Treasuries Not Paying Attention To Fundamentals–Here’s Why
BOND MARKET RECAP
1/31/2005
March Bonds closed up 0-06 at 114-27. This was
0-14 up from the low and 0-02 off the high.
March 10 Yr Treasury Notes finished up 0-005 at
112-085, 0-005 off the high and 0-075 up from the low.
The Treasury market continued to impress
the trade as prices held close to the old highs even in the face of better than
expected US economic information, higher US equity prices and sharply lower
energy prices. In other words, the Treasury market isn’t paying that much
attention to bearish fundamental developments arising from regularly scheduled
economic reports. Some traders seem to suggest that yield curve buying continues
to dominate the action and that the expectation of an US interest rate hike is
indirectly providing some support for Treasuries, as that would seem to insure
that future growth will remain controlled.
Technical Outlook
BONDS (MAR) 02/01/2005: The market rallied to a
new contract high. Studies are showing positive momentum but are now in
overbought territory, so some caution is warranted. The cross over and close
above the 18-day moving average indicates the longer-term trend has turned up.
It is a mildly bullish indicator that the market closed over the pivot swing
number. The near-term upside objective is at 115-09. The 9-day RSI over 70
indicates the market is approaching overbought levels. The next area of
resistance is around 115-04 and 115-09, while 1st support hits today at 114-20
and below there at 114-08.
TNOTES (MAR) 02/01/2005: Momentum studies are
trending higher but have entered overbought levels. The cross over and close
above the 18-day moving average indicates the longer-term trend has turned up.
With the close higher than the pivot swing number, the market is in a slightly
bullish posture. The near-term upside objective is at 112-165. The next area of
resistance is around 112-130 and 112-165, while 1st support hits today at
112-040 and below there at 111-300.
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STOCK INDICES RECAP
1/31/2005
March S&P finished up 7.1 at 1181.8, 0.9 off the
high and 4.5 up from the low.
March S&P E-Mini closed up 6.75 at 1181.5. This
was 4.75 up from the low and 1.5 off the high.
March Dow closed up 35 at 10482. This was 30 up
from the low and 24 off the high.
The stock market was somewhat impressive in the
action Monday but considering the flow of positive fundamental news we are not
surprised in the initial rise in prices. However, in retrospect seeing crude oil
prices down sharply, the favorable Iraqi election outcome and the mostly
favorable corporate news the bulls should have had control over prices. The
market was also supported by a mostly favorable sweep of US economic
information, especially with Personal Income rising sharper than Personal
Income. In the past, the market was concerned that the recovery was being fueled
by consumer credit but the information Monday seemed to countervail those fears.
Technical Outlook
S&P 500 (MAR) 02/01/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The cross over and close above the 18-day
moving average indicates the longer-term trend has turned up. The gap upmove on
the day session chart is a bullish indicator for trend. With the close over the
1st swing resistance number, the market is in a moderately positive position.
The next upside target is 1186.30. The next area of resistance is around 1184.50
and 1186.30, while 1st support hits today at 1179.10 and below there at 1175.50.
SP EMINI (MAR) 02/01/2005: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The market now above the 18-day moving average
suggests the longer-term trend has turned up. A positive setup occurred with the
close over the 1st swing resistance. The near-term upside target is at 1186.93.
The next area of resistance is around 1184.62 and 1186.93, while 1st support
hits today at 1178.38 and below there at 1174.44.
NASDAQ (MAR) 02/01/2005: Rising from oversold
levels, daily momentum studies would support higher prices, especially on a
close above resistance. The market back below the 18-day moving average suggests
the longer-term trend could be turning down. Market positioning is positive with
the close over the 1st swing resistance. The near-term upside objective is at
1535.00. Daily studies suggest buying dips today. The next area of resistance is
around 1530.00 and 1535.00, while 1st support hits today at 1518.00 and below
there at 1511.00.
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CURRENCY MARKET RECAP
1/31/2005
March US Dollar finished up 11 at 8364, 22 off
the high and 21 up from the low.
