The Real Driving Force Behind Gold’s Bull Market
BOND MARKET RECAP
9/19/2003
The Treasury bonds managed to get fleeting
support from the idea that the BOJ might be forced to intervene in a massive
force and that in turn could result in continued Treasury buying by the BOJ.
However, some traders think that last weeks gains off the central bank theme
have left prices significantly above fair value. With the economic report slate
nearly empty until the middle of next week the near term overbought status of
the bonds appears to be even more significant. Some traders think that the stock
market will have to weaken in order for bonds to add significantly to last weeks
highs.
Technical Outlook
BONDS (DEC) 09/22/03: With the close higher than
the pivot swing number, the market is in a slightly bullish posture. Near-term
resistance for bonds is at 109.14 and then again at 109.26, while swing support
hits at 108.23 and below there at 108.12. The market’s close above the 9-day
moving average suggests the short-term trend remains positive. Studies are
showing positive momentum, but are now in overbought territory so some caution
is warranted. The next upside target is 109.26.
T-NOTES(DEC) Momentum studies are trending
higher, but have entered overbought levels. The near-term upside objective is at
113.04. It is a mildly bullish indicator that the market closed over the pivot
swing number. The major trend is down with the cross over back below the 40-day
moving average. Near-term resistance for the T-Notes is at 112.26 and then again
at 113.04, while swing support hits at 112.07 and below there at 111.29. The
market’s short-term trend is positive on a close above the 9-day moving average.
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STOCK INDICES RECAP
9/19/2003
The stock market deserved a profit taking session
especially since the Dollar was making such significant downside throughout the
session. However, it would appear that energy prices are softening and that a
lower Dollar could help to stem the loss of manufacturing jobs and that could
eventually be seen as a positive. In the near term the stock market is possibly
going to see some profit-taking but without a key economic report for the next
few sessions we hardly see cause for a widespread washout in prices. We
originally feared a weaker opening Monday because the COT report is probably
going to show an overly long small spec position but with the report delayed
until Monday afternoon we see nothing significant into the opening Monday.
Technical Outlook
S&P500 (DEC) 09/22/03: The market’s close below
the pivot swing number is a mildly negative setup. Underlying support comes in
at 1028.40 and 1024.55, with overhead resistance at 1037.20 and 1042.15. The
market’s short-term trend is positive on a close above the 9-day moving average.
Momentum studies are trending higher, but have entered overbought levels. The
near-term upside objective is at 1042.15.
S&P E-Mini (DEC): The market made a new contract
high on the rally. Rising stochastics at overbought levels warrant some caution
for bulls. The next upside objective is 1049.13. The market has a slightly
positive tilt with the close over the swing pivot. Near-term resistance for the
S&P Mini is at 1044.75 and then again at 1049.13, while swing support hits at
1029.75 and below there at 1019.13. A positive signal for trend short-term was
given on a close over the 9-bar moving average.
NASDAQ (DEC) The market’s close above the
9-day moving average suggests the short-term trend remains positive. With the
close higher than the pivot swing number, the market is in a slightly bullish
posture. The market should run into resistance at 1404.25 and above there at
1413.88 with support at 1384.75 and 1374.88. Studies are showing positive
momentum, but are now in overbought territory so some caution is warranted. The
next upside target is 1413.9.
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CURRENCY MARKET
RECAP
9/19/2003
The Dollar came under broad based attack Friday
and would seem to be primed to fall even further. While we think the G7
statement (that China would begin to loosen its peg to the Dollar) fostered the
decline traders were well aware that the Dollar was in a slide before the
Chinese news. The US economic report slate was empty and the US stock market was
lower and that simply allowed the liquidation to gather momentum. The magnitude
of the gains in the Pound and the Canadian really hint at the beginning of major
upswings in those currencies.
Technical Outlook
YEN (DEC): The market’s close above the 9-day
moving average suggests the short-term trend remains positive. Since the close
was above the 2nd swing resistance number, the market’s posture is bullish and
could see more upside follow-through early in the session. Swing resistance is
targeted at 88.24 and above there at 88.81, with the yen finding support around
87.15 and below there at 86.63. Studies are showing positive momentum, but are
now in overbought territory so some caution is warranted. The next upside target
is 88.81. The 9-day RSI over 70 indicates the market is approaching overbought
levels.
EURO (DEC): Momentum studies are trending higher,
but have entered overbought levels. The near-term upside objective is at 1.1417.
