Why Bonds Will Be More Volatile Tomorrow

Technical Outlook

BONDS (SEP) 9/5/2003: The market setup is
supportive for early gains with the close over the 1st swing resistance.
Near-term resistance for bonds is at 106.29 and then again at 107.05, while
swing support hits at 106.02 and below there at 105.15. A negative signal for
trend short-term was given on a close under the 9-bar moving average. Momentum
studies trending lower at mid-range could accelerate a price break if support
levels are broken. The next downside objective is 105.15.

T-NOTES(SEP) The daily stochastics gave a bullish
indicator with a crossover up. The near-term upside objective is at 112.07. The
market’s close above the 2nd swing resistance number is a bullish indication.
Near-term resistance for the T-Notes is at 111.28 and then again at 112.07,
while swing support hits at 110.30 and below there at 110.10. The market’s
short-term trend is positive on a close above the 9-day moving average.

 

STOCK INDICES RECAP

9/4/2003

The stock market just couldn’t get it together
Thursday as the market was acting a little overbought and vulnerable. It
appeared as if the Fed comments injured sentiment when they suggested that the
Fed would cut if the employment situation didn’t improve. In other words, the
stock market didn’t like the idea that the US economy might need assistance in
recovering. We also think that some longs moved to the sidelines rather than
weather the monthly payroll report. In the end, the stock market showed more
strength than weakness and with the US numbers mostly showing strength the bull
camp continues to hold an edge.

Technical Outlook

S&P500 (SEP) 9/5/2003: The close over the pivot
swing is a somewhat positive setup. The upside daily closing price reversal
gives the market a bullish tilt. Underlying support comes in at 1024.60 and
1019.50, with overhead resistance at 1032.00 and 1034.30. 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 objective is at 1034.30. The
market is becoming somewhat overbought now that the RSI is over 70.

S&P E-Mini (SEP): Studies are showing positive
momentum, but are now in overbought territory so some caution is warranted. The
next upside target is 1035.50. 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 1031.75 and then again at 1035.50, while swing support hits
at 1022.25 and below there at 1016.50. 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 (SEP) 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 setup is supportive for early gains with the close
over the 1st swing resistance. The market should run into resistance at 1386.00
and above there at 1392.00 with support at 1365.00 and 1350.00. The market is
approaching overbought levels with an RSI over 70. Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
1392.00.

 

CURRENCY MARKET RECAP

9/4/2003

The Dollar just can’t seem to muster consistent
long interest partly because of the choppy nature of recent US economic reports
and partly because the US Fed revitalized concern of the jobless recovery with
its comments Thursday afternoon. It should be noted that the Canadian Dollar
make a critical upside breakout and that might serve to funnel some money into
the Canadian from an overvalued US Dollar. The Pound also made big gains against
the Dollar Thursday. Given the conflicting views on the US economy the monthly
payroll report might not be as important of a report to the Dollar.

Technical Outlook

YEN (SEP): A positive signal for trend short-term
was given on a close over the 9-bar moving average. The gap lower on the day
session chart is bearish and puts the market on the defensive. Could see some
early pressure today given the market’s negative setup with the close below the
2nd swing support. Swing resistance is targeted at 85.84 and above there at
85.93, with the yen finding support around 85.54 and below there at 85.33. 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 85.33.

EURO (SEP): Stochastics are rising from over sold
levels which is bullish and should support higher prices. The near-term upside
target is at 1.1009. The defensive setup, with the close under the 2nd swing
support, could cause some early weakness. Swing support for the Euro comes in at
1.0781, with overhead resistance at 1.1009. The close above the 9-day moving
average is a positive short-term indicator for trend. The close below the 40-day
moving average is an indication the longer-term trend is down. More selling
pressure is likely given yesterday’s gap lower price action on the day session
chart.

 

PRECIOUS METALS RECAP

9/4/2003

The gold market showed fleeting bouts of selling
Thursday with December futures at time down over $4.00. Since the US Dollar fell
almost 100 points off its daily high we can understand how gold managed to repel
most of the early losses. The Fed did promise to cut interest rates if US
payrolls continued to be soft and that would normally support gold but in the
same speech the Fed suggested that deflation could remain a risk for a long time
and that kept the gold market from benefiting from the rate cut talk.

Technical Outlook

SILVER (DEC): The market tilt is slightly
negative with the close under the pivot. Initial support for silver is at 501.3
and below there at 499.4 with resistance likely at 504.3 and 505.8. A negative
signal for trend short-term was given on a close under the 9-bar moving average.
Momentum studies trending lower at mid-range could accelerate a price break if
support levels are broken. The next downside objective is 499.4.

GOLD (DEC): Support for gold today comes in near
369.20, while resistance is pegged at 377.60. 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 369.20. It is a slightly negative indicator
that the close was under the swing pivot. The close above the 9-day moving
average is a positive short-term indicator for trend.

