This Is Why Hogs Surged Today…
BOND MARKET RECAP
10/15/2004
December Bonds closed down 0-13 at 113-00. This
was 0-19 up from the low and 0-28 off the high.
December 10 Yr Treasury Notes finished down 0-100
at 113-070, 0-160 off the high and 0-140 up from the low.
The December Treasury market managed to
rise to new contract high, while the weekly bond chart posted the highest trade
since late March. The fact that the Chairman of the Federal Reserve continued to
suggest that the US economy would be able to avoid the dire consequences of
ultra high energy prices combined with the fact that US retail sales were much
stronger than expected prompted a large number of longs to bank profits. We
doubt that the steep slide Friday morning was the result of a true improvement
in the outlook toward the economy but given the magnitude of the highs posted
early in the session its logical that many longs decided to bank profits. In
fact, traders suggested that a decline below 112-23 seemed to kick up a sharp
wave of technical stop loss selling.
Technical Outlook
BONDS (DEC) 10/18/2004: The market made a new
contract high on the rally. Momentum studies are rising from mid-range, which
could accelerate a move higher if resistance levels are penetrated. The close
above the 9-day moving average is a positive short-term indicator for trend. The
market could take on a defensive posture with the daily closing price reversal
down. The market’s close below the 1st swing support number suggests a
moderately negative setup for today. The near-term upside objective is at
115-00. The next area of resistance is around 113-29 and 115-00, while 1st
support hits today at 112-03 and below there at 111-11.
TNOTES (DEC) 10/18/2004: Positive momentum
studies in the neutral zone will tend to reinforce higher price action. The
close above the 9-day moving average is a positive short-term indicator for
trend. The downside closing price reversal on the daily chart is somewhat
negative. The market’s close below the 1st swing support number suggests a
moderately negative setup for today. The near-term upside objective is at
114-060. The next area of resistance is around 113-215 and 114-060, while 1st
support hits today at 112-230 and below there at 112-085.
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STOCK INDICES RECAP
10/15/2004
December S&P finished up 5.2 at 1108.3, 5.4 off
the high and 6.1 up from the low.
December S&P E-Mini closed up 5.25 at 1108.25.
This was 6.25 up from the low and 5.5 off the high.
December Dow closed up 37 at 9925. This was 38 up
from the low and 48 off the high.
December Dow E-Mini finished up 33 at 9921, 53
off the high and 39 up from the low.
The equity market seemed to discount the ongoing
investigation into the insurance industry. However, with US retail sales rising
twice as much as was expected and auto sales posting surprisingly strong sales
there was a slight wave of buying. The market was also benefiting from the
oversold status of the market. The fact that the Chairman of the Federal Reserve
continued to reiterate that the US economy would be able to withstand the
negative influence of high oil seemed to provide some confidence to traders.
Volume was also much higher than the recent pattern but that could have come off
an options expiration and it could have been the effect of concentrated short
covering.
Technical Outlook
S&P 500 (DEC) 10/18/2004: Daily stochastics are
trending lower but have declined into oversold territory. The close below the
9-day moving average is a negative short-term indicator for trend. The close
over the pivot swing is a somewhat positive setup. The next downside objective
is now at 1096.63. The next area of resistance is around 1114.05 and 1119.62,
while 1st support hits today at 1102.55 and below there at 1096.63.
SP EMINI (DEC) 10/18/2004: Momentum studies are
declining, but have fallen to oversold levels. A negative signal for trend
short-term was given on a close under the 9-bar moving average. With the close
higher than the pivot swing number, the market is in a slightly bullish posture.
The next downside objective is now at 1096.32. The next area of resistance is
around 1114.12 and 1119.81, while 1st support hits today at 1102.38 and below
there at 1096.32.
