What’s Next For Bonds
BOND MARKET RECAP
10/3/03
No mistake about it the Treasuries were due the
strong washout Friday because the payroll number was significantly better than
what 99% of the economists thought it would be. It should also be noted that
bonds had rallied 8 1/2 points in the month of September alone and therefore the
massive improvement in the macro economic case certainly takes the bulls to task
with a major washout. Later in the session, seeing the ISM non-manufacturing
Index fall sharply could have supported bonds and notes but the market showed
almost no reaction. In other words, the tilt is so bearish that bullish numbers
have almost no effect.
Technical Outlook
BONDS (DEC) 10/06/03: The close below the 2nd
swing support number puts the market on the defensive. Near-term resistance for
bonds is at 110.08 and then again at 112.05, while swing support hits at 107.17
and below there at 106.23. The market’s close below the 9-day moving average is
an indication the short-term trend remains 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
106.23.
T-NOTES(DEC) 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 110.32. The market is in a bearish position
with the close below the 2nd swing support 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 113.10 and then again at 114.18, while swing support hits at
111.17 and below there at 110.32. The market’s short-term trend is negative as
the close remains below the 9-day moving average.
STOCK INDICES RECAP
10/3/03
A major upward adjustment was due in the stock
market and with the non-farm payrolls showing a gain the main threat to the US
recovery is mitigated. In other words, the stock market is given new life from
the favorable numbers and may see significant appreciation in the coming
sessions unless there is a major countervailing development to the bullish set
of events Friday morning. Since the stock market recent corrected aggressively
that could mean that the market has enough short-term buying power to mount an
impressive and sustained rally. Prior to the last two weeks economic readings
the only thing negative from the economy was the payroll threat and that threat
is now less disconcerting.
Technical Outlook
S&P500 (DEC) 10/06/03: The market’s close above
the 2nd swing resistance number is a bullish indication. The gap up on the day
session chart gave a bullish indicator and more follow through could be seen
this session. Underlying support comes in at 1022.70 and 1018.45, with overhead
resistance at 1034.50 and 1042.05. 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 1042.05.
S&P E-Mini (DEC): The market made a new contract
high on the rally. 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 1048.38. The market has a bullish tilt coming into today’s
trade with the close above the 2nd swing resistance. Near-term resistance for
the S&P Mini is at 1038.75 and then again at 1048.38, while swing support hits
at 1018.75 and below there at 1008.38. A positive signal for trend short-term
was given on a close over the 9-bar moving average.
NASDAQ (DEC) 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. 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 should
run into resistance at 1389.00 and above there at 1401.00 with support at
1364.00 and 1351.00. The daily stochastics have crossed over up which is a
bullish indication. The next upside target is 1401.0.
CURRENCY MARKET
RECAP
10/3/03
The Dollar was simply saved by the payroll
report. In the event that the US payrolls declined and certainly if they
declined by more than expected the US Dollar would have gotten hammered Friday
morning. As it stands, those that recently sold the Dollar had to consider
buying it back as the pendulum on the economy seemed to shift directions.
However, many traders think that the weak ISM non-manufacturing readings
released after the payrolls justify waiting for a couple sessions before exiting
the shorts. In the mean time the Canadian Dollar might have gotten the biggest
benefit from the numbers released Friday morning.
Technical Outlook
YEN (DEC): The market’s close above the 9-day
moving average suggests the short-term trend remains positive. 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. Swing
resistance is targeted at 90.57 and above there at 90.90, with the yen finding
support around 90.08 and below there at 89.92. The daily stochastics have
crossed over down which is a bearish indication. 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
89.92. The 9-day RSI over 70 indicates the market is approaching overbought
levels.
EURO (DEC): 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 1.1419. The market is in a
bearish position with the close below the 2nd swing support number. Swing
support for the Euro comes in at 1.1419, with overhead resistance at 1.1723. The
market’s short-term trend is negative as the close remains below the 9-day
moving average. The gap down on the day session chart is bearish with more
selling pressure possible today.