March Euro finished down 0.13 at 130.35, 0.3 off
the high and 0.15 up from the low.
March Euro Dollar closed down 0.01 at 97.02. This
was 0.01 up from the low and 0.005 off the high.
March Canadian Dollar closed down 0.02 at 80.59.
This was 0.11 up from the low and 0.31 off the high.
March British Pound finished down 0.52 at 187.78,
0.59 off the high and 0.28 up from the low.
March Swiss closed down 0.29 at 84.23. This was
0.02 up from the low and 0.25 off the high.
March Japanese Yen closed down 0.26 at 96.75.
This was 0.02 up from the low and 0.3 off the high.
The Dollar disappointed some bulls with the muted
reaction to the Iraqi election. The poor performance in the Dollar was made even
more prevalent with the markets dismal reaction to a sweep of better than
expected economic information. However, with some patently poor economic
readings from the UK the currency with the most recent success against the
Dollar was under pressure and that gave the Dollar the ability to hold its
mostly positive stance throughout the session. The Canadian Dollar impressively
managed to hold up above some extremely critical support points on the charts
and given the gains in the Canadian it might have forged the most significant
action of the session.
Technical Outlook
YEN (MAR) 02/01/2005: The close under the 60-day
moving average indicates the longer-term trend could be turning down. Momentum
studies trending lower at mid-range should accelerate a move lower if support
levels are taken out. The market back below the 18-day moving average suggests
the longer-term trend could be turning down. It is a slightly negative indicator
that the close was under the swing pivot. The next downside target is now at
96.50. The next area of resistance is around 96.91 and 97.14, while 1st support
hits today at 96.59 and below there at 96.50.
EURO (MAR) 02/01/2005: The stochastics indicators
are rising from oversold levels, which is bullish and should support higher
prices. The market back below the 18-day moving average suggests the longer-term
trend could be turning down. It is a slightly negative indicator that the close
was under the swing pivot. The next upside objective is 130.83. The next area of
resistance is around 130.57 and 130.83, while 1st support hits today at 130.13
and below there at 129.94.
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PRECIOUS METALS RECAP
1/31/2005
April Gold closed down 4 at 424.1. This was 2.6
up from the low and 2.5 off the high.
March Silver finished down 0.048 at 6.747, 0.018
off the high and 0.127 up from the low.
April Platinum closed up 1.5 at 873.8. This was
3.8 up from the low and 2.2 off the high.
The gold market was seemingly under moderate
pressure early in the session as the market was apparently seeing flight to
quality liquidation following the Iraqi election. It seemed as if all the metals
were under a long liquidation tilt but surprisingly the Dollar was not in our
opinion an overwhelming catalyst behind the weakness in gold. To many metals
traders it must be disappointing to see the Iraqi election pass so quietly and
even more concerning that stronger than expected US economic numbers haven’t
provided more support to the metals from the physical demand component.
Technical Outlook
SILVER (MAR) 02/01/2005: Momentum studies are
trending higher but have entered overbought levels. The cross over and close
above the 18-day moving average is an indication the longer-term trend has
turned positive. It is a slightly negative indicator that the close was lower
than the pivot swing number. The next upside target is 686.5. The next area of
resistance is around 682.0 and 686.5, while 1st support hits today at 667.5 and
below there at 657.5.
GOLD (APR) 02/01/2005: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The close below the 18-day moving average is an
indication the longer-term trend has turned down. The close below the 2nd swing
support number puts the market on the defensive. The near-term upside target is
at 429.1. The next area of resistance is around 426.6 and 429.1, while 1st
support hits today at 421.6 and below there at 419.0.
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COPPER MARKET RECAP
1/31/2005
March Copper finished down 0.35 at 143.50, 0.20
off the high and 1.20 up from the low.
The copper market appeared to start the week off
in a profit taking mode and after the mostly favorable macro economic news of
the last three sessions one would have expected the bullishly biased copper
market to have extended on the upside. However, longer term forecast continue to
suggest that production is on the rise and that 2004 production increased by
over 6% when compared to 2003 and that seems to have undermined the bull camp.