NASDAQ (DEC) 10/18/2004: Negative momentum
studies in the neutral zone will tend to reinforce lower price action. A
negative signal for trend short-term was given on a close under the 9-bar moving
average. The upside daily closing price reversal gives the market a bullish
tilt. The market has a slightly positive tilt with the close over the swing
pivot. The next downside objective is now at 1411.00. The next area of
resistance is around 1448.00 and 1459.00, while 1st support hits today at
1424.00 and below there at 1411.00.
MINIDOW (DEC) 10/18/2004: Daily stochastics are
trending lower but have declined into oversold territory. The market’s close
below the 9-day moving average is an indication the short-term trend remains
negative. It is a mildly bullish indicator that the market closed over the pivot
swing number. The next downside target is 9832. The next area of resistance is
around 9966 and 10016, while 1st support hits today at 9874 and below there at
9832.
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CURRENCY MARKET RECAP
10/15/2004
December US Dollar finished down 43 at 8722, 60
off the high and 24 up from the low.
December Euro finished up 0.77 at 124.72, 0.31
off the high and 0.98 up from the low.
December Euro Dollar closed down 0.005 at 97.755.
This was 0.02 up from the low and 0.01 off the high.
December Canadian Dollar closed up 0.13 at 79.77.
This was 0.62 up from the low and 0.11 off the high.
December British Pound finished up 0.64 at
179.55, 0.33 off the high and 0.68 up from the low.
December Swiss closed up 0.72 at 81.28. This was
0.83 up from the low and 0.11 off the high.
December Japanese Yen closed up 0.33 at 91.86.
This was 0.22 up from the low and 0.34 off the high.
The Dollar fell below what had been considered
solid consolidation support and to the lowest level since February. Apparently
the market was disappointed with softer than expected Industrial Production
readings and the somewhat disappointing New York Fed manufacturing readings.
Even the Michigan sentiment readings were disappointing and that seemed to give
the Dollar more than enough fundamental rationale to slide to new lows. The
biggest benefactor of the Dollar slide was Euro, followed closely by the Swiss.
Technical Outlook
YEN (DEC) 10/18/2004: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. 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. The next upside target is 92.44. The next area of
resistance is around 92.13 and 92.44, while 1st support hits today at 91.58 and
below there at 91.33.
EURO (DEC) 10/18/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The close above the 9-day
moving average is a positive short-term indicator for trend. 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 target is
125.84. The next area of resistance is around 125.36 and 125.84, while 1st
support hits today at 124.08 and below there at 123.27.
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PRECIOUS METALS RECAP
10/15/2004
December Gold closed up 0.6 at 420.1. This was
1.1 up from the low and 2.9 off the high.
December Silver finished up 0.055 at 7.11, 0.06
off the high and 0.075 up from the low.
October Platinum closed up 4.1 at 850. This was
equal to the low and 2 off the high.
The early optimism seemed to fade, which is
surprising considering that the US Dollar fell to a significant new low. In
fact, we would have expected the Dollar slide to have given the gold market an
additional wave of buying interest, but no such interest surfaced. It was
positive for gold, silver and platinum to see generally favorable US economic
information but the numbers weren’t strong enough to generally support the
metals aggressively on the physical demand front. However, it is still clear
that gold and silver are seeing some residual support off the concept that
energy prices could cause a financial debacle.
Technical Outlook
SILVER (DEC) 10/18/2004: 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 market’s close
below the 9-day moving average is an indication the short-term trend remains
negative. The close over the pivot swing is a somewhat positive setup. The next
downside target is now at 697.2. The next area of resistance is around 717.8 and
724.1, while 1st support hits today at 704.3 and below there at 697.2.
GOLD (DEC) 10/18/2004: Momentum studies trending
lower at mid-range should accelerate a move lower if support levels are taken
out. The close above the 9-day moving average is a positive short-term indicator
for trend. It is a mildly bullish indicator that the market closed over the
pivot swing number. The next downside objective is now at 416.6. The next area
of resistance is around 422.1 and 424.5, while 1st support hits today at 418.1
and below there at 416.6.
