What Fueled The Impressive Bond Rally
BOND MARKET RECAP
9/26/2003
A very impressive rally Friday seemed to be
fueled by disappointing US numbers, residual weakness in the US stock market and
by ideas that more central bank buying might be seen next week. We also saw
indications that some in the trade were buying the rumor ahead of the next
unemployment report. It is also possible that technical signals on the charts
pushed the funds from a net spec short to a net spec long position. An even more
surprising bit of dialogue flowing from the Trade Friday was the idea that
long-term bonds yields needed to rise to get back to where the Fed thinks they
should be!
Technical Outlook
BONDS (DEC) 09/29/03: Since the close was above
the 2nd swing resistance number, the market’s posture is bullish and could see
more upside follow-through early in the session. Near-term resistance for bonds
is at 112.03 and then again at 112.16, while swing support hits at 110.21 and
below there at 109.20. The market’s close above the 9-day moving average
suggests the short-term trend remains positive. Studies are showing positive
momentum, but are now in overbought territory so some caution is warranted. The
next upside target is 112.16. The 9-day RSI over 70 indicates the market is
approaching overbought levels.
T-NOTES(DEC) Momentum studies are trending
higher, but have entered overbought levels. The near-term upside objective is at
114.27. The market’s close above the 2nd swing resistance number is a bullish
indication. The major trend is down with the cross over back below the 40-day
moving average. Near-term resistance for the T-Notes is at 114.19 and then again
at 114.27, while swing support hits at 113.17 and below there at 112.24. The
market’s short-term trend is positive on a close above the 9-day moving average.
With a reading over 70, the 9-day RSI is approaching overbought levels.
STOCK INDICES RECAP
9/26/2003
The stock market continues to slide lower and
really hasn’t made the type of washout and recovery that would suggest a major
low is in place. However, one must give credit to the market for standing up
against the potential washout Friday morning. The stock market also absorbed or
didn’t see the Greenspan comments Friday afternoon that many consumers are in
major financial distress in the US and are having trouble servicing that debt
load. In the end many traders think the stock market is teetering on the edge of
another failure.
Technical Outlook
S&P500 (DEC) 09/29/03: The market’s close below
the pivot swing number is a mildly negative setup. Underlying support comes in
at 990.50 and 988.25, with overhead resistance at 998.50 and 1004.25. The
market’s short-term trend is negative as the close remains below the 9-day
moving average. Daily stochastics are trending lower, but have declined into
oversold territory. The next downside objective is now at 988.25.
S&P E-Mini (DEC): Daily stochastics declining
into oversold territory suggest the selling may be drying up soon. The next
downside objective is 988.63. The market tilt is slightly negative with the
close under the pivot. The market back below the 40-day moving average suggests
the longer-term trend could be turning down. Near-term resistance for the S&P
Mini is at 999.25 and then again at 1004.63, while swing support hits at 991.25
and below there at 988.63. A negative signal for trend short-term was given on a
close under the 9-bar moving average.
NASDAQ (DEC) The moving average crossover
down (9 below 18) indicates a possible developing short-term downtrend. It is a
slightly negative indicator that the close was lower than the pivot swing
number. The market should run into resistance at 1324.50 and above there at
1343.75 with support at 1297.50 and 1289.75. Momentum studies are declining, but
have fallen to oversold levels. The next downside target is 1289.8. The close
under the 40-day moving average indicates the longer-term trend could be turning
down.
CURRENCY MARKET
RECAP
9/26/2003
It would seem that the Dollar defied gravity
Friday as the economic numbers are weak enough to send the Dollar sharply lower
and the US stock market action was mostly weak into the Dollar Index close.
However, it would seem that the bull camp could manage little follow through
around the highs in the Dollar Friday and many think that it is only a matter of
time before the Dollar comes crashing down in a resumption of the downside
trend. It should be noted that China and Japan hold 44.6% of the foreign
holdings of US Treasuries and so far the flat price of bonds have gained enough
to offset currency losses but we have to wonder if the current rally in
Treasuries combined with a extremely weak view on the Dollar might not result in
a wholesale liquidation of Treasuries soon and a migration out of the Dollar.
Technical Outlook
YEN (DEC): The market’s close above the 9-day
moving average suggests the short-term trend remains positive. The daily closing
price reversal up is positive. With the close higher than the pivot swing
number, the market is in a slightly bullish posture. Swing resistance is
targeted at 89.86 and above there at 90.12, with the yen finding support around
89.29 and below there at 88.98. Studies are showing positive momentum, but are
now in overbought territory so some caution is warranted. The next upside target
is 90.12. The 9-day RSI over 70 indicates the market is approaching overbought
levels.