The market is in a bearish position with the close below the 2nd swing support
number. Swing support for the Euro comes in at 1.1221, with overhead resistance
at 1.1417. The market’s short-term trend is positive on a close above the 9-day
moving average. The gap down on the day session chart is bearish with more
selling pressure possible today.
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PRECIOUS METALS
RECAP
9/19/2003
It was very clear from the action Friday that the
direction of the Dollar is the real driving force behind the gold bull market.
While we suspect that traders are in for a number of reasons the action Friday
highlights the importance of a lower Dollar. While the silver market managed a
minor gain it is clear that it is not getting as much speculative volume as the
gold market. While the BOJ might try to intervene to stop the rise in the Yen
the gains might be so great that the Bank of Japan decides to stand back and let
the market settle down and that could mean a quick slide in the Dollar to 94.00.
We have to think that a slide toward 94.00 in the Dollar will quickly propel
December gold toward $400. Until the Press detects hedge selling the upside
should continue in gold.
Technical Outlook
SILVER (DEC): With the close higher than the
pivot swing number, the market is in a slightly bullish posture. Initial support
for silver is at 524.2 and below there at 518.9 with resistance likely at 529.9
and 534.2. The market’s close above the 9-day moving average suggests the
short-term trend remains positive. The daily stochastics have crossed over up
which is a bullish indication. The next upside target is 529.9.
GOLD (DEC): Support for gold today comes in near
376.58, while resistance is pegged at 387.98. Momentum studies trending lower at
mid-range should accelerate a move lower if support levels are taken out. The
next downside objective is now at 376.58. With the close over the 1st swing
resistance number, the market is in a moderately positive position. The market’s
short-term trend is positive on a close above the 9-day moving average.
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COPPER MARKET RECAP
9/19/2003
The copper market managed to right the ship after
early weakness and did so despite a weaker US equity market. Some traders
suggest that buyers were interested in the US copper market because of arbitrage
relationships. In fact, if the Dollar continues to slide maybe US warehouse
stocks of copper will come into vogue. A number of technical systems seem to
have the next resistance level in December copper coming in at 84.50.
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ENERGY MARKET RECAP
9/19/2003
The energy complex faded under the weight of an
OPEC admission that they were producing over quota by 329,000 barrels and that
their August production was up by 438,000 barrels over the prior month. While
OPEC suggested that most of the increased production came from Iraq the market
can’t discount the fact that more “net” supply is headed to the market. We also
think that some longs exited ahead of the weekend for fear that more progress
might be made on the UN takeover of Iraq! Also more seasonal temps in the
forecast and the passing of the hurricane continue to give the bear camp an
edge.
Technical Outlook
CRUDE OIL (NOV): 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. Support for crude is keyed on 26.74 and below
there at 26.40, with resistance pegged at 27.40 and 27.72. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. Daily stochastics are trending lower, but have declined into oversold
territory. The next downside objective is now at 26.40. With a reading under 30,
the 9-day RSI is approaching oversold levels.
UNLEADED GAS (NOV): Momentum studies are
declining, but have fallen to oversold levels. The next downside target is
72.47. The swing indicator gave a moderately negative reading with the close
below the 1st support number. Resistance today is at 76.37, while support should
be found around 72.47. The market’s close below the 9-day moving average is an
indication the short-term trend remains negative. The 9-day RSI under 20
suggests the market is extremely oversold.
HEATING OIL (NOV): The market’s close below the
1st swing support number suggests a moderately negative setup for today. Heating
oil should encounter support around 70.04, with resistance is at 73.24. The
market’s short-term trend is negative as the close remains below the 9-day
moving average. Daily stochastics are trending lower, but have declined into
oversold territory. The next downside objective is now at 70.04. With a reading
under 20, the 9-day RSI indicates the market is extremely oversold.
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CORN MARKET RECAP
9/19/2003
Dec corn closed higher on short covering after
filling a gap left after the Aug crop report. Not only was the market over sold,
but some bullish news also helped to support prices. French corn prices hit new
highs as private crop forecasts peg the French crop at 32.1 million tons vs 35.7
million tons in August and 40 million tons last year. The US dollar dropping to
2 1/2 year lows against the yen could bring about more export business. Basis
levels at the Gulf were up indicating demand is strong. Export sales will be
released Monday after being delayed due to hurricane Isabel with expectations
for corn sales between 650,000 to 1,000,000 tons compared to last week’s tally
of 920,400 tons. Next Resistance for Dec corn is at 229 then 232 1/2.