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COPPER MARKET RECAP
10/15/2004
December Copper finished up 3.95 at 130.90, 0.50
off the high and 2.10 up from the low.
Copper prices showed an impressive early bounce
and added to those gains as the session wore on. To see the copper market rise
in the face of significant gains in Shanghai copper stocks is clear evidence
that the market is no longer worried about Chinese demand softening and
therefore rekindling massive losses in copper futures. It is possible that the
currency adjusted prices of copper caused some value buyers to jump into US
copper futures on the long side. Reports that copper exports from Chile ramped
up aggressively over year ago totals was mostly the result of significantly
higher flat prices and not necessarily because volumes were up sharply.
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ENERGY MARKET RECAP
10/15/2004
December Crude Oil closed down 0.09 at 53.97.
This was 0.72 up from the low and 0.08 off the high.
December Heating Oil closed down 0.13 at 154.97.
This was 2.47 up from the low and 0.13 off the high.
December Unleaded Gas finished down 0.98 at
140.99, 0.81 off the high and 1.29 up from the low.
December Natural Gas finished down 0.04 at 7.96,
0.03 off the high and 0.07 up from the low.
December Propane closed down 0.00 at 0.92. This
was equal to the low and equal to the high.
The energy complex started out weak, partially
because of week ending profit taking and partly because the exchange raised
margins on energy futures contracts. A Saudi Official continued to suggest that
ultra high oil prices were the result of inadequate oil refining capacity and
given the last refinery operating rate readings from the US it is clear that at
least 10% of US refining capacity is currently idled. The Chairman of the
Federal Reserve discussed the impact of high energy prices and it would seem
that energy prices are assuming that demand can’t contract and that the world
economy won’t be derailed by high prices. In other words, a large portion of $54
oil is built off the theme that demand will continue to grow.
Technical Outlook
CRUDE OIL (DEC) 10/18/2004: The crossover up in
the daily stochastics is a bullish signal. Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The market’s short-term trend is positive on the close above the 9-day moving
average. With the close higher than the pivot swing number, the market is in a
slightly bullish posture. The near-term upside target is at 54.61. The market is
becoming somewhat overbought now that the RSI is over 70. The next area of
resistance is around 54.37 and 54.61, while 1st support hits today at 53.57 and
below there at 53.01.
UNLEADED (DEC) 10/18/2004: A bearish signal was
triggered on a crossover down in the daily stochastics. Momentum studies are
trending lower from high levels which should accelerate a move lower on a break
below the 1st swing support. The close above the 9-day moving average is a
positive short-term indicator for trend. It is a slightly negative indicator
that the close was lower than the pivot swing number. The next downside
objective is now at 138.77. With a reading over 70, the 9-day RSI is approaching
overbought levels. The next area of resistance is around 142.04 and 142.97,
while 1st support hits today at 139.94 and below there at 138.77.
HEATING OIL (DEC) 10/18/2004: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The market’s short-term trend is positive on the close above the
9-day moving average. The close over the pivot swing is a somewhat positive
setup. The next upside target is 156.98. The 9-day RSI over 70 indicates the
market is approaching overbought levels. The next area of resistance is around
156.27 and 156.98, while 1st support hits today at 153.67 and below there at
151.79.
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CORN MARKET RECAP
10/15/2004
December Corn finished up 2 1/2 at 206 3/4,
3/4 off the high and 2 1/2 up from the low. March Corn closed up 2 1/4 at 216
3/4. This was 2 3/4 up from the low and 1/4 off the high.
Steady to higher cash basis levels along with
positive export news was enough to support more short-covering from speculators.