EURO (DEC): The daily stochastic’s gave a bearish
indicator with a crossover down. Momentum studies are trending lower from high
levels which should accelerate a move lower on a break below the 1st swing
support. The next downside objective is now at 1.1387. The market is in a
bearish position with the close below the 2nd swing support number. Swing
support for the Euro comes in at 1.1387, with overhead resistance at 1.1501. The
market’s short-term trend is positive on a close above the 9-day moving average.
The gap down on the day session chart is bearish with more selling pressure
possible today.
PRECIOUS METALS
RECAP
9/26/2003
The gold market started out weak and stayed weak
for most of the session as the Dollar tried to remain in positive ground and
many in the trade fear the post close report from the COT considering that
another all time record spec long is expected to be posted. With the US equity
market showing moderate weakness and the US Treasuries showing significant
concern over the US recovery progress we have to think that most of the macro
economic supports for the gold market remain in place. Therefore, profit taking
and position squaring are most likely the main driving forces behind the gold
action on Friday.
Technical Outlook
SILVER (DEC): It is a slightly negative indicator
that the close was lower than the pivot swing number. Initial support for silver
is at 509.5 and below there at 506.5 with resistance likely at 517.5 and 519.5.
The market’s close below the 9-day moving average is an indication the
short-term trend remains negative. Negative momentum studies in the neutral zone
will tend to reinforce lower price action. The next downside target is 506.5.
GOLD (DEC): Support for gold today comes in near
376.08, while resistance is pegged at 389.08. 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 376.08. The market’s close below the pivot
swing number is a mildly negative setup. The market’s short-term trend is
negative as the close remains below the 9-day moving average.
COPPER MARKET RECAP
9/26/2003
More weakness in copper Friday was the direct
result of more concern for the US economy and the choppy action in the US equity
market. We also think that the funds in copper were protecting month ending
performance by exiting. After all why would the bulls stay in position given
that most of the economic reports out from the US showed a slackening of the
recovery pace. The biggest influence of the session were reports that China had
actually delivered against shorts as threatened early in the week and that goes
a long way toward stemming the concentrate shortage in China.
ENERGY MARKET RECAP
9/26/2003
The energy complex seemed to sag under profit
taking and possibly because of the dialogue flowing the Russian President’s
meeting with the US President. Putin seemed to suggest that Russian wanted a
bigger portion of the world oil market but wouldn’t restrict exports unless
prices were unfair. Putin verified that Russia did restrict exports in the 1st
quarter of 2002 and those efforts were certainly part of the $8 rally in crude
oil prices in the months after that period. The market almost totally ignored
the fact that Venezuelan election officials settled on some new rules that would
effectively delay the recall election well into 2004 and that could certainly
whip up tensions in Venezuela over the coming weeks!
Technical Outlook
CRUDE OIL (NOV): The market’s close below the
pivot swing number is a mildly negative setup. Support for crude is keyed on
27.92 and below there at 27.66, with resistance pegged at 28.40 and 28.62. The
market’s short-term trend is positive on a close above the 9-day moving average.
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
28.62.
UNLEADED GAS (NOV): Positive momentum studies in
the neutral zone will tend to reinforce higher price action. The next upside
target is 80.73. With the close higher than the pivot swing number, the market
is in a slightly bullish posture. Resistance today is at 80.73, while support
should be found around 76.13. The daily closing price reversal up is positive.
The market’s close above the 9-day moving average suggests the short-term trend
remains positive.
HEATING OIL (NOV): It is a mildly bullish
indicator that the market closed over the pivot swing number. Heating oil should
encounter support around 73.21, with resistance is at 77.41. The market’s
short-term trend is positive on a close above the 9-day moving average. 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 77.41.
The upside closing price reversal on the daily chart is somewhat bullish.
CORN MARKET RECAP
9/26/2003
An inside day in corn wasn’t that impressive but
the market did manage to close higher on the week. Some traders suggested that
fears of excess rain slowing harvest in some regions might have given the market
a little boost but few doubt the market will have much upside potential in the
days ahead. Supposedly Congressional Republicans were working toward a bill that
double the use of corn based ethanol. As usual the progress on the bill was
delayed due to a last minute “glitch” over MTBE! Some expected the situation to
be resolved as early as Friday afternoon.
Technical Outlook
CORN (DEC) 09/29/03: 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 228 1/2.
The market’s close below the pivot swing number is a mildly negative setup.
