What’s Driving Bonds Higher

Technical Outlook

BONDS (DEC) 10/22/2003: The market has a slightly positive tilt with the close over the swing pivot. Near-term resistance for bonds is at 107.32 and then again at 108.13, while swing support hits at 107.03 and below there at 106.19. A positive signal for trend short-term was given on a close over the 9-bar moving average. A bullish signal was given with an upside crossover of the daily stochastics. The next upside objective is 108.13.

T-NOTES(DEC) The daily stochastics gave a bullish indicator with a crossover up. The near-term upside objective is at 112.10. It is a mildly bullish indicator that the market closed over the pivot swing number. Near-term resistance for the T-Notes is at 111.30 and then again at 112.10, while swing support hits at 111.08 and below there at 110.29. The market’s short-term trend is negative as the close remains below the 9-day moving average.

STOCK INDICES RECAP

10/21/2003

The stock market chopped around unchanged for most of the session despite very favorable earnings reports through out the session. Apparently the market was slightly disappointed by AT&T and SBC earnings because Boise Cascade produced some very supportive earnings. The bulls seem to have control over prices but don’t appear to have a significant following. With the US economic slate remaining empty until Thursday traders expect more of the same action ahead.

Technical Outlook

S&P500 (DEC) 10/22/2003: The close over the pivot swing is a somewhat positive setup. The daily closing price reversal down is a negative indicator for prices. Underlying support comes in at 1040.15 and 1037.23, with overhead resistance at 1046.85 and 1050.63. The close above the 9-day moving average is a positive short-term indicator for trend. Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The next downside objective is now at 1037.23.

S&P E-Mini (DEC): A new contract high was made on the rally. The downside closing price reversal on the daily chart is somewhat negative. 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 1035.56. 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 1047.88 and then again at 1053.06, while swing support hits at 1039.13 and below there at 1035.56. 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 1429.75 and above there at 1439.38 with support at 1408.25 and 1396.38. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 1396.38.

CURRENCY MARKET RECAP

10/21/2003

The Dollar forged an inside day Tuesday despite periodic weakness in the US equity market and a strong bid for the Euro. In order to turn some technical systems down in the December Dollar, many traders need to see a close below 92.22. With the exception of the Euro the Canadian showed the most significant resolve in a 50-point recovery off its low. Therefore, the Canadian might be considered the strongest bull market in the currency sector.

Technical Outlook

YEN (DEC): A negative signal for trend short-term was given on a close under the 9-bar moving average. The market has a bullish tilt coming into today’s trade with the close above the 2nd swing resistance. Swing resistance is targeted at 91.65 and above there at 91.90, with the yen finding support around 91.05 and below there at 90.70. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 90.70.

EURO (DEC): 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 1.1557. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing support for the Euro comes in at 1.1557, with overhead resistance at 1.1719. The close below the 9-day moving average is a negative 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

10/21/2003

The gold market flashed higher on rumors of fund buying and with prices climbing above chart resistance it would appear that some type of stop loss buying was joined by fresh buying. Interestingly enough gold and silver went up in sync and that gives more credence to the idea that a new bull wave has begun. It certainly helped seeing the Dollar slide lower but many in the trade suggest that the Dollar won’t significantly lift gold unless it manages to close below 92.22.

Technical Outlook

SILVER (DEC): The market setup is supportive for early gains with the close over the 1st swing resistance. Initial support for silver is at 503.3 and below there at 499.2 with resistance likely at 506.9 and 510.3. A positive signal for trend short-term was given on a close over the 9-bar moving average. Stochastics are at mid-range, but trending higher which should reinforce a move higher if resistance levels are taken out. The next upside objective is 506.9. Daily studies suggest buying dips today.

GOLD (DEC): Support for gold today comes in near 375.13, while resistance is pegged at 386.53. Momentum studies are rising from mid-range which could accelerate a move higher if resistance levels are penetrated. The near-term upside target is at 386.53. There could be more upside follow through since the market closed above the 2nd swing resistance. The close above the 9-day moving average is a positive short-term indicator for trend. 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.

COPPER MARKET RECAP

10/21/2003

Copper prices were weak Tuesday partly because of profit taking considerations and partly because of the outlook toward the global recovery was tempering. The copper market stayed weak despite rumors that Freeport was selling copper concentrate directly from inventories. In other words, the market continues to pick up on the theme that there is a shortage of some copper products but apparently the need to take profits off the strong run last week took control of the session. It would seem that nothing of significance has changed fundamentally in copper and that should mitigate the duration of price weakness.

ENERGY MARKET RECAP

10/21/2003

The energy complex stayed positive despite some comments from Venezuela that suggested a production hike wouldn’t be ruled out if the price of the OPEC basket remained above the top of the $28 band. Maybe the Venezuelan stance is to talk up support for the band so that they can force through a higher band later on. It would seem surprising for OPEC to talk about raising production off the band when the cartel is supposed to be implementing a production cut November 1st. Keeping prices under pressure are fears for the Wednesday morning inventories and Petrologistics forecast that OPEC production is running 400,000 barrels per day above the prior months flow.