December Corn closed up 2 1/4 on the week. Gulf basis levels jumped 2 cents to
34 over December. Weekly export sales for corn came in at 1.484 million tons (a
new marketing year high) as compared with 800,000-1.1 million tons expected and
853,900 tons necessary each week to reach the USDA projection. Cumulative sales
have reached 24.1% of the forecast for the entire season as compared with 26.3%
on average for this time of the year. In addition, overnight daily sales
included Taiwan buying 56,000 tons and 35,000 tons of US corn and South Korea
buying 105,000 tons of optional origin corn. The drought developing in South
Africa may have already impacted the wheat crop and the upcoming corn crop will
be watched closely to see if the developing El Nino will have an impact on
sensitive areas such as Australia, South Africa and Southeast Asia. Support for
December corn comes in at 204 1/2 and 203 1/4 with 207 1/4 and 210 1/2 as
resistance.
Technical Outlook
CORN (DEC) 10/18/2004: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. A positive signal for trend short-term was given on a
close over the 9-bar moving average. With the close over the 1st swing
resistance number, the market is in a moderately positive position. The
near-term upside target is at 209 1/2. The next area of resistance is around 208
1/4 and 209 1/2, while 1st support hits today at 205 1/4 and below there at 203
1/4.
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SOY COMPLEX RECAP
10/15/2004
November Soybeans finished down 1 1/2 at 514, 4
off the high and 1 up from the low. January Soybeans closed down 2 1/2 at 518
3/4. This was 3/4 up from the low and 4 3/4 off the high.
December Soymeal closed up 0.2 at 152.7. This was
0.6 up from the low and 1.1 off the high.
December Soybean Oil finished down 0.18 at 20.32,
0.32 off the high and 0.02 up from the low.
Strength in the other grains and short-covering
seemed to be the supportive factors for the soybean complex to support the
bounce. Commercial buyers in meal became more active on a test of yesterday’s
lows and the market managed a significant bounce. Expectations for a bumper crop
helped limit the buying support. Weekly export sales for soybeans came in at
980,900 tons as compared with 600,000-900,000 expected and 374,000 tons
necessary each week to reach the USDA projection. Cumulative sales have reached
37.2% of the forecast for the entire season as compared with 35.5% on average
for this time of the year. Of the weekly total, China was a buyer of 263,800
tons which brought the cumulative purchases to 3.745 million tons. For meal,
sales were 177,600 tons from 100,000-200,000 expected. Cumulative sales have
reached 36% of the forecast for the entire season as compared with 28.9% on
average for this time of the year. Oil sales were 17,500 tons as compared with
trade expectations at 5,000-20,000 tons. There were 130 deliveries for oil and 3
for meal this morning. November Soybeans closed 14 1/2 on the week with December
meal down $7.20 and December Oil down 0.29 cents. Gulf basis jumped 4 cents over
the past two days. November soybean resistance comes in at 519 and 523 1/4 with
510 1/2 and 506 as next support points.
Technical Outlook
BEANS (NOV) 10/18/2004: Rising from oversold
levels, daily momentum studies would support higher prices, especially on a
close above resistance. The market’s close below the 9-day moving average is an
indication the short-term trend remains negative. The market’s close below the
pivot swing number is a mildly negative setup. The near-term upside target is at
519 3/4. The next area of resistance is around 516 1/2 and 519 3/4, while 1st
support hits today at 511 1/2 and below there at 509 3/4.
MEAL (DEC) 10/18/2004: Daily stochastics are
trending lower but have declined into oversold territory. The market’s close
below the 9-day moving average is an indication the short-term trend remains
negative. The close over the pivot swing is a somewhat positive setup. The next
downside objective is 151.2. The next area of resistance is around 153.5 and
154.5, while 1st support hits today at 151.9 and below there at 151.2.
BEANOIL (DEC) 10/18/2004: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The close below the 9-day moving average is a negative
short-term indicator for trend. The downside closing price reversal on the daily
chart is somewhat negative. The market tilt is slightly negative with the close
under the pivot. The near-term upside target is at 20.73. The next area of
resistance is around 20.49 and 20.73, while 1st support hits today at 20.15 and
below there at 20.06.
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WHEAT MARKET RECAP
10/15/2004
December Wheat finished up 5 1/4 at 319 1/4, 1/4 off the high
and 4 3/4 up from the low. March Wheat closed up 6 at 330 3/4. This was 5 1/4 up
from the low and 1/4 off the high.
