0-110 at
111-145, 0-020 off the high and 0-195 up from the low.
The Treasury market started out slightly
higher, added to the gains into the US numbers and even more surprisingly held
most of the gains through the rather surprising gains in the US equity market.
Considering the overt weakness in the US numbers and the offsetting inflation
components within the PPI it is not surprising that the Treasuries decided to
stick with the existing uptrend pattern in the action Tuesday. In fact, with the
very sharp recovery move in the crude oil market, we can understand the Treasury
market holding value as a resurgent energy price structure could accentuate the
soft spot that the US Fed has already acknowledged. We also suspect that many
Treasury players were skeptical of the equity market gains but consistent equity
market gains may begin to erode the bullish sentiment toward bonds and notes.
Technical Outlook
BONDS (JUN) 04/20/2005: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The market now above the 18-day moving average suggests the
longer-term trend has turned up. The outside day up and close above the previous
day’s high is a positive signal. The market setup is supportive for early gains
with the close over the 1st swing resistance. The near-term upside target is at
115-14. The market is becoming somewhat overbought now that the RSI is over 70.
The next area of resistance is around 115-01 and 115-14, while 1st support hits
today at 113-27 and below there at 113-01.
TNOTES (JUN) 04/20/2005: 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 on the daily chart is somewhat positive. With the close over the 1st
swing resistance number, the market is in a moderately positive position. The
near-term upside objective is at 112-045. The market is becoming somewhat
overbought now that the RSI is over 70. The next area of resistance is around
111-285 and 112-045, while 1st support hits today at 111-025 and below there at
110-160.
Â
STOCK INDICES RECAP
4/19/2005
June S&P finished up 7.8 at 1154.6, 2.4 off the
high and 4.6 up from the low.
June S&P E-Mini closed up 8 at 1154.75. This was
8.25 up from the low and 2.25 off the high.
June Dow closed up 67 at 10140. This was 50 up
from the low and 20 off the high.
The 180 degree shift in economic sentiment seemed
to gather momentum Tuesday despite the fact that energy prices were on the rise
again. Apparently the early corporate earnings dialogue combined with an
existing short covering tilt to propel prices upward. Apparently the market was
unaffected by the sharp rise in the PPI reading but it seems as if the market
was focusing in on the excluding food and energy component of the report. While
we can understand the argument that the market was overly bearish toward future
potentials, we are skeptical of a significant upward extension, especially if it
takes place in the face of rising oil prices.
Technical Outlook
S&P 500 (JUN) 04/20/2005: 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. With the close over the 1st swing
resistance number, the market is in a moderately positive position. The next
downside objective is now at 1147.60. The next area of resistance is around
1159.19 and 1161.59, while 1st support hits today at 1152.20 and below there at
1147.60.
SP EMINI (JUN) 04/20/2005: 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.
Market positioning is positive with the close over the 1st swing resistance. The
next downside objective is 1143.25. The next area of resistance is around
1161.00 and 1164.25, while 1st support hits today at 1150.50 and below there at
1143.25.
NASDAQ (JUN) 04/20/2005: 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. Market positioning is positive with
the close over the 1st swing resistance. The next downside target is 1410.13.
The market is approaching oversold levels on an RSI reading under 30. The next
area of resistance is around 1433.75 and 1439.12, while 1st support hits today
at 1419.25 and below there at 1410.13.
Â
CURRENCY MARKET RECAP
4/19/2005
June US Dollar finished down 22 at 8375, 34 off
the high and 8 up from the low.
June Euro finished up 0.12 at 130.5, 0.22 off the
high and 0.4 up from the low.
June Euro Dollar closed up 0.015 at 96.635. This
was 0.045 up from the low and 0.005 off the high.
June Canadian Dollar closed up 0.39 at 80.57.
This was 0.44 up from the low and 0.18 off the high.
June British Pound finished up 1.3 at 191.16,
0.12 off the high and 0.71 up from the low.
June Swiss closed up 0.26 at 84.74. This was 0.38
up from the low and 0.12 off the high.
June Japanese Yen closed up 0.54 at 93.97. This
was 0.46 up from the low and 0.01 off the high.
At times during the session Tuesday, the Dollar
Index was the only major commodity market on the Board that was lower on the
day. With the US housing starts figure extremely soft and the PPI impact muted
by the excluding Food and Energy reading the Dollar can hardly expect support
from the inflation theme. In fact, with the housing starts and permits extremely
soft the macro economic differential and interest rate differential arguments
are directly against the Dollar. Talk from the US Fed suggesting that the US has
indeed hit a soft spot also discourages buying of the Dollar and possibly
entrenches the advantage of the Pound.
