What Was Surprising About Today’s Bond Rally
BOND MARKET RECAP
10/2/2003
The bonds managed to recover a large portion of
the early losses Thursday probably because the numbers were mostly softer than
expected. However, since the market is faced with the critical monthly
unemployment report we suspect that some of the buying Thursday was short
covering ahead of the report. The surprising thing about the bond rally is that
prices managed to climb in the face of Fed comments that the US economy was
recovering at a good clip. Considering the magnitude of the report Friday
morning one can hardly ascertain much from the action Thursday.
Technical Outlook
BONDS (DEC) 10/3/2003: The close below the 1st
swing support could weigh on the market. Near-term resistance for bonds is at
112.04 and then again at 112.26, while swing support hits at 110.18 and below
there at 109.22. A positive signal for trend short-term was given on a close
over the 9-bar moving average. 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 109.22.
T-NOTES(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 113.03. 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 114.19 and then again at
115.01, while swing support hits at 113.20 and below there at 113.03. The
market’s short-term trend is positive on a close above the 9-day moving average.
STOCK INDICES RECAP
10/2/2003
The stock market is doing a very good job of
discounting negative economic readings but it certainly helped that the Fed was
talking positively toward the US recovery process during the session. We
wondered if the stock market was pricing the potential for the capture of Bin
Laden or Saddam as Pakistani and US forces seem to be aggressively on the trail
of something. At times it seemed like the stock market was factoring in a
possible interest rate cut but with the Fed upbeat on the economy that argument
doesn’t really hold water.
Technical Outlook
S&P500 (DEC) 10/3/2003: The close over the pivot
swing is a somewhat positive setup. Underlying support comes in at 1015.05 and
1008.53, with overhead resistance at 1024.55 and 1027.53. The close above the
9-day moving average is a positive short-term indicator for trend. Momentum
studies are rising from mid-range which could accelerate a move higher if
resistance levels are penetrated. The near-term upside objective is at 1027.53.
S&P E-Mini (DEC): Positive momentum studies in
the neutral zone will tend to reinforce higher price action. The next upside
target is 1027.63. With the close higher than the pivot swing number, the market
is in a slightly bullish posture. The cross over and close above the 40-day
moving average indicates the longer-term trend has turned up. Near-term
resistance for the S&P Mini is at 1024.75 and then again at 1027.63, while swing
support hits at 1015.25 and below there at 1008.63. The market’s close above the
9-day moving average suggests the short-term trend remains positive.
NASDAQ (DEC) 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 1347.50 and above there at 1355.75 with support at
1328.50 and 1317.75. Daily stochastics declining into oversold territory suggest
the selling may be drying up soon. The next downside objective is 1317.75.
CURRENCY MARKET
RECAP
10/2/2003
The Dollar market was the only market that seemed
to directly track the fundamentals Thursday as the weaker than expected early
numbers pulled the Dollar down off the highs and into the close the Dollar gave
even more ground. However, some traders suggested that the Fed comments simply
saved the day for the Dollar because the trade could have really tried to hammer
the Greenback if the Fed hadn’t been upbeat on US prospects. However, the Dollar
looks to remain on the rocks until after the trade sees the unemployment report
Friday morning.
Technical Outlook
YEN (DEC): A positive signal for trend short-term
was given on a close over the 9-bar moving average. The market tilt is slightly
negative with the close under the pivot. Swing resistance is targeted at 90.74
and above there at 90.91, with the yen finding support around 90.31 and below
there at 90.05. Rising stochastics at overbought levels warrant some caution for
bulls. The next upside objective is 90.91. 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 1.1602. The defensive setup, with the
close under the 2nd swing support, could cause some early weakness. Swing
support for the Euro comes in at 1.1602, with overhead resistance at 1.1736. The
close above the 9-day moving average is a positive short-term indicator for
trend. The market is becoming somewhat overbought now that the RSI is over 70.
More selling pressure is likely given yesterday’s gap lower price action on the
day session chart.
