Why Cattle May Be Topping Out

Technical Outlook

BONDS (MAR) 12/04/03: 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. Near-term resistance for bonds is at 107.22 and then again at 108.11, while swing support hits at 106.17 and below there at 106.01. The market’s close below the 9-day moving average is an indication the short-term trend remains negative. The close under the 40-day moving average indicates the longer-term trend could be turning down. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 106.01.

T-NOTES(MAR) The daily closing price reversal down puts the market on the defensive. 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 109.25. The market’s close below the pivot swing number is a mildly negative setup. Near-term resistance for the T-Notes is at 110.22 and then again at 111.01, while swing support hits at 110.02 and below there at 109.25. The market’s short-term trend is negative as the close remains below the 9-day moving average.

STOCK INDICES RECAP

12/3/2003

The stock market managed to post another new high on the year and seems to be capable of extending the upward pattern of prices. The US managed to post a significantly impressive non-farm productivity reading early in the session and that helped the market discount the disappointing readings from the ISM later in the session. The fact that investors continue to chase prices up despite the rise in prices is confirmation that the economy is improving or at least Main Street thinks it’s improving.

Technical Outlook

S&P500 (DEC) 12/04/03: The market’s close below the pivot swing number is a mildly negative setup. The daily closing price reversal down puts the market on the defensive. Underlying support comes in at 1060.15 and 1057.38, with overhead resistance at 1069.85 and 1076.78. 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 1076.78.

S&P E-Mini (DEC): 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. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 1077.13. The market tilt is slightly negative with the close under the pivot. Near-term resistance for the S&P Mini is at 1070.00 and then again at 1077.13, while swing support hits at 1060.00 and below there at 1057.13. A positive signal for trend short-term was given on a close over the 9-bar moving average.

NASDAQ (DEC) 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. Daily stochastics are showing positive momentum from oversold levels which should reinforce a move higher if near-term resistance is taken out. The close below the 2nd swing support number puts the market on the defensive. The market should run into resistance at 1435.25 and above there at 1461.88 with support at 1399.75 and 1390.88. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 1461.9.

CURRENCY MARKET RECAP

12/3/2003

The Dollar managed a fresh contract low on the opening but then didn’t extend the downside action into a slightly disappointing US ISM non-manufacturing report reading. However, the Dollar did stay below the prior days close and seems to be tilted downward. The only apparent change in the recent action has come from the Pound becoming a little top heavy and not as upwardly sensitive as the rest of the currency on Dollar weakness. Some Dollar shorts might fear the upcoming US initial claims and monthly payroll reports but so far the Dollar really hasn’t paid much attention to the macro economic readings from the US.

Technical Outlook

YEN (DEC): The market’s close above the 9-day moving average suggests the short-term trend remains positive. The gap upmove on the day session chart is a bullish indicator for trend. A positive setup occurred with the close over the 1st swing resistance. Swing resistance is targeted at 92.65 and above there at 92.76, with the yen finding support around 92.32 and below there at 92.10. The daily stochastics have crossed over up which is a bullish indication. The next upside target is 92.76. Short-term indicators suggest buying dips today.

EURO (DEC): Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 1.2143. The market is in a bearish position with the close below the 2nd swing support number. Swing support for the Euro comes in at 1.2041, with overhead resistance at 1.2143. The market’s short-term trend is positive on a close above the 9-day moving average. With a reading over 70, the 9-day RSI is approaching overbought levels. The market’s key reversal down is a bearish signal. The rally brought the market to a new contract high. The gap down on the day session chart is bearish with more selling pressure possible today.

PRECIOUS METALS RECAP

12/3/2003

Some gold longs might be disappointed with the performance of gold over the last 36 hours, as two new lows in the Dollar really haven’t yielded much in the way of supportive price action. Certainly the US stock market is siphoning off money from gold and it is possible that some longs decided to bank some profits on the recent run to $407 but it would seem like most of the long contingent is sticking with the up trend. Some traders are suggesting that February gold now has critical pivot point support at $401.8.

Technical Outlook

SILVER (MAR): It is a slightly negative indicator that the close was lower than the pivot swing number. Initial support for silver is at 546.0 and below there at 541.7 with resistance likely at 548.9 and 552.5. The market’s close above the 9-day moving average suggests the short-term trend remains positive. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 548.9.

GOLD (FEB): Support for gold today comes in near 401.40, while resistance is pegged at 407.00. Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 407.00. It is a mildly bullish indicator that the market closed over the pivot swing number. The market’s short-term trend is positive on a close above the 9-day moving average.