Technical Outlook
YEN (JUN) 04/20/2005: Momentum studies are rising
from mid-range, which could accelerate 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. There could be more upside follow through since the
market closed above the 2nd swing resistance. The near-term upside objective is
at 94.32. The next area of resistance is around 94.19 and 94.32, while 1st
support hits today at 93.73 and below there at 93.39.
EURO (JUN) 04/20/2005: The moving average
crossover up (9 above 18) indicates a possible developing short-term uptrend.
Momentum studies are trending higher from mid-range, which should support a move
higher if resistance levels are penetrated. The cross over and close above the
18-day moving average is an indication the longer-term trend has turned
positive. The market has a slightly positive tilt with the close over the swing
pivot. The near-term upside objective is at 131.10. The next area of resistance
is around 130.86 and 131.10, while 1st support hits today at 130.24 and below
there at 129.86.
Â
PRECIOUS METALS RECAP
4/19/2005
June Gold closed up 5.4 at 434.4. This was 5.7 up
from the low and 0.8 off the high.
July Silver finished up 0.205 at 7.295, 0.015 off
the high and 0.195 up from the low.
Â
The gold market spiked upward as the black cloud
of economic slowing seemed to dissipate with the stock market rise. It would
also seem as if the funds were simply inclined to move back into long side of
the metals as impressive chart action was seen in all sectors. While a softer
Dollar helped the gold and silver rally we suspect that the improved macro
economic outlook was the primary driving force. We doubt that the market managed
much of the big gains off the inflationary argument as the headline PPI gain was
at least partially offset by a muted excluding food and energy reading. The
whole argument for a lower Dollar/floating Chinese currency might also be
fostering some increased flight to quality buying as tampering with the currency
equation in Asia could result in surprising consequences.
Technical Outlook
SILVER (JUL) 04/20/2005: The cross over and close
above the 60-day moving average indicates the longer-term trend has turned up.
The daily stochastics gave a bullish indicator with a crossover up. 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. 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 target is at
746.0. The next area of resistance is around 740.0 and 746.0, while 1st support
hits today at 719.1 and below there at 704.1.
GOLD (JUN) 04/20/2005: The cross over and close
above the 60-day moving average is an indication the longer-term trend has
turned positive. Stochastics are at mid-range but trending higher, which should
reinforce a move higher if resistance levels are taken out. The cross over and
close above the 18-day moving average indicates the longer-term trend has turned
up. There could be more upside follow through since the market closed above the
2nd swing resistance. The near-term upside target is at 439.6. The next area of
resistance is around 437.6 and 439.6, while 1st support hits today at 431.2 and
below there at 426.7.
Â
COPPER MARKET RECAP
4/19/2005
June Copper closed up 2.65 at 147.05. This was
1.55 up from the low and equal to the high.
The improved macro economic shift certainly
helped facilitate short covering and fresh spec buying in copper. With a large
copper mining company indicated that Chinese demand for copper remained strong
in the 1st quarter, talk of ongoing economic strength throughout China, it isn’t
surprising to see copper prices rise in synch with the US equity market. Even
more surprising is the fact that copper managed the rise in the face of
International Copper Study Group forecasts of an increase in global copper mine
capacity. However, given the sharp rise in all the metals on Tuesday it is
likely that fund buying interest was present in copper. Given that copper
supposedly maintains tight fundamentals, just seeing the demand prospect
recovery slightly is cause for an appreciation in prices.
Â
ENERGY MARKET RECAP
4/19/2005
June Crude Oil closed up 2.08 at 53.55. This was
1.45 up from the low and 0.20 off the high.
June Heating Oil closed up 4.75 at 149.50. This
was 3.10 up from the low and 0.60 off the high.
June Unleaded Gas finished up 7.10 at 158.10,
0.15 off the high and 5.10 up from the low.
June Natural Gas finished up 0.09 at 7.14, 0.04
off the high and 0.03 up from the low.
June Propane closed up 0.03 at 0.85. This was
equal to the low and 0.01 off the high.
The energy complex flashed higher under the
combination of a second US refinery glitch, improving macro economic sentiment
and suggestions from OPEC that there would be no need for a 500,000 barrel per
day production increase in May. We suspect that the improved macro economic view
made the markets response to the US refinery issues possible but seeing OPEC
shut down the additional supply talk certainly seemed to suggest that a near
term floor in prices was partially enforced. Some even suggested that the market
was postured to discount another rise in the coming weekly crude stocks reading
in favor of an increasing attention to the gasoline stocks.
