This Is What It’ll Take To Repair Investor Sentiment
BOND MARKET RECAP
8/6/2004
September Bonds closed up 1-27 at 110-27. This
was 1-22 up from the low and 1-03 off the high.
September 10 Yr Treasury Notes finished up 1-155
at 112-230, 0-190 off the high and 1-125 up from the low.
No matter how one views the monthly payroll
report is it difficult not to come away from the report with significant concern
for the economy. While the payroll disappointment was partially offset by a
decline in the unemployment rate and by the minor rise in earnings and work week
readings. However, with the net payroll gain extremely discouraging and the
prior months payroll readings downwardly revised that simply serves to change
the entire economic landscape. In conclusion, the Treasuries deserved to rally
sharply and would seem to be ready to maintain significantly higher pricing.
Furthermore, soft equity prices and firm energy prices also continued to support
the bull case in bonds and notes.
Technical Outlook
#BONDS (SEP) 08/09/04: 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 112.14 and then again at 113.22, while swing support hits at 109.15 and
below there at 107.24. 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 113.22. The 9-day RSI over 70 indicates the market is
approaching overbought levels.
T-NOTES(SEP) Momentum studies are trending
higher, but have entered overbought levels. The near-term upside objective is at
114.19. The market’s close above the 2nd swing resistance number is a bullish
indication. Near-term resistance for the T-Notes is at 113.26 and then again at
114.19, while swing support hits at 111.24 and below there at 110.15. The upside
crossover (9 above 18) of the moving averages suggests a developing short-term
uptrend. With a reading over 70, the 9-day RSI is approaching overbought levels.
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STOCK INDICES RECAP
8/6/2004
September S&P finished down 14.9 at 1063.6, 10.4
off the high and 2.6 up from the low.
September S&P E-Mini closed down 15.25 at
1063.25. This was 2.5 up from the low and 19.75 off the high.
September Dow closed down 133 at 9800. This was
24 up from the low and 165 off the high.
September Dow E-Mini finished down 134 at 9799,
171 off the high and 24 up from the low.
The stock market deserved to come under
aggressive attack Friday morning as the reports severely damage investing and
consumer sentiment. Even with the unemployment rate managing to decline the
market wasn’t comforted especially with the prior month’s payrolls being
reduced. In short, a new low for the year in stock prices certainly indicates
that trade expectations are extremely poor. In order to countervail the
disastrous payroll readings quickly, the stock market will have to find a fresh
and surprising development. Since many reports pale in importance to the monthly
payroll it could take a long string of very favorable second tier numbers to
begin to repair investor sentiment.
Technical Outlook
#S&P500 (SEP) 08/09/04: The market’s close below
the 1st swing support number suggests a moderately negative setup for today. The
gap down on the day session chart is bearish with more selling pressure possible
today. Underlying support comes in at 1057.00 and 1052.50, with overhead
resistance at 1070.00 and 1078.50. 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 1052.50. With a reading under 30, the 9-day RSI is approaching oversold
levels.
S&P E-Mini (SEP): The market made a new contract
low on the break. Daily stochastics declining into oversold territory suggest
the selling may be drying up soon. The next downside objective is 1045.31. The
close below the 1st swing support could weigh on the market. Near-term
resistance for the S&P Mini is at 1074.38 and then again at 1089.81, while swing
support hits at 1052.13 and below there at 1045.31. A negative signal for trend
short-term was given on a close under the 9-bar moving average. The market is
approaching over sold levels on an RSI reading under 30.
NASDAQ (SEP) The sell-off took the market to a
new contract low. The gap lower price action on the day session chart is a
bearish indicator for trend. The market’s close below the 9-day moving average
is an indication the short-term trend remains negative. The close below the 2nd
swing support number puts the market on the defensive. The market should run
into resistance at 1333.00 and above there at 1354.00 with support at 1303.00
and 1294.00. The 9-day RSI under 30 indicates the market is approaching oversold
levels. Momentum studies are declining, but have fallen to oversold levels. The
next downside target is 1294.0.
MINI DOW (SEP) The market’s close below the 9-day
moving average is an indication the short-term trend remains negative. The
market should run into resistance at 9899 and above there at 10032 with support
at 9704 and 9642. Momentum studies are declining, but have fallen to oversold
levels. The next downside target is 9642. The swing indicator gave a moderately
negative reading with the close below the 1st support number. The 9-day RSI
under 30 indicates the market is approaching oversold levels.
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CURRENCY MARKET RECAP
8/6/2004
September US Dollar finished down 132 at 8846,
143 off the high and 9 up from the low.