Technical Outlook

CRUDE OIL (DEC): 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 30.06 and below there at 29.85, with resistance pegged at 30.58 and 30.89. The market’s close on the 9-day moving average is neutral. .

UNLEADED GAS (DEC): Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 80.80. The market tilt is slightly negative with the close under the pivot. Resistance today is at 84.00, while support should be found around 80.80. A negative signal for trend short-term was given on a close under the 9-bar moving average.

HEATING OIL (DEC): The close over the pivot swing is a somewhat positive setup. Heating oil should encounter support around 82.22, with resistance is at 84.92. The close below the 9-day moving average is a negative short-term indicator for trend. 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 82.22.

CORN MARKET RECAP

10/21/2003

The corn market might have garnered some support from Wheat as feed wheat prices are high and feed demand is high. The market might also have been supported by persistent strength in cash corn despite the fact the harvest is moving well into a completion phase. There was also significant talk about ethanol and the prospect of expanded use in the new energy bill. Even California seemed to be moving toward acceptance of ethanol or biomass for part of their gasoline needs. The ousted Governor of California seemed to rage against ethanol and with the headlines Tuesday it would appear that the state will now begin moving toward production of the gasoline additive. Before the session China announced that September 2003 exports totaled 1.4 million metric tons an increase of 43% and that total makes all the difference in the world on the supply and demand balance sheet.

Technical Outlook

CORN (DEC) 10/22/2003: The crossover up in the daily stochastics is a bullish signal. The near-term upside target is at 219 1/2. There could be more upside follow through since the market closed above the 2nd swing resistance. Market resistance comes in at 219 1/2 today, with support at 211 1/2. The close below the 9-day moving average is a negative short-term indicator for trend.

SOY COMPLEX RECAP

10/21/2003

A loss of momentum hinders the soybean market, as the talk about more Chinese demand seems to have lost its impact. The market did see supportive information from Argentina where it showed August bean exports to have declined by 46% from a year ago. Early in the session China showed that soybean oil imports had doubled in September compared to the prior year. Chinese soybean imports in September were pegged at 3 million metric tons compared to 1.3 million the year before. Therefore, China has taken a significant bite out of the world supply and the question is will they continue at a torrid pace in the future.

Technical Outlook

SOYBEANS (JAN) 10/22/03 The daily closing price reversal up is a positive indicator that could support higher prices. The market tilt is slightly negative with the close under the pivot. The next area of resistance is around 736 1/2 and 742 , while 1st support hits today at 724 1/2 and below there at 718 . The market’s close on the 9-day moving average is neutral. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 718 . 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 229.5. The outside day up gives the market a positive tilt. The market rallied to a new contract high. The upside daily closing price reversal gives the market a bullish tilt. First resistance comes in at 227.6, with support at 222.5. The close above the 9-day moving average is a positive short-term indicator for trend. There could be more upside follow through since the market closed above the 2nd swing resistance. The market is becoming somewhat overbought now that the RSI is over 70.

BEAN OIL (DEC): A negative signal for trend short-term was given on a close under the 9-bar moving average. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 25.79. It is a slightly negative indicator that the close was lower than the pivot swing number. The gap lower on the day session chart is bearish and puts the market on the defensive. Daily swing resistance is found at 26.14 and above there at 26.29. Support should be encountered at 25.89 and 25.79.

WHEAT MARKET RECAP

10/21/2003

December wheat closed 6 3/4 higher on the session with weather in the central plains as the key bullish force. Wheat is now up near 20 cents off of last weeks lows so traders will be sensitive to see if export demand slows on the bounce. After a few more days of hot and dry weather in the plains, colder air moves in on the weekend and early next week which could generate some moisture. However, traders are still nervous that western Kansas may miss out of the rain event which will keep the conditions poor for the freshly emerging crop in western Kansas. There has been no rain in Garden City Kansas for the past few weeks and it was 93 degrees on Monday and windy. With conditions like this, topsoil moisture is dropping rapidly.

Technical Outlook

WHEAT (DEC) 10/22/2003: Daily studies suggest buying dips today. The market setup is supportive for early gains with the close over the 1st swing resistance. Expect near-term support around 336 1/4 and below there at 330 1/2, with resistance levels at 344 1/2 and 347 . 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 347 .

LIVE CATTLE RECAP

10/21/2003

December cattle closed near unchanged on the session with a range of near 250 points. Slaughter came in at 132,000 head as compared with trade expectations of 118,000 to 125,000 head. The higher slaughter is a supportive factor and shows stronger than expected demand from the packer. Boxed-beef prices at mid-session came in down $2.45 cents to $198.20 which helped pressure the market early. However, after the 817 point break from last weeks highs, the long liquidation selling slowed and the market bounced quickly. The futures discount to the cash market was seen as a supportive factor but rumors that cash cattle was being offered at 98.00 helped keep traders bearish.

