This Currency May Be Well Positioned

Technical Outlook

BONDS (MAR) 12/08/03: 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. Near-term resistance for bonds is at 110.15 and then again at 111.12, while swing support hits at 108.02 and below there at 106.18. The market’s close above the 9-day moving average suggests the short-term trend remains positive. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 106.18.

T-NOTES(MAR) The daily stochastics gave a bullish indicator with a crossover up. The near-term upside objective is at 113.12. The market’s close above the 2nd swing resistance number is a bullish indication. Near-term resistance for the T-Notes is at 112.26 and then again at 113.12, while swing support hits at 111.07 and below there at 110.06. The market’s short-term trend is positive on a close above the 9-day moving average.

STOCK INDICES RECAP

12/5/2003

Initially the stock market managed to avoid aggressive selling in the wake of a disappointing monthly unemployment report. However, as the session wore on it appeared as if more and more longs decided to liquidate. Around mid session, the trade began to foster concerns toward current holiday retail sales patterns and that added to the selling mentality. With a winter storm hitting the east coast, into a critical holiday weekend shopping period, the market may be accurate in downgrading retail sales projections and deflating prices. Since the market was overbought to begin with, the weak macro economic information simply exaggerated the selling. Some the trade suggested that sellers were dumping shares because of a new terrorism tape that surfaced Friday morning. However, because the monthly unemployment report is so critical and was so disappointing it could take several favorable developments to countervail the negativeness thrown on the market Friday.

Technical Outlook

S&P500 (DEC) 12/08/03: The market’s close below the 1st swing support number suggests a moderately negative setup for today. Underlying support comes in at 1057.60 and 1053.95, with overhead resistance at 1066.80 and 1072.35. 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 1072.35.

S&P E-Mini (DEC): The key reversal down puts the market on the defensive. 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 1072.44. The close below the 1st swing support could weigh on the market. Near-term resistance for the S&P Mini is at 1066.88 and then again at 1072.44, while swing support hits at 1057.63 and below there at 1053.94. A positive signal for trend short-term was given on a close over the 9-bar moving average.

NASDAQ (DEC) The market’s close below the 9-day moving average is an indication the short-term trend remains negative. The swing indicator gave a moderately negative reading with the close below the 1st support number. The market should run into resistance at 1421.50 and above there at 1436.25 with support at 1398.50 and 1390.25. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 1436.3. The close under the 40-day moving average indicates the longer-term trend could be turning down.

CURRENCY MARKET RECAP

12/5/2003

There were some in the trade that expected the dollar to reject the down side trend this week because the U.S. dropped steel trade sanctions. However, the downtrend in the dollar looks to remain intact and with U.S. economic information coming in ultra weak Friday morning, it is possible that the dollar accelerates on the downside. With a stellar Canadian payroll gain, it would seem that the Canadian is in a good position to rise sharply against the U.S. Dollar. Early commentary from the ECB Friday morning would seem to suggest that little will be done to stop the continued rise in the Euro against the Dollar. With U.S. economic reformation so dismal Friday morning it would appear as if the British Pound has found new life and will now manage to reject recent selling pressure.

Technical Outlook

YEN (DEC): The market’s close above the 9-day moving average suggests the short-term trend remains positive. A positive setup occurred with the close over the 1st swing resistance. Swing resistance is targeted at 93.20 and above there at 93.44, with the yen finding support around 92.55 and below there at 92.14. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 93.44. Short-term indicators suggest buying dips today.

EURO (DEC): Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 1.2232. The market is in a bearish position with the close below the 2nd swing support number. Swing support for the Euro comes in at 1.2056, with overhead resistance at 1.2232. The market’s short-term trend is positive on a close above the 9-day moving average. With a reading over 70, the 9-day RSI is approaching overbought levels. The gap down on the day session chart is bearish with more selling pressure possible today.