September Euro finished up 2.13 at 122.69, 0.08
off the high and 2.22 up from the low.
September Euro Dollar closed up 0.085 at 98.175.
This was 0.085 up from the low and 0.05 off the high.
September Canadian Dollar closed up 0.31 at
76.16. This was 0.46 up from the low and 0.29 off the high.
September British Pound finished up 1.62 at
183.51, 0.79 off the high and 1.95 up from the low.
September Swiss closed up 1.5 at 80. This was
1.55 up from the low and 0.14 off the high.
September Japanese Yen closed up 1 at 90.68. This
was 1.01 up from the low and 0.57 off the high.
The Payroll reading is very disappointing and
could mean that the Dollar is destined for a series of lower sessions as the
market much rush to extract the gains put into the Dollar in the last month.
With the pendulum shifting against the US economy the currency markets probably
won’t even pay much attention to external numbers and since the US payroll was
so disappointing and the most widely watched US report it would be a surprise to
see the bearish sentiment in the Dollar reversed without some spectacular
development. The Canadian and the Pound managed to show strength even when the
Dollar was strong and now that the Dollar is faltering the Canadian and the
Pound should be able to extend gains consistently over the coming sessions.
Technical Outlook
#CURRENCIES 08/09/04: YEN (SEP): 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 91.47 and above there at 92.15,
with the yen finding support around 89.89 and below there at 88.99. The close
under the 40-day moving average indicates the longer-term trend could be turning
down. Positive momentum studies in the neutral zone will tend to reinforce
higher price action. The next upside target is 92.15.
EURO (SEP): 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 1.2446. The market is in a
bearish position with the close below the 2nd swing support number. Swing
support for the Euro comes in at 1.1986, with overhead resistance at 1.2446. 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
8/6/2004
October Gold closed up 7.3 at 400.8. This was 8
up from the low and 2.4 off the high.
September Silver finished up 0.025 at 6.775,
0.125 off the high and 0.075 up from the low.
October Platinum closed up 4.7 at 832. This was 7
up from the low and equal to the high.
The magnitude of the Dollar slide rekindled
trading interest in gold and silver and with the Dollar possibly headed down to
the July lows the trade thinks that the gold market has the ability to return to
the July highs of $411. While we doubt that the US payroll readings are going to
fire up wild economic anxiety the weakness in the payroll was apparently enough
to hammer US stocks, fuel the bonds sharply higher and undermine the Dollar.
Therefore, a certain amount of anxiety is already present. The macro economic
numbers were soft enough that silver seemed to be undermined but the trade
should continue to watch for signs that silver exchange stocks are going to
tighten further.
Technical Outlook
#P-METALS 08/09/04: SILVER (SEP): With the close
higher than the pivot swing number, the market is in a slightly bullish posture.
Initial support for silver is at 667.5 and below there at 658.8 with resistance
likely at 698.8 and 687.5. The moving average crossover up (9 above 18)
indicates a possible developing short-term uptrend. Studies are showing positive
momentum, but are now in overbought territory so some caution is warranted. The
next upside target is 698.8. The 9-day RSI over 70 indicates the market is
approaching overbought levels.
GOLD (OCT): Support for gold today comes in near
389.00, while resistance is pegged at 409.80. 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 409.80. The market’s close
above the 2nd swing resistance number is a bullish indication. The market’s
short-term trend is positive on a close above the 9-day moving average. The
major trend could be turning up with the close back above the 40-day moving
average.
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COPPER MARKET RECAP
8/6/2004
September Copper finished down 0.20 at 127.80,
1.40 off the high and 0.50 up from the low.
The copper market really didn’t show much
reaction to the extremely soft US economic information but from the weak action
of the last five sessions it is clear that copper is paying some attention to
the economic outlook. Some traders think that the significantly lower US Dollar
provided some support to copper, while others think that ongoing declines in
stock levels were the main reason why prices avoided a more significant downside
washout. With Goldman Sachs predicting a 2005 surplus in copper it is clear that
the market is concerned about the relatively lofty price of copper. To a degree
copper continues to discount the threat of lower future demand and that ability
could run out quickly if the Friday morning numbers are a signal of even weaker
activity ahead.
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ENERGY MARKET RECAP
8/6/2004
September Crude Oil closed down 0.46 at 43.95.
This was 0.20 up from the low and 0.65 off the high.
September Heating Oil closed down 1.84 at 117.46.
This was 0.86 up from the low and 1.34 off the high.
September Unleaded Gas finished down 0.97 at
123.47, 3.03 off the high and 0.87 up from the low.