 

COPPER MARKET RECAP

9/4/2003

Copper prices came back to earth Thursday after
the recent aggressive rally and that was probably because of the rise in US
initial claims and the talk from the Fed that they might have to raise rates if
the jobs situation in the US didn’t improve. The way copper and equity prices
rose early this week it was disappointing to the markets to see the Fed voicing
concern over the US economy. It should also be known that Chinese sellers showed
up in the early morning action Thursday and that tends to put a damper on
prices. In the end copper should have been able to garner support off the
favorable factory orders release but fears of the employment situation dominated
sentiment instead.

 

ENERGY MARKET RECAP

9/4/2003

The bulls in the energy complex had to be
disappointed with the weekly inventory readings as distillate and crude oil
stocks rose moderately. The crude stock gains were 1.8 million barrels while the
distillate stock gains were roughly 2.4 and 2.9 million barrels. As a result of
the inventory readings, back month gasoline prices deflated as the trade now
expects the tightness situation to abate as we move into the future. Adding a
little additional pressure to prices Thursday were reports of a minor increase
in OPEC production +(162,000 barrels per day). Iraqi oil production in July was
also pegged to up by 342,000 barrels per day to a new total of 956,000 barrels
per day.

Technical Outlook

CRUDE OIL (OCT): The market broke to a new
contract low. The market setup is somewhat negative with the close under the 1st
swing support. Support for crude is keyed on 28.46 and below there at 27.97,
with resistance pegged at 29.50 and 30.05. 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 27.97. Some caution in pressing
the downside is warranted with the RSI under 30.

UNLEADED GAS (OCT): Daily stochastics declining
into oversold territory suggest the selling may be drying up soon. The next
downside objective is 81.27. The market has a slightly positive tilt with the
close over the swing pivot. Resistance today is at 88.67, while support should
be found around 81.27. The daily closing price reversal up is a positive
indicator that could support higher prices. A negative indicator was given with
the downside crossover of the 9 & 18 bar moving average.

HEATING OIL (OCT): The market setup is somewhat
negative with the close under the 1st swing support. Heating oil should
encounter support around 73.51, with resistance is at 79.51. 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 73.51.
Some caution in pressing the downside is warranted with the RSI under 30.

 

CORN MARKET RECAP

9/4/2003

December corn is in a solid position to re-test
the May highs supported by deteriorating crop conditions, a firm cash market,
new tender business, a lack of farmer selling and a lack of deliveries on the
September. Commercials were said to be putting on bull spreads, buying Sept and
selling Dec. The US attach‚ to Brazil pegged Brazil’s 2004 corn crop at 38
million tons compared to an estimate of 43.5 million tons in 2003. Export sales
estimates for corn range between 800,000 to 1,000,000 tonnes, compared to 99,600
last week.

Technical Outlook

CORN (DEC) 9/5/2003: Daily stochastics have risen
into overbought territory which will tend to support reversal action if it
occurs. The near-term upside target is at 250 . There could be more upside
follow through since the market closed above the 2nd swing resistance. Market
resistance comes in at 250 today, with support at 242 . 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.

 

SOY COMPLEX RECAP

9/4/2003

Expectations for weekly export sales call for
500,000 to 600,000 compared to last weeks 618,000. With the September beans
climbing above $6.00 there was a little more fanfare than many would have
expected. It would seem that cash activity gave the futures an added lift, as
farmers are evidently unwilling to sell until higher prices or the USDA report
forces them to sell. The cash strength is probably coming because of anticipated
export demand and because of the anticipation for more physical tightness ahead
of the US harvest.

Technical Outlook

SOYBEANS (NOV) 09/05/03 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 592 and 594 1/2, while 1st support hits
today at 584 1/4 and below there at 579 . 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 579 .

MEAL (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 178.6. First resistance comes in
at 184.4, with support at 181.0. 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.

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 21.31. With the close higher than the pivot swing number, the
market is in a slightly bullish posture. Daily swing resistance is found at
21.09 and above there at 21.31. Support should be encountered at 20.78 and
20.69. The market is approaching overbought levels with an RSI over 70.

 

WHEAT MARKET RECAP

9/4/2003

The market closed 4 cents lower on the session
and to the lowest level since August 5th as hefty deliveries and commercial
selling along with talk of a higher production forecast for next weeks spring
wheat crop production forecast from the USDA helped pressure. Egypt bought
60,000 tons of soft white wheat at their overnight tender bringing the total to
180,000 tons in two days, however, indications that Egypt may buy soft red
winter wheat somewhere else (possibly France) helped pressure the market. Weekly
export sales, released before the opening, are expected to come in near
500,000-700,000 tons as compared with 1.286 million tons last week.

Technical Outlook

WHEAT (DEC) 9/5/2003: 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 365 and below
there at 363 1/2, with resistance levels at 370 1/2 and 374 1/2. 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 1/2.