Market resistance comes in at 228 1/2 today, with support at 224 . The market’s
short-term trend is positive on a close above the 9-day moving average.
SOY COMPLEX RECAP
9/26/2003
November soybeans closed 1 cent higher on the
session and 18 1/2 cents higher on the week. A run at new contract highs failed
at mid-session and the market pulled 4 1/2 cents off of the highs into the
close. For the Grains stocks report, traders look for September 1st stocks at
146 million bushels (range 133-170) as compared with last years stocks at 208
million. Commercial buying supported a move to new contract highs for December
meal. The Census crush report showed August crush at 125.6 million bushels as
compared with 124.7 million expected.
Technical Outlook
SOYBEANS (NOV) 09/29/03: The daily closing price
reversal up is positive. It is a slightly negative indicator that the close was
lower than the pivot swing number. The next area of resistance is around 661 and
665 3/4, while 1st support hits today at 651 1/2 and below there at 646 3/4. The
market’s close above the 9-day moving average suggests the short-term trend
remains positive. Studies are showing positive momentum, but are now in
overbought territory so some caution is warranted. The next upside target is 665
3/4. The 9-day RSI over 70 indicates the market is approaching overbought
levels.
MEAL (DEC): Momentum studies are trending higher,
but have entered overbought levels. The near-term upside objective is at 199.5.
The rally brought the market to a new contract high. First resistance comes in
at 197.8, with support at 194.3. The market’s short-term trend is positive on a
close above the 9-day moving average. It is a mildly bullish indicator that the
market closed over the pivot swing number. With a reading over 70, the 9-day RSI
is approaching overbought levels.
BEAN OIL (DEC): The market’s close above the
9-day moving average suggests the short-term trend remains positive. Daily
stochastics turning lower from overbought levels is bearish and will tend to
reinforce a downside break especially if near-term support is penetrated. The
next downside target is 23.39. 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 23.78 and above there at 23.85. Support should be encountered at 23.55
and 23.39. The 9-day RSI over 70 indicates the market is approaching overbought
levels.
WHEAT MARKET RECAP
9/26/2003
December wheat pushed to the highest level since
September 5th but failed to make inroads onto the gap area (365-367 1/2). Strong
export sales supported the 26 cent rally off of last Fridays lows but the buying
slowed late =in the session and profit taking set-in. The close below the
opening and the close below 361 is a potential bearish technical development.
Jordon bought 128,308 tons of US wheat. The USDA will issue a wheat production
forecast in Tuesday’s small grains report. The average trade estimate for the
wheat crop is at 2.288 billion bushels (range 2.240-2.320) as compared with the
August forecast of 2.292 billion bushels. For the Grains stocks report, traders
look for September 1st stocks at 2.078 (range 2.017-2.125) as compared with last
years stocks at 1.751 billion.
Technical Outlook
WHEAT (DEC) 09/29/03: 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. Look for
near-term support at 355 1/2 and below there at 352 1/2, with resistance levels
at 363 and 367 1/2. The market’s close above the 9-day moving average suggests
the short-term trend remains positive. Positive momentum studies in the neutral
zone will tend to reinforce higher price action. The next upside target is 367
1/2.
LIVE CATTLE RECAP
9/26/2003
December cattle remains in a short-term downtrend
as weaker beef prices and a lower cash market this week contributed to the
selling pressures and to the long liquidation selling from the funds. Boxed-beef
prices at mid-session were down 72 cents on the session to $160.71 for choice
beef and down 56 cents for select beef to $126.54. Weakening packer profit
margins could lead to lower cash markets again next week after cash traded
actively at $88-89 on the week. The Hogs and Pigs report this afternoon could
impact the cattle market early net week if the results are a surprise against
expectations.
Technical Outlook
CATTLE (DEC) 09/29/03: The daily stochastics have
crossed over down which is a bearish indication. The next downside target is
82.22. The close below the 2nd swing support number puts the market on the
defensive. Support should be encountered at 82.67 and below there at 82.22.
Market resistance is at 83.82 and then again at 84.52. The moving average
crossover down (9 below 18) indicates a possible developing short-term
downtrend.
LEAN HOGS RECAP
9/26/2003
While traders were looking for a quiet day with
consolidation trade ahead of the USDA Hogs and Pigs report, the bearish cash
fundamentals helped trigger a sharp break on the session. The move to the lowest
level since September 5th for December hogs triggered more selling from fund
traders who have been trying to hold on to a net long position. Pork cut-out
values were sharply lower on Thursday which contributed to the bearish cash
outlook for early next week. The results of this afternoons September 1st Hogs
and Pigs report will set the tone for early next week. All hogs and pigs are
expected to come in near 97.4% of last year (range 97-98.9), kept for breeding
at 96.9% (95.2-98) and kept for marketings at 97.5% (96.9-99.1).
