Why Bonds Exploded

Technical Outlook

#BONDS (SEP) 6/16/2004: The market has a bullish
tilt coming into today’s trade with the close above the 2nd swing resistance.
Near-term resistance for bonds is at 106.18 and then again at 107.07, while
swing support hits at 104.03 and below there at 102.09. 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. A
bullish signal was given with an upside crossover of the daily stochastics. The
next upside objective is 107.07.

T-NOTES(SEP) The daily stochastics gave a bullish
indicator with a crossover up. The near-term upside objective is at 109.25. The
market’s close above the 2nd swing resistance number is a bullish indication.
The major trend could be turning up with the close back above the 40-day moving
average. Near-term resistance for the T-Notes is at 109.12 and then again at
109.25, while swing support hits at 107.25 and below there at 106.19. The
market’s short-term trend is positive on a close above the 9-day moving average.

STOCK INDICES RECAP

6/15/2004

The stock market likes the status quo and with
the information Tuesday morning it would seem like things are likely to stay the
same at least for the near term. In other words, lower uncertainty allows would
be buyers to move into the stock market in anticipation of ongoing growth. The
fact that energy prices continue to be weak despite a shutdown of Iraqi exports
shows that at least part of the anxiety chain in the energy complex has been
broken and that is positive for equity prices. Triple witching expiration might
also have provided added buying volume but the fact that some inflation will be
tolerated and that the Fed won’t have to be aggressive with rate hikes is a big
positive to stocks.

Technical Outlook

#S&P500 (SEP) 6/16/2004: Market positioning is
positive with the close over the 1st swing resistance. Underlying support comes
in at 1128.85 and 1124.03, with overhead resistance at 1138.15 and 1142.63. 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 1124.03.

S&P E-Mini (SEP): 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
1120.00. A positive setup occurred with the close over the 1st swing resistance.
Near-term resistance for the S&P Mini is at 1139.75 and then again at 1145.00,
while swing support hits at 1127.25 and below there at 1120.00. The market’s
close below the 9-day moving average is an indication the short-term trend
remains negative.

NASDAQ (SEP) 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. The
market should run into resistance at 1494.50 and above there at 1503.50 with
support at 1475.50 and 1465.50. Stochastics turning bearish at overbought levels
will tend to support lower prices if support levels are broken. The next
downside objective is 1465.50.

MINI DOW (MAR) The close above the 9-day moving
average is a positive short-term indicator for trend. The market should run into
resistance at 10426 and above there at 10466 with support at 10339 and 10292.
Daily stochastics have risen into overbought territory which will tend to
support reversal action if it occurs. The near-term upside target is at 10466.
Market positioning is positive with the close over the 1st swing resistance.
Short-term indicators suggest buying pullbacks today.

CURRENCY MARKET RECAP

6/15/2004

The Dollar came under aggressive stop loss
selling action Tuesday partly because the Fed looks to refrain from aggressive
rate hike action and partly because the Euro, Swiss and Pound were so
extensively oversold. However, one would think that the US economy is producing
enough inflation potential to mitigate a significant washout in the Dollar.
University of Michigan sentiment figures were strong enough that the Dollar
should find some support off the macro economic differential.

Technical Outlook

#CURRENCIES 6/16/2004: YEN (SEP): A positive
signal for trend short-term was given on a close over 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 92.64 and above there at
93.05, with the yen finding support around 91.04 and below there at 89.85.
Stochastics turning bearish at overbought levels will tend to support lower
prices if support levels are broken. The next downside objective is 89.85.

EURO (SEP): 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 1.1987. The defensive setup, with
the close under the 2nd swing support, could cause some early weakness. Swing
support for the Euro comes in at 1.1987, with overhead resistance at 1.2243. 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

6/15/2004

The gold and silver markets got the better of two
worlds on Tuesday as the Dollar weakened and the outlook for the economy also
brightened. With the Fed possibly discouraged from aggressively hiking interest
rates (because the core CPI was muted) we suspect that many buyers moved into
gold and silver. Some traders were recently short the metals looking for a major
downside thrust off the CPI and when that didn’t prevail they were forced to buy
to cover their positions. Other traders suggested that not having the Fed come
down on US growth and inflation hard and early means that inflation still have a
chance of catching hold but that is a long shot argument.

