Two Sides Of The Energy Coin…

Technical Outlook

#BONDS (JUN) 05/18/04: A positive setup occurred
with the close over the 1st swing resistance. Near-term resistance for bonds is
at 106.01 and then again at 106.09, while swing support hits at 104.32 and below
there at 104.07. The market’s close above the 9-day moving average suggests the
short-term trend remains positive. 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 106.09. Short-term indicators
suggest buying dips today.

T-NOTES(JUN) Daily momentum studies are on the
rise from low levels and should accelerate a move higher on a push through the
1st swing resistance. The near-term upside objective is at 110.04. The market’s
close above the 2nd swing resistance number is a bullish indication. Near-term
resistance for the T-Notes is at 109.30 and then again at 110.04, while swing
support hits at 109.07 and below there at 108.22. The market’s short-term trend
is positive on a close above the 9-day moving average.

 

STOCK INDICES RECAP

5/17/2004

The stock market started out weak in response to
significant international losses but managed to bounce on news that Sarin gas
might have been used in an attack inside Iraq. In other words, the stock market
managed to rally off the argument that the use of weapons of mass destruction
validated part of the Bush Administrations claims, which in turn might raise the
odds that Bush would get re-elected. If Bush is re-elected the stock market is
relieved that the tax cuts put in place by Bush will remain in place. In
retrospect seeing the use of nerve gas is potentially a major negative to equity
prices and to the world. The stock market remains under the gun and will be
watching the direction of oil prices closely as many investors are growing more
concerned that the recovery is set to fail as a result of out of control energy
prices.

Technical Outlook

#S&P500 (JUN) 05/18/04: The market’s close below
the 1st swing support number suggests a moderately negative setup for today.
Underlying support comes in at 1080.20 and 1073.70, with overhead resistance at
1091.20 and 1095.70. The market’s short-term trend is negative as the close
remains below the 9-day moving average. The daily stochastic’s gave a bearish
indicator with a crossover down. The next downside objective is now at 1073.70.
Daily studies pointing down suggests selling minor rallies.

S&P E-Mini (JUN): A bearish signal was triggered
on a crossover down in the daily stochastics. The next downside objective is
1069.50. The close below the 1st swing support could weigh on the market.
Near-term resistance for the S&P Mini is at 1093.75 and then again at 1102.50,
while swing support hits at 1077.25 and below there at 1069.50. A negative
signal for trend short-term was given on a close under the 9-bar moving average.

NASDAQ (JUN) 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
swing indicator gave a moderately negative reading with the close below the 1st
support number. The market should run into resistance at 1395.75 and above there
at 1404.63 with support at 1375.25 and 1363.63. Short-term indicators on the
defensive. Consider selling an intraday bounce. The daily stochastics have
crossed over down which is a bearish indication. The next downside target is
1363.6.

MINI DOW (JUN) 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 9980 and above there at 10057 with support
at 9840 and 9777. The daily stochastics have crossed over down which is a
bearish indication. The next downside target is 9777. 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.

 

CURRENCY MARKET RECAP

5/17/2004

The Dollar started out weak and pretty much
stayed weak throughout the session. The market seemed to bid the Dollar up
briefly when it was learned that Sarin gas was used on troops inside Iraq.
Apparently some players think that the use of weapons of mass destruction
somehow gives the US some credibility. However, in the end the market might take
the use of a nerve gas as a sign that US troops are in even more peril. As if
the geopolitical news weren’t enough to drive the Dollar down, the US Fed also
released softer than expected New York manufacturing stats. In short, the macro
economic differential argument saw the US Dollar’s advantage deteriorate with
the information flow Monday morning.

Technical Outlook

#CURRENCIES 05/18/04: YEN (JUN): The market’s
close below the 9-day moving average is an indication the short-term trend
remains negative. The downside closing price reversal on the daily chart is
somewhat negative. It is a slightly negative indicator that the close was lower
than the pivot swing number. Swing resistance is targeted at 87.87 and above
there at 88.43, with the yen finding support around 87.08 and below there at
86.85. The close under the 40-day moving average indicates the longer-term trend
could be turning down. Momentum studies are declining, but have fallen to
oversold levels. The next downside target is 86.85. The 9-day RSI under 30
indicates the market is approaching oversold levels.

