Why Cattle Bulls Must Be Cautious

Technical Outlook

BONDS (DEC) 11/12/2003: The market tilt is slightly negative with the close under the pivot. Near-term resistance for bonds is at 107.14 and then again at 107.31, while swing support hits at 106.17 and below there at 106.05. 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 106.05.

T-NOTES(DEC) Daily stochastics are trending lower, but have declined into oversold territory. The next downside objective is now at 110.19. The market’s close below the pivot swing number is a mildly negative setup. Near-term resistance for the T-Notes is at 111.12 and then again at 111.22, while swing support hits at 110.26 and below there at 110.19. The downside crossover (9 below 18) of the moving averages suggests a developing short-term downtrend.

STOCK INDICES RECAP

11/11/2003

The stock market continued to languish in the face of slightly disappointing weekly chain store sales readings and general lackluster attitudes toward the coming holiday sales season. We also noted more intense attacks on US forces in Iraq and that could certainly turn up the liquidation heat on stock prices. In the end the trade can’t seem to put on a happy face. The bias is down until some headline change takes place and right now there really isn’t anything on the coming schedule that would suggest a change is imminent.

Technical Outlook

S&P500 (DEC) 11/12/2003: It is a slightly negative indicator that the close was under the swing pivot. Underlying support comes in at 1043.00 and 1040.05, with overhead resistance at 1048.20 and 1050.45. 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 objective is now at 1040.05.

S&P E-Mini (DEC): A new contract high was made on the rally. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 1039.06. It is a slightly negative indicator that the close was lower than the pivot swing number. Near-term resistance for the S&P Mini is at 1049.13 and then again at 1051.56, while swing support hits at 1042.88 and below there at 1039.06. The market’s close below the 9-day moving average is an indication the short-term trend remains negative.

NASDAQ (DEC) A negative signal for trend short-term was given on a close under the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. The market should run into resistance at 1420.00 and above there at 1429.00 with support at 1402.00 and 1393.00. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 1393.00.

CURRENCY MARKET RECAP

11/11/2003

Pit session was closed Tuesday, but the Euro showed strength in the “Globex” trade, possibly because private US retail sales readings (released Tuesday morning) were weak. In other words, the Dollar probably would have seen selling if the market weren’t closed for holiday.

Technical Outlook

YEN (DEC): A positive signal for trend short-term was given on a close over the 9-bar moving average. If yesterday’s gap higher on the day session chart holds, additional buying could develop this session. The market setup is supportive for early gains with the close over the 1st swing resistance. Swing resistance is targeted at 92.81 and above there at 93.25, with the yen finding support around 91.95 and below there at 91.53. 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 93.25. Daily studies suggest buying dips today.

EURO (DEC): The crossover up in the daily stochastics is a bullish signal. The near-term upside target is at 1.1540. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing support for the Euro comes in at 1.1428, with overhead resistance at 1.1540. 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. More selling pressure is likely given yesterday’s gap lower price action on the day session chart.

PRECIOUS METALS RECAP

11/11/2003

The gold market managed to rally because the Euro (trading on the Globex market) showed moderate gains and traders assumed that pointed to a weaker Dollar. The Dollar Index market was closed due to holiday. We also think that gold prices have been supported by ideas that US economic readings (private retail sales readings for the first week of November) were soft. Recently gold prices have been lifted by economic numbers that show that the US economy is vulnerable and that is because that creates uncertainty. The silver market continues to show signs of weakness as if the weakness in equity prices is undermining sentiment.

Technical Outlook

SILVER (DEC): The market tilt is slightly negative with the close under the pivot. Initial support for silver is at 504.0 and below there at 501.2 with resistance likely at 507.3 and 509.5. 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 507.3.

GOLD (DEC): Support for gold today comes in near 384.88, while resistance is pegged at 391.08. The crossover up in the daily stochastics is a bullish signal. The near-term upside target is at 391.08. The close over the pivot swing is a somewhat positive setup. The downside crossover of the 9 & 18 bar moving average is a negative signal.

COPPER MARKET RECAP

11/11/2003

The copper market soared despite talk from Codelco that the world supply glut was being alleviated. Codelco suggested that they intended to hold back 200,000 tons of production until exchange stocks declined to 800,000 tons. The most recent LME stocks reading showed a mere 506,025 tons, which would seem to suggest that idled production could be restarted at any time. We think the gains in the US action Tuesday were mostly the result of renewed Chinese buying overnight and not necessarily off developments in the US.

ENERGY MARKET RECAP

11/11/2003

The unleaded market showed moderately bullish leadership capacity Tuesday and might have been given added support from ideas that US gasoline imports were falling off seasonally. It would appear that aggression toward US forces in Baghdad is reaching a fever pitch and that might cause some bulls to speculate that the US would pull out (which is absurd). If the US pulled out that would certainly put rather important Iraqi exports in question. However, we doubt that the market is too concerned about Iraq with the focused now centered on the weekly inventory numbers Wednesday morning.

Technical Outlook

CRUDE OIL (JAN): Market positioning is positive with the close over the 1st swing resistance. Support for crude is keyed on 30.68 and below there at 30.36, with resistance pegged at 31.13 and 31.26. 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 31.26. Short-term indicators suggest buying pullbacks today.