PRECIOUS METALS
RECAP
10/2/2003
The bull camp continues to be disappointed but
with the Dollar holding mostly higher on the session one can’t become too
concerned about the lackluster action. There was some divergence between the
silver and gold Thursday but in the end both market ended weaker. The silver
market almost violated critical chart support levels and that should not be
taken lightly, as the silver market probably continues to carry a massive small
spec and fund long position. The type of long component in place in gold and
silver is such that seeing sustained corrective action might begin to result in
some long liquidation!
Technical Outlook
SILVER (DEC): The market tilt is slightly
negative with the close under the pivot. Initial support for silver is at 507.3
and below there at 504.6 with resistance likely at 510.7 and 512.8. 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 504.6.
GOLD (DEC): Support for gold today comes in near
380.15, while resistance is pegged at 387.35. Stochastics trending lower at
midrange will tend to reinforce a move lower especially if support levels are
taken out. The next downside target is now at 380.15. It is a slightly negative
indicator that the close was under the swing pivot. The close below the 9-day
moving average is a negative short-term indicator for trend.
COPPER MARKET RECAP
10/2/2003
The copper market posted a very impressive rally
Thursday and that rally was accomplished in the face of poor economic numbers
and a weak stock market. In fact, the copper market managed to rally
aggressively despite seeing talk of production restarts. Maybe the fact that the
worlds largest copper producer raised its 2004 premiums to European customers
sends a signal that demand is getting strong enough to raise prices caused the
market to rally. It is now expected that premium levels in the Pacific Rim will
also rise and that could give the overnight markets a reason to follow US prices
higher.
ENERGY MARKET RECAP
10/2/2003
The energy complex saw support from ideas that
winter stockpiling was underway in the products. With some record cold readings
in the Midwest the trade was certainly prompted to seek forward coverage for
future needs. The crude oil market as also lifted by news that Venezuelan
production was slipping. Natural gas prices got additional negative news from
the weekly inventory readings but the colder than normal weather pattern
discouraged the natural gas market from falling more significantly off the
supply figures. As long as refinery-operating rates remain at low levels one
might conclude that product stocks are going to tighten, especially if the early
heating use continues.
Technical Outlook
CRUDE OIL (NOV): The cross over and close above
the 40-day moving average is an indication the longer-term trend is up. Follow
through buying looks likely if the market can hold yesterday’s gap on the day
session chart. Market positioning is positive with the close over the 1st swing
resistance. Support for crude is keyed on 29.68 and below there at 29.50, with
resistance pegged at 30.01 and 30.16. 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 30.16. The market is becoming somewhat
overbought now that the RSI is over 70.
UNLEADED GAS (NOV): Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
83.80. The market setup is supportive for early gains with the close over the
1st swing resistance. Resistance today is at 83.80, while support should be
found around 80.00. If yesterday’s gap higher on the day session chart holds,
additional buying could develop this session. A positive signal for trend
short-term was given on a close over the 9-bar moving average. The market now
above the 40-day moving average suggests the longer-term trend is up.
HEATING OIL (NOV): The close over the pivot swing
is a somewhat positive setup. Heating oil should encounter support around 79.38,
with resistance is at 82.48. 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 82.48. The market is becoming somewhat overbought now that
the RSI is over 70. Follow through buying looks likely if the market can hold
yesterday’s gap on the day session chart.
CORN MARKET RECAP
10/2/2003
The corn showed only fleeting response to the
strong soybean rally as most in the trade were unwilling to suggest that some
corn might have been damaged by the cold. The corn might also have been
negatively impacted by forecasts for below normal rainfall ahead as that could
help to accelerate harvest activity. Private forecasts pegged the corn to be
back toward the record 10 bullion zone and that has a way of pressuring prices.
Some the private forecasts suggested that 2003 might have a 141 yield and that
is defeating of the bull camp. Weekly export sales in corn were 916,000 compared
to expectations for the weekly export sales readings in corn of 800,000 to
1,000,000 tons.