We also think that comments from the Shanghai copper market suggesting
lackluster interest ahead of the coming Chinese holiday prompted some longs to
bank profits and move to the sidelines. Apparently the Government of Chile
predicted that the average price of copper in 2005 would be in a range of 1.16
to 1.2, which is significantly lower than the average price in 2004 of 1.31 and
that was seen as a negative.
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ENERGY MARKET RECAP
1/31/2005
March Crude Oil closed up 1.02 at 48.20. This was
2.15 up from the low and 0.05 off the high.
March Heating Oil closed up 2.09 at 134.81. This
was 6.46 up from the low and 0.19 off the high.
March Unleaded Gas finished up 2.55 at 134.76,
0.24 off the high and 6.66 up from the low.
March Natural Gas finished up 0.06 at 6.32, 0.01
off the high and 0.20 up from the low.
March Propane closed down 0.03 at 0.70. This was
0.00 up from the low and 0.01 off the high.
The energy complex caved in following the OPEC
decision on Sunday to hold production steady. Certainly the passage of the Iraqi
election dropped the anxiety level and also prompted some long liquidation.
Providing some support to prices Monday were comments from OPEC that they would
probably not be hiking production into the March time frame, when many expect
demand to kick up. OPEC went on to suggest that $50 crude oil pricing probably
wasn’t that damaging to the world economy and that would seem to temper some of
the overtly bearish ideas that were floated last week by various OPEC members.
In the 6 to 10 day weather forecast it is clear that temps remain mild for at
least the coming week and that should leave the bears with a minor edge.
Technical Outlook
CRUDE OIL (MAR) 02/01/2005: Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. The market now above the 18-day moving average suggests the
longer-term trend has turned up. The upside closing price reversal on the daily
chart is somewhat bullish. Market positioning is positive with the close over
the 1st swing resistance. The next downside objective is 45.48. The next area of
resistance is around 49.30 and 49.87, while 1st support hits today at 47.10 and
below there at 45.48.
UNLEADED (MAR) 02/01/2005: Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. The cross over and close above the 18-day moving average is an
indication the longer-term trend has turned positive. The daily closing price
reversal up is a positive indicator that could support higher prices. Market
positioning is positive with the close over the 1st swing resistance. The next
downside objective is now at 126.26. The next area of resistance is around
138.20 and 140.05, while 1st support hits today at 131.31 and below there at
126.26.
HEATING OIL (MAR) 02/01/2005: Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The major trend could be turning up with the close back above the 18-day
moving average. The daily closing price reversal up is a positive indicator that
could support higher prices. The market has a slightly positive tilt with the
close over the swing pivot. The next downside target is now at 126.60. The next
area of resistance is around 138.13 and 139.89, while 1st support hits today at
131.49 and below there at 126.60.
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CORN MARKET RECAP
1/31/2005
March Corn finished up 1 1/4 at 197, 1/2
off the high and 1 3/4 up from the low. May Corn closed up 1 1/4 at 204 1/2.
This was 1 3/4 up from the low and 1/2 off the high.
The higher close for March corn after making a
contract low and taking out Friday’s range is consider a key reversal and could
support more active technical buying and short-covering on Tuesday. The
inability to add to the downside early in the trading session helped trigger a
move higher on the session and a bounce. Funds were noted buyers of near 2500
contracts into the mid-session. The weekend Commitment-of-Traders report with
options showed a record net short position of the fund trader and of the
combined speculative position which helped support some short-covering. Weekly
export inspections came in at 32.69 million bushels as compared with trade
expectations for 28-33 million and 40.8 million bushels necessary each week to
reach the USDA projection. Cumulative shipments have reached 37% of the USDA
forecast for the season as compared with 40% on average for this time of the
year. Resistance for March corn comes in at 197 3/4 and 198 1/2 with support at
195 1/4 and 191.