PRECIOUS METALS
RECAP
10/3/03
The reason to hold gold went up in smoke with the
better than expected US payroll report. In fact, the gold market saw a triple
shot of negative influence with less anxiety on the economy, a sharply higher
Dollar and alternative investment potential in the equity market. With both gold
and silver holding excessively long small spec and fund positions and the
markets all violating chart support it is not surprising that prices fell so
aggressively. With the “record” long positions in both markets there is no
reason to suggest that the downside should end easily.
Technical Outlook
SILVER (DEC): The close below the 2nd swing
support number puts the market on the defensive. Initial support for silver is
at 467.5 and below there at 458.8 with resistance likely at 494.0 and 499.5. The
market’s close below the 9-day moving average is an indication the short-term
trend remains negative. Momentum studies are declining, but have fallen to
oversold levels. The next downside target is 458.8. The 9-day RSI under 30
indicates the market is approaching oversold levels. The outside day down and
close below the previous day’s low is a negative signal. The downside closing
price reversal on the daily chart is somewhat negative.
GOLD (DEC): Support for gold today comes in near
353.50, while resistance is pegged at 393.50. 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 353.50. The market is in a bearish position
with the close below the 2nd swing support number. 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. The outside
day down is a negative signal. The daily closing price reversal down puts the
market on the defensive.
COPPER MARKET RECAP
10/3/03
The copper market should have been supported by
the developments Friday as the outlook for the US economy improved and the stock
market made things look even better. With the continued declines in exchange
warehouse stocks and the improved demand potential prices should be able to
maintain the positive track. The trade certainly found support off the idea that
copper dealers were raising premiums to customers all over the world for 2004
deliveries. In other words, the macro economic outlook is evidently strong
enough for dealers to raise rates.
ENERGY MARKET RECAP
10/3/03
A good bull market manages to get fresh news when
it needs it and the energy complex latched onto the potential for a general
strike in Nigeria. Seeing Nigeria strike could crimp crude and unleaded imports
into the US and that is certainly reason to fuel up prices. The energy complex
was already seeing buying interest from colder than normal weather, low overall
distillate stocks and winter buying and the Nigerian situation is simply another
excuse to rally. If OPEC members continue to talk up the idea of another
production cut in December crude oil prices could rise to 31.00.
Technical Outlook
CRUDE OIL (DEC): The market’s close above the 2nd
swing resistance number is a bullish indication. Support for crude is keyed on
29.73 and below there at 29.20, with resistance pegged at 30.47 and 30.68. The
market’s close on the 9-day moving average is neutral. .
UNLEADED GAS (DEC): Studies are showing positive
momentum, but are now in overbought territory so some caution is warranted. The
next upside target is 82.69. 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. Resistance today is at 82.69, while support should be
found around 79.39. The moving average crossover up (9 above 18) indicates a
possible developing short-term uptrend. The 9-day RSI over 70 indicates the
market is approaching overbought levels.
HEATING OIL (DEC): With the close over the 1st
swing resistance number, the market is in a moderately positive position.
Heating oil should encounter support around 80.26, with resistance is at 83.66.
The market’s short-term trend is positive on a close above the 9-day moving
average. Momentum studies are trending higher, but have entered overbought
levels. The near-term upside objective is at 83.66. With a reading over 70, the
9-day RSI is approaching overbought levels. The outside day up is a positive
signal. The upside closing price reversal on the daily chart is somewhat
bullish.
CORN MARKET RECAP
10/3/03
The corn market managed to recover a good portion
of the losses for the week with spread support (liquidation of soybean/corn
spreads) and a crop production estimate for next weeks support which was below
trade expectations. The oversold condition of the market helped provide some new
buying support but the move to a more active week of harvest next week helped
limit the gains. In spite of the harvest, basis levels at the gulf were firm and
light showers and cold weather in the eastern cornbelt helped slow the harvest.
Support for December corn comes in at 220 1/4 with 227 1/2 as resistance.
