Treasuries Roar — Here’s Why
BOND MARKET RECAP
9/8/2004
September Bonds closed up 0-31 at 112-14. This
was 1-16 up from the low and 0-04 off the high.
September 10 Yr Treasury Notes finished up 0-215
at 113-135, equal to the high and 0-295 up from the low.
Treasury prices started out slightly firmed
but then roared in the wake of the Fed Beige Book as the trade took the
statements from the Fed to mean that slowing pockets are still very prevalent in
the US economy. Reports suggesting a cooling of loan demand seemed to feed into
the concern of a housing bubble and that was more than enough cause to push
prices sharply higher. It would almost seem like the market dramatically
downgraded the chance of an interest rate hike in the September 21st FOMC
meeting. Considering that the Fed suggested that the US economy as a whole was
still expanding in late July and August we are a little surprised with the
magnitude of the rally.
Technical Outlook
BONDS (DEC) 09/09/2004: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The close above
the 9-day moving average is a positive short-term indicator for trend. The
market’s close above the 2nd swing resistance number is a bullish indication.
The next downside target is now at 109-07. The next area of resistance is around
112-03 and 112-18, while 1st support hits today at 110-14 and below there at
109-07.
TNOTES (DEC) 09/09/2004: Negative momentum
studies in the neutral zone will tend to reinforce lower price action. The
market’s close above the 9-day moving average suggests the short-term trend
remains positive. The market has a bullish tilt coming into today’s trade with
the close above the 2nd swing resistance. The next downside target is now at
110-290. The next area of resistance is around 112-255 and 113-035, while 1st
support hits today at 111-225 and below there at 110-290.
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STOCK INDICES RECAP
9/8/2004
September S&P finished down 3.5 at 1118.7, 4.7
off the high and 2.6 up from the low.
September S&P E-Mini closed down 3.75 at 1118.5.
This was 2.5 up from the low and 5 off the high.
September Dow closed down 15 at 10327. This was
26 up from the low and 31 off the high.
September Dow E-Mini finished down 14 at 10328,
30 off the high and 27 up from the low.
At times the stock market showed signs of
moderate profit taking but eventually managed to keep losses to fairly
insignificant levels. It seemed like the Greenspan commentary provided support
to stocks but that the Beige book released later in the session ended up robbing
the market of what ever positive tilt was presented from the early Fed dialogue.
While the Fed Beige book suggested that overall US growth continued in late July
and August the stock market was disappointed by the statement that several
districts were reporting slower economic growth. All in all there was little
during the session Wednesday that would suggest a sustained downward pulse in
stock prices.
Technical Outlook
S&P 500 (SEP) 09/09/2004: Rising stochastics at
overbought levels warrant some caution for bulls. A positive signal for trend
short-term was given on a close over the 9-bar moving average. The market’s
close below the pivot swing number is a mildly negative setup. The next upside
objective is 1126.47. The next area of resistance is around 1122.25 and 1126.47,
while 1st support hits today at 1114.95 and below there at 1111.88.
SP EMINI (SEP) 09/09/2004: Momentum studies are
trending higher but have entered overbought levels. The market’s short-term
trend is positive on the close above the 9-day moving average. The market tilt
is slightly negative with the close under the pivot. The next upside objective
is 1126.62. The next area of resistance is around 1122.25 and 1126.62, while 1st
support hits today at 1114.75 and below there at 1111.63.
NASDAQ (SEP) 09/09/2004: Momentum studies
trending lower from overbought levels is a bearish indicator and would 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 downside closing price reversal
on the daily chart is somewhat negative. It is a slightly negative indicator
that the close was under the swing pivot. The next downside target is 1361.25.
The next area of resistance is around 1390.50 and 1403.25, while 1st support
hits today at 1369.50 and below there at 1361.25.
MINIDOW (SEP) 09/09/2004: Momentum studies are
trending higher but have entered overbought levels. The close above the 9-day
moving average is a positive short-term indicator for trend. The market’s close
below the pivot swing number is a mildly negative setup. The next upside
objective is 10386. The next area of resistance is around 10357 and 10386, while
1st support hits today at 10301 and below there at 10273.
