What Remains A Driving Force For Treasuries

Technical Outlook

BONDS (DEC) 10/27/03: A positive setup occurred with the close over the 1st swing resistance. Near-term resistance for bonds is at 109.27 and then again at 110.13, while swing support hits at 108.11 and below there at 107.13. 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 110.13. Short-term indicators suggest buying dips today.

T-NOTES(DEC) 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 113.22. It is a mildly bullish indicator that the market closed over the pivot swing number. 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 113.12 and then again at 113.22, while swing support hits at 112.13 and below there at 111.24. The market’s short-term trend is positive on a close above the 9-day moving average.

STOCK INDICES RECAP

10/24/2003

The stock market just wants to see the negatives as 85% of earnings reports for the third quarter have come in better than expectations and yet investors continue to liquidate holdings. Maybe the whole October curse is behind the slide but it is also clear that the lack of macro economic information this week has allowed the bears to downgrade the outlook on the recovery. It would almost seem like the trade is no longer expecting favorable holiday sales activity. If the market can’t get bullish about economic prospects then prices have to get cheap enough to attract investors and apparently prices haven’t reached that level yet.

Technical Outlook

S&P500 (DEC) 10/27/03: It is a mildly bullish indicator that the market closed over the pivot swing number. The upside closing price reversal on the daily chart is somewhat bullish. Underlying support comes in at 1022.85 and 1012.83, with overhead resistance at 1036.55 and 1040.23. 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 1012.83.

S&P E-Mini (DEC): The daily closing price reversal up is a positive indicator that could support higher prices. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 1012.63. The market has a slightly positive tilt with the close over the swing pivot. Near-term resistance for the S&P Mini is at 1037.00 and then again at 1040.63, while swing support hits at 1023.00 and below there at 1012.63. A negative signal for trend short-term was given on a close under the 9-bar moving average.

NASDAQ (DEC) The daily closing price reversal up is positive. The market’s close below the 9-day moving average is an indication the short-term trend remains negative. The close equal to the pivot swing number is a neutral directional indicator. The market should run into resistance at 1392.00 and above there at 1399.50 with support at 1362.00 and 1339.50. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 1339.5.

CURRENCY MARKET RECAP

10/24/2003

The Dollar probed to a new contract low but seemed to repel from that new low or at least consolidate just above the new low. However, with the expectations for next weeks US new home sales data to post a decline of 2.2%, the Dollar would seem to have additional downside. Even the US equity market action would seem to propagate additional downside in the Dollar. About the only detraction from a significant slide in the Dollar is that few other economic zones are giving a reason to rush 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. A positive setup occurred with the close over the 1st swing resistance. Swing resistance is targeted at 91.82 and above there at 92.06, with the yen finding support around 91.37 and below there at 91.16. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 91.16.

EURO (DEC): Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 1.1873. The market is in a bearish position with the close below the 2nd swing support number. Swing support for the Euro comes in at 1.1731, with overhead resistance at 1.1873. The downside crossover (9 below 18) of the moving averages suggests a developing short-term downtrend. The gap down on the day session chart is bearish with more selling pressure possible today.

PRECIOUS METALS RECAP

10/24/2003

A new high for the move in gold seemed to be directly tied to the new contract low in the Dollar but it would seem like some bullion dealers were buying into gold and the spec and fund crowd was willing to pay up for fresh long plays. In other words, gold is acting like it has the capacity to move to a new higher trading range and the market wouldn’t seem to be too concerned about the excessively overbought readings in the weekly COT reports. This week end marks the beginning of the Indian Wedding Season and that could also have provided the clear cut buying lift in the action Friday. Many traders are suggesting that gold is now headed to $400.

Technical Outlook

SILVER (DEC): With the close higher than the pivot swing number, the market is in a slightly bullish posture. Initial support for silver is at 513.3 and below there at 511.1 with resistance likely at 518.3 and 519.8. 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 518.3. The downside closing price reversal on the daily chart is somewhat negative.

GOLD (DEC): Support for gold today comes in near 381.73, while resistance is pegged at 396.73. Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 396.73. The market’s close above the 2nd swing resistance number is a bullish indication. The market’s short-term trend is positive on a close above the 9-day moving average.

COPPER MARKET RECAP

10/24/2003

The market doesn’t appear to have found fair value and is concerned about the impact of expanding production. From the recent equity market action and the gains in the Treasury market it would seem like the macro economic outlook is deteriorating and that copper might be breaking off rising supply and the potential for slackening demand. Seeing Chinese traders selling copper during the action Friday is certainly a major negative as they are the main reason copper prices soared in the first place. A CNBC survey suggests that housing starts for September (due out next week) will show a 2.2% decline and that certainly propagates the concern for future copper demand. We are already seeing signs that some South American producers are increasing output and that could leave copper in a down trend pattern for most of next week. A capitulation point in December copper might be as far down as 87.70.