PRECIOUS METALS RECAP

12/5/2003

The gold market posted very impressive performance Friday. In fact, the gold rejected early selling even without the benefit of an ultra weak U.S. dollar. Later in the session, the U.S. dollar weekend, stock prices declined and the environment was ripe for additional gold buying. The rally Friday puts the gold market right up to a new contract high and gives the bull’s new-found confidence. Perhaps the most important result of the action Friday is the fact that the Dollar trend remains down, even though the U.S. dropped steel trade sanctions in the prior session. Therefore, it would seem as if nothing has changed with respect to the Dollar trend. In conclusion, it would appear as if the gold market is prepared for another wave up adjustment.

Technical Outlook

SILVER (MAR): With the close higher than the pivot swing number, the market is in a slightly bullish posture. Initial support for silver is at 544.0 and below there at 538.0 with resistance likely at 549.5 and 554.5. 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 549.5.

GOLD (FEB): Support for gold today comes in near 398.65, while resistance is pegged at 412.65. Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 412.65. 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. With a reading over 70, the 9-day RSI is approaching overbought levels. The outside day up is a positive signal. The upside closing price reversal on the daily chart is somewhat bullish.

COPPER MARKET RECAP

12/5/2003

The copper market impressed the trade by managing to stay positive on the day in the face of disappointing U.S. numbers and a sagging U.S. equity market. By the action Friday, it is clear that copper prices are primarily dependent upon the Chinese copper market action and not necessarily U.S. copper demand prospects. It is also possible the copper prices were supported by story that Codelco would shut down a mine for a nine day maintenance period. However, while copper might derive most of its buying interest from the Chinese market, a macro economic debacle in the U.S. would certainly undermine sentiment. In conclusion, the copper market mounted a massive run on the week and one would expect the Commitment of Traders report to dramatically understate the speculative long position of the copper market.

ENERGY MARKET RECAP

12/5/2003

It appeared as if the energy complex was into a profit taking technical slide on Friday. The energy complex even failed to get support from the videos showing suspected terrorist training activities linked to persons inside Saudi Arabia. It’s unclear what ties the new videos have to Saudi Arabia but any threat to a major oil supplier should be supportive to energy prices. The EIA attempted to throw cold water on OPEC dialogue that called for higher energy prices to offset a sagging U.S. dollar. While many watchdog groups may complain that OPEC is unjustified in raising prices off the dollar, OPEC will do as a please. With a winter storm hitting the U.S. Friday, the illusion of increased heating demand should provide the market with a modest underpin. The natural gas market apparently decided take profits after a significant rally and more than likely holds a record net spec long position (if one adjusts the COT report for the gains since the report was measured).

Technical Outlook

CRUDE OIL (JAN): The market’s close below the pivot swing number is a mildly negative setup. Support for crude is keyed on 30.46 and below there at 30.30, with resistance pegged at 31.00 and 31.38. The market’s short-term trend is positive on a close above the 9-day moving average. The daily stochastic’s gave a bearish indicator with a crossover down. The next downside objective is now at 30.30.

UNLEADED GAS (JAN): Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 83.54. It is a slightly negative indicator that the close was lower than the pivot swing number. Resistance today is at 86.94, while support should be found around 83.54. The market’s close above the 9-day moving average suggests the short-term trend remains positive.

HEATING OIL (JAN): The market’s close below the pivot swing number is a mildly negative setup. Heating oil should encounter support around 84.32, with resistance is at 89.62. The market’s short-term trend is positive on a close above the 9-day moving average. Momentum studies are trending higher from mid-range which should support a move higher if resistance levels are penetrated. The near-term upside objective is at 89.62.

CORN MARKET RECAP

12/5/2003

March corn open moderately weaker but managed to climb back up toward the highs of the day into the close, In the end corn finished the day less than a cent lower. Apparently the trade remains concerned about Chinese export intentions for 2004 but were not concerned enough to buy weakness in US corn prices. The trade continues to expect that China will suspend or dramatically curtail corn exports in 2004 and that is providing a measure of support to corn prices. Many traders expressed concern that the weekly Commitment of Traders report would post an overly long position in corn and therefore some traders scrambled out of longs ahead of the report. It also appeared as if the weakness in soybeans provided some added selling impetus in the corn during action Friday. Apparently a 120,000 ton corn sale to Egypt, announced before the opening Friday morning, provided very little support to corn prices during the action Friday.