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CURRENCY MARKET RECAP
9/8/2004
September US Dollar finished down 44 at 8880, 97
off the high and 2 up from the low.
September Euro finished up 0.8 at 121.87, 0.03
off the high and 1.61 up from the low.
September Euro Dollar closed up 0.015 at 98.105.
This was 0.02 up from the low and 0.0025 off the high.
September Canadian Dollar closed down 0.17 at
77.53. This was 0.28 up from the low and 0.07 off the high.
September British Pound finished up 1.48 at
178.82, 0.2 off the high and 1.72 up from the low.
September Swiss closed up 0.44 at 79.37. This was
1.17 up from the low and 0.02 off the high.
September Japanese Yen closed up 0.02 at 91.5.
This was 0.36 up from the low and 0.2 off the high.
A massive decline in the Dollar takes the
Greenback close to a downside breakout point on the charts. It would seem that
the Dollar was undermined by the revelation US rates were going to hold steady
as some traders apparently expected to see at least a threat of higher rates
following the improvement in the August payroll report. Since the Pound was the
most oversold coming into the session Wednesday it is not surprising that it
forged such an aggressive bounce following the Fed letdown. The Canadian Dollar
came under aggressive pressure in the wake of the BOC rate hike but we suspect
that the Canadian will manage to regain its bull market status within a couple
sessions.
Technical Outlook
YEN (DEC) 09/09/2004: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The close above
the 9-day moving average is a positive short-term indicator for trend. With the
close higher than the pivot swing number, the market is in a slightly bullish
posture. The next downside objective is 91.22. The next area of resistance is
around 92.27 and 92.55, while 1st support hits today at 91.61 and below there at
91.22.
EURO (DEC) 09/09/2004: The market now above the
40-day moving average suggests the longer-term trend has turned up. 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
market’s close above the 9-day moving average suggests the short-term trend
remains positive. The outside day up is somewhat positive. The market’s close
above the 2nd swing resistance number is a bullish indication. The next upside
target is 123.06. The next area of resistance is around 122.62 and 123.06, while
1st support hits today at 120.96 and below there at 119.73.
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PRECIOUS METALS RECAP
9/8/2004
December Gold closed up 2 at 401.4. This was 4.5
up from the low and 0.9 off the high.
December Silver finished down 0.023 at 6.212,
0.058 off the high and 0.112 up from the low.
October Platinum closed up 1.1 at 846.4. This was
18.4 up from the low and 0.4 off the high.
After initial weakness the metals market managed
to recoil away from the lows off the back of a significant Dollar reversal.
However, it was clear that both gold and silver will need step wise losses in
the Dollar to continue to recover from the recent lows. We are actually
surprised that the disappointing economic dialogue released during the session
didn’t negatively influence both gold and silver but it was apparent that all
the metals markets were technically oversold and due for a bounce. With the
Dollar now standing at critical chart support levels it is clear that gold and
silver are also sitting at a critical crossroads.
Technical Outlook
SILVER (DEC) 09/09/2004: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The market’s short-term trend is negative as the close
remains below the 9-day moving average. The market tilt is slightly negative
with the close under the pivot. The next downside objective is 602.9. The market
is approaching oversold levels on an RSI reading under 30. The next area of
resistance is around 629.7 and 636.9, while 1st support hits today at 612.8 and
below there at 602.9.
GOLD (DEC) 09/09/2004: A negative indicator was
given with the downside crossover of the 9 & 18 bar moving average. 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 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 395.1. The next area of
resistance is around 404.0 and 405.9, while 1st support hits today at 398.7 and
below there at 395.1.
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COPPER MARKET RECAP
9/8/2004
December Copper finished down 1.55 at 125.65,
0.55 off the high and 1.55 up from the low.