EURO (JUN): 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 1.2078. The market is in a
bearish position with the close below the 2nd swing support number. Swing
support for the Euro comes in at 1.1936, with overhead resistance at 1.2078. The
downside crossover (9 below 18) of the moving averages suggests a developing
short-term downtrend. The major trend is down with the cross over back below the
40-day moving average. The gap down on the day session chart is bearish with
more selling pressure possible today.

 

PRECIOUS METALS RECAP

5/17/2004

Gold prices opened higher, soared and then backed
off into mid session. From the ebb and flow of gold prices early Monday it was
clear that the direction of the Dollar and the action in the US equity market
was driving prices. While silver showed some positive correlation it was clear
that gold was the primary benefactor of the bull case. Certainly seeing rumors
that Sarin gas had been used in Iraq fostered flight to quality interest in gold
and silver but again the gold market seemed to get the biggest benefit. Many
traders suggested that 90.50 in the June Dollar Index might be a critical pivot
point in the gold market in the coming sessions!

Technical Outlook

#P-METALS 05/18/04: SILVER (JUL): It is a
slightly negative indicator that the close was lower than the pivot swing
number. Initial support for silver is at 554.0 and below there at 545.3 with
resistance likely at 575.0 and 581.0. 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 575.0. The downside closing price reversal on the daily chart is
somewhat negative.

GOLD (AUG): Support for gold today comes in near
376.03, while resistance is pegged at 386.63. The daily stochastics gave a
bullish indicator with a crossover up. The near-term upside objective is at
386.63. With the close over the 1st swing resistance number, the market is in a
moderately positive position. The market’s short-term trend is negative as the
close remains below the 9-day moving average. The gap up on the day session
chart gave a bullish indicator and more follow through could be seen this
session.

 

COPPER MARKET RECAP

5/17/2004

The copper market came under aggressive selling
Monday mostly in response to deteriorating macro economic conditions. However,
the market is also a little disappointing in the fact that Chinese buyers
continue to stay away and that US economic numbers released Monday morning
contracted. With a series of technical support levels violated and the near term
cloudy geopolitical outlook it is not surprising that copper slid to new lows
for the move. The only positive thing that developed Monday for copper was a
sharply lower Dollar, which could have made the US copper market look a little
more attractive on the arbitrage front.

 

ENERGY MARKET RECAP

5/17/2004

The energy complex managed another new contract
run early but then faded off those highs as OPEC voiced its desire to take the
edge off the run away bull market mentality. With OPEC suggesting that more
supply wouldn’t end the long speculation in the market and also suggesting that
US refinery problems and US gasoline rules are partially to blame for soaring
world prices the trade did see a temporary setback into mid session. Iran
suggested that the June production increase would be a cooperative effort and
that suggests that somebody besides Saudi Arabia has additional productive
capacity. However, with reports the insurgents used Sarin gas to attack troops
in Iraq one might expect the anxiety premiums to escalate even further. It
should also be noted that Indonesia (an OPEC member) reportedly imported 503,000
barrels of oil in April and exported only 448,000 barrels in March. With OPEC
actually calling on the US to change its gasoline regulations one might think
that the odds of a summer gasoline waiver have improved.

Technical Outlook

#ENERGIES 05/18/04: CRUDE OIL (JUL): The rally
brought the market to a new contract high. It is a mildly bullish indicator that
the market closed over the pivot swing number. Support for crude is keyed on
41.11 and below there at 40.55, with resistance pegged at 41.86 and 42.05. 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 42.05. With a reading over 70, the 9-day RSI is
approaching overbought levels.