UNLEADED GAS (JAN): Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 85.32. The market has a bullish tilt coming into today’s trade with the close above the 2nd swing resistance. Resistance today is at 85.32, while support should be found around 82.12. A positive signal for trend short-term was given on a close over the 9-bar moving average. Daily studies suggest buying dips today.

HEATING OIL (JAN): There could be more upside follow through since the market closed above the 2nd swing resistance. Heating oil should encounter support around 83.55, with resistance is at 86.25. 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 86.25.

CORN MARKET RECAP

11/11/2003

March corn closed 1/4 cent lower on the session in a choppy. Two-sided trade with positioning ahead of the USDA report helping to offset any strength from wheat or a sharp rally in soybeans. The lack of new news regarding China export or import activity helped to limit the movement as the market is attempting to absorb the tail end of the US harvest. The USDA Crop Production and Supply/Demand reports are expected to show record production and record demand. The average trade estimate at 10.345 billion bushels (range 10.483-10.257) as compared to 10.207 billion bushels last month. While there is a possible jump in production, the average trade estimate for ending stocks comes in at 1.345 billion bushels, down 8 million from last month do to likely increases in demand.

Technical Outlook

CORN (MAR) 11/12/2003: 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 236 1/2. It is a slightly negative indicator that the close was under the swing pivot. Market resistance comes in at 242 today, with support at 236 1/2. The close below the 9-day moving average is a negative short-term indicator for trend.

SOY COMPLEX RECAP

11/11/2003

January soybeans closed 13 3/4 cents higher on the session and up 37 3/4 cents from Monday’s lows. Follow-through technical buying supported the market along with rumor that China had bought 5-9 cargoes of US soybeans. Higher cash markets, bull spread from commercials and positioning ahead of the USDA Crop Production and Supply/demand reports added to the bullish tone. The results of the report will set the tone for Wednesday’s opening. Fund and commercial buyers have provided the best support but news of rains in Argentina were seen as a limiting factor early in the session but active buying supported the market late. The average trade estimate for production for the November USDA report is at 2.452 billion bushels (range 2.476-2.430) which compares to 2.468 billion bushels in the prior USDA report. Ending stocks are expected to fall to near 117 million bushels as compared with 130 million last month.

Technical Outlook

SOYBEANS (JAN) 11/12/03 The gap upmove on the day session chart is a bullish indicator for trend. The market setup is supportive for early gains with the close over the 1st swing resistance. The next area of resistance is around 782 1/2 and 787 3/4, while 1st support hits today at 768 1/2 and below there at 759 3/4. The market’s close on the 9-day moving average is neutral. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 759 3/4.

MEAL (MAR): 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 236.3. Follow through buying looks likely if the market can hold yesterday’s gap on the day session chart. First resistance comes in at 241.2, with support at 238.0. The close below the 9-day moving average is a negative short-term indicator for trend. There could be more upside follow through since the market closed above the 2nd swing resistance.

BEAN OIL (MAR): 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 25.76. With the close higher than the pivot swing number, the market is in a slightly bullish posture. Daily swing resistance is found at 25.64 and above there at 25.76. Support should be encountered at 25.33 and 25.14.

WHEAT MARKET RECAP

11/11/2003

March wheat closed 3 cents higher on the session to $3.99 but the highs at 4.00 came within 1/2 cent of filling the gap left at the contract high (island top) from August 18th. The shift in trade psychology ever since there were rumors that China was planning an import program for 2004 has provided solid buying support and increasing optimism of stronger US exports ahead. Positioning ahead of the USDA report, released before the opening, added to the positive tone for the market as traders look for an increase in export projections and declining ending stocks for the report. Traders look for ending stocks to come in near 609 million bushels as compared with 633 million from the October forecast.

Technical Outlook

WHEAT (MAR) 11/12/2003: The market has a slightly positive tilt with the close over the swing pivot. Expect near-term support around 394 1/2 and below there at 388 1/2, with resistance levels at 403 1/4 and 406 . 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 406 . The market is approaching overbought levels with an RSI over 70.

LIVE CATTLE RECAP

11/11/2003

December cattle closed limit-down after an early sharp rally. The lightly traded November contract managed an all-time high for any futures month at 104.20 before closing lower on the session. Floor talk centered on expectations for a possible decline in consumer demand after tonight’s Notional news coverage regarding the high price of beef. The uncertainty on the impact of media coverage on beef prices was enough to trigger massive long liquidation selling from the speculator, especially after moving higher for seven sessions in a row. Boxed-beef cut-out values were up $1.32 to $172.45 but this news had no impact as the futures were already in a long liquidation mode at mid-session. Cash cattle in the plains were bid at $104 early in the session with offers at $106 but after the futures collapsed, bids were withdrawn.

Technical Outlook

CATTLE (DEC) 11/12/2003: Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 99.92. The close below the 1st swing support could weigh on the market. Support should be encountered at 95.57 and below there at 94.97. Market resistance is at 98.05 and then again at 99.92. The key reversal down puts the market on the defensive. The outside day down is somewhat negative. The market made a new contract high on the rally. The market could take on a defensive posture with the daily closing price reversal down. A positive signal for trend short-term was given on a close over the 9-bar moving average.

