What The Dollar Decline Means For Gold
BOND MARKET RECAP
10/14/2003
The bond market was down hard as it was expected
to be following the very strong US economic situation Monday. However, the
economic information Tuesday morning was less than impressive and served to
bring the Treasury market up off its lows. The fact, that the US stock market
surrendered early gains also seemed to provide the bonds with some short
covering interest. Some traders were suggesting that the bonds were a little
short term oversold around the lows Tuesday and that is why the market bottomed.
The trade found it hard to muster much in the way of fresh selling considering
that initial lofty expectations for the retail sales readings due out Wednesday
morning we changed to include a contraction of -0.2%.
Technical Outlook
BONDS (DEC) 10/15/2003: The close below the 1st
swing support could weigh on the market. Near-term resistance for bonds is at
107.14 and then again at 107.30, while swing support hits at 106.19 and below
there at 106.08. A negative signal for trend short-term was given on a close
under the 9-bar moving average. The market back below the 40-day moving average
suggests the longer-term trend could be turning down. Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
next downside objective is 106.08. Bearish daily studies indicate selling minor
rallies this session.
T-NOTES(DEC) Daily stochastics are trending
lower, but have declined into oversold territory. The next downside objective is
now at 111.08. The market’s close below the 1st swing support number suggests a
moderately negative setup for today. 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
112.00 and then again at 112.10, while swing support hits at 111.15 and below
there at 111.08. The downside crossover (9 below 18) of the moving averages
suggests a developing short-term downtrend.
STOCK INDICES RECAP
10/14/2003
The stock market might have gotten a little
overbought Tuesday around the highs. It is also clear that earnings reports are
being given less consideration than many would have expected or it would seem
like the trade was expecting some really strong readings. Certainly the trade
was undermined by calls to change the “specialist” system at the NYSE, as any
change of historical context should cerate uncertainty in the market place. The
stock market was also undermined by the weaker than expected Richmond Fed
readings released Tuesday morning. A sharp reversal in the US Dollar and soaring
energy prices might also have prompted longs to take profits.
Technical Outlook
S&P500 (DEC) 10/15/2003: The close over the pivot
swing is a somewhat positive setup. The outside day up gives the market a
positive tilt. The upside daily closing price reversal gives the market a
bullish tilt. Underlying support comes in at 1042.80 and 1035.70, with overhead
resistance at 1053.20 and 1056.50. The close above the 9-day moving average is a
positive short-term indicator for trend. Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside objective is at 1056.50. The market is becoming somewhat
overbought now that the RSI is over 70.
S&P E-Mini (DEC): The outside day up and close
above the previous day’s high is a positive signal. A new contract high was made
on the rally. The daily closing price reversal up is positive. Studies are
showing positive momentum, but are now in overbought territory so some caution
is warranted. The next upside target is 1056.75. With the close higher than the
pivot swing number, the market is in a slightly bullish posture. Near-term
resistance for the S&P Mini is at 1053.50 and then again at 1056.75, while swing
support hits at 1043.00 and below there at 1035.75. 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.
NASDAQ (DEC) The market made a new contract
high on the rally. A positive signal for trend short-term was given on a close
over the 9-bar moving average. The market has a slightly positive tilt with the
close over the swing pivot. The market should run into resistance at 1433.50 and
above there at 1438.25 with support at 1415.50 and 1402.25. Rising stochastics
at overbought levels warrant some caution for bulls. The next upside objective
is 1438.25.
CURRENCY MARKET
RECAP
10/14/2003
A major range up trade was virtually rejected
Tuesday in a sign that the Dollar might only have short covering interest in its
corner. In other words, fresh long players simply have no appetite for the long
side of the Dollar. In looking at the US economic numbers floated Tuesday it’s
understandable that the market turned on the Dollar especially since the US
stock market was also showing signs of weakness. The Pound showed the most
benefit off the Dollar reversal and it would appear that the Pound is primed for
a run to a new higher trading range.