Technical Outlook

#P-METALS 6/16/2004: SILVER (SEP): The market
setup is supportive for early gains with the close over the 1st swing
resistance. Initial support for silver is at 568.3 and below there at 560.2 with
resistance likely at 575.6 and 582.3. 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 560.2.

GOLD (AUG): Support for gold today comes in near
380.60, while resistance is pegged at 394.60. 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 380.60. There could be more upside
follow through since the market closed above the 2nd swing resistance. The close
below the 9-day moving average is a negative 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. The outside day up gives the market a positive tilt.
The upside daily closing price reversal gives the market a bullish tilt.

COPPER MARKET RECAP

6/15/2004

The copper market saw the strong action in US
stocks as a sign that US demand for copper might remain positive. We also have
to think that copper was partly relieved with the idea that US rates were not
going to shoot higher. Given the hope for sustained US growth the shorts in
copper simply decided to exit positions rather than take the heat of a near term
upside bulge. With energy prices also tracking lower and interest rates not as
big of a threat to growth one has to admit that the outlook for the economy is
pretty good and that might have brought fresh buyers into the action Tuesday.

ENERGY MARKET RECAP

6/15/2004

The energy complex didn’t respond Monday to
potentially bullish talk from OPEC and on Tuesday the market decided not to
respond to more attacks against the Iraqi pipeline. In fact, it is very
surprising that the energy complex stayed weak in the face of news that Iraqi
tanker loading had halted due to the recent pipeline attacks. Some traders were
suggesting that weekly inventory stats on Wednesday morning were going to
provide more evidence of rising supplies and that forced more longs to the
sidelines. It is also possible that the capture of some key insurgents in Iraq
took some sting out of the bull case. In the end demand looks to remain strong
but supply rebuilding is currently expected by the market.

Technical Outlook

#ENERGIES 6/16/2004: CRUDE OIL (AUG): The outside
day down gives the market a bearish tilt. The daily closing price reversal down
is a negative indicator for prices. The market setup is somewhat negative with
the close under the 1st swing support. Support for crude is keyed on 36.63 and
below there at 36.07, with resistance pegged at 38.22 and 39.25. 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 36.07.
Short-term indicators on the defensive. Consider selling an intraday bounce.

UNLEADED GAS (AUG): Daily stochastics declining
into oversold territory suggest the selling may be drying up soon. The next
downside objective is 111.11. The market tilt is slightly negative with the
close under the pivot. Resistance today is at 117.31, while support should be
found around 111.11. A negative signal for trend short-term was given on a close
under the 9-bar moving average.

HEATING OIL (AUG): It is a slightly negative
indicator that the close was under the swing pivot. Heating oil should encounter
support around 94.74, with resistance is at 103.54. 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. A
crossover down in the daily stochastics is a bearish signal. The next downside
target is now at 94.74. The outside day down gives the market a bearish tilt.
The daily closing price reversal down is a negative indicator for prices.

CORN MARKET RECAP

6/15/2004

Improving crop conditions and a non-threatening
weather forecast helped to trigger more aggressive selling and the weak close.
Traders believe the forecast keeps the crop on track for new all-time record
high yields and continued long liquidation selling from fund traders has
pressured both old and new crop corn. The Commitment-of-Traders report with
options showed that fund traders added more than 32,000 contracts to their net
long position in just one week ending June 8th to reach a net long position of
over 93,000 contracts. The jump in open interest occurred on June 1st and 2nd so
traders are assuming that the bulk of this new buying occurred in the 319-327
1/2 range. As a result, traders view the move to the lowest level since early
February (basis July futures) as a bearish development which could attract
significant long liquidation selling ahead. More rains in the short-term
forecast could spark more flood concerns but the short-term selling remains
active. December corn support comes in at 282 1/2 and 278 with 287 1/2 and 289
1/2 as resistance.

Technical Outlook

#CORN (DEC) 6/16/2004: 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 279 1/4. The defensive setup,
with the close under the 2nd swing support, could cause some early weakness.
Market resistance comes in at 292 1/4 today, with support at 279 1/4. The
downside crossover of the 9 & 18 bar moving average is a negative signal.