Technical Outlook
HOGS (DEC) 09/29/03: The market is in a bearish
position with the close below the 2nd swing support number. Resistance levels
comes in at 56.62 and 57.65 today, while support is around 55.07 and then 54.55.
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 54.55.
COCOA MARKET RECAP
9/26/2003
Selling was documented in London and New York in
what seems to be a change of opinion on the prospect of violence. We have to
think that a massive decline in prices emerged partly because of origin selling
and partly because a day passed without significant escalation of recent
tensions. However, hose that got short around the lows Friday certainly carry a
large risk of some weekend flare up of tensions. Seeing some origin selling
alleviates some concern on the part of the commercial and trade interests as any
cocoa that makes it out of the country helps to lower the threat later in the
year. With all the gap up and gap down action on the charts that is bound to
create anxiety and stop loss liquidation in both directions.
Technical Outlook
COCOA (DEC)09/29/03 The gap lower price action on
the day session chart is a bearish indicator for trend. Could see some early
pressure today given the market’s negative setup with the close below the 2nd
swing support. Cocoa should run into resistance at 1617 and above there at 1636
with support at 1587 and 1576. Positive momentum studies in the neutral zone
will tend to reinforce higher price action. The next upside target is 1636.00.
COFFEE MARKET RECAP
9/26/2003
The market closed sharply lower on the session
led by expectations for a good rain across the southern growing area of Brazil.
Since this was the drier region, trade house selling was active enough to
trigger a sharply lower opening which was the high of the day as there was a
lack of new buying interest from roasters or speculators. The Vietnam harvest
will commence in mid-October and the crop is expected to be higher than last
year. The India growing regions had poor weather for the second year in a row
which is expected to keep production down near 275,275 tons as compared with the
2001/2002 crop near 300,000 tons. If the forecast for Brazil is still wet next
week, 60.40 becomes next downside objective for December coffee.
Technical Outlook
COFFEE (DEC)9/29/03 The gap lower price action on
the day session chart is a bearish indicator for trend. Could see some early
pressure today given the market’s negative setup with the close below the 2nd
swing support. Momentum studies are declining, but have fallen to oversold
levels. The next downside objective is now at 62.05.The Coffee contract should
run into resistance at 64.10 and above there at 65.05 with support at 62.6 and
62.05. The market’s short-term trend is negative as the close remains below the
9-day moving average. The major trend is down with the cross over back below the
40-day moving average.
SUGAR MARKET RECAP
9/26/2003
After another threat to break-out to the
downside, March sugar managed a strong recovery on the session. News that
Indonesia issued import permits for 87,500 tons for white sugar, likely for use
into the Ramadan holiday period ahead, help boost ideas that buyers could get
more active over the near-term. The market continues to find some routine buying
in the cash markets on breaks and spats of short-covering from speculators. The
recovery and higher close from 8-month lows for the London market helped support
the recovery bounce.
Technical Outlook
SUGAR (MAR) 09/29/03: The upside closing price
reversal on the daily chart is somewhat bullish. With the close over the 1st
swing resistance number, the market is in a moderately positive position. Swing
resistance comes in at 6.41, with support found at 6.03. The market’s short-term
trend is positive on a close above the 9-day moving average. 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 6.41.
Consider buying pull-backs since daily studies are bullish.
COTTON MARKET RECAP
9/26/2003
The National Cotton Council’s domestic mill use
data for August showed a seasonally adjusted annual rate of 6.3 million bales
from expectations near 6 million bales. While slightly above expectations, it is
still sharp drop from 7.05 million in July and traders are concerned that the
higher cotton price which just discourage more domestic demand. The trade is
still waiting for many buyers to catch-up on bookings as well with many
traditional buyers waiting “hoping” for lower prices into harvest to book more
US cotton. Cumulative export sales for the 2003/2004 season have reached just
30.7% of the USDA forecast for the season as compared with 49.9% on average for
this time of the year.
Technical Outlook
COTTON (DEC) 09/29/03: The market’s close above
the 9-day moving average suggests the short-term trend remains positive. The
swing indicator gave a moderately negative reading with the close below the 1st
support number. Next resistance area comes in at 66.02 and then again at 66.16,
while support is targeted at 65.62 and 65.36. Daily stochastics turning lower
from overbought levels is bearish and will tend to reinforce a downside break
especially if near-term support is penetrated. The next downside target is
65.36.