September Natural Gas finished down 0.12 at 5.59,
0.08 off the high and 0.02 up from the low.
September Propane closed down 0.00 at 0.84. This
was equal to the low and equal to the high.
Energy prices saw some minor negative news in the
headlines Friday morning with the US payroll report pointing to a very weak
economy and the Russian courts seemingly making a ruling that might favor Yokos
in its financial battle. Seeing the favor shift toward Yukos and away from the
Russian government means that near term Russian supply flow concerns might abate
slightly. However, it should be noted that the market basically discounted
concerns early Friday morning that Venezuela might be poised to see labor
conflict in the oil sector! While the COT report showed a moderately large spec
and fund long, that positioning was probably dramatically overstated due to the
extension of the rally following the measurement of that report.
Technical Outlook
#ENERGIES 08/09/04: CRUDE OIL (SEP): The rally
brought the market to a new contract high. 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 43.53 and below
there at 43.21, with resistance pegged at 44.38 and 44.91. 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
43.21.
UNLEADED GAS (SEP): Negative momentum studies in
the neutral zone will tend to reinforce lower price action. The next downside
target is 120.11. It is a slightly negative indicator that the close was lower
than the pivot swing number. Resistance today is at 127.91, while support should
be found around 120.11. The downside closing price reversal on the daily chart
is somewhat negative. The market’s close below the 9-day moving average is an
indication the short-term trend remains negative.
HEATING OIL (SEP): The market’s close below the
pivot swing number is a mildly negative setup. Heating oil should encounter
support around 115.38, with resistance is at 119.78. 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. 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 115.38.
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CORN MARKET RECAP
8/6/2004
September Corn finished up 1 3/4 at 225
3/4, 1 1/4 off the high and 2 1/4 up from the low. December Corn closed up 2 at
236 3/4. This was 2 3/4 up from the low and 1/4 off the high.
December corn closed 11 1/4 cents higher on the
week. The market opened strong but weakness in the other grains led to slow and
quiet trade late as light long liquidation selling helped pressure. The early
strength came from follow-through buying and short-covering from speculators who
have reacted to the highest trade since July 21st but the short-covering support
slowed and the lack of new buying along with weakness in soybeans pulled the
market off of the early highs. While the weather outlook seems perfect for much
of the country, there are some light concern with the below normal to much below
normal temperatures in the northern Midwest and the forecast for colder weather
to return late next week. Gulf basis was steady. Support for December corn comes
in at 231 1/4 and 228 3/4 with 236 3/4 and 239 as next resistance.
Technical Outlook
#CORN (DEC) 08/09/04: 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 239. The market’s
close above the 2nd swing resistance number is a bullish indication. Market
resistance comes in at 239 today, with support at 233. The market’s short-term
trend is positive on a close above the 9-day moving average.
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SOY COMPLEX RECAP
8/6/2004
September Soybeans finished down 12 1/4 at 569
1/4, 13 3/4 off the high and 3 1/4 up from the low. November Soybeans closed
down 9 1/2 at 561 3/4. This was 3 3/4 up from the low and 11 1/4 off the high.
August Soymeal closed up 1.9 at 188.7. This was
3.2 up from the low and 0.3 off the high.
August Soybean Oil finished up 0.43 at 23.1, 0.05
off the high and 0.63 up from the low.
November soybeans closed 7 1/4 cents lower on the
week with December Meal down $2.80 and December oil 66 higher on the week. The
higher close in oil on the week after moving to a new 11 month lows might spark
some short-covering next week. The bearish weather outlook seemed to have been
the primary factor to encourage another round of active selling. Cash traders
believe that China may have bought near 4-6 cargoes of US soybeans this week
which may help explain the firm basis at the gulf. The sharp drop in the US
dollar was also seen as slightly supportive. The market continues to find some
underlying support from the cold weather forecasts for Canada and the northern
sections of the cornbelt and a potential impact on the maturity pace of the crop
or even a possible freeze before the crop is fully matured. On the other hand,
more scattered rains are in the forecast for Monday and Tuesday next week and
the weather seems ideal for improving crop conditions ahead. There were no
soybean or oil deliveries this morning but meal deliveries were 17 lots.
November soybean support comes in at 556 and 542 with 562 1/2 and 570 as next
resistance.
Technical Outlook
#SOYBEANS (NOV) 08/09/04: The swing indicator
gave a moderately negative reading with the close below the 1st support number.