Technical Outlook
CORN (MAR) 02/01/2005: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
major trend has turned down with the cross over back below the 18-day moving
average. Market positioning is positive with the close over the 1st swing
resistance. The next downside objective is 194 1/2. The next area of resistance
is around 198 and 198 3/4, while 1st support hits today at 196 and below there
at 194 1/2.
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SOY COMPLEX RECAP
1/31/2005
March Soybeans finished up 3/4 at 514 3/4, 3 3/4
off the high and 4 3/4 up from the low. May Soybeans closed down 1/2 at 512 1/2.
This was 4 1/2 up from the low and 3 off the high.
March Soymeal closed down 0.3 at 153.8. This was
0.5 up from the low and 2.0 off the high.
March Soybean Oil finished up 0.12 at 19.36, 0.17
off the high and 0.21 up from the low.
The new low close for meal clashed with a
reversal and higher close from a contract low in oil to support a mixed trade in
soybeans. In the overnight session, March soybeans came within 1/2 cent of a new
contract low. May soybeans broke to new contract lows early today on reports of
rain over the weekend in key growing regions in Brazil and Argentina. Weakness
in palm oil futures in Malaysia overnight and at the China exchange added to the
bearish tone early. A lack of follow-through fund selling after the weekend
Commitment-of-Traders report showed near record net short positions of the
speculator for soybeans and meal helped trigger another round of short-covering
to push futures higher on the session but May soybeans closed lower on the day.
Oil also closed higher on the session after posting an early contract low.
Technicians may turn a bit friendlier the market on the higher close after
hitting new lows. In addition, a lack of producer selling helped firm the cash
basis level and added to the short-covering support this morning. Weekly export
inspections came in at 26.819 million bushels as compared with trade
expectations for 27-32 million and 11.5 million bushels necessary each week to
reach the USDA projection. Cumulative shipments have reached 64.6% of the USDA
forecast for the season as compared with 58.6% on average for this time of the
year. Funds were noted buyers of near 3500 soybean contracts into the
mid-session. Resistance for March soybeans comes in at 519 1/4 and 521 1/2 with
support at 511 and 508 1/2.
Technical Outlook
BEANS (MAR) 02/01/2005: Momentum studies are
declining, but have fallen to oversold levels. The market back below the 18-day
moving average suggests the longer-term trend could be turning down. The daily
closing price reversal up is a positive indicator that could support higher
prices. The market has a slightly positive tilt with the close over the swing
pivot. The next downside objective is now at 506. The next area of resistance is
around 519 and 523, while 1st support hits today at 510 1/2 and below there at
506.
MEAL (MAR) 02/01/2005: Momentum studies are still
bearish but are now at oversold levels and will tend to support reversal action
if it occurs. The market back below the 18-day moving average suggests the
longer-term trend could be turning down. The outside day down and close below
the previous day’s low is a negative signal. The market tilt is slightly
negative with the close under the pivot. The next downside target is now at
151.7. The next area of resistance is around 155.0 and 156.6, while 1st support
hits today at 152.6 and below there at 151.7.
BEANOIL (MAR) 02/01/2005: The market made a new
contract low on the break. Momentum studies are declining, but have fallen to
oversold levels. The major trend has turned down with the cross over back below
the 18-day moving average. The upside closing price reversal on the daily chart
is somewhat bullish. With the close higher than the pivot swing number, the
market is in a slightly bullish posture. The next downside target is now at
18.97. The next area of resistance is around 19.55 and 19.73, while 1st support
hits today at 19.17 and below there at 18.97.
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WHEAT MARKET RECAP
1/31/2005
March Wheat finished up 1 at 291, 1 off the high and 3 1/2 up
from the low. May Wheat closed up 1 1/4 at 298 3/4. This was 3 3/4 up from the
low and 1/4 off the high.