UNLEADED GAS (JUL): Studies are showing positive
momentum, but are now in overbought territory so some caution is warranted. The
next upside target is 136.73. It is a slightly negative indicator that the close
was lower than the pivot swing number. Resistance today is at 136.73, while
support should be found around 132.93. The market’s close above the 9-day moving
average suggests the short-term trend remains positive. The 9-day RSI over 70
indicates the market is approaching overbought levels.

HEATING OIL (JUL): It is a mildly bullish
indicator that the market closed over the pivot swing number. Heating oil should
encounter support around 102.31, with resistance is at 105.11. 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 105.11. With a reading over 70, the 9-day RSI is
approaching overbought levels. The upside closing price reversal on the daily
chart is somewhat bullish.

 

CORN MARKET RECAP

5/17/2004

The market followed soybeans lower early in the
session but found some support from the surge in the wheat market and continued
firm cash basis. The outside day higher and close above the opening was seen as
a positive technical factor with traditional technical indicators in oversold
status. The forecast for perfect weather for the early growth period added to
the long liquidation selling seen early in the session. Weekly export
inspections came in at 28.4 million bushels as compared with trade expectations
at 33-38 million bushels. Cumulative shipments have reached 1.29 billion bushels
as compared with 1.04 billion last year at this time. The corn crop in Argentina
is now 70% harvested, down 6.6% from last years pace. Cash basis levels are firm
and there was some short-covering seen ahead of the Philippines tender for
340,000 tons of corn for prompt shipment. Traders expect tonight’s weekly crop
progress report to show plantings near 90-94% complete. December corn support
comes in at 283 and 278 3/4 with 290 1/2 and 296 1/2 as short-term resistance.

Technical Outlook

#CORN (JUL) 05/18/04: Daily stochastics are
trending lower, but have declined into oversold territory. The next downside
objective is now at 286 1/4. The market’s close above the 2nd swing resistance
number is a bullish indication. Market resistance comes in at 300 3/4 today,
with support at 286 1/4. The market’s short-term trend is negative as the close
remains below the 9-day moving average. The outside day up is a positive signal.
The upside closing price reversal on the daily chart is somewhat bullish.

 

SOY COMPLEX RECAP

5/17/2004

A near perfect weather forecast for this week and
continued macro economic concerns for the world and China economies helped to
trigger heavy long liquidation selling early in the session but a recovery in
wheat and corn prices and a partial recovery in world equity markets helped to
ease the selling pressures late. The gap lower opening on a Monday is seen as a
bearish technical indicator and added to the long liquidation trend. The July
futures low came in at the 50-cent daily limit. Funds were noted sellers of near
4000 contracts by mid-session. The CBOT is raising margin requirements for old
crop soybeans which is also a factor which could increase distressed sales due
to margin calls. The Buenos Aires Grain Exchange indicated that the Argentina
soybean crop is now 76.5% harvested. Weekly export inspections came in at 4.292
million bushels as compared with trade expectations at 4-8 million bushels.
Cumulative shipments have reached 801.9 million bushels as compared with 939.6
million last year at this time. Traders expect tonight’s weekly crop progress
report to show plantings near 50% complete. Old crop meal futures margin
requirements were also increased which added to the negative tone with talk of
more active imports of products keeping the cash tone soft. July soybean support
points come in at 889 and 882 1/2 with 921 and 932 1/2 as resistance.

Technical Outlook

#SOYBEANS (JUL) 05/18/04: The gap lower price
action on the day session chart is a bearish indicator for trend. The swing
indicator gave a moderately negative reading with the close below the 1st
support number. The next area of resistance is around 919 and 928 1/4, while 1st
support hits today at 891 1/2 and below there at 873 1/4. The moving average
crossover down (9 below 18) indicates a possible developing short-term
downtrend. Momentum studies are declining, but have fallen to oversold levels.
The next downside target is 873 1/4. The 9-day RSI under 30 indicates the market
is approaching oversold levels.

MEAL (JUL): 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 279.6. The gap down on the day session chart
is bearish with more selling pressure possible today. First resistance comes in
at 296.8, with support at 286.3. The market’s short-term trend is negative as
the close remains below the 9-day moving average. The market’s close below the
pivot swing number is a mildly negative setup.