ENERGY MARKET RECAP

10/24/2003

In the last two sessions crude oil prices have rejected a sharply lower move and have also rejected a sharply higher price bid. Certainly seeing Norway agree to additional production cuts if they are needed, is supportive of energy prices but we have to think that the refinery problems and the concern over Nigerian production was a little overdone as a bull theme in the early action Friday morning. Norway also suggested that Brent prices at $22-$25 were reasonable and that Brent prices of $25 to $30 were acceptable! In other words, maybe Norway will favor a higher band price but at the same time might be willing to draw the line at $30. In conclusion, energy prices seem to have the potential hold at a higher level, especially if North American weather sees the cold forecast projected for next week. Apparently Nigeria will reconsider a nationwide strike for next Friday and that could serve to underpin prices in the coming week.

Technical Outlook

CRUDE OIL (DEC): The daily closing price reversal down puts the market on the defensive. It is a mildly bullish indicator that the market closed over the pivot swing number. Support for crude is keyed on 29.71 and below there at 29.35, with resistance pegged at 30.61 and 31.15. The market’s close on the 9-day moving average is neutral. .

UNLEADED GAS (DEC): Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 79.93. With the close higher than the pivot swing number, the market is in a slightly bullish posture. Resistance today is at 84.33, while support should be found around 79.93. The market’s close below the 9-day moving average is an indication the short-term trend remains negative.

HEATING OIL (DEC): The market’s close below the pivot swing number is a mildly negative setup. Heating oil should encounter support around 80.93, with resistance is at 85.43. 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 80.93. The daily closing price reversal down puts the market on the defensive.

CORN MARKET RECAP

10/24/2003

The corn market was mostly unchanged Friday but it was thought that the funds were buyers of a significant number of futures contracts. Some traders think the funds have actually shifted their net short position from 25,000 contracts short to a net long. Some estimates put the amount of fund buying Friday at 7,000 contracts after a massive buying binge on Thursday. Reports of heavy farmer selling held the market back but most of the selling supposedly came in Thursday. Cash corn basis levels fell sharply and cash receipts exploded and that could serve to cap prices in the near term. In other words, higher prices pulled out some corn from the farmers.

Technical Outlook

CORN (DEC) 10/27/03: Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 240 1/4. The market’s close above the 2nd swing resistance number is a bullish indication. Market resistance comes in at 240 1/4 today, with support at 229 3/4. 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.

SOY COMPLEX RECAP

10/24/2003

November soybeans closed roughly on the prior days close but managed to consolidate most of the gains posted from the prior session. Considering the recent break neck rally it is understandable that prices exhibited a profit taking mentality during the session Friday. It is possible that the roll over from November into January and other months sparked some choppy action Friday but it would not seem like anything has changed with respect to the fundamentals. In fact, with the US Dollar falling to another new low, US beans are becoming more attractive but the dominating issue will continue to be whether China continues to buy!

Technical Outlook

SOYBEANS (JAN) 10/27/03: 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 772 1/2 and 776 3/4, while 1st support hits today at 761 1/2 and below there at 754 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 776 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 243.4. First resistance comes in at 242.3, with support at 238.3. 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. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 27.07. It is a slightly negative indicator that the close was lower than the pivot swing number. Daily swing resistance is found at 26.87 and above there at 27.07. Support should be encountered at 26.52 and 26.37.

WHEAT MARKET RECAP

10/24/2003

In the face of reports of consumer wheat buying in Europe prices barely managed to sustain the higher prices forged on Thursday. The trade continues to look toward China for more sales but with spring wheat basis levels weakening significantly it appeared that some recent spec longs in wheat decided to bank profits. Keeping the bull camp interested in the long side were weather forecasts that keep the concern of dryness in the mind of the market. In other words, the winter wheat crop is getting off to a bad start! Minneapolis continues to see significant volume of receipts and that is certainly tempering the bullish mentality in that wheat market.

Technical Outlook

WHEAT (DEC) 10/27/03: It is a slightly negative indicator that the close was lower than the pivot swing number. Look for near-term support at 365 1/2 and below there at 362 3/4, with resistance levels at 372 1/2 and 376 3/4. The moving average crossover up (9 above 18) indicates a possible developing short-term uptrend. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 376 3/4. The 9-day RSI over 70 indicates the market is approaching overbought levels.