Technical Outlook
CORN (DEC) 10/06/03: The daily stochastics gave a
bullish indicator with a crossover up. The near-term upside objective is at 227
. The market’s close above the 2nd swing resistance number is a bullish
indication. Market resistance comes in at 227 today, with support at 218 . The
market’s short-term trend is negative as the close remains below the 9-day
moving average.
SOY COMPLEX RECAP
10/3/03
The soybean market sagged aggressively in a
delayed response to recent USDA readings and because of some private forecasts
released during the session. Private forecasts pegged the soybean crop at 2.619
million and the yield was pegged at 36.1 bushels and that is a slight decline
from the last USDA forecast. The beans were given added pressure by the
extensive overbought condition and the idea that the COT report to be released
after the close would confirm the overbought status. The magnitude of the break
surprised some traders because the US continued to see frost in some areas as of
Friday morning.
Technical Outlook
SOYBEANS (NOV) 10/06/03: The close below the 2nd
swing support number puts the market on the defensive. The next area of
resistance is around 686 1/2 and 699 1/4, while 1st support hits today at 669
and below there at 664 1/4. The market’s close above the 9-day moving average
suggests the short-term trend remains positive. The daily stochastics have
crossed over down which is a bearish indication. 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 664
1/4.
MEAL (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 195.4. The gap down on the day
session chart is bearish with more selling pressure possible today. First
resistance comes in at 201.4, with support at 196.7. The market’s short-term
trend is positive on a close above the 9-day moving average. The market is in a
bearish position with the close below the 2nd swing support number.
BEAN OIL (DEC): The market’s close above the
9-day moving average suggests the short-term trend remains positive. The daily
stochastics have crossed over down which is a bearish indication. 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 24.28. The close below the 2nd swing support number puts
the market on the defensive. Daily swing resistance is found at 25.13 and above
there at 25.58. Support should be encountered at 24.48 and 24.28.
WHEAT MARKET RECAP
10/3/03
The wheat market moved lower on follow-through
technical selling from the weak action on Thursday and from weakness in the
soybean complex. Good weather for Australia and South America were seen as
bearish longer-term factors and the market focus seems to be on the longer-term
outlook for a jump in production in 2004 instead of the tight global stocks and
active US exports. Stats Canada pegged the wheat crop at 22.0 million tons as
compared with trade expectations at 21.0-23.9 million tons and 16.2 million tons
last year. The forecast is up 1 million tons from the last USDA forecast. The
sharp rally in the US dollar was seen as a bearish force.
Technical Outlook
WHEAT (DEC) 10/06/03: The swing indicator gave a
moderately negative reading with the close below the 1st support number. Look
for near-term support at 347 1/2 and below there at 344 3/4, with resistance
levels at 356 1/2 and 363 1/4. The market’s close below the 9-day moving average
is an indication the short-term trend remains negative. Positive momentum
studies in the neutral zone will tend to reinforce higher price action. The next
upside target is 363 1/4.
LIVE CATTLE RECAP
10/3/03
The market made new contract highs again but
there was a lack of new buying interest and long liquidation selling from fund
traders was active. Funds are holding a large net long position. Given the
extreme overbought condition of the market, a correction is needed but with Cash
markets at $90.00 and December cattle near 86.00, the corrections could be
shallow. The traders report, released this afternoon, could show the extent of
the net long by the funds but may also show that small speculators are holding a
hefty net short position in a bull market. The small spec buy stops have been
bull market fuel in the past few months.
Technical Outlook
CATTLE (DEC) 10/06/03: Studies are showing
positive momentum, but are now in overbought territory so some caution is
warranted. The next upside target is 87.42. With the close higher than the pivot
swing number, the market is in a slightly bullish posture. Support should be
encountered at 85.80 and below there at 85.27. Market resistance is at 86.87 and
then again at 87.42. A new contract high was made on the rally. The market’s
close above the 9-day moving average suggests the short-term trend remains
positive.