Technical Outlook
CRUDE OIL (JUN) 04/20/2005: The market now above
the 60-day moving average suggests the longer-term trend has turned up. 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’s close above the 2nd swing resistance number is a bullish indication.
The next downside target is now at 51.60. The next area of resistance is around
54.39 and 54.89, while 1st support hits today at 52.75 and below there at 51.60.
UNLEADED (JUN) 04/20/2005: 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. 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. If yesterday’s
gap higher on the day session chart holds, additional buying could develop this
session. The market’s close above the 2nd swing resistance number is a bullish
indication. The next upside target is 162.03. The next area of resistance is
around 160.67 and 162.03, while 1st support hits today at 155.47 and below there
at 151.64.
HEATING OIL (JUN) 04/20/2005: The cross over and
close above the 40-day moving average is an indication the longer-term trend has
turned positive. 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. The market’s close above
the 2nd swing resistance number is a bullish indication. The next downside
objective is now at 145.28. The next area of resistance is around 151.54 and
152.67, while 1st support hits today at 147.85 and below there at 145.28.
Â
CORN MARKET RECAP
4/19/2005
May Corn finished up 5 1/4 at 209 1/2, 1/2
off the high and 4 1/2 up from the low. December Corn closed up 4 1/2 at 233.
This was 4 1/4 up from the low and 1 off the high.
May corn managed to move to an 11-session high on
active buying from funds in corn and in a wide range of commodities markets.
Planting progress was not as far along as anticipated and wet weather in the
southern and western cornbelt this week could slow progress. Surging soybean
values and a sharp jump in the CRB Index helped support active buying and
short-covering early in the trading session today. Traders were looking for
planting progress to reach 18-22% as of April 17th but the weekly crop progress
report pegged plantings at 14% complete as compared with 20% last year and 10%
as the 15-year average for this time of the year. Support for May corn comes in
at 205 with resistance at 210 1/2 and 212.
Technical Outlook
CORN (MAY) 04/20/2005: 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 cross over and close above the 18-day moving
average indicates the longer-term trend has turned up. The market’s close above
the 2nd swing resistance number is a bullish indication. The next upside
objective is 213 1/2. The next area of resistance is around 212 and 213 1/2,
while 1st support hits today at 207 and below there at 203 1/2.
Â
SOY COMPLEX RECAP
4/19/2005
May Soybeans finished up 21 1/2 at 631, 1 off the
high and 17 up from the low. November Soybeans closed up 25 1/4 at 629. This was
19 up from the low and 1/2 off the high.
May Soymeal closed up 7.9 at 194.9. This was 6.9
up from the low and 0.1 off the high.
May Soybean Oil finished up 0.56 at 22.83, 0.15
off the high and 0.46 up from the low.
Fund buying emerged to drive soybeans sharply
higher on the day with soybeans following the CRB index higher from an oversold
condition. Funds were noted buyers of near 9000 contracts. The market did not
have much news to follow before the opening except for the higher trade in the
night session. In China, futures experienced a moderate rally overnight on news
that soybean planted acreage for the countries largest producing province
(Heilongjiang) could be down 3.1% from last year. With China total imports of
soybeans up sharply to a record high this year, a lower crop could boost imports
again for the new crop season. A combination of this news and talk of the
oversold condition of the market helped to trigger active speculative buying and
the strong gains for early in the session. Oil World, the German oilseed
analyst, lowered their forecast for Brazil production down to 50 million tonnes
as compared with the recent USDA forecast at 54 million tonnes. Export news is
slow with Taiwan buying 58,000 tonnes of soybeans from Brazil overnight and
Taiwan tendering for 15,000 tonnes of US soybeans as part of a combined cargo
with 20,000 tonnes of US corn. May soybean support comes in at 614 1/2 with 636
as next resistance.
Technical Outlook
BEANS (MAY) 04/20/2005: The major trend could be
turning up with the close back above the 40-day moving average. The crossover up
in the daily stochastics is a bullish signal. Stochastics are at mid-range but
trending higher, which should reinforce a move higher if resistance levels are
taken out. 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 bullish
tilt coming into today’s trade with the close above the 2nd swing resistance.
The next upside objective is 645 1/4. The next area of resistance is around 640
1/4 and 645 1/4, while 1st support hits today at 621 3/4 and below there at 608
1/2.