Technical Outlook
YEN (DEC): A positive signal for trend short-term
was given on a close over the 9-bar moving average. The close below the 1st
swing support could weigh on the market. Swing resistance is targeted at 92.60
and above there at 92.95, with the yen finding support around 91.52 and below
there at 90.79. A bearish signal was triggered on a crossover down in the daily
stochastics. Stochastics turning bearish at overbought levels will tend to
support lower prices if support levels are broken. The next downside objective
is 90.79. The market is approaching overbought levels with an RSI over 70.
EURO (DEC): Momentum studies trending lower from
overbought levels is a bearish indicator and would tend to reinforce lower price
action. The next downside target is now at 1.1537. The defensive setup, with the
close under the 2nd swing support, could cause some early weakness. Swing
support for the Euro comes in at 1.1537, with overhead resistance at 1.1847. The
close above the 9-day moving average is a positive short-term indicator for
trend. More selling pressure is likely given yesterday’s gap lower price action
on the day session chart.
PRECIOUS METALS
RECAP
10/14/2003
The gold market owes the bounce Tuesday directly
to the decline in the US Dollar, which seemed to follow the US equity market
lower after an initial higher opening. It was clear that the gold market got
more support from the Dollar action then did silver and that clearly shows the
divergence between the precious metals. In fact, given the dismal economic
information from the Fed and the slightly weak equity price action Tuesday the
silver market seems to be on the verge of a technical failure. In the end, the
gold market seems to have only a weaker Dollar in its bull corner.
Technical Outlook
SILVER (DEC): The market tilt is slightly
negative with the close under the pivot. Initial support for silver is at 488.7
and below there at 484.1 with resistance likely at 494.0 and 497.7. A positive
signal for trend short-term was given on a close over the 9-bar moving average.
Rising from over sold levels, daily momentum studies would support higher prices
especially on a close above resistance. The next upside objective is 494.0.
GOLD (DEC): Support for gold today comes in near
371.30, while resistance is pegged at 380.10. Momentum studies are still
bearish, but are now at oversold levels and will tend to support reversal action
if it occurs. The next downside target is now at 371.30. The close over the
pivot swing is a somewhat positive setup. The close above the 9-day moving
average is a positive short-term indicator for trend.
COPPER MARKET RECAP
10/14/2003
The copper market appeared to make a blow off top
after running right up to 90.00 and failing aggressively. It seemed as if the
funds turned away from copper after the run and with the US stock market weaker
and the Richmond Fed readings coming out soft its understandable that stop loss
selling prevailed. We have seen no change in the pace of decline in LME stocks
but recently the Shanghai copper stocks have shown some periodic gains. Without
a solidly bullish macro economic outlook nearby copper prices might find it hard
to sustain prices around the 90-cent level.
ENERGY MARKET RECAP
10/14/2003
Apparently the trade is beginning to factor the
November 1st production cut and a return to slightly colder US temps. So far,
the market seems to be largely unconcerned about possibly supply disruptions in
Nigeria, especially since the Press reported a key refinery to have returned to
the 50,000 barrel per day output level and prices hardly took notice. The trade
noted fund buying in the action Tuesday and that is warranted considering that
the technical position of the crude oil market was probably minimally long
entering the session Tuesday.
Technical Outlook
CRUDE OIL (DEC): The market rallied to a new
contract high. The daily closing price reversal down is a negative indicator for
prices. It is a slightly negative indicator that the close was under the swing
pivot. Support for crude is keyed on 31.46 and below there at 31.05, with
resistance pegged at 32.41 and 32.95. The market’s close on the 9-day moving
average is neutral. .
UNLEADED GAS (DEC): Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
89.19. The market has a slightly positive tilt with the close over the swing
pivot. Resistance today is at 89.19, while support should be found around 83.79.