COPPER MARKET RECAP

12/3/2003

It took copper prices a while to respond to the extremely bullish overnight action in the Chinese and European copper markets but eventually the bulls prevailed. The bears might suggest that the copper market pulsed higher but was unable to hold all of the gains. We have to think that the US equity market action was supportive to copper prices but it is possible that prices are a little short term overbought following the massive rally this week of 600 points.

ENERGY MARKET RECAP

12/3/2003

The energy complex recovered from early weakness off the weekly stocks report as higher than expected build-ups in distillate & gasoline stocks were offset by a larger than expected decline in crude oil stocks. The markets saw mostly a sideways trade Wednesday as the trade awaits any new developments on production coming from the OPEC meeting in Vienna tomorrow as there is some speculation that the cartel will cut production again. Jan crude resistance is at 85 and support at 83.

Technical Outlook

CRUDE OIL (JAN): It is a mildly bullish indicator that the market closed over the pivot swing number. Support for crude is keyed on 30.69 and below there at 30.10, with resistance pegged at 31.52 and 31.76. The downside crossover (9 below 18) of the moving averages suggests a developing short-term downtrend. 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 30.10.

UNLEADED GAS (JAN): Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 82.30. A positive setup occurred with the close over the 1st swing resistance. Resistance today is at 87.70, while support should be found around 82.30. The moving average crossover down (9 below 18) indicates a possible developing short-term downtrend.

HEATING OIL (JAN): It is a mildly bullish indicator that the market closed over the pivot swing number. Heating oil should encounter support around 84.26, with resistance is at 88.26. The downside crossover (9 below 18) of the moving averages suggests a developing short-term downtrend. 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 84.26.

CORN MARKET RECAP

12/3/2003

The corn market caught fire Wednesday as talk of increased fund buying sparked the market higher and then fostered another wave of buying into the close. Expectations for the weekly export sales report call for 800,000 to 1,000,000 tons and that comes on the heels of a very strong reading last week of 1,601,800 tons. The general consensus is that demand for corn is rising and that prices haven’t really given that issue much credit. Some traders are also beginning to talk about the protein impact on corn. In other words, if soybean meal prices get too expensive some feed operations will consider shifting to corn.

Technical Outlook

CORN (MAR) 12/04/03: Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 256 . The market’s close above the 2nd swing resistance number is a bullish indication. Market resistance comes in at 256 today, with support at 247 . The market’s short-term trend is positive on a close above the 9-day moving average.

SOY COMPLEX RECAP

12/3/2003

The soybean market continues to play up and down the idea that the Chinese are into the market for more supplies. The latest ebb and flow is that the Chinese delegation that had canceled their visit to Chicago because of the trade issues had decided to go ahead with the trip on December 17th and 18th. Expectations for the weekly export sales report call for 500,000 to 850,000 tons compared to 862,000 tons last week. The market is also seeing support off the basis, which is itself being supported by the hope for more Chinese business.

Technical Outlook

SOYBEANS (JAN) 12/04/03: With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next area of resistance is around 783 1/2 and 789 1/4, while 1st support hits today at 772 1/2 and below there at 767 1/4. The market’s close above the 9-day moving average suggests the short-term trend remains positive. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 789 1/4.

MEAL (JAN): 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 237.4. First resistance comes in at 235.7, with support at 232.5. The market’s short-term trend is positive on a close above the 9-day moving average. It is a mildly bullish indicator that the market closed over the pivot swing number.

BEAN OIL (JAN): The market’s close above the 9-day moving average suggests the short-term trend remains positive. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 28.21. With the close higher than the pivot swing number, the market is in a slightly bullish posture. A new contract high was made on the rally. Daily swing resistance is found at 28.01 and above there at 28.21. Support should be encountered at 27.68 and 27.55.

WHEAT MARKET RECAP

12/3/2003

The wheat market is showing signs of mounting a new upside thrust and that is because the trade is beginning to look ahead to potentially tight supply and demand conditions. The weekly export sales report is expected to see exports of 450,000 to 650,000 tons compared to 1,134,600 last week. Wheat is also seeing support off the idea that Egypt (Egypt bought 60,000 tons of US wheat early and that started the bullish ball rolling) will continue to buy cash and that other buyers are close to taking down some future needs. It should also be noted that persistent new lows in the Dollar is making US wheat prices look even more attractive to foreign buyers.

Technical Outlook

WHEAT (MAR) 12/04/03: The gap upmove on the day session chart is a bullish indicator for trend. 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. Look for near-term support at 411 and below there at 406 1/4, with resistance levels at 418 and 420 1/4. The market’s close above the 9-day moving average suggests the short-term trend remains positive. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 420 1/4.