Technical Outlook
CORN (DEC) 09/22/03: Daily stochastics are
trending lower, but have declined into oversold territory. The next downside
objective is now at 220 3/4. The market’s close above the 2nd swing resistance
number is a bullish indication. Market resistance comes in at 229 3/4 today,
with support at 220 3/4. The market’s short-term trend is negative as the close
remains below the 9-day moving average. The outside day up is a positive signal.
The upside closing price reversal on the daily chart is somewhat bullish.
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SOY COMPLEX RECAP
9/19/2003
Soybeans drove sharply higher and into new
contract highs with continued talk of China buying, fears of smaller soybeans
and lower yields and new concerns that Illinois and Iowa soybean yields are also
under threat of charcoal rot disease. The fungus normally will be more prevalent
in the south were hot and dry conditions persist but this years hot and dry
weather in the late summer could make the fungus flourish, according to
agronomists from each state. January soybeans closed 10 cents higher on the
session and the market is now up 41 1/2 cents since the September 11th USDA
report.
Technical Outlook
SOYBEANS (NOV) 09/22/03: A new contract high was
made on the rally. 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 area of resistance is around 644 1/2 and 647 3/4, while
1st support hits today at 632 and below there at 622 3/4. The market’s close
above the 9-day moving average suggests the short-term trend remains positive.
Studies are showing positive momentum, but are now in overbought territory so
some caution is warranted. The next upside target is 647 3/4. The 9-day RSI over
70 indicates the market is approaching overbought levels.
MEAL (DEC): Momentum studies trending lower at
mid-range should accelerate a move lower if support levels are taken out. The
next downside objective is now at 184.3. First resistance comes in at 192.3,
with support at 187.6. The market’s short-term trend is positive on a close
above the 9-day moving average. The market’s close above the 2nd swing
resistance number is a bullish indication.
BEAN OIL (DEC): The market’s close above the
9-day moving average suggests the short-term trend remains positive. Studies are
showing positive momentum, but are now in overbought territory so some caution
is warranted. The next upside target is 23.68. With the close higher than the
pivot swing number, the market is in a slightly bullish posture. Daily swing
resistance is found at 23.58 and above there at 23.68. Support should be
encountered at 23.25 and 23.02. The 9-day RSI over 70 indicates the market is
approaching overbought levels.
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WHEAT MARKET RECAP
9/19/2003
News that Egypt bought 60,000 tons of wheat from
Australia instead of the US with indications that the US price was too high
helped trigger the early weakness in the wheat market. When December wheat
managed to hold Thursday’s lows in spite of the Egypt news, the aggressive
selling from fund traders slowed and the market experienced a bounce. News that
gulf basis was firm in spite of the Egypt news added to the positive tone and
may indicate a strong export demand pace. Traders await news from the traders
report on the extent of fund liquidation and news about weekly export sales.
Both have been delayed until next week due to hurricane.
Technical Outlook
WHEAT (DEC) 09/22/03: The outside day up and
close above the previous day’s high is a positive signal. The daily closing
price reversal up is positive. A positive setup occurred with the close over the
1st swing resistance. Look for near-term support at 342 1/2 and below there at
335 1/2, with resistance levels at 352 1/4 and 355 . The market’s close below
the 9-day moving average is an indication the short-term trend remains negative.
The daily stochastics have crossed over up which is a bullish indication. The
next upside target is 355 .
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LIVE CATTLE RECAP
9/19/2003
Cattle pushed to the lowest level since early
September with growing concerns that more Canadian beef and even live animals in
the weeks ahead could drag cash prices down off of all-time highs. Talk of a
slowdown in demand due to the east coast storms and weaker beef prices added to
the bearish tone. Beef prices for Choice boxed-beef 650-700 pounds were down
$2.75 to $160.55. Positioning ahead of the cold storage and cattle-on-feed
reports, released this afternoon, added to the bearish tone.
Technical Outlook
CATTLE (DEC) 09/22/03: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The next downside
target is 81.62. The close below the 2nd swing support number puts the market on
the defensive. Support should be encountered at 82.12 and below there at 81.62.
Market resistance is at 83.02 and then again at 83.42. The market’s close below
the 9-day moving average is an indication the short-term trend remains negative.
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LEAN HOGS RECAP
9/19/2003
The market closed mixed but near the highs of the
session as early weakness failed to generate new selling interest. Weakness in
cattle and disappointment over the lack of strength in the pork cut-out in spite
of the sharp drop in slaughter on Thursday helped trigger the early losses.