Technical Outlook
CORN (DEC) 10/3/2003: 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 218 1/4. The close over the
pivot swing is a somewhat positive setup. Market resistance comes in at 223 1/4
today, with support at 218 1/4. The downside crossover of the 9 & 18 bar moving
average is a negative signal. Some caution in pressing the downside is warranted
with the RSI under 30.
SOY COMPLEX RECAP
10/2/2003
Another new contract high and a move above
critical even numbered resistance of $7.00 fed the bull frenzy even if the
market wasn’t able to sustain the close above $7.00. Apparently the market was
factoring damage to beans in Illinois, Indiana and Ohio due the cold overnight.
The trade was also driven higher by some forecasts that call for even colder
temps tonight. The weekly export sales report showed sales of 701,000 tons
compared to expectations of 300,000 to 450,000 tons. The market also totally
discounted stories that Western Brazilian growing regions were moving forward on
planting after getting recent rains. Some estimates have the frost cutting the
US soybean crop by as much as 2-4 million bushels.
Technical Outlook
SOYBEANS (NOV) 10/03/03 The market made a new
contract high on the rally. The gap upmove on the day session chart is a bullish
indicator for trend. The market has a bullish tilt coming into today’s trade
with the close above the 2nd swing resistance. The next area of resistance is
around 701 1/2 and 705 3/4, while 1st support hits today at 692 1/2 and below
there at 687 3/4. 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 705 3/4. 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 208.1. The market rallied to a new contract
high. First resistance comes in at 205.9, with support at 202.7. 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 25.78. 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. The market made a new contract high on the rally. If yesterday’s
gap higher on the day session chart holds, additional buying could develop this
session. Daily swing resistance is found at 25.64 and above there at 25.78.
Support should be encountered at 25.20 and 24.90. The market is approaching
overbought levels with an RSI over 70.
WHEAT MARKET RECAP
10/2/2003
December wheat closed sharply lower as some in
the pit suggested that the Canadian wheat numbers to be released Friday morning
were leaked. The break is certainly surprising considering the stronger than
expected export sales readings and the positive leadership from the soybean
market. Export sales came in at 762,000 compared to expectations of 500,000 to
700,000. Some traders suggested that the selling was prompted mostly by
technical considerations and that is could certainly be weak handed longs
exiting ahead of the Canadian numbers. The European wheat market closed weaker
and that could have left the US market with a weak tone.
Technical Outlook
WHEAT (DEC) 10/3/2003: The market could take on a
defensive posture with the daily closing price reversal down. The close below
the 1st swing support could weigh on the market. Expect near-term support around
353 1/2 and below there at 348 3/4, with resistance levels at 365 and 371 3/4. 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 371 3/4.
LIVE CATTLE RECAP
10/2/2003
December cattle closed moderately higher and into
new contract highs as trade expectations for higher cash markets and a steady
flow of fund buying supported the strong gains. Packer bids were up to $90, but
offers were up to $91-$92. Slaughter on the week through Thursday was only at
504,000 head as compared with 514,000 the previous week and 526,000 last year at
this time. Boxed-beef prices were slightly lower at mid-session but the decline
in slaughter is expected to support beef prices soon.
Technical Outlook
CATTLE (DEC) 10/3/2003: Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
87.65. The market has a slightly positive tilt with the close over the swing
pivot. Support should be encountered at 85.42 and below there at 84.55. Market
resistance is at 86.97 and then again at 87.65. 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.
LEAN HOGS RECAP
10/2/2003
December hogs closed 22 lower on the session but
managed to recover 70 points off of the lows after a very weak start to the
session. Weakness in pork product prices and the hefty slaughter pace is
pressuring cash markets and weight data this week suggest that there are some
hogs backed-up in the country. Producers may have been hoping for a bullish USDA
report last week so that they could sell hogs at a higher price. Slaughter is
expected to be high on Saturday with many traders looking for more than 100,000
head. Slaughter came in at 390,000 head which brings the weekly total to 1.556
million head from 1.474 million last week at this time. Higher weights, higher
slaughter and more imports from Canada are keeping the short-term trend down.