LEAN HOGS RECAP
10/3/03
The technical bounce may have just about run its
course as the hefty pork production from this week (big slaughter at heavier
weights) should be a factor to keep pork values under pressure. Pork values were
down 91 cent on Thursday afternoon which put cut-out at $61.42, down $3.81 cents
on the week. A seasonal rise in production in the weeks just ahead combined with
the fact that producers may have backed-up some hogs in the country suggests
that production will remain large and that lower prices may be necessary to
clean-up the hefty supply.
Technical Outlook
HOGS (DEC) 10/06/03: The market’s close below the
pivot swing number is a mildly negative setup. Resistance levels comes in at
55.02 and 55.95 today, while support is around 53.62 and then 53.15. 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. The major trend is down with the cross over back below the 40-day
moving average. Daily stochastics are trending lower, but have declined into
oversold territory. The next downside objective is now at 53.15.
COCOA MARKET RECAP
10/3/03
The cocoa market managed to finish the session
slightly higher on the day and without significant reports of violence the
market is left without a critical driving influence. Apparently industry buying
continues to show up which hints that recent lows are some sort of value zone or
fair value. Talk of a general strike in Nigeria suggests that supply in that
country might be affected and some might think that is a reason to bid up
prices.
Technical Outlook
COCOA (DEC)10/06/03 The market has a slightly
positive tilt with the close over the swing pivot. Cocoa should run into
resistance at 1574 and above there at 1589 with support at 1546 and 1533.
Negative momentum studies in the neutral zone will tend to reinforce lower price
action. The next downside target is 1532.50.
COFFEE MARKET RECAP
10/3/03
An inside day up is only slightly supportive but
with the trade picking up more signs of light industry buying it would seem that
the coffee market is close to a fair value. While the jury is still out on the
weather it would seem that weather patterns remain dry enough to support coffee
prices into next week. However, some traders note that December coffee prices
are sitting roughly 300 point above solid chart support. With no rain expected
until the middle of next week the bull camp should be able to maintain favor.
Technical Outlook
COFFEE (DEC)10/6/03 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
66.50.The Coffee contract should run into resistance at 65.75 and above there at
66.50 with support at 64.4 and 63.80. The market’s short-term trend is positive
on a close above the 9-day moving average. The major trend could be turning up
with the close back above the 40-day moving average.
SUGAR MARKET RECAP
10/3/03
The market seems to be consolidating and waiting
for a better feel for the short-term supply situation and to determine of end
users turn active at the recent lower pricing structure. If not, the market
looks poised to move to a lower price level which might help absorb the hefty
Brazil harvest and spark some increased buying from end users. The Sao Paulo
Sugarcane Agroindustry Union indicates that the center-south cane harvest was
75% complete as of the middle of September. The group believes that the harvest
is running about 10% above last year. In addition to a large crop in Brazil,
Thailand and China had bumper crops and stock levels are high in India and
Thailand.
Technical Outlook
SUGAR (MAR) 10/06/03: With the close over the 1st
swing resistance number, the market is in a moderately positive position. Swing
resistance comes in at 6.57, with support found at 6.33. The market’s short-term
trend is positive on a close above the 9-day moving average. The major trend
could be turning up with the close back above the 40-day moving average.
Momentum studies are trending higher, but have entered overbought levels. The
near-term upside objective is at 6.57. Consider buying pull-backs since daily
studies are bullish.
COTTON MARKET RECAP
10/3/03
A massive slide in cotton prices had to catch the
market overbought and vulnerable. The fact that a private forecast was floated
calling for the US cotton crop to come in at 17.084 million bales was probably
less important than the extremely overbought condition of the market coming into
the session. Certainly seeing the larger production tally gave the bears
confidence to attack the market following the aggressive gains posted since the
middle of September. The private cotton crop forecast was 145,000 bales more
than the last USDA projection.
Technical Outlook
COTTON (DEC) 10/06/03: 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 68.53 and then again at 69.87,
while support is targeted at 66.13 and 65.07. 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
65.07. A new contract high was made on the rally. The downside closing price
reversal on the daily chart is somewhat negative.