Copper prices managed a slightly lower range but
according to some sources a much weaker US Dollar provided some arbitrage buying
around the lows. Apparently the copper market was supported by the ICSG deficit
projection of 682,000 metric tons. It would seem that copper prices are finding
some macro economic support but we are not sure that the market has enough
positive inspiration from the economy to manage a rise above the August
consolidation highs.
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ENERGY MARKET RECAP
9/8/2004
October Crude Oil closed down 0.54 at 42.77. This
was 0.37 up from the low and 0.93 off the high.
October Heating Oil closed down 0.24 at 116.12.
This was 1.62 up from the low and 2.28 off the high.
October Unleaded Gas finished up 0.25 at 118.17,
1.83 off the high and 1.87 up from the low.
October Natural Gas finished down 0.16 at 4.63,
0.25 off the high and 0.01 up from the low.
October Propane closed down 0.01 at 0.77. This
was equal to the low and 0.01 off the high.
The energy complex was periodically lifted and
pressured during the action Wednesday which in a sense shows that the market is
in the process of making a major decision. Early in the session prices were
lower off the residual impact of the bearish OPEC statements Tuesday. However,
toward mid session prices were lifted by a series of bullish EIA projections for
growth in world demand. Prices were also lifted by suggestions from the EIA that
OPEC had less excess or buffer supply capacity than was previously suggested.
Late in the session the energy market surprising weakened as if the trade was no
longer expecting the delayed weekly inventory report to extend the string of
declines in US crude oil inventories.
Technical Outlook
CRUDE OIL (OCT) 09/09/2004: The close below the
40-day moving average is an indication the longer-term trend has turned down.
The daily stochastics gave a bearish indicator with a crossover down. Momentum
studies are still bearish but are now at oversold levels and will tend to
support reversal action if it occurs. The close below the 9-day moving average
is a negative short-term indicator for trend. The daily closing price reversal
down is a negative indicator for prices. The market setup is somewhat negative
with the close under the 1st swing support. The next downside objective is now
at 41.61. The next area of resistance is around 43.41 and 44.21, while 1st
support hits today at 42.12 and below there at 41.61.
UNLEADED (OCT) 09/09/2004: Positive momentum
studies in the neutral zone will tend to reinforce higher price action. The
market’s short-term trend is positive on the close above the 9-day moving
average. It is a slightly negative indicator that the close was under the swing
pivot. The next upside objective is 121.85. The next area of resistance is
around 120.02 and 121.85, while 1st support hits today at 116.32 and below there
at 114.46.
HEATING OIL (OCT) 09/09/2004: The daily
stochastics gave a bearish indicator with a crossover down. Negative momentum
studies in the neutral zone will tend to reinforce lower price action. The
market’s short-term trend is positive on the close above the 9-day moving
average. The market could take on a defensive posture with the daily closing
price reversal down. The market’s close below the pivot swing number is a mildly
negative setup. The next downside objective is 112.39. The next area of
resistance is around 118.07 and 120.18, while 1st support hits today at 114.17
and below there at 112.39.
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CORN MARKET RECAP
9/8/2004
December Corn finished up 1/4 at 226 3/4, 1
1/4 off the high and 1 1/2 up from the low. March Corn closed up 1 at 235 1/2.
This was 1 3/4 up from the low and 1 off the high.
With less than a 3 cent range, it is hard to read
much into the close. The market was expected to open higher due to declining
crop conditions but the bearish weather forecast and expectations for the USDA
to show a bumper crop estimate in this week’s report helped to trigger some
early selling. The market managed to hold 1/4 cent above the August lows which
sparked some additional buying into mid-session. Expectations for increased
harvest moving into the heart of the Midwest soon helped to limit the buying.
While the weekly crop progress reports showed significant advancement to
maturity, the crops in Minnesota and South Dakota are still significantly behind
normal maturity rates for this time of the year. Crops which have reached the
denting stage increased to 61% from 46% last week and 74% as the 5-year average.