The next area of resistance is around 569 and 578 1/2, while 1st support hits
today at 554 and below there at 548 1/2. The market’s close below the 9-day
moving average is an indication the short-term trend remains negative. Daily
stochastics are showing positive momentum from oversold levels which should
reinforce a move higher if near-term resistance is taken out. The next upside
target is 578 1/2.
MEAL (DEC): Daily stochastics are trending lower,
but have declined into oversold territory. The next downside objective is now at
167.6. The daily closing price reversal down puts the market on the defensive.
First resistance comes in at 175.6, with support at 169.9. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. The market’s close below the 1st swing support number suggests a
moderately negative setup for today. Daily studies pointing down suggests
selling minor rallies.
BEAN OIL (DEC): The market’s close below the
9-day moving average is an indication the short-term trend remains negative.
Daily stochastics are showing positive momentum from oversold levels which
should reinforce a move higher if near-term resistance is taken out. The next
upside target is 21.82. It is a slightly negative indicator that the close was
lower than the pivot swing number. Daily swing resistance is found at 21.47 and
above there at 21.82. Support should be encountered at 20.81 and 20.50.
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WHEAT MARKET RECAP
8/6/2004
September Wheat finished down 5 3/4 at 315 3/4, 8 1/4 off the
high and 3/4 up from the low. December Wheat closed down 4 at 332. This was 1
1/2 up from the low and 5 3/4 off the high.
December Wheat closed 6 1/2 cents higher on the
week. The lack of new export news overnight and concerns that a bumper crop in
Western Canada this year could increase the competition on the world market for
wheat exports were seen as bearish factors but the improved technical condition
of the market and a collapse in the dollar were seen as positive factors. The
lack of an announcement on China buying helped to pressure the market early.
Talk of a seasonal tendency for grain markets to rally into early September
helped to provide some support. The outlook for hefty yields in the spring wheat
belt and news yesterday from the Canadian Wheat board on higher production are
factors which could attract selling on technical bounces. Western Canada wheat
production for the 2004/2005 season was pegged at 24.3 million tons from 22.1
million as the June forecast and from 21.1 million last year. Gulf basis was
steady this morning. December wheat support comes in at 331 1/2 and 328 with 335
1/2 and 338 as resistance.
Technical Outlook
#WHEAT (DEC) 08/09/04: The downside closing price
reversal on the daily chart is somewhat negative. The swing indicator gave a
moderately negative reading with the close below the 1st support number. Look
for near-term support at 328 1/2 and below there at 325 3/4, with resistance
levels at 335 1/2 and 340 1/4. 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 340 1/4.
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LIVE CATTLE RECAP
8/6/2004
October Live Cattle closed up 0.20 at 87.60. This
was 0.62 up from the low and 0.20 off the high.
October Feeder Cattle finished up 0.17 at 112.12,
0.17 off the high and 1.07 up from the low.
The cattle market inched higher on the session as
trade volume slowed after a challenge of Thursday’s highs and lows failed to see
follow-through. The tone in the cash market has remained optimistic late this
week after packers failed to buy more cattle at $82.00 but the sharp drop in
beef prices on the week leaves packer profit margins deep in the red. This,
along with a higher showlist next week could weaken the cash market tone.
Boxed-beef cut-out values were down $.23 to $138.11 at mid-session as compared
with $142.92 last week at this time. Slaughter for the week came in at 625,000
head as compared with 634,000 last week and 720,000 head last year.
Technical Outlook
#CATTLE (OCT) 08/09/04: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The next downside
target is 86.67. With the close higher than the pivot swing number, the market
is in a slightly bullish posture. Support should be encountered at 87.20 and
below there at 86.67. Market resistance is at 88.02 and then again at 88.32. 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
8/6/2004
October Lean Hogs closed up 0.60 at 70.75. This
was 0.85 up from the low and 0.15 off the high.
February Pork Bellies finished down 0.80 at
96.45, 1.80 off the high and 0.10 up from the low.
October hogs managed to push to a new contract
high and a new high close as a steady cash market and trade optimism over
exports and domestic demand was enough to encourage active buying with funds
leading the pack. Fund and speculative buying has pushed open interest to a
record high. Bull spread activity helped to support. Cash hogs at Peoria were
steady and pork values have slipped the last three session but traders remain
confident that exports will remain high. The 2-Day lean Index for the period
ending August 4th was up 13 cents to 79.42 from 79.32 one week previous.
Technical Outlook
#HOGS (OCT) 08/09/04: It is a mildly bullish
indicator that the market closed over the pivot swing number. Resistance levels
comes in at 71.25 and 71.57 today, while support is around 70.25 and then 69.57.
The rally brought the market to a new contract high. 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 71.57.