The higher close after reaching a contract low is
a bullish technical development and could support soma additional technical
support on Tuesday. Good weather for the US crop and a lack of export news
helped trigger the early weakness and move to new contract lows and with the
weekend Commitment-of-Traders report showing an oversold condition, the higher
close on the day and above the opening is considered a key reversal. Weekend
news that Pakistan seeks 100,000 tons of wheat from Russia or Argentina helped
to pressure the market early in the session. South Korea bought 19,000 tons of
US wheat over the weekend. Weekly export inspections came in at 21.5 million
bushels as compared with trade expectations for 12-17 million and 16.1 million
bushels necessary each week to reach the USDA projection. Cumulative shipments
have reached 71.9% of the USDA forecast for the season as compared with 68.3% on
average for this time of the year. March wheat resistance comes in at 292 and
293 1/2 with support at 289 and 287 1/2.
Technical Outlook
WHEAT (MAR) 02/01/2005: The market broke to a new
contract low. Daily stochastics declining into oversold territory suggest the
selling may be drying up soon. The close below the 18-day moving average is an
indication the longer-term trend has turned down. The daily closing price
reversal up on the daily chart is somewhat positive. With the close higher than
the pivot swing number, the market is in a slightly bullish posture. The next
downside objective is 286. The next area of resistance is around 293 1/4 and 294
3/4, while 1st support hits today at 288 3/4 and below there at 286.
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LIVE CATTLE RECAP
1/31/2005
February Live Cattle finished up 0.45 at 90.22,
0.12 off the high and 1.07 up from the low.
March Feeder Cattle closed up 0.30 at 100.52.
This was 1.07 up from the low and 0.27 off the high.
April live cattle pushed moderately higher on the
session (up 65) finding support from a positive Cattle Inventory report and
ideas that the recent sharp break in beef prices might help clean-up supply due
to better demand. Boxed-beef cut-out values were down 38 cents into the
mid-session to $143.27 as compared with $151.33 last week at this time. Some
talk of sloppy feedlot conditions due to weekend rains helped support but a lack
of rain in the forecast for the week is likely to dry up pens. Estimated
Federally Inspected Slaughter came in at 117,000 head versus trade guesses
ranging from 115,000 to 118,000. Resistance comes in at 88.42 and 88.87 for
April cattle.
Technical Outlook
CATTLE (FEB) 02/01/2005: The daily stochastics
gave a bullish indicator with a crossover up. Positive momentum studies in the
neutral zone will tend to reinforce higher price action. The major trend could
be turning up with the close back above the 18-day moving average. It is a
mildly bullish indicator that the market closed over the pivot swing number. The
next upside objective is 91.170. The next area of resistance is around 90.820
and 91.170, while 1st support hits today at 89.650 and below there at 88.800.
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LEAN HOGS RECAP
1/31/2005
February Lean Hogs finished down 0.35 at 73.77,
0.52 off the high and 0.32 up from the low.
February Pork Bellies closed down 0.37 at 94.00.
This was 0.70 up from the low and 0.70 off the high.
Strength in the pork product market, and
particularly the loin market on Friday helped support a bounce in the hog market
in spite of talk of potentially lower cash markets early this week. The jump in
loin prices gives traders hope that exports, once again, could help clean-up the
hefty supply of pork and keep the cash market firm. The outlook for mild weather
in the Midwest this week helped limit the buying support. The market also found
support on follow-through technical buying after the reversal on Friday.
Estimated Federally Inspected Slaughter came in at 395,000 head versus trade
guesses ranging from 390,000 to 396,000. The CME 2-day lean index for the period
ending January 27th came in at 74.92, up 17 cents from the previous session and
up from 73.76 one week previous. April hogs closed 25 higher on the session with
resistance coming in at 75.95 and 76.45, a 50% correction of the January 18th to
January 28th break.
Technical Outlook
HOGS (FEB) 02/01/2005: Momentum studies are
declining, but have fallen to oversold levels. The major trend has turned down
with the cross over back below the 18-day moving average. It is a slightly
negative indicator that the close was lower than the pivot swing number. The
next downside target is 73.000. The next area of resistance is around 74.200 and
74.650, while 1st support hits today at 73.370 and below there at 73.000.