Iowa jumped to 63% from 39% last week and 80% average and Minnesota jumped to
20% from 6% last week and 71% average. South Dakota is now 35% denting vs. 17%
last week and 66% average. As a result, an early end to the growing season for
Minnesota and South Dakota could have a significant impact on the balance sheet
for the 2004/2005 season. Minnesota is the 4th largest producing state and South
Dakota ranks 6th. A 20% cut in production from these two states alone (if the
growing season ends early) would represent 307 million bushels. This compares
with the current ending stocks forecast of 1.132 billion bushels. December corn
support comes in at 226 1/2 and 225 with resistance at 230 1/2 and 232 3/4.
Technical Outlook
CORN (DEC) 09/09/2004: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
close below the 9-day moving average is a negative short-term indicator for
trend. It is a mildly bullish indicator that the market closed over the pivot
swing number. The next downside target is now at 224. The next area of
resistance is around 228 and 229 1/4, while 1st support hits today at 225 1/2
and below there at 224.
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SOY COMPLEX RECAP
9/8/2004
November Soybeans finished unchanged at 583 1/2,
2 1/2 off the high and 6 up from the low. January Soybeans closed down 1/2 at
590 1/2. This was 5 1/2 up from the low and 2 off the high.
December Soymeal closed up 2 at 170.7. This was
3.4 up from the low and 0.3 off the high.
December Soybean Oil finished down 0.35 at 23.62,
0.33 off the high and 0.34 up from the low.
While declining crop conditions for the week came
as a bullish surprise to support the higher opening, the outlook for warm and
mostly dry weather for the next week was seen as bearish and the market pushed
below Tuesday’s lows before a late recovering bounce. Talk of high yields in the
delta and higher than expected yields in the southern cornbelt helped to
support. Funds were noted sellers of near 200 contracts. The weather looks ideal
to help the crop reach maturity in the north and for increased harvest activity
in the south in the days just ahead. The lack of frost concerns added to the
bearish tone and the National Weather Service 6-10 and 8-14 day weather models
indicated above normal temperatures ahead. Basis levels for soybeans and meal
have slipped recently as harvest moves north and delta soybeans have also moved
north. The lack of deliveries against the September contracts, however, has
provided some underlying support. The technical action this week seems bearish
with the market gapping the uptrend channel to start the week and futures
hitting the lowest level since August 17th today. November soybeans short-term
resistance points come in at 584 1/2 and 586 with 575 and 565 1/2 as support.
Technical Outlook
BEANS (NOV) 09/09/2004: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. It is a slightly negative indicator that the close was under the swing
pivot. The next downside target is 574 1/4. The next area of resistance is
around 587 3/4 and 591, while 1st support hits today at 579 1/4 and below there
at 574 1/4.
MEAL (DEC) 09/09/2004: A negative indicator was
given with the downside crossover of the 9 & 18 bar moving average. Negative
momentum studies in the neutral zone will tend to reinforce lower price action.
The market’s close below the 9-day moving average is an indication the
short-term trend remains negative. The market has a slightly positive tilt with
the close over the swing pivot. The next downside target is now at 166.3. The
next area of resistance is around 172.5 and 173.6, while 1st support hits today
at 168.9 and below there at 166.3.
BEANOIL (DEC) 09/09/2004: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. The market’s short-term trend is negative as the close
remains below the 9-day moving average. It is a slightly negative indicator that
the close was lower than the pivot swing number. The next downside target is now
at 22.95. The next area of resistance is around 23.95 and 24.28, while 1st
support hits today at 23.29 and below there at 22.95.
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WHEAT MARKET RECAP
9/8/2004
December Wheat finished up 2 1/2 at 319 3/4, 1 off the high
and 3 3/4 up from the low. March Wheat closed up 2 1/4 at 330. This was 4 up
from the low and 1/4 off the high.
The lack of producer selling and increase in
export activity has combined to support December wheat futures and cash basis
levels this week and the cash strength could begin to attract short-covering
from fund traders who hold a near record net short position. The technical
action is improving with a series of three “higher lows” since the August low
and the market beginning to show an ability to move above some significant
moving averages. Short-covering could intensify if resistance levels are
violated. Taiwan is tendering from 86,000 tons of US wheat and South Korea
bought 10,200 tons overnight. Deliveries were considered light at 120 lots.