Power outages in North Carolina were thought to lead to another day of slow
slaughter today. For the monthly cold storage report, released after the close,
traders are looking for belly stocks to come in near 15.3-18.0 million pounds as
compared with 14.3 million last year. The results of the cold storage report
could impact prices next week and traders will also be monitoring the total pork
supply in storage.
Technical Outlook
HOGS (DEC) 09/22/03: It is a mildly bullish
indicator that the market closed over the pivot swing number. Resistance levels
comes in at 58.87 and 59.22 today, while support is around 57.67 and then 56.85.
The upside closing price reversal on the daily chart is somewhat bullish. The
market’s short-term trend is positive on a close above the 9-day moving average.
Momentum studies are trending lower from high levels which should accelerate a
move lower on a break below the 1st swing support. The next downside objective
is now at 56.85.
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COCOA MARKET RECAP
9/19/2003
Cocoa prices surprised the trade with a
significant bounce and reversal of the recent downtrend pattern. With the Press
reporting more industry buying it would seem that hedgers have declared the
recent lows to be fair value. Maybe the commercial accounts think that this
weeks lows factors a good crop and that evidence of some minor problems will
result in prices adjusting sharply higher. It is also possible that part of the
gains Friday were simple short covering by an overly short fund contingent. It
is also possible that some commercial buyers saw the extremely deflated price of
US cocoa and decided to arbitrage some value out of the market.
Technical Outlook
COCOA (DEC)09/22/03 The market setup is
supportive for early gains with the close over the 1st swing resistance. Cocoa
should run into resistance at 1545 and above there at 1564 with support at 1493
and 1460. Momentum studies are declining, but have fallen to oversold levels.
The next downside target is 1459.50.
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COFFEE MARKET RECAP
9/19/2003
A lack of producer selling on the break and a
lack of follow-through technical selling on a test of the lows this week helped
support a minor bounce in coffee. With little rain on the weekend and a warm and
dry trend in Brazil coffee areas through at least Thursday of next week, the
trade found little reason to test the short-side and the dryness trend helped
support some light buying. December coffee closed 40 higher on the session but
715 points lower on the week.
Technical Outlook
COFFEE (DEC)9/22/03 The market has a slightly
positive tilt with the close over the swing pivot. Momentum studies are
declining, but have fallen to oversold levels. The next downside objective is
now at 62.20.The Coffee contract should run into resistance at 63.40 and above
there at 63.70 with support at 62.65 and 62.20. The market’s short-term trend is
negative as the close remains below the 9-day moving average.
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SUGAR MARKET RECAP
9/19/2003
The follow-through rally from Thursday’s reversal
was not too impressive and the close was only 1 tick higher on the session and
below the opening. The early speculative buying did support some early strength
and gains in London failed to find the same enthusiasm in New York. With plenty
of bearish short-term cash fundamental news, the market will need to show
evidence of increased short-term cash business to experience much in the way of
follow-through buying from Thursday’s reversal.
Technical Outlook
SUGAR (MAR) 09/22/03: It is a mildly bullish
indicator that the market closed over the pivot swing number. Swing resistance
comes in at 6.27, with support found at 6.13. The market’s short-term trend is
negative as the close remains below the 9-day moving average. Daily momentum
studies are on the rise from low levels and should accelerate a move higher on a
push through the 1st swing resistance. The near-term upside objective is at
6.27.
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COTTON MARKET RECAP
9/19/2003
December cotton finished higher despite news that
hurricane Isabel did minimal damage to the crop. The fundamentals have shifted
so dramatically to a bullish supply/demand situation that the market may not
have fully priced in the new fundamentals. Dec cotton is technically over sold,
but prices continue to find solid support at 64 cents. Therefore, price
corrections are likely to be shallow. Weekly export sales, which were delayed
for the Washington hurricane shut-down, are expected to show sales near
30,000-50,000 bales as compared with 29,800 bales last week. Shipments are
expected near 100,000-120,000 bales as compared with 115,400 bales last week.
Key will be China’s take.
Technical Outlook
COTTON (DEC) 09/22/03: The market’s close above
the 9-day moving average suggests the short-term trend remains positive. It is a
slightly negative indicator that the close was lower than the pivot swing
number. Next resistance area comes in at 66.20 and then again at 66.82, while
support is targeted at 64.95 and 64.32. Daily stochastics turning lower from
overbought levels is bearish and will tend to reinforce a downside break
especially if near-term support is penetrated. The next downside target is
64.32.