The daily closing price reversal up is a positive indicator that could support
higher prices. A positive signal for trend short-term was given on a close over
the 9-bar moving average. The market is approaching overbought levels with an
RSI over 70.
HEATING OIL (DEC): It is a slightly negative
indicator that the close was under the swing pivot. Heating oil should encounter
support around 86.34, with resistance is at 90.44. The close above the 9-day
moving average is a positive short-term indicator for trend. A crossover down in
the daily stochastics is a bearish signal. Momentum studies trending lower from
overbought levels is a bearish indicator and would tend to reinforce lower price
action. The next downside target is now at 86.34. The market is becoming
somewhat overbought now that the RSI is over 70. The daily closing price
reversal down is a negative indicator for prices.
CORN MARKET RECAP
10/14/2003
December corn closed 1 cent higher on the session
after the early weakness failed to generate new selling interest. The market was
down early on seasonal selling pressures brought on by expectations for weakness
due to the harvest of the record crop. For the third session in a row, support
at the 215 1/2 level held. Weekly export inspections came in at 33.499 million
bushels as compared with trade expectations at 29-34 million. In addition, the
USDA announced a sale of 215,000 tons of US corn to unknown destination. For the
weekly crop progress report, released in the afternoon, traders are looking for
harvest to be near 35-40% complete as of Sunday.
Technical Outlook
CORN (DEC) 10/15/2003: Momentum studies are still
bearish, but are now at oversold levels and will tend to support reversal action
if it occurs. The next downside target is now at 214 . There could be more
upside follow through since the market closed above the 2nd swing resistance.
Market resistance comes in at 222 today, with support at 214 . The close below
the 9-day moving average is a negative short-term indicator for trend.
SOY COMPLEX RECAP
10/14/2003
November soybeans closed nearly 10 cents higher
on the session while July soybeans were down 20 cents. The bull spreads were
very active with a major trade house noted as bull spreading more than 3000
contracts. The demand seems to be front loaded for the market with China demand
and US crusher demand the most active for US soybeans in the next few months. In
addition, the export pace remains strong. Weekly export inspections came in at
24.4 million bushels as compared with trade expectations at 17-22 million. Talk
of profit-taking from the overbought condition and South America producer
hedging helped pressure the 2004 contracts.
Technical Outlook
SOYBEANS (NOV) 10/15/03 The market made a new
contract high on the rally. The market setup is supportive for early gains with
the close over the 1st swing resistance. The next area of resistance is around
748 and 753 1/4, while 1st support hits today at 734 1/2 and below there at 726
1/4. The market’s close on the 9-day moving average is neutral. Rising
stochastics at overbought levels warrant some caution for bulls. The next upside
objective is 753 1/4. The market is approaching overbought levels with an RSI
over 70.
MEAL (DEC): Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 225.0. The market rallied to a new contract
high. First resistance comes in at 223.3, with support at 219.2. The close above
the 9-day moving average is a positive short-term indicator for trend. Market
positioning is positive with the close over the 1st swing resistance. The market
is becoming somewhat overbought now that the RSI is over 70.
BEAN OIL (DEC): A positive signal for trend
short-term was given on a close over the 9-bar moving average. Rising
stochastics at overbought levels warrant some caution for bulls. The next upside
objective is 27.28. It is a slightly negative indicator that the close was lower
than the pivot swing number. The market made a new contract high on the rally.
The market could take on a defensive posture with the daily closing price
reversal down. Daily swing resistance is found at 26.97 and above there at
27.28. Support should be encountered at 26.40 and 26.14. The market is
approaching overbought levels with an RSI over 70.
WHEAT MARKET RECAP
10/14/2003
December wheat closed 8 1/2 cents lower on the
session and at the low end of a 10 cent range. Weak export news, fund selling
and rumors that Egypt may have cancelled a cargo of soft red winter wheat from
the US helped pressure. Weekly export inspections came in at just 22.01 million
bushels as compared with trade expectations at 25-30 million. With traders
already concerned that the presence of vomitoxin in some US wheat could be
hurting demand, rumors that Egypt cancelled 60,000 tons of US wheat due to the
presence of vomitoxin helped trigger the aggressive long liquidation selling.