Technical Outlook

CATTLE (DEC) 10/22/2003: Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 85.95. The market tilt is slightly negative with the close under the pivot. Support should be encountered at 87.25 and below there at 85.95. Market resistance is at 89.67 and then again at 90.80. A negative signal for trend short-term was given on a close under the 9-bar moving average.

LEAN HOGS RECAP

10/21/2003

December hogs closed limit down on the session and down 535 points from last week’s highs. Cash markets were weak with Peoria down $1.00 on the session. Pork cutout values have been coming down since late last week which causes packers to see if they can get by with lower cash markets and still receive all the hogs they need to slaughter. Slaughter, and pork production, has been coming in well above trade expectations. Traders are hopeful that higher beef prices will cause better demand but the surge in supply was unexpected. The bearish monthly cold storage report helped pressure the belly market and traders expect the weekly report to show anywhere from 300,000 pounds net out to 1.0 million pounds net in. Slaughter was 394,000 head as compared with 388,000-392,000 expected.

Technical Outlook

HOGS (DEC) 10/22/2003: The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Resistance levels comes in at 56.30 and 57.20 today, while support is around 55.07 and then 54.75. More selling pressure is likely given yesterday’s gap lower price action on the day session chart. The close below the 9-day moving average is a negative short-term indicator for trend. The close below the 40-day moving average is an indication the longer-term trend is down. 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 54.75.

COCOA MARKET RECAP

10/21/2003

Some the funds appeared to be covering positions and taking profits in the action Tuesday. We also suspect that some industry buyers were doing some light buying as that has been their pattern. We would however expect commercial and industry buying to abate if prices manage a temporary rise off the threat to hold back physical cocoa from the exporters. So far the threat is to stop sales of cocoa for only 1 week. There were also reports of trucks bound for the port being stopped and that could have been the reason behind the higher close Tuesday.

Technical Outlook

COCOA (DEC)10/22/03 The market setup is supportive for early gains with the close over the 1st swing resistance. Cocoa should run into resistance at 1417 and above there at 1426 with support at 1397 and 1386. Momentum studies are declining, but have fallen to oversold levels. The next downside target is 1386.00.

COFFEE MARKET RECAP

10/21/2003

Coffee prices jumped to the highest level since October 8th in spite of bearish news from Vietnam and what appears to be a bearish weather forecast for Brazil. December coffee closed 85 higher on the session. While the Vietnam government indicated that the size of the 2003/2004 crop (which will be harvested soon) will be near 11 million bags was seen as bearish but did not pressure futures too much. However, a poll of traders contacted by Reuters indicated a crop at near 11.85 million bags which is up 29% from last year. Rains were still in the forecast for Brazil which should ease stress during the flowering period for areas in Brazil that have not received good rains in October.

Technical Outlook

COFFEE (DEC)10/22/03 The market setup is supportive for early gains with the close over the 1st swing resistance. 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 64.00.The Coffee contract should run into resistance at 63.35 and above there at 64.00 with support at 61.6 and 60.50. The market’s short-term trend is positive on a close above the 9-day moving average. The market was pushed to a new contract low.

SUGAR MARKET RECAP

10/21/2003

Sugar closed slightly higher in quiet trade. The market seems to be in a sideways pattern as producer selling is increasing on rallies but the speculative selling is drying up on breaks. Trade house buying has provided some support on breaks. The fundamentals still look bearish and the market is likely to remain in a longer-term downtrend. Futures are oversold, basis last weeks COT report, but the speculative net short position has still not reached a historical extreme. The Sao Paulo Cane Agroindustry Union indicated on Monday that the center-south crop for the 2003/2004 season is likely to reach a record high 291.4 million tons, up 7.8% from last year.

Technical Outlook

SUGAR (MAR) 10/22/2003: The upside daily closing price reversal gives the market a bullish tilt. The close over the pivot swing is a somewhat positive setup. Swing resistance comes in at 6.16, with support found at 5.92. The close above the 9-day moving average is a positive short-term indicator for trend. The crossover up in the daily stochastics is a bullish signal. The near-term upside target is at 6.16.

COTTON MARKET RECAP

10/21/2003

Cotton prices ended the session slightly lower despite evidence before the opening that Chinese imports of cotton in September were up 52% from the prior year. Chinese September imports totaled 20,807 metric tons and the trade must have over compensated for that import hope with the wild gains in early October because prices didn’t manage to add to recent gains. Maybe improved harvest conditions prompted an overly long spec position to move to the sidelines after the Chinese news failed to inspire fresh buyers.

Technical Outlook

COTTON (DEC) 10/22/2003: 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 75.84 and then again at 76.24, while support is targeted at 74.79 and 74.14. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 74.14. The market is approaching overbought levels with an RSI over 70.