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COCOA MARKET RECAP
1/31/2005
March Cocoa finished down 37 at 1525, 33 off the
high and 2 up from the low.
The cocoa market gapped down and managed an
impressive range down and that would seem to leave the market with some
additional downside. In fact, according to the latest COT report it would seem
like the cocoa market was long enough to justify the stop loss selling wave that
seemed to dominate the market on Monday. In fact, despite the fact that physical
supply is starting to taper off the market isn’t apparently capable of holding
all of the recent gains. In fact, reports of origin selling seemed to be behind
the break Monday and that would seem to insinuate that buying interest is
thinning along with supply flow.
Technical Outlook
COCOA (MAR) 02/01/2005: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The cross over and close above the 18-day moving average
indicates the longer-term trend has turned up. 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. The next upside target is 1567. The next area of resistance is
around 1542 and 1567, while 1st support hits today at 1508 and below there at
1498.
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COFFEE MARKET RECAP
1/31/2005
March Coffee closed up 0.05 at 105.35. This was
0.75 up from the low and 0.65 off the high.
As opposed to the sugar market, the coffee market
seemed to be somewhat impacted by the rollover action, but since the most recent
COT report showed only a minimal 700 contract increase in the net spec and fund
long position, we are not overly concerned about the short term overbought
status of the coffee market. In conclusion consolidating the gains from last
Friday should leave the bull camp in control of coffee. With the London market
hitting a new high for 2005 that should have fostered a little more gains in the
US market. However, the trade was confused by reports from Vietnamese Trade
Minister that the recently harvested crop would be at least 10% larger than last
year’s crop. Traders had been looking for a decline in the Vietnamese coffee
crop.
Technical Outlook
COFFEE (MAR) 02/01/2005: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The major trend could be turning up with the close back above the 18-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 106.70. The
next area of resistance is around 106.05 and 106.70, while 1st support hits
today at 104.70 and below there at 103.95.
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SUGAR MARKET RECAP
1/31/2005
March Sugar closed up 0.07 at 9.22. This was 0.09
up from the low and 0.02 off the high.
The apparently the trade detected fund buying
despite the recent overly long fund long reading in the COT report. Furthermore,
it would also seem like some of the early buying was short covering by the trade
and with the market poised just below the contract highs, control of the market
would seem to sit with the bull camp. For the market to manage more gains in the
face of roll over action suggests that some longs are willing to stick with
positions regardless of overbought technicals. Seeing minimal gains in the New
York sugar market after the startling impressive gains in the London white sugar
market, seems to hint at an overbought situation in the US.
Technical Outlook
SUGAR (MAR) 02/01/2005: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The cross over and close above the 18-day moving average indicates the
longer-term trend has turned up. The close over the pivot swing is a somewhat
positive setup. The next upside objective is 9.31. The next area of resistance
is around 9.27 and 9.31, while 1st support hits today at 9.17 and below there at
9.10.
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COTTON MARKET RECAP
1/31/2005
March Cotton finished up 0.41 at 43.76, 0.34 off
the high and 0.41 up from the low.
The market managed to push higher on the session
finding support from the oversold condition and from Friday’s news from the
Cotton Council survey that planted acreage for the coming year is likely to be
near unchanged from last year and not a big jump anticipated by the trade. While
higher on the day, futures failed to take out Friday’s highs and given the
bullish news, some traders might see this as a failure. Uzbekistan raised its
cotton fibre output for last year to 976,565 tonnes, up 3.3% from the previous
year.
Technical Outlook
COTTON (MAR) 02/01/2005: The moving average
crossover down (9 below 18) indicates a possible developing short-term
downtrend. Daily stochastics are trending lower but have declined into oversold
territory. The close below the 18-day moving average is an indication the
longer-term trend has turned down. With the close higher than the pivot swing
number, the market is in a slightly bullish posture. The next downside objective
is now at 43.00. The next area of resistance is around 44.13 and 44.49, while
1st support hits today at 43.39 and below there at 43.00.