The recent break in futures and weakness in the US dollar was seen as a positive
combination for exports but the weak inspection number was enough to add to the
bearish demand outlook.
Technical Outlook
WHEAT (DEC) 10/15/2003: The market could take on
a defensive posture with the daily closing price reversal down. Bearish daily
studies indicate selling minor rallies this session. The close below the 1st
swing support could weigh on the market. Expect near-term support around 319 1/2
and below there at 316 , with resistance levels at 331 and 339 . A negative
signal for trend short-term was given on a close under the 9-bar moving average.
Daily stochastics declining into oversold territory suggest the selling may be
drying up soon. The next downside objective is 316 .
LIVE CATTLE RECAP
10/14/2003
October cattle closed limit up for the 7th
session in a row but December cattle opened at limit-up but closed sharply
lower. The reversal from a contract high could attract technical selling
pressure; however, the close was still at a sharp discount to the cash market.
Boxed-beef cut-out values were up $5.31 to $187.07 which is a new all-time high.
October closed at 100.32 which is an all-time high for cattle prices. An
increase in margins imposed by the exchanged may have added to the negative
tone.
Technical Outlook
CATTLE (DEC) 10/15/2003: A bearish signal was
triggered on a crossover down in the daily stochastics. Stochastics turning
bearish at overbought levels will tend to support lower prices if support levels
are broken. The next downside objective is 90.42. Could see some early pressure
today given the market’s negative setup with the close below the 2nd swing
support. Support should be encountered at 91.50 and below there at 90.42. Market
resistance is at 94.45 and then again at 96.32. The key reversal down puts the
market on the defensive. The outside day down is somewhat negative. The market
made a new contract high on the rally. The market could take on a defensive
posture with the daily closing price reversal down. A positive signal for trend
short-term was given on a close over the 9-bar moving average. The market is
approaching overbought levels with an RSI over 70.
LEAN HOGS RECAP
10/14/2003
After opening into new contract highs, the
sharply lower close on the session leaves the market vulnerable to significant
long liquidation and technical selling over the near-term. December hogs closed
sharply lower and the break started when cattle moved off of limit-up in the
morning session. Cash markets were mixed with some locations steady while Peoria
and others were down 50 cents. Ideas that this weeks rally was based on cattle
strength helped trigger the long liquidation trend. Pork production is running
above trade expectations but traders are hopeful that higher beef prices will
support higher pork prices ahead. However, the premium of futures to cash and
the overbought condition helped pressure.
Technical Outlook
HOGS (DEC) 10/15/2003: The market setup is
somewhat negative with the close under the 1st swing support. Resistance levels
comes in at 60.22 and 61.77 today, while support is around 57.82 and then 56.97.
The market rallied to a new contract high. The daily closing price reversal down
is a negative indicator for prices. The upside crossover of the 9 & 18 bar
moving average is a positive signal. Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 61.77.
COCOA MARKET RECAP
10/14/2003
The cocoa market was unable to sustain the
favorable action posted Monday in the action Tuesday. While it is possible that
cocoa prices get some support from developments in Nigeria the market didn’t get
any support Tuesday from the arrest of key Labor leaders. Apparently Nigerian
cocoa farmers are unwilling to continue selling cocoa at deflated prices and
have halted trade. Therefore, cocoa prices might see some support but still
don’t have the catalyst to spark and up trend pattern. The press is reporting
that most of the trade action is taking place between small specs instead of
commercials and origins.
Technical Outlook
COCOA (DEC)10/15/03 The market tilt is slightly
negative with the close under the pivot. Cocoa should run into resistance at
1477 and above there at 1500 with support at 1444 and 1434. Momentum studies are
declining, but have fallen to oversold levels. The next downside target is
1433.75.