The market continues to see positive technical
action and follow-through technical buying from the sweeping reversal on October
12th and the close over 303 1/4 today for December wheat confirms the daily
reversal with a weekly closing price reversal from a contract low. December
Wheat closed 16 higher on the week. Weekly export sales for wheat came in at
592,400 tons as compared with 400,000-700,000 expected and 327,700 tons
necessary each week to reach the USDA projection. Cumulative sales have reached
58.2% of the forecast for the entire season as compared with 46.5% on average
for this time of the year. Very hot weather in Australia has dried up fields
again after rains just 2 weeks ago and traders are beginning to adjust
production forecasts lower. At their weekly tender, Japan bought 130,000 tons of
wheat with 45,000 of the total from the US. Basis for soft red winter wheat is
still firming, especially for higher quality wheat for exporters. December wheat
support comes in at 315 and 311 1/2 with resistance at 319 1/4 and 324 1/4 as
resistance.
Technical Outlook
WHEAT (DEC) 10/18/2004: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. 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. The next upside objective is 323.
The next area of resistance is around 321 3/4 and 323, while 1st support hits
today at 316 3/4 and below there at 313 1/4.
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LIVE CATTLE RECAP
10/15/2004
December Live Cattle closed up 0.65 at 88.75.
This was 0.82 up from the low and 0.05 off the high.
November Feeder Cattle finished up 0.17 at
112.37, 0.37 off the high and 0.15 up from the low.
The cattle market found support from a surging
pork market and from a positive tone for the cash market but buying was subdued
as traders awaited some indications on the cash market. Hogs were supported by
news of anti-dumping duties slapped on Canadian hog imports. News that Japan and
US high-level talks will resume next week in an attempt to lift the ban on US
beef entering Japan helped to provide some support. In addition, strength in the
beef market added to the positive tone. Boxed-beef cutout values (600-750
choice) were up $.82 on the day at mid-session to $139.10 as compared with
$132.56 last week at this time.
Technical Outlook
CATTLE (DEC) 10/18/2004: The daily stochastics
have crossed over up which is a bullish indication. Daily stochastics have risen
into overbought territory which will tend to support reversal action if it
occurs. 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. The near-term upside objective is at 89.420. The next
area of resistance is around 89.170 and 89.420, while 1st support hits today at
88.320 and below there at 87.700.
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LEAN HOGS RECAP
10/15/2004
December Lean Hogs closed up 2.00 at 66.85. This
was 1.85 up from the low and equal to the high.
February Pork Bellies finished up 2.92 at 96.52,
0.07 off the high and 3.22 up from the low.
The hog market surged higher from an oversold
condition on Friday with the discount of futures to cash and news of import
duties on Canadian hogs moving into the US helping to support the late surge.
The US commerce department announced that new US anti-dumping duties as high as
15.01% will be slapped on Canadian hog imports beginning next week. While the
announcement was anticipated, the high duty was a bit of a surprise and small
speculators were caught net short and moved to cover. Cash hogs were mostly $.50
lower on the session and the CME 2-Day Lean Index for the period ending October
13th was reported at 72.91, down $.88 from the previous session.
Technical Outlook
HOGS (DEC) 10/18/2004: The cross over and close
above the 40-day moving average indicates the longer-term trend has turned up.
The crossover up in the daily stochastics is a bullish signal. The stochastic
indicator is rising from oversold levels, which is bullish and should support
higher prices. The market’s short-term trend is positive on the close above the
9-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
68.220. The next area of resistance is around 67.750 and 68.220, while 1st
support hits today at 65.920 and below there at 64.550.
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COCOA MARKET RECAP
10/15/2004
December Cocoa finished down 10 at 1447, 22 off
the high and 7 up from the low.