MEAL (MAY) 04/20/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The market now above the 18-day moving average
suggests the longer-term trend has turned up. There could be more upside follow
through since the market closed above the 2nd swing resistance. The near-term
upside target is at 200.2. The next area of resistance is around 198.3 and
200.2, while 1st support hits today at 191.4 and below there at 186.2.
BEANOIL (MAY) 04/20/2005: The crossover up in the
daily stochastics is a bullish signal. 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 cross over and close above the 18-day moving average is an
indication the longer-term trend has turned positive. The market’s close above
the 2nd swing resistance number is a bullish indication. The near-term upside
objective is at 23.36. The next area of resistance is around 23.13 and 23.36,
while 1st support hits today at 22.53 and below there at 22.15.
Â
WHEAT MARKET RECAP
4/19/2005
May Wheat finished up 6 1/4 at 308, 1/4 off the high and 5 1/2
up from the low. July Wheat closed up 6 1/2 at 317 3/4. This was 5 1/2 up from
the low and 1/4 off the high.
The oversold technical condition of the market,
strength in soybeans and strength in other commodity markets was seen as
positive factors for the wheat market but strength in other grains and other
markets helped to support. Crop conditions are not quite as good as anticipated
but still on track for above average yields for the winter wheat crop and the
spring wheat crop is going into the ground on time and with good soil moisture
conditions. Spring wheat planting progress reached 23% as of April 17th as
compared with 32% last year and 20% as the 15-year average for this time of the
year. In the weekly crop progress reports, winter wheat crops were rated 69% in
good to excellent condition as compared with 70% last week, 46% last year and
54% as the 15-year average for this time of the year. Poor to very poor readings
came in at 6% as compared with 23% last year and 16% as the 15-year average.
Japan is tendering for 100,000 tonnes of wheat as aid for Jordan. Technical
indicators are showing oversold readings which may have prompted some buying
when most other commodity markets pushed higher on the day. May wheat support
comes in at 303 1/2 with resistance at 316 3/4.
Technical Outlook
WHEAT (MAY) 04/20/2005: The crossover up in the
daily stochastics is a bullish signal. 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. The market has a bullish tilt coming
into today’s trade with the close above the 2nd swing resistance. The next
upside objective is 312 1/4. The next area of resistance is around 310 3/4 and
312 1/4, while 1st support hits today at 305 1/4 and below there at 301.
Â
LIVE CATTLE RECAP
4/19/2005
June Live Cattle finished up 0.85 at 85.40, 0.05
off the high and 0.87 up from the low.
May Feeder Cattle closed up 0.20 at 107.52. This
was 0.27 up from the low and 0.37 off the high.
June cattle moved moderately higher on the
session and managed a new 11-session peak as the discount of futures to the cash
market and hopes for strong seasonal demand into May helped to provide support.
Talk of cash cattle trading at $92.00-$93.00 this week, steady to $1.00 higher
from last week helped to provide support. Boxed beef cutout values at
mid-session were up $1.30 to $157.49 as compared with $154.45 one week ago.
Warmer than normal weather for several Midwest locations helped to support ideas
that retail beef clearance was active over this past week.
Technical Outlook
CATTLE (JUN) 04/20/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The cross over and close above the 18-day
moving average indicates the longer-term trend has turned up. The market’s close
above the 2nd swing resistance number is a bullish indication. The near-term
upside objective is at 86.100. The next area of resistance is around 85.850 and
86.100, while 1st support hits today at 84.950 and below there at 84.270.
Â
LEAN HOGS RECAP
4/19/2005
June Lean Hogs finished up 0.97 at 77.67, 0.07
off the high and 1.47 up from the low.
May Pork Bellies closed down 0.27 at 85.95. This
was 2.65 up from the low and 0.05 off the high.
The move to the lowest level since February 15th
for June futures failed to attract new selling interest and the market closed
moderately higher on the session and up sharply from the lows. The reversal may
attract some additional technical buying over the short-term. Peoria cash
markets were down $1.00 on the day and packer demand was thought to be weak due
to poor profit margins. A new contract low was hit in bellies which helped limit
the gains early in the session. Ideas that seasonal demand will be strong this
spring and ideas that producer fieldwork could slow the marketings pace in the
next several weeks helped to provide underlying support. The CME 2-day Lean Hog
index for the period ending April 15th came in at 69.87, up.43 on the day and up
from 68.27 last week at this time.