Technical Outlook

CORN (MAR) 12/08/03: Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 251 1/4. The market’s close below the pivot swing number is a mildly negative setup. Market resistance comes in at 251 1/4 today, with support at 244 1/4. The market’s short-term trend is positive on a close above the 9-day moving average.

SOY COMPLEX RECAP

12/5/2003

The soybean complex weakened in the action Friday, with the front month contracts showing the most weakness. Maybe prices weakened off news that 92% of the Brazilian 2003-2004 crop was planted. In other words, the current planting pace is running slightly ahead of last year. Mato Grasso, Brazil’s largest producing state is 94% planted compared to 92% last year. The market already anticipates a 15% larger crop in Brazil and considering the pipeline tightness, soybean prices will remain extremely volatile and attentive to Brazilian crop progress. The Brazilian soybean export registration pace for 2004-2005 remains 16% below the prior years pace and that could have been slightly supportive to prices. One would have expected soybean prices to garner some support off the idea that Chinese and U.S. Trade relations improved on the week, as a result of the U.S. dropping steel restrictions but in the end no such support was seen.

Technical Outlook

SOYBEANS (JAN) 12/08/03: The swing indicator gave a moderately negative reading with the close below the 1st support number. The next area of resistance is around 767 and 776 , while 1st support hits today at 753 1/2 and below there at 749 . The market’s close above the 9-day moving average suggests the short-term trend remains positive. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 776 .

MEAL (JAN): Momentum studies are trending higher from mid-range which should support a move higher if resistance levels are penetrated. The near-term upside objective is at 231.8. The gap down on the day session chart is bearish with more selling pressure possible today. First resistance comes in at 228.6, with support at 223.4. The market’s short-term trend is negative as the close remains below the 9-day moving average. The market is in a bearish position with the close below the 2nd swing support number.

BEAN OIL (JAN): The market’s close above the 9-day moving average suggests the short-term trend remains positive. 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 27.07. It is a slightly negative indicator that the close was lower than the pivot swing number. Daily swing resistance is found at 27.62 and above there at 27.81. Support should be encountered at 27.25 and 27.07.

WHEAT MARKET RECAP

12/5/2003

The wheat market gapped sharply lower and held most of the losses in the close Friday. The May wheat contract closed at lowest level since November 28th and could be vulnerable to even more losses off technical considerations. Initially the trade thought that simple light position-squaring was taking place but in the end, an all out washout took place. The trade did note that a substantially weaker Dollar could increase the attractiveness of U.S. wheat in the near future and that served to temper the losses. It’s also likely that the overt weakness in soybean prices Friday added to the downside pressure in wheat.

Technical Outlook

WHEAT (MAR) 12/08/03: The gap lower price action on the day session chart is a bearish indicator for trend. The swing indicator gave a moderately negative reading with the close below the 1st support number. Look for near-term support at 399 and below there at 395 , with resistance levels at 407 1/2 and 412 . The market’s close below the 9-day moving average is an indication the short-term trend remains negative. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 412 .

LIVE CATTLE RECAP

12/5/2003

February cattle closed 132 lower on the week after a 1 tick loss on Friday. The weekly closing price reversal (after a contract high) is a bearish technical development and helps confirm the top formation from Wednesday, December 3rd. Beef production for the week came in at 457.8 million pounds which is down 10.4% from last year. The weakness in the beef market on the week in spite of the slow production is a sign of weak demand and packer profit margins are deep in the red. Weakness in the bear spreads is also seen as a short-term bearish force.

Technical Outlook

CATTLE (FEB) 12/08/03: Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 90.82. It is a slightly negative indicator that the close was lower than the pivot swing number. Support should be encountered at 91.35 and below there at 90.82. Market resistance is at 92.35 and then again at 92.82. The market’s close below the 9-day moving average is an indication the short-term trend remains negative.