BEAN OIL (JUL): The market’s close below the
9-day moving average is an indication the short-term trend remains negative.
Momentum studies are declining, but have fallen to oversold levels. The next
downside target is 28.71. It is a slightly negative indicator that the close was
lower than the pivot swing number. The gap lower price action on the day session
chart is a bearish indicator for trend. Daily swing resistance is found at 30.00
and above there at 30.29. Support should be encountered at 29.21 and 28.71. The
9-day RSI under 30 indicates the market is approaching oversold levels.

 

WHEAT MARKET RECAP

5/17/2004

Active trade house buying in the options pit was
enough to pull the market moderately higher into the close. The cold weather
threat of last week resurfaced as a potential bullish supply factor as cold
weather may have permanently damaged crops and lowered yield prospects. More hot
and dry weather for early this week may also be seen as a stressful situation
for the Kansas wheat crop. With the crop in the heading and flowering period,
freezing temperatures may have caused significant damage. In addition, there are
some disease concerns for the soft red winter wheat belt due to too much rain in
the late stages of development. Weekly export inspections came in at 19.4
million bushels as compared with trade expectations at 22-27 million bushels.
Cumulative shipments have reached 1.081 billion bushels as compared with 804.5
million last year at this time. Traders await tonight’s weekly crop progress
report which may show some of the impact of rain last week but also freeze
fears. South Korea is tendering for 20,000 tons of US wheat. July wheat
resistance comes in at 370 and 379 1/4 with support at 361 and 359 1/2.

Technical Outlook

#WHEAT (JUL) 05/18/04: A positive setup occurred
with the close over the 1st swing resistance. Look for near-term support at 362
and below there at 354, with resistance levels at 373 and 376. The market’s
close below the 9-day moving average is an indication the short-term trend
remains negative. Momentum studies are declining, but have fallen to oversold
levels. The next downside target is 354.

 

LIVE CATTLE RECAP

5/17/2004

June cattle closed sharply lower on the session
and to the lowest level since April 30th as a continued weak tone in the beef
market and expectations for weaker cash markets again this week helped trigger
long liquidation selling. Beef prices moved to a new 5-qweek low. Boxed-beef
cut-out values were down $1.18 to $156.84 as compared with $160.69 last week at
this time. Slaughter came in at 126,000 head as compared with trade expectations
of 125,000-130,000 head. Expectations for Friday’s Cattle-on-Feed report to show
low placements helped support the October cattle relative to the nearby
contracts. Ideas that there were unsold cattle in last weeks showlist which will
show up this week helped sour the cash outlook.

Technical Outlook

#CATTLE (AUG) 05/18/04: Negative momentum studies
in the neutral zone will tend to reinforce lower price action. The next downside
target is 81.65. The close below the 2nd swing support number puts the market on
the defensive. Support should be encountered at 82.02 and below there at 81.65.
Market resistance is at 83.42 and then again at 84.42. The market’s close below
the 9-day moving average is an indication the short-term trend remains negative.

 

LEAN HOGS RECAP

5/17/2004

The hog market moved sharply lower on the session
as a steady to lower tone in the cash hog market, lower cattle futures, weakness
in the belly market and ideas that record high pork values might slow demand
helped to trigger the selling. June hogs closed at a 650 point discount to the
May futures on the last day of trade on Friday so the long liquidation sell-off
could find support from the wide basis. The 2-day lean index was up $1.09 to
$81.13 as compared with $71.62 as of the end of April. Slaughter came in at
373,000 head as compared with trade expectations at 355,000-370,000 head. The
higher than expected slaughter could mean strong demand from packers for live
inventory.

Technical Outlook

#HOGS (JUL) 05/18/04: The market is in a bearish
position with the close below the 2nd swing support number. Resistance levels
comes in at 73.92 and 75.32 today, while support is around 71.97 and then 71.42.
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 71.42.