Technical Outlook
HOGS (JUN) 04/20/2005: Daily stochastics are
trending lower but have declined into oversold territory. The close below the
18-day moving average is an indication the longer-term trend has turned down.
The outside day up and close above the previous day’s high is a positive signal.
Market positioning is positive with the close over the 1st swing resistance. The
next downside target is 75.770. The next area of resistance is around 78.420 and
78.850, while 1st support hits today at 76.900 and below there at 75.770.
Â
COCOA MARKET RECAP
4/19/2005
July Cocoa finished up 16 at 1555, 13 off the
high and 11 up from the low.
The cocoa market felt the positive tug of renewed
fund buying interest as did as a number of other physical commodity markets. It
didn’t hurt to see the US Dollar continue to slide but we suspect that fund
activity was the primary driving force of the gains. The trade might also have
seen some minor additional support in cocoa off the ongoing confirmation of
lower Ivory Coast supply flow, as the October through March cocoa export totally
remained below year ago levels. While the market isn’t completely convinced that
lower supply flow is being seen from the Ivory Coast, that argument is given
substance by the improved macro economic tilt.
Technical Outlook
COCOA (JUL) 04/20/2005: 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. The market has a slightly
positive tilt with the close over the swing pivot. The next upside target is
1579. The next area of resistance is around 1567 and 1579, while 1st support
hits today at 1543 and below there at 1532.
Â
COFFEE MARKET RECAP
4/19/2005
July Coffee closed up 6.20 at 121.35. This was
5.35 up from the low and 0.65 off the high.
July coffee surged higher to close 620 points
higher on the day finding support from renewed fund buying and crop concerns in
Vietnam. July coffee in London closed at the highest level since March 14th (one
day after contract highs) which helped support the buying trend in New York.
Fund buying supported the early gains on the heels of strong buying in London
and buy stops were activated above Monday’s highs and then again over last weeks
highs. Continued dryness in Vietnam and Brazil this week and failure to move
lower on news of higher monthly stocks from Friday afternoon helped to support
the market psychology.
Technical Outlook
COFFEE (JUL) 04/20/2005: The daily stochastics
have crossed over up which is a bullish indication. Daily stochastics are
showing positive momentum from oversold levels, which should reinforce a move
higher if near term resistance is taken out. The major trend has turned down
with the cross over back below the 18-day moving average. 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 next upside objective
is 126.15. The next area of resistance is around 124.35 and 126.15, while 1st
support hits today at 118.40 and below there at 114.20.
Â
SUGAR MARKET RECAP
4/19/2005
July Sugar closed up 0.13 at 8.43. This was 0.08
up from the low and 0.02 off the high.
July sugar rallied moderately on the session
finding support from talk of the oversold condition, talk of improving demand in
the cash market and a surge higher in the CRB Index. Renewed fears of inflation
and active fund buying across a wide range of commodity markets helped to
provide underlying support. Expectations of continued buying in the cash market
from Russia and hopes that China will be an active importer this year added to
the positive tone. China production looks to be near 1.6 million tonnes below
consumption for the coming year. Thailand exports for February totaled 234,042
tonnes, down 2.5% from last year.
Technical Outlook
SUGAR (JUL) 04/20/2005: Daily stochastics are
showing positive momentum from oversold levels, which should reinforce a move
higher if near term resistance is taken out. The major trend has turned down
with the cross over back below the 18-day moving average. If yesterday’s gap
higher on the day session chart holds, additional buying could develop this
session. Market positioning is positive with the close over the 1st swing
resistance. The next upside target is 8.51. The next area of resistance is
around 8.47 and 8.51, while 1st support hits today at 8.38 and below there at
8.32.
Â
COTTON MARKET RECAP
4/19/2005
July Cotton finished up 1.03 at 54.87, 0.73 off
the high and 0.52 up from the low.
The early surge in all of the commodity markets
and especially economic sensitive markets helped support the solid gains in
cotton, especially early in the day. Funds were active buyers across a wide
range of commodity markets and with a stronger economy and increased
inflationary fears, buyers were active in cotton. In addition, higher crude oil
prices keep cotton more competitive against polyester. The market was called
only slightly higher on the session but a lack of new selling interest helped to
support.
Technical Outlook
COTTON (JUL) 04/20/2005: The daily stochastics
gave a bullish indicator with a crossover up. 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. The market setup is supportive for early gains with
the close over the 1st swing resistance. The next upside target is 56.17. The
next area of resistance is around 55.49 and 56.17, while 1st support hits today
at 54.25 and below there at 53.68.