LEAN HOGS RECAP

12/5/2003

February hogs closed 65 higher on the session Friday but down 140 on the week. Cash hogs were steady and the fact that pork values were higher on the week in spite of the hefty pork production pace may have helped trigger some on the buying. The sharp break pulled a good portion of the hefty premium out of the February futures. Pork production for the week was 424.9 million pounds which is up 12.6% from the holiday week last week but still up 5% from last year. The CME 2-day lean index was up 18 to 49.83.

Technical Outlook

HOGS (FEB) 12/08/03: It is a mildly bullish indicator that the market closed over the pivot swing number. Resistance levels comes in at 54.40 and 54.77 today, while support is around 53.20 and then 52.37. The market’s short-term trend is negative as the close remains below the 9-day moving average. The daily stochastic’s gave a bearish indicator with a crossover down. The next downside objective is now at 52.37.

COCOA MARKET RECAP

12/5/2003

The cocoa market appeared to launch into a significant corrective break early in the session but managed to regain the majority of lost ground into the close. According to press reports, the cocoa market saw significant fund buying around lows. In conclusion, the cocoa market has seen significant fund and small spec buying on the week and should now be significantly long by most technical indicators. The trade did note origin selling in the early going and that appeared to prompt the initial decline but it is clear that the buyers overwhelmed the sellers into the close.

Technical Outlook

COCOA (MAR)12/08/03 The market tilt is slightly negative with the close under the pivot. Cocoa should run into resistance at 1623 and above there at 1645 with support at 1568 and 1535. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 1644.75.

COFFEE MARKET RECAP

12/5/2003

March coffee closed 95 higher on the session and up 400 points on the week as short-covering continued to provide solid support and Brazil commercial selling remains light. The sharp drop in open interest on the week suggests that funds are exiting their net short position but the extent of the rally is difficult to gage when the last COT report showed a record high fund short position. Bullish crop estimates from the Brazil government and talk of increased roaster buying from Europe (dollar at a record low against the euro) added to the positive tone. Traders await news on the extent of the net short position as of December 2nd in tonight’s weekly crop progress report.

Technical Outlook

COFFEE (MAR)12/8/03 The market has a slightly positive tilt with the close over the swing pivot. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The near-term upside objective is at 65.50.The Coffee contract should run into resistance at 65.20 and above there at 65.50 with support at 64.15 and 63.40. The upside crossover (9 above 18) of the moving averages suggests a developing short-term uptrend.

SUGAR MARKET RECAP

12/5/2003

March Sugar closed 6 lower on the session but up 40 higher on the week as producer and trade house selling helped futures consolidate some of the week’s gains. While we continue to hear of the bearish fundamental set-up and that the fuel for the short-covering rally is about to run dry, we should note that open interest as of December 4th is now 203,729 contracts, up 15,081 contracts in just 4 trading sessions. The steep run-up over the past week leaves the market overbought but the foundation of the rally is not short-covering with open interest on the rise and China a potential major buyer for the coming season. The Russian Sugar Producers Union indicated that white sugar production from imported raws from the start of this year through December 1st has totaled 3.69 million tonnes as compared with 4.29 million last year at this time.

Technical Outlook

SUGAR (MAR) 12/08/03: The market’s close below the 1st swing support number suggests a moderately negative setup for today. Swing resistance comes in at 6.77, with support found at 6.53. 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 6.77. With a reading over 70, the 9-day RSI is approaching overbought levels.

COTTON MARKET RECAP

12/5/2003

March cotton closed 26 higher on the session and up 140 on the week as the outlook for more sales to China helped support good trade house buying. While the weekly sales report news on Thursday did not confirm the China interest, the active buying from trade houses and active rumors that China is buying the recent sharp break helped provide underlying support. Traders were already expecting heavy sales for next weeks sales report and on the same day, the world USDA report should give some further indication on the size of the crop in China and on the demand from the consuming giant.

Technical Outlook

COTTON (MAR) 12/08/03: 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. Next resistance area comes in at 72.04 and then again at 72.52, while support is targeted at 70.94 and 70.32. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 72.52.