The cocoa market managed a minor rally in the
face of a 2.3% increase in the US grind and that is a little suspect when one
considers that both the US and European grind figures for the 3rd quarter were
below expectations. However, later in the session cocoa prices slid back from
the highs of the day and went negative even though many traders were voicing
concern about the potential for Ivory Coast political stress over the weekend.
However, a new low in the Dollar would seem to make US cocoa somewhat attractive
in international terms and that could continue to support cocoa above the $1,400
critical support level.
Technical Outlook
COCOA (DEC) 10/18/2004: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. A positive signal for trend short-term was given on a close over
the 9-bar moving average. The market tilt is slightly negative with the close
under the pivot. The next upside objective is 1479. The next area of resistance
is around 1461 and 1479, while 1st support hits today at 1433 and below there at
1422.
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COFFEE MARKET RECAP
10/15/2004
December Coffee closed up 1.40 at 74.65. This was
1.80 up from the low and 0.25 off the high.
Surprisingly the coffee market managed to respect
the prior days low and in the process formed what appears to be a triple bottom
low. News that Latin American 2003-2004 coffee exports declined 3.1% and that
September Latin American coffee exports declined by a whopping 20% might have
given the market the capacity to short cover. Certainly many shorts had cause to
bank some profits especially since there continues to be dryness threats present
in some Brazilian agricultural areas. The Press also reported fund buying and
that would be a fresh development in coffee.
Technical Outlook
COFFEE (DEC) 10/18/2004: Daily stochastics are
trending lower but have declined into oversold territory. The market’s close
below the 9-day moving average is an indication the short-term trend remains
negative. A positive signal was given by the outside day up. Market positioning
is positive with the close over the 1st swing resistance. The next downside
target is now at 72.25. The next area of resistance is around 75.65 and 76.30,
while 1st support hits today at 73.65 and below there at 72.25.
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SUGAR MARKET RECAP
10/15/2004
March Sugar closed down 0.10 at 9.15. This was
0.01 up from the low and 0.11 off the high.
Sugar prices forged an inside day trade Friday
and seemed to migrate toward the middle of the week’s range into the close.
According to news sources, Russian demand into next year is set to expand
because domestic stocks are thought to be tight. Supposedly the New Year will
bring about increased activity by the Russians and with the ongoing expectation
for strong world wide energy use of sugar we have to think that the bull trend
remains in effect. Supposedly Russia production 864,000 tons of sugar up to
October 13th which is almost exactly the amount produced in the prior year. A
number of News sources continue to carry stories about funds rotating into soft
commodities from energy and metals investments but the funds are already
massively into the sugar market.
Technical Outlook
SUGAR (MAR) 10/18/2004: Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. The market’s close above the 9-day moving average suggests the
short-term trend remains positive. The market setup is somewhat negative with
the close under the 1st swing support. The next downside objective is now at
9.06. The next area of resistance is around 9.21 and 9.29, while 1st support
hits today at 9.09 and below there at 9.06.
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COTTON MARKET RECAP
10/15/2004
December Cotton finished down 0.70 at 45.82, 1.31
off the high and 0.17 up from the low.
Cotton prices drifted lower and filled a gap on
the charts. Apparently some funds were sellers and considering that the export
sales reading was disappointing it is not difficult for the market to rekindle
oversupply fears. In fact, given the last USDA ending stocks forecast the cotton
market can hardly withstand anything from the negative camp. The weekly export
sales figures came in at 98,800 bales compared to expectations of 100,000 to
175,000 bales. We suspect that the COT report will overstate the size of the net
spec and fund short in cotton as the market rallied from the time that the COT
report was measured. In order for cotton to reach a historic short fund and
small spec position the COT must show a combined short of close to 30,000
contracts.
Technical Outlook
COTTON (DEC) 10/18/2004: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. A negative signal for trend short-term was given on a
close under the 9-bar moving average. It is a slightly negative indicator that
the close was under the swing pivot. The near-term upside target is at 47.58.
The next area of resistance is around 46.56 and 47.58, while 1st support hits
today at 45.08 and below there at 44.63.