Weekly export inspections from yesterday were 32.8 million bushels as compared
with trade expectations for 18.0-23.0 million bushels. In addition, cumulative
export sales are running well ahead of the pace to reach the current USDA
projection. The Canadian wheat board indicated that crop production in the
countries grain belt could be down 5-10% due to poor weather. Statistic Canada
pegged July 31st wheat stocks at 6.062 million tons from 5.725 million last
year. A Reuters survey showed the average trade estimate for the US 2004/2005
ending stocks for Friday’s report at 560 million bushels (range 531-578) as
compared with 578 million bushels from the USDA in the August report. Support
for December wheat comes in at 318 and 312 with 321 and 323 3/4 as resistance.
Technical Outlook
WHEAT (DEC) 09/09/2004: Stochastics trending
lower at midrange will tend to reinforce a move lower especially if support
levels are taken out. The market’s short-term trend is negative as the close
remains below the 9-day 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 314 1/2. The next area of resistance is around 322 and 323
3/4, while 1st support hits today at 317 1/2 and below there at 314 1/2.
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LIVE CATTLE RECAP
9/8/2004
October Live Cattle closed up 0.52 at 82.90. This
was 0.50 up from the low and 0.50 off the high.
October Feeder Cattle finished up 1.50 at 108.07,
0.57 off the high and 1.47 up from the low.
The market managed to close moderately higher on
the session after markets failed to push lower after holding 82.00 support for
October cattle. Indications that Japan might ease their requirements to test all
cattle for mad cow disease is seen as a potential positive factor for the coming
months. Strength in the beef market and hopes that the “re-stocking” process for
Florida once the power is restored to millions of customers who lost frozen and
fresh meat due to the hurricane helped to support. Boxed-beef cutout values
(600-750 choice) were up $0.70 on the day at mid-session to $132.16 as compared
with $136.07 last week at this time. Slaughter came in at 124,000 head as
compared with trade expectations of 124,000-129,000 head.
Technical Outlook
CATTLE (OCT) 09/09/2004: Momentum studies are
declining, but have fallen to oversold levels. The market’s close below the
9-day moving average is an indication the short-term trend remains negative.
Market positioning is positive with the close over the 1st swing resistance. The
next downside target is 81.920. The next area of resistance is around 83.400 and
83.900, while 1st support hits today at 82.420 and below there at 81.920.
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LEAN HOGS RECAP
9/8/2004
October Lean Hogs closed down 0.57 at 64.55. This
was 0.40 up from the low and 0.60 off the high.
February Pork Bellies finished up 0.30 at 96.05,
0.55 off the high and 1.20 up from the low.
The market pushed sharply lower on the session
finding increased selling from the trade due to lower cash markets, expectations
for lower cash markets on Thursday and ample near-term supply of market-ready
hogs. Weekly average weights for Iowa/Minnesota for the week ending September
9th were reported at 262.3 pounds which is up from 261.8 pounds last week and
257.1 pounds last year. With weekly slaughter running over 2 million head and
hefty weight hogs, pork production is running at a high pace. Slaughter came in
at 400,000 head as compared with trade expectations of 394,000-399,000 head. For
the weekly cold storage report, traders are looking for a net out-movement of
1.0-1.6 million pounds as compared with a net out-movement of 1.8 million pounds
of frozen bellies last week.
Technical Outlook
HOGS (OCT) 09/09/2004: Momentum studies are
rising from mid-range, which could accelerate a move higher if resistance levels
are penetrated. The market’s close below the 9-day moving average is an
indication the short-term trend remains negative. It is a slightly negative
indicator that the close was lower than the pivot swing number. The next upside
target is 65.570. The next area of resistance is around 65.020 and 65.570, while
1st support hits today at 64.050 and below there at 63.600.