LIVE CATTLE RECAP

10/24/2003

December cattle closed 140 higher on the session but still 17 lower on the week. The surge was led by news of cash cattle trading at $98.00, up $3.00 from earlier in the week. Ideas that the market was oversold and the stability in the cash market also helped to halt the aggressive long liquidation selling seen earlier in the week. Beef prices were down $4.85 to $181.81. Slaughter on the week improved to 648,000 head from 620,000 last week but still down from 714,000 last year. While slaughter was down 9.2% from last year, the lower slaughter weights caused beef production to come in at down 12.4% from last year.

Technical Outlook

CATTLE (DEC) 10/27/03: Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 88.70. A positive setup occurred with the close over the 1st swing resistance. Support should be encountered at 89.40 and below there at 88.70. Market resistance is at 90.37 and then again at 90.65. The gap upmove on the day session chart is a bullish indicator for trend. The market’s close above the 9-day moving average suggests the short-term trend remains positive.

LEAN HOGS RECAP

10/24/2003

December hogs closed opened higher but closed 30 lower on the session and closed 712 points lower on the week. Early strength was triggered by the oversold condition of the market and the surge in cattle, however, with cash markets down .50-$1.00 on the session and with the 11% break in pork product prices this week expected to pressure cash again early next week, the market sold off into the close. Slaughter for the week came in at 2.101 million head as compared with 2.118 million last week and 2.048 million last years at this time.

Technical Outlook

HOGS (DEC) 10/27/03: The market’s close below the pivot swing number is a mildly negative setup. Resistance levels comes in at 53.12 and 54.00 today, while support is around 51.77 and then 51.30. The daily closing price reversal down puts the market on the defensive. 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 51.30.

COCOA MARKET RECAP

10/24/2003

Cocoa prices managed to extend the gains posted Thursday but the trade seem to suggest that some shorts were covering ahead of the weekly COT report because they feared the market might bounce Monday if the trade judged the market to be too oversold. We suspect that origin selling will step in and that some Ivory Coast farmers might decide to sell some product in the face of more attractive pricing. In looking at the charts the market would seem to have significant overhead resistance off the underside of the vast consolidation of the 5-months.

Technical Outlook

COCOA (DEC)10/27/03 The market has a slightly positive tilt with the close over the swing pivot. Cocoa should run into resistance at 1455 and above there at 1470 with support at 1409 and 1378. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 1469.50.

COFFEE MARKET RECAP

10/24/2003

December coffee closed higher again and at the highest level since October 8th. However, some traders are suggesting that the market has made a bottom and has sent a message that prices below 62 cents in the December might be too cheap. Slightly drier weather in Brazil might provide some support to coffee prices next week and that is the idea that rains in Central America could create some harvest delays and that is minor support to prices. The London trade thinks that coffee is locked in a range and doesn’t have the fundamentals to trade much higher.

Technical Outlook

COFFEE (DEC)10/27/03 The market has a slightly positive tilt with the close over the swing pivot. Daily stochastics are showing positive momentum from oversold levels which should reinforce a move higher if near-term resistance is taken out. The near-term upside objective is at 64.05.The Coffee contract should run into resistance at 63.60 and above there at 64.05 with support at 62.6 and 62.05. The market’s short-term trend is positive on a close above the 9-day moving average.

SUGAR MARKET RECAP

10/24/2003

A key reversal from a new contract low for the December contract in London triggered the bounce in New York. The lack of new selling interest in London in spite of the weak cash market news helped trigger the reversal and March sugar in New York moved back up to the high end of the 2 1/2 week range. With low volume and key industry traders in Brazil for an industry function, it is hard to read too much into the reversal in London or in the higher trade in New York. The bearish near-term cash fundamentals and the hefty stocks at exporting countries are factors which are likely to bring about producer selling on rallies.

Technical Outlook

SUGAR (MAR) 10/27/03: The market’s close above the 2nd swing resistance number is a bullish indication. Swing resistance comes in at 6.27, with support found at 5.87. 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 6.27.

COTTON MARKET RECAP

10/24/2003

December cotton closed 152 higher on the session and 659 higher on the week as a late surge in trade house buying in call options contributed to the drive to new contract and 5-year highs. More and more reports of strong demand from China for US cotton helped support the market. Reports from the Minister of Agriculture in China last week indicating that the crop could be as low as 4.366 million tons were seen as way too low with most traders still thinking the crop is near 4.9 million tons but with usage at 6.4 million, there are many who believe imports will be higher than 1 million tons. This is near 4.592 million bales. The weekly imports from China of 488,300 bales was enough to trigger a limit-up move on Thursday.

Technical Outlook

COTTON (DEC) 10/27/03: The market’s close above the 9-day moving average suggests the short-term trend remains positive. A positive setup occurred with the close over the 1st swing resistance. Next resistance area comes in at 83.50 and then again at 84.22, while support is targeted at 80.73 and 78.68. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 84.22. The 9-Day RSI over 90 suggests the market is extremely overbought. A new contract high was made on the rally.