LEAN HOGS RECAP

11/11/2003

The downside breakout of the recent consolidation counts down to 49.95 for the December futures after the collapse and weak close. Cash markets were steady to $1.00 lower and this triggered aggressive fund selling as December futures were trying to hold onto a stiff premium to the cash market. Packer demand was also lower as some plants cut-back for the Veterans Day holiday. Weakness in the pork market from Monday night and a limit-down move in the cattle market added to the bearish tone. The CME 2-day lean Index through November 7th was up 34 cents to 50.03 which is the 5th consecutive day of higher values. Slaughter will not be released due to holiday. Traders were looking for the weekly cold storage report to show an in-movement of 1.5-1.9 million pounds.

Technical Outlook

HOGS (DEC) 11/12/2003: The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Resistance levels comes in at 51.85 and 53.47 today, while support is around 49.65 and then 49.07. The close below the 9-day moving average is a negative short-term indicator for trend. A crossover down in the daily stochastics is a bearish signal. The next downside target is now at 49.07.

COCOA MARKET RECAP

11/11/2003

The market managed an impressive pulse up Tuesday, possible because arrivals rates at most Ivory Coast ports continue to lag well below year ago levels and the trade is watching that situation closely. In fact, Dow Jones reported that exports of semi-manufactured cocoa products from the main port of the Ivory Coast were down 74% from October of 2002. Apparently Ivory Coast bean exports were down sharply 98% versus year ago data. While the market thinks the supply is available it is becoming a little concerned about the flow.

Technical Outlook

COCOA (MAR)11/12/03 The market setup is supportive for early gains with the close over the 1st swing resistance. Cocoa should run into resistance at 1467 and above there at 1476 with support at 1436 and 1414. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 1476.25. Short-term indicators suggest buying dips today.

COFFEE MARKET RECAP

11/11/2003

March coffee closed 15 higher on the session with a tight range and an inside trading day. Funds were selling but this was offset by small spec buying. More rain for Brazil later this week was seen as slightly negative but New York failed to follow the London market into new lows as London is under pressure from the harvest of the large crop in Vietnam. Colombia harvested 1.14 million bags of coffee in October as compared with 1.06 million bags last year. Exports were 934,000 bags vs. 830,000 last year. Traders believe that near 20% of the new crop has been harvested in Vietnam which is helping to pull prices lower. Traders believe the new Vietnam harvest will total near 660,000-710,000 tonnes as compared with 600,000 tonnes last year. CSCE exchange stocks were up 585 bags to 4.455 million bags with 27,093 bags pending review.

Technical Outlook

COFFEE (MAR)11/12/03 The market tilt is slightly negative with the close under the pivot. Momentum studies are declining, but have fallen to oversold levels. The next downside objective is now at 61.70.The Coffee contract should run into resistance at 62.90 and above there at 63.30 with support at 62.1 and 61.70. The market’s short-term trend is negative as the close remains below the 9-day moving average.

SUGAR MARKET RECAP

11/11/2003

The market closed at the highest level since October 6th but besides the oversold condition, traders await another reason to believe that the rally can extend. The market closed 1 tick higher in choppy, two-sided trade as fund buying slowed down on a test of Monday’s highs and the market drifted back to near unchanged. Strength in London helped support the early gains but traders await evidence of increased cash business in order to assume a that there will be follow-through to the upside from last weeks weekly closing price reversal. Egypt is expected to buy 40,000 tonnes of raw sugar in a tender for Monday but there is little other news to excite cash dealers. Indonesia is expected to need to buy 400,000 tons of white sugar this winter with the suppliers Thailand and India.

Technical Outlook

SUGAR (MAR) 11/12/2003: 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 6.34, with support found at 6.06. The downside crossover of the 9 & 18 bar moving average is a negative signal. 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 6.34.

COTTON MARKET RECAP

11/11/2003

The cotton market closed moderately lower but remained inside of Monday’s range. Positioning ahead of the USDA report helped keep volume down and speculative long liquidation selling was enough to see price erosion into the close. While the focus of attention is clearly on the size of the China crop and possible China import demand for the season, traders also look for higher production from the US. The average trade estimate came in at 17.78 million bales (17.6-18.0) as compared with 17.6 million bales last month. Ending stocks are expected to come in near 4.45 million bales from 4.6 million last month but the range of estimates is as low as 3.0 million bales to as high as 5.7 million bales. China is the wild card and if the USDA increases China import numbers due to a lower production forecast, the US is expected to benefit the most. Traders are looking for a China crop near 22.33 million bales as compared with last months forecast at 25.5 million bales. There are plenty of international traders who believe that China will be hard pressed to see more than 20 million bales produced for this season.

Technical Outlook

COTTON (MAR) 11/12/2003: A negative signal for trend short-term was given on a close under the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. Next resistance area comes in at 79.64 and then again at 80.40, while support is targeted at 78.41 and 77.94. Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The next downside objective is 77.94.