SOY COMPLEX RECAP

6/15/2004

Improving crop conditions and non-threatening
weather helped to drive November soybeans lower on the session as speculative
long liquidation selling was seen as active. In fact, November soybeans hit the
lowest level since February 13th before the late session bounce. December Oil
pushed to the lowest level since January 5th. On the other hand, July soybeans
continue to find support from extremely tight stocks and tight producer holding
which has commercials interested in owning July futures just in case producer
selling does not emerge and short-term demand remains at a high enough level to
drive down commercial inventories. Buying slowed on a challenge of yesterday’s
highs. Fear that some China demand may seep into the US market if trade disputes
with Brazil are not resolved soon add to the friendly tone for old crop.
Processors continue to push up basis bids in an attempt to attract new producer
selling. Brazil senior Ag officials are en route to Beijing in order to discuss
standards which will be necessary for China to accept Brazil soybeans, according
to the Brazil Ag Minister. The COT reports show a slight overbought condition
and a long liquidation trend which is short-term negative. Resistance for
November soybeans comes in at 662 and 669 with 654 1/2 and 642 1/2 as next
support levels.

Technical Outlook

#SOYBEANS (NOV) 06/16/04 The close below the 1st
swing support could weigh on the market. The next area of resistance is around
667 and 679 1/4, while 1st support hits today at 648 and below there at 641 1/4.
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 641 1/4. Bearish
daily studies indicate selling minor rallies this session.

MEAL (DEC): 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 202.8. First resistance comes in at
207.2, with support at 204.5. The close below the 9-day moving average is a
negative short-term indicator for trend. It is a slightly negative indicator
that the close was under the swing pivot.

BEAN OIL (DEC): A negative indicator was given
with the downside crossover of the 9 & 18 bar moving average. Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
next downside objective is 23.63. The swing indicator gave a moderately negative
reading with the close below the 1st support number. Daily swing resistance is
found at 24.52 and above there at 24.93. Support should be encountered at 23.87
and 23.63. Short-term indicators on the defensive. Consider selling an intraday
bounce.

WHEAT MARKET RECAP

6/15/2004

Harvest delays in Kansas and more rains due later
this week along with fear of more rain on the soft red winter wheat crop in the
southern mid-west seem to be short-term supportive factors but weakness in the
other grains and increasing fund selling helped to pressure the market to the
lowest level since November 19th. The recent downtrend combined with rising open
interest suggests that fund traders are building a net short position and this
was confirmed in last nights weekly Commitment-of-Traders reports. Export news
is quiet as end users seem to be waiting for some sign of a low in the recent
price trend before extending coverage. Traders remain hopeful that Pakistan will
tender for 250,000 tons of wheat this month and that they will use GSM credits
to buy from the US. Recent quality issues with Australia add to the chances that
US receives at least some of this new business. July wheat resistance comes in
at 355 with 346 and 343 1/2 as next support levels.

Technical Outlook

#WHEAT (DEC) 6/16/2004: 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 367 and below
there at 363 2/4, with resistance levels at 375 and 379 2/4. 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 363 2/4.

LIVE CATTLE RECAP

6/15/2004

Weakness in the beef market and talk of more
losses in the cash market over the near-term helped trigger the late sell-off in
August cattle after early choppy, two-sided trade. Boxed beef cut-out vales (for
choice 600-750lbs) dropped $2.10 to $149.19 at mid-session as compared with
$155.46 last week at this time. Packer bids in the cash market came in at
$84-$85 as compared with $90 last week with offers at $90-$93. The showlist was
seen as slightly higher with some unsold cattle from last week staying on the
showlist this week. In addition, slaughter weights are thought to be on the
rise. In their weekly slaughter report, the USDA pegged average weights for the
week ending June 12th at 1209 pounds, up 5 pounds from the previous week.

Technical Outlook

#CATTLE (AUG) 6/16/2004: Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The next downside objective is 83.77. The market tilt is slightly
negative with the close under the pivot. Support should be encountered at 84.37
and below there at 83.77. Market resistance is at 85.95 and then again at 86.92.
A negative signal for trend short-term was given on a close under the 9-bar
moving average.

LEAN HOGS RECAP

6/15/2004

Weakness in pork cut-out values on Monday
afternoon and lower cash market trade before the opening trigger the gap lower
opening for July hogs and heavy speculative selling during the session. The
market closed sharply lower on the session and tested the low end of the 9-day
consolidation. A late recovery in July bellies and hopes that market ready
supplies would tighten soon helped to support the bounce off of the lows. The
2-day lean index for the period ending June 11th was 78.86, up 35 cents from the
previous session. The discount of July to the cash market helped to provide some
support. Traders look for the weekly cold storage report, released after the
close, to show an out-movement of 500,000-1.0 million pounds. Cash hogs traded
$1.00 lower at Peoria.