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COCOA MARKET RECAP
9/8/2004
December Cocoa finished up 9 at 1488, 10 off the
high and 38 up from the low.
The cocoa market probed to yet another new low
for the move but did manage to recoil from the low into the close. It seems that
some funds were buyers around the lows and that may suggest a fair fundamental
value was found or at least a solid technical level was found on the charts.
While the weather hasn’t changed we suspect that some shorts were growing
impatient considering the magnitude of the declines posted since the August
high. The Press also reported Trade buying and that could mean that commercial
buyers saw value around the $1,450 low.
Technical Outlook
COCOA (DEC) 09/09/2004: Momentum studies are
still bearish but are now at oversold levels and will tend to support reversal
action if it occurs. The close below the 9-day moving average is a negative
short-term indicator for trend. The upside daily closing price reversal gives
the market a bullish tilt. It is a slightly negative indicator that the close
was under the swing pivot. The next downside target is now at 1433. The market
is approaching oversold levels on an RSI reading under 30. The next area of
resistance is around 1512 and 1529, while 1st support hits today at 1464 and
below there at 1433.
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COFFEE MARKET RECAP
9/8/2004
December Coffee closed up 0.40 at 71.25. This was
0.70 up from the low and 0.35 off the high.
While the coffee market respected the prior
sessions low, it would not seem like there was much in the way of speculative
interest standing in the way of more selling. However, with rumors of roaster
buying we suspect that some traders will hesitate to sell coffee 400 points
below the recent highs. Some traders thought that the fund selling interest was
drying up and that could also serve to reduce the downside momentum. In general
it would seem like weather concerns are dripping from the market and that could
leave coffee without a dominating focus.
Technical Outlook
COFFEE (DEC) 09/09/2004: 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 market has a slightly positive tilt with the close over the swing
pivot. The next downside objective is 70.15. The next area of resistance is
around 71.75 and 72.20, while 1st support hits today at 70.75 and below there at
70.15.
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SUGAR MARKET RECAP
9/8/2004
October Sugar closed up 0.03 at 7.92. This was
0.20 up from the low and 0.07 off the high.
October sugar closed 3 ticks higher on the
session with a volatile trade posting a 27 point range. Active fund and
speculative buying drove the market sharply lower on the session until
commercial buying emerged to support. Liquidation out of the October contract
was the feature of the day with March sugar gaining 9 points on March during the
session. Trade houses also helped to support a recovery in London. Indonesian
and Iraq appear to have interest in buying cash sugar on the recent break which
might have helped support. Talk of increased interest from international buyers
helped to support. There is also talk that India could buy 2.0-2.5 million tons
of sugar from October through September of 2005.
Technical Outlook
SUGAR (MAR) 09/09/2004: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. A positive signal for trend short-term was given on a close over the
9-bar moving average. The upside closing price reversal on the daily chart is
somewhat bullish. A positive setup occurred with the close over the 1st swing
resistance. The next upside target is 8.91. The next area of resistance is
around 8.80 and 8.91, while 1st support hits today at 8.51 and below there at
8.31.
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COTTON MARKET RECAP
9/8/2004
October Cotton finished up 0.80 at 53.00, 0.85
off the high and 1.10 up from the low.
The cotton market opened lower but closed 37
higher for December futures led by fears of additional hurricane damage to the
crop if the new hurricane moves into the gulf this weekend. The average trade
estimate (Reuters survey) for Friday’s USDA crop production report is at 19.857
million bales (range 19.5-20.4) as compared with the August forecast of 20.18
million bales and 18.26 million bales last year. Ending stocks are expected near
5.62 million bales (range 5.3-6.0) as compared with the August forecast of 5.9
million bales.
Technical Outlook
COTTON (DEC) 09/09/2004: Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. The close above the 9-day moving average is a positive short-term
indicator for trend. The close over the pivot swing is a somewhat positive
setup. The next downside target is now at 51.00. The next area of resistance is
around 54.19 and 55.29, while 1st support hits today at 52.05 and below there at
51.00.