 

LIVE CATTLE RECAP

9/4/2003

October cattle pushed higher and to new contract
highs as a lack of new news triggered a mid-session break but selling dried up
and the discount of futures to the cash market and higher beef prices helped
support. Boxed-beef cut-out values were up $1.13 to $147.85 for choice 600-750
pound carcasses which is whining $2.20 of the all-time highs from early June and
is clearly a new all-time high for this time of the year. Packer profit margins
are strong and the strength in the beef market gives packers an incentive to
continue to pay-up in the cash market similar to this week at $85.00-$85.50.

Technical Outlook

CATTLE (OCT) 9/5/2003: Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
85.90. The market has a slightly positive tilt with the close over the swing
pivot. Support should be encountered at 84.37 and below there at 83.80. Market
resistance is at 85.42 and then again at 85.90. 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 is approaching overbought levels with
an RSI over 70.

 

LEAN HOGS RECAP

9/4/2003

October hogs closed near the highs of the day and
30 points higher on the session as a firm cash tone helped provide support but
the premium of futures to cash limited the gains. Higher trade in cash bellies
at mid-session and continued hope that the flow of pork from Canada will slow
helped support. Slaughter was higher than expected for the third session in a
row at 390,000 head. The technical action remains positive but next resistance
is just overhead at 56.10 for October hogs.

Technical Outlook

HOGS (OCT) 9/5/2003: The close over the pivot
swing is a somewhat positive setup. Resistance levels comes in at 56.47 and
56.67 today, while support is around 55.70 and then 55.12. 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 56.67. With a
reading over 70, the 9-day RSI is approaching overbought levels.

 

COCOA MARKET RECAP

9/4/2003

Just when it seemed like the cocoa market was
going to post a pattern of declines the trade picked up on some lower production
talk from Cameroon because of dryness. The trade also talked about the potential
for lower production from Nigeria and that means that there is enough supply
uncertainty to support prices in the near term. With the trade buying cocoa
Thursday around the lows that would seem to suggest a fair value exists
somewhere around $1,668.

Technical Outlook

COCOA (DEC)09/05/03 The market has a bullish tilt
coming into today’s trade with the close above the 2nd swing resistance. Cocoa
should run into resistance at 1727 and above there at 1744 with support at 1681
and 1652. 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 1651.50.

 

COFFEE MARKET RECAP

9/4/2003

A wave of short covering poured in to Dec coffee
once the contract push through the 64.50 level. The next major technical hurdle
will be a close over 65. The market may be developing a bottom as the world
coffee balance sheets show a shift from a 5.7 million bag surplus to an 8.3
million bag deficit in the 2003/04 season. Conditions are expected to remain dry
in Brazil’s growing areas through Tuesday of next week. Guatemala raised coffee
exports in 2002/03 to 3.91 million bags compared to 3.3 million bags in 2001/02.

Technical Outlook

COFFEE (DEC)9/5/03 The market has a bullish tilt
coming into today’s trade with the close above the 2nd 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 66.20.The Coffee contract should run into resistance at
65.80 and above there at 66.20 with support at 64.2 and 63.00. The upside
crossover (9 above 18) of the moving averages suggests a developing short-term
uptrend. The major trend could be turning up with the close back above the
40-day moving average.

 

SUGAR MARKET RECAP

9/4/2003

Heavy fund sales pressured October sugar below
critical support at 6 cents, which now sets the market up for a test of 549. A
bearish supply/demand outlook, a lack of tender business and the Funds exiting
their net long position are all factors which will continue to pressure sugar.
With the chart structure breaking down, there seems little in the way from
preventing an eventual break to 5.20 basis the October contract.

Technical Outlook

SUGAR (OCT) 9/5/2003: The outside day down gives
the market a bearish tilt. The daily closing price reversal down is a negative
indicator for prices. The defensive setup, with the close under the 2nd swing
support, could cause some early weakness. Swing resistance comes in at 6.35,
with support found at 5.69. 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 5.69. Some caution in pressing the
downside is warranted with the RSI under 30.

 

COTTON MARKET RECAP

9/4/2003

December cotton continued to gain ground
supported by weather in the Southeast, Delta & Texas which could damage the
quality of the crop. The next upside target for Dec cotton is 61 cents. The
market shrugged off reports that the International Cotton Advisory Committee is
forecasting a 1.1 million bale surplus for 2004/05 (production – consumption
estimates) compared to an estimated 3 million bale deficit for 2003/04. Export
sales will be released Friday due to the holiday with the range of estimates
between 80,000 to 120,000 bales, compared to 99,600 bales the previous week.

Technical Outlook

COTTON (DEC) 9/5/2003: 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 60.20 and then again at 60.60, while support is
targeted at 59.37 and 58.94. Rising stochastics at overbought levels warrant
some caution for bulls. The next upside objective is 60.60. The market is
approaching overbought levels with an RSI over 70.