 

COCOA MARKET RECAP

5/17/2004

Cocoa prices made new contract lows in the US
market even in the face of a weak Dollar. In other words, even with support from
the arbitrage market cocoa prices managed to slide to new lows. With the funds
deciding to add to their short positions and origin sellers moving to protect
their physical holdings, there is very little buying interest to prop up prices.
It would seem like the commercial traders are becoming more aggressive with buy
orders and considering recent market action they could become even more
aggressive. Even a temporary strike at an Ivory Coast Port failed to deter the
market from moving lower and that shows the bear camp has very little fear.

Technical Outlook

COCOA (JUL) 05/18/04 The sell-off took the market
to a new contract low. The downside closing price reversal on the daily chart is
somewhat negative. The market tilt is slightly negative with the close under the
pivot. Cocoa should run into resistance at 1327 and above there at 1343 with
support at 1302 and 1293. 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 1293.25.

 

COFFEE MARKET RECAP

5/17/2004

The coffee market closed sharply lower and near
the low end of the recent one-month trading range as funds were active sellers
and there was some speculative selling based on a lack of frost problems on the
cold weekend in Brazil where temperatures reached a low of 3 degrees Celsius in
some coffee growing regions. There was also some origin selling noted which
added to the bearish tone. For the US Monthly Green Coffee stocks report,
released after the close, stocks were down 109,665 bags to 5.845 million bags.
Traders were looking for stocks to be unchanged to 50,000 bags higher so the
report will be considered supportive. Last month’s stocks were 5.955 million
bags.

Technical Outlook

COFFEE (JUN) 5/18/04 There could be some early
pressure today given the market’s negative setup with the close below the 2nd
swing support. The daily stochastics have crossed over down which is a bearish
indication. The next downside objective is now at 67.55. The Coffee contract
should run into resistance at 70.90 and above there at 72.75 with support at
68.3 and 67.55. The market’s short-term trend is negative as the close remains
below the 9-day moving average.

 

SUGAR MARKET RECAP

5/17/2004

July sugar closed 15 higher on the session
supported by speculative buying. News that Indonesia will issue 180,000 tonnes
of raw export permits over the coming months was supportive news, but upside
gains will continue to be limited by slack demand amid a huge Brazilian harvest.
The Commitment-of-Traders report with options showed that speculators liquidated
37,000 contracts of their net long position in the week ending May 11th and
despite the selling by both funds and small traders, the combined speculative
position is still over 82,000 contracts net long which is negative. Indian
stocks were estimated at 8.3 million tons by the USDA at the end of 2003/04 and
they project stocks to be 4.5 million tons at the end of 2004/05. The USDA
expects India to import 1 million tons of mostly raw sugar during 2004/05.

Technical Outlook

#SUGAR (JUL) 05/18/04: With the close over the
1st swing resistance number, the market is in a moderately positive position.
Swing resistance comes in at 6.64, with support found at 6.28. The market’s
short-term trend is positive on a close above the 9-day moving average. The
daily stochastics gave a bullish indicator with a crossover up. The near-term
upside objective is at 6.64. Consider buying pull-backs since daily studies are
bullish.

 

COTTON MARKET RECAP

5/17/2004

December cotton close sharply lower on the
session as the China economic situation combined with fears that China demand
will also slow due to a 15% jump in planted acreage in China helped to keep the
market in a long liquidation mode. Tighter credit rules in China and other
factors to slow economic growth could impact demand for old crop cotton as well
but the USDA actually raised their old crop import demand in the last world
supply/demand report. For the 2003/2004 marketing years, China has bought 4.78
million bales of US cotton as compared with 1.687 million bales last year at
this time.

Technical Outlook

#COTTON (JUL) 05/18/04: The market’s close above
the 9-day moving average suggests the short-term trend remains positive. It is a
slightly negative indicator that the close was lower than the pivot swing
number. Next resistance area comes in at 64.71 and then again at 65.11, while
support is targeted at 63.71 and 63.11. Studies are showing positive momentum,
but are now in overbought territory so some caution is warranted. The next
upside target is 65.11.