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COCOA MARKET RECAP
8/6/2004
September Cocoa finished down 93 at 1610, 38 off
the high and 15 up from the low.
It might be difficult to determine whether the
sharp decline in cocoa prices was the direct result of less weather concerns or
because the funds decided to bank some profits. With the Dollar falling sharply
the cocoa market could have seen support off the expectation of arbitrage
buying. If the primary reason for the big gains in cocoa were simply interest by
the funds it is possible that the downside action extends early next week,
especially since the COT report showed the market to be extensively overbought
in the small spec and fund category.
Technical Outlook
COCOA (SEP) 08/09/04 The gap lower price action
on the day session chart is a bearish indicator for trend. There could be some
early pressure today given the market’s negative setup with the close below the
2nd swing support. Cocoa should run into resistance at 1637 and above there at
1669 with support at 1584 and 1563. 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
1562.75.
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COFFEE MARKET RECAP
8/6/2004
September Coffee closed up 1.15 at 67.05. This
was 1.30 up from the low and 0.65 off the high.
September coffee closed 115 points higher on the
session and 60 higher on the week. While there is some rain in the forecast for
the weekend in Brazil coffee growing areas, there does not appear to be a
weather threat for the next 10 days. A container shortage in Brazil and a
firming tone for cash markets and basis levels in the region helped to support
the bounce. Ideas that the market is too oversold helped to provide underlying
support which was seen as short-covering from fund traders. The higher close on
the week could support a minor bounce from a technically oversold condition but
the longer-term fundamentals still look bearish unless the wet weather harvest
delays were enough to significantly reduce the crop forecast from Brazil.
Technical Outlook
COFFEE (SEP) 8/9/04 The market has a bullish tilt
coming into today’s trade with the close above the 2nd swing resistance. The
daily stochastics have crossed over up which is a bullish indication. The
near-term upside objective is at 68.85. The Coffee contract should run into
resistance at 68.05 and above there at 68.85 with support at 66.1 and 64.95. The
market’s short-term trend is positive on a close above the 9-day moving average.
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SUGAR MARKET RECAP
8/6/2004
October Sugar closed up 0.04 at 8.17. This was
0.06 up from the low and 0.06 off the high.
October sugar closed 4 ticks higher on the
session but down 11 points on the week. The weekly closing price reversal after
hitting a contract high this week is a potential sign of a top. In addition, the
Commitment-of-Traders report with options, released this afternoon, is likely to
show a record or near record net long position of the speculator near 150,000
contracts and open interest for New York sugar hit an all-time high. Traders
await results of tenders from Libya and Iraq. Thailand officials proposed a
barter deal for 1 million tons of sugar for oil or copper from Iran. A Senior
Brazil Ag Minister indicated that the country is ready to supply the potential
annual demand for Japan for near 1.8 billion liters of fuel ethanol. Last year,
Japan decided to allow a mixture of up to 3% mix in gasoline. Brazil exported a
total of 1.04 billion liters for the January to July 16th time frame as compared
with 460 million liters exported for all of 2003.
Technical Outlook
#SUGAR (OCT) 08/09/04: It is a mildly bullish
indicator that the market closed over the pivot swing number. Swing resistance
comes in at 8.29, with support found at 8.05. The market’s short-term trend is
negative as the close remains below the 9-day moving average. 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 8.05.
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COTTON MARKET RECAP
8/6/2004
October Cotton finished down 0.83 at 44.90, 1.05
off the high and 0.30 up from the low.
The cotton market continued to consolidate giving
some the impressive that the downtrend pace is abating. We are a little
surprised that cotton managed to hold above the prior days lows as prices slide
aggressively off the highs of the day into the close. Apparently India suggested
that their crop was looking bigger than last year and that is probably all the
market needed to embrace the bear case again. The selling off the high Friday
morning was thought to be coming from the locals and the small funds which might
mean that the short covering tilt may have run its course. The market might have
seen the higher opening off slightly improved demand expectations following the
much better than expected export sales figures Thursday morning.
Technical Outlook
#COTTON (OCT) 08/09/04: The market’s close above
the 9-day moving average suggests the short-term trend remains positive. The
swing indicator gave a moderately negative reading with the close below the 1st
support number. Next resistance area comes in at 45.58 and then again at 46.44,
while support is targeted at 44.23 and 43.74. Daily stochastics are showing
positive momentum from oversold levels which should reinforce a move higher if
near-term resistance is taken out. The next upside target is 46.44. The outside
day down and close below the previous day’s low is a negative signal. The
downside closing price reversal on the daily chart is somewhat negative.