Active bear spreading supported the 2004 contracts.
Technical Outlook
HOGS (DEC) 10/3/2003: The close over the pivot
swing is a somewhat positive setup. Resistance levels comes in at 55.25 and
55.72 today, while support is around 54.15 and then 53.52. 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 53.52.
COCOA MARKET RECAP
10/2/2003
The cocoa market saw evidence that the rebel
stance will be strongly opposed by Ivory Coast citizens, as the Press reported
thousands of anti-rebel demonstrators on Thursday. Therefore, a civil war might
be less likely if the opposition of anti government activities is broad based.
On the other hand, increased tensions could easily result in the rebels becoming
reactionary to the protests. The trade did note some industry buying Thursday
and that should serve to discourage more downside pressure in the near term.
Technical Outlook
COCOA (DEC)10/03/03 The market tilt is slightly
negative with the close under the pivot. Cocoa should run into resistance at
1569 and above there at 1580 with support at 1540 and 1522. The daily
stochastics have crossed over down which is a bearish indication. The next
downside target is 1521.75.
COFFEE MARKET RECAP
10/2/2003
December coffee saw a very volatile day with the
market rallying early off a lack of rain in Brazil only to be knocked down later
in the session on fund and producer sales. Focus remains on the weather forecast
for Brazil and there are some forecasts indicating a lack of rain until around
October 12th. This could impact the coffee crop since it is in the critical
bloom stage. However, Funds & producers find prices over 66 too tempting and
selling ensued. More volatility is likely with an upward bias if Brazil
continues to lack rain. Dec coffee has resistance at 67 then 68.
Technical Outlook
COFFEE (DEC)10/3/03 The downside closing price
reversal on the daily chart is somewhat negative. The market tilt is slightly
negative with the close under the pivot. The daily stochastics have crossed over
up which is a bullish indication. The near-term upside objective is at 68.40.The
Coffee contract should run into resistance at 66.30 and above there at 68.40
with support at 62.7 and 61.20. The market’s short-term trend is positive on a
close above the 9-day moving average. The major trend is down with the cross
over back below the 40-day moving average.
SUGAR MARKET RECAP
10/2/2003
March sugar closed slightly weaker and now that
prices have corrected, at looks as if futures prices will resume the down trend.
The fundamentals remain bearish and a lack of physical business and producer
selling should pressure March sugar back toward 6 cents. In other news Brazil
September sugar exports were lower than last year. Syria’s tenders of raw &
white sugar for November will be completed by mid-month. Short covering by funds
was the basis behind the recent up move and once that stops prices should head
lower.
Technical Outlook
SUGAR (MAR) 10/3/2003: The market setup is
somewhat negative with the close under the 1st swing support. Swing resistance
comes in at 6.48, with support found at 6.30. 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 target is at 6.48.
COTTON MARKET RECAP
10/2/2003
December cotton closed sharply higher and is
likely to challenge contract highs Friday, but the trade is weary that a record
open interest will soon lead to a sharp profit taking break. Traders should
protect any long positions with trailing stops or with options. Export sales
came in higher than expected at 92,900 bales vs estimates between 20,000 to
50,000 bales. The recent price jump has so far not discourage foreign buyers
possibly because the Dollar continues to fall.
Technical Outlook
COTTON (DEC) 10/3/2003: A positive signal for
trend short-term was given on a close over the 9-bar moving average. The market
setup is supportive for early gains with the close over the 1st swing
resistance. Next resistance area comes in at 68.95 and then again at 69.33,
while support is targeted at 67.65 and 66.73. Stochastics turning bearish at
overbought levels will tend to support lower prices if support levels are
broken. The next downside objective is 66.73. The market is approaching
overbought levels with an RSI over 70. The outside day up is somewhat positive.
The daily closing price reversal up is a positive indicator that could support
higher prices.