Technical Outlook

#HOGS (AUG) 6/16/2004: The defensive setup, with
the close under the 2nd swing support, could cause some early weakness.
Resistance levels comes in at 75.50 and 76.05 today, while support is around
74.45 and then 74.00. 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. 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 74.00.

COCOA MARKET RECAP

6/15/2004

The cocoa market was sharply higher early in the
session and then failed to hold all of the gains. Apparently funds decided to
cover in London and that sparked an early rally in the US. With the Pound up
sharply we doubt that London will be providing sustained upside direction and
with the producers noted sellers around the highs Tuesday the market would seem
to a lid over prices. Volume and open interest as well as the fundamentals
suggest that cocoa might be caught in a trading range.

Technical Outlook

COCOA (SEP) 06/16/04 The market setup is
supportive for early gains with the close over the 1st swing resistance. Cocoa
should run into resistance at 1363 and above there at 1380 with support at 1339
and 1332. Momentum studies are declining, but have fallen to oversold levels.
The next downside target is 1331.50.

COFFEE MARKET RECAP

6/15/2004

Long liquidation selling based on improving
harvest weather and a lack of cold weather in the forecast for Brazil helped to
trigger the sharp break and move to the lowest level since May 25th for
September coffee. Brazil sold 94.6% of the 80,000 bags offered at their weekly
auction on Tuesday which added to the short-term bearish tone. September coffee
in London gapped lower to leave a 3-day island top and fund selling drove the
market sharply lower. The forecast for warmer and especially drier weather in
key producing areas in Brazil helped to drive futures lower with significant
long liquidation selling noted. In New York, speculators built up a net long
position of over 34,000 contracts and fears of further long liquidation selling
ahead added to the bearish tone.

Technical Outlook

COFFEE (SEP) 6/16/04 The gap lower price action
on the day session chart is a bearish indicator for trend. The close below the
1st swing support could weigh on the market. Negative momentum studies in the
neutral zone will tend to reinforce lower price action. The next downside
objective is now at 78.80. The Coffee contract should run into resistance at
81.60 and above there at 82.80 with support at 79.6 and 78.80. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. Daily studies pointing down suggests selling minor rallies.

SUGAR MARKET RECAP

6/15/2004

The slightly lower opening failed to attract new
selling and a lack of new fundamental news left the market with light
short-covering to support the 11 point gain on the session. Talk that the recent
break could attract increased cash news helped to provide some support with
rumors of buying from Algeria, Bangladesh and Libya. Weather turned more
favorable for the Brazil harvest to advance this week which is seen as a
limiting factor on a bounce. Thailand officials in Brazil this week are
interested in importing ethanol technology and in ethanol imports for the
short-run as the country hopes to have up to 10% bio-fuel in their gasoline by
2006. High global energy prices continue to provide underlying support to sugar
as a more significant shift to ethanol production would suggests less cane
moving toward sugar production.

Technical Outlook

#SUGAR (OCT) 6/16/2004: Market positioning is
positive with the close over the 1st swing resistance. Swing resistance comes in
at 7.40, with support found at 7.10. 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 7.10.

COTTON MARKET RECAP

6/15/2004

The collapse in July cotton to limit-down and
active trade house selling in futures and in the options pit helped to drive the
market sharply lower in spite of news on Monday of declining crop conditions and
a sharp decline in deliverable stocks. The CotLook A Index was down 55 to 66.25.
The weekly spec/hedge report and rain in the forecast for dry areas of West
Texas added to the bearish tone. NY cotton certified stocks declined on June
14th to 224,888 bales, down from 225,530 bales the previous day and 305,725
bales on June 9th.

Technical Outlook

#COTTON (OCT) 6/16/2004: A negative signal for
trend short-term was given on a close under the 9-bar moving average. There
could be some early pressure today given the market’s negative setup with the
close below the 2nd swing support. Next resistance area comes in at 56.21 and
then again at 58.01, while support is targeted at 53.81 and 53.21. A bearish
signal was triggered on a crossover down in the daily stochastics. The next
downside objective is 53.21. The market is approaching over sold levels on an
RSI reading under 30. The market made a new contract low on the break. The gap
lower on the day session chart is bearish and puts the market on the defensive.