COFFEE MARKET RECAP
10/14/2003
December coffee bounced off of Monday’s low at
63.25 today and managed a rally back to 64.50 before settling at 64.20, 0.85
higher on the day. This comes a day after the market broke out to the downside
its lowest level since September of 2002. In the process Dec coffee filled a
63.75-64.00 gap left on Monday’s opening. Commercial buying was seen near the
lows today, with some spec interest developing after that. Additional support
may have been found in Brazil’s weather forecast, which calls for a return to
hot and dry in the next few days after some heavy rainfall over the weekend.
Traders are looking for Wednesday’s monthly coffee stocks report to show a
decline of 50,000 to 210,000 bags during September as compared with 6.227
million bags at the end of August. CSCE exchange stocks were down 6,036 bags to
4.433 million bags with 46,561 pending review. As of September 30th Brazilian
cooperative coffee stocks were measured at 7.50 million bags, 17.6% below a year
ago but up from 7.11 million as of August 31st.
Technical Outlook
COFFEE (DEC)10/15/03 The market has a bullish
tilt coming into today’s trade with the close above the 2nd swing resistance.
Momentum studies are declining, but have fallen to oversold levels. The next
downside objective is now at 59.85.The Coffee contract should run into
resistance at 62.15 and above there at 62.65 with support at 60.75 and 59.85.
The market’s short-term trend is negative as the close remains below the 9-day
moving average.
SUGAR MARKET RECAP
10/14/2003
Sugar closed slightly higher in quiet trade. The
reversal from Monday could support a short-term technical bounce but rallies
still look like selling opportunities. The market continues to be plagued with
bearish supply news as producers from Brazil, Thailand and other key exporters
are stuck holding significant sugar stocks which are available to move on the
world market. World importers continue to operate on a hand-to-mouth basis and
see no reason to extend coverage with increasing supplies on the horizon as
European and Thailand sugars become more available into early 2004. Russian
sugar prices are below world values and importers would loose money if they
brought in sugar at current prices which means that world prices will need to
move lower or internal sugar prices in Russia higher in order to see import
interest from the world’s largest importer.
Technical Outlook
SUGAR (MAR) 10/15/2003: The close over the pivot
swing is a somewhat positive setup. Swing resistance comes in at 6.12, with
support found at 5.90. The close below the 9-day moving average is a negative
short-term indicator for trend. Momentum studies are still bearish, but are now
at oversold levels and will tend to support reversal action if it occurs. The
next downside target is now at 5.90.
COTTON MARKET RECAP
10/14/2003
December cotton closed 34 higher on the session
at 71.62 but stayed inside yesterday’s range throughout the day, marking the
second day of consolidation near the top of Friday’s wide range. However, the
March, May and July 04 contracts all traded to new highs. The weekly spec and
hedge report showed specs net long 54,610 contracts as of October 10th,
representing 50.3% of open interest and an increase of 2% over a week prior. The
gross long reached a record 77,467, adding to concerns about the market’s
“overbought” status. There were comments from the trade that China may have
bought more cotton overnight, after 130,000 were reportedly purchased last week.
The Crop Progress report, released after the close, showed 28% of the crop
harvested as of October 12 versus 29% a year ago and a 5-year average of 39% for
this week. Crops rated good/excellent comprised 48% of the crop versus 50% last
week. There were no year ago ratings. The Cotlook “A” index was unchanged at
69.70.
Technical Outlook
COTTON (DEC) 10/15/2003: A positive signal for
trend short-term was given on a close over the 9-bar moving average. The market
has a slightly positive tilt with the close over the swing pivot. Next
resistance area comes in at 71.90 and then again at 72.15, while support is
targeted at 71.35 and 71.05. Rising stochastics at overbought levels warrant
some caution for bulls. The next upside objective is 72.15. The market is
approaching overbought levels with an RSI over 70.