LIVE CATTLE RECAP

12/3/2003

February cattle closed limit-down and the key reversal could attract more selling on Thursday. With a lack of cash market activity and funds holding a hefty net long position, news from the Canadian Ag Minister that Canadian officials believe that the US border will reopen for Canadian cattle under 30 months old seemed to be the news item to trigger the long liquidation selling.
Boxed-beef cut-out values for 600-750 pound carcasses were up $.09 to $162.95 but the 750-900 pounders were down $1.55 to $158.56. The key reversal, which is a sign of a major top, would be confirmed if February cattle closed under 93.17 on Friday, December 5th. This would be considered a weekly reversal as well and could attract new sellers and long liquidation selling from speculators. Long liquidation selling could be significant with the Commitment-of-Traders report with options showing large traders holding a huge net long position of over 35,000 contracts. At the October key reversal the RSI indicator hit a peak at 79.8, at the November 11th reversal the RSI hit a peak at 79.1 and at last week’s highs the RSI indicator hit a peak at 73.9. The divergence in the indicators at each new high suggests a loss in upside momentum.

Technical Outlook

CATTLE (FEB) 12/04/03: Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 95.40. The swing indicator gave a moderately negative reading with the close below the 1st support number. Support should be encountered at 92.32 and below there at 91.90. Market resistance is at 94.07 and then again at 95.40. A new contract high was made on the rally. The downside closing price reversal on the daily chart is somewhat negative. The market’s close above the 9-day moving average suggests the short-term trend remains positive.

LEAN HOGS RECAP

12/3/2003

February futures closed sharply lower on the session led by bearish news in the cattle market and by weakness in the cash hog market. Peoria hogs were down $1.00 on the session with locations in Iowa down as much as $1.50 which turned the speculator as an active seller after the recent rally brought February hogs to a stiff premium to the cash market on hopes that a cash low was in place. Hog slaughter came in at 395,000 head which was at the high end of the estimates and is also thought to be close to the industry capacity. On top of the bearish talk in the cattle pit with a reversal from an all-time high, the belly market was limit-down after a bearish weekly cold storage report. The 2-day CME Lean Index was up 20 points to 49.47 as compared with 49.21 back on November 17th. Weakness in the cash market and a near-capacity slaughter was unexpected news for the hog bulls.

Technical Outlook

HOGS (FEB) 12/04/03: The market is in a bearish position with the close below the 2nd swing support number. Resistance levels comes in at 55.35 and 56.75 today, while support is around 53.35 and then 52.75. The market’s short-term trend is negative as the close remains below 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 56.75.

COCOA MARKET RECAP

12/3/2003

On going violence and political turmoil in the Ivory Coast continued to support March cocoa prices along with industry buying. There are growing concerns as to the amount of cocoa that will leave the country since political unrest seems to be escalating again. As a result, origin selling has been light as producers believe prices will move higher. US certified cocoa warehouse stocks prior to the start of the 2003/04 season stood at 91,000 tonnes vs 170,000 tonnes a year ago. In other news, Brazil’s cocoa arrivals as of Nov 30th were up 20% from year ago. Next resistance for Mar cocoa is at $1,600.

Technical Outlook

COCOA (MAR)12/04/03 The market setup is supportive for early gains with the close over the 1st swing resistance. Cocoa should run into resistance at 1595 and above there at 1611 with support at 1558 and 1537. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 1610.75. Short-term indicators suggest buying dips today.

COFFEE MARKET RECAP

12/3/2003

March coffee closed higher for the 6th session in a row as fund buying emerged after a lower opening. News that Brazil will issue its first official estimate for the 2004/2005 crop on Thursday instead of December 10th led some traders to believe the news will be good news for the coffee market if the government wants to release the news earlier than normal. Most traders seem to be looking for a crop near 40-45 million bags. CSCE coffee stocks were down 15,935 bags to 4.382 million bags with 22,631 bags pending review. In London, the January contract closed above the 40-day moving average for the second day in a row which is a first since September 15th.

Technical Outlook

COFFEE (MAR)12/4/03 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 66.45.The Coffee contract should run into resistance at 65.90 and above there at 66.45 with support at 64.6 and 63.85. The market’s short-term trend is positive on a close above the 9-day moving average.

SUGAR MARKET RECAP

12/3/2003

March sugar closed 20 higher on the session after a gap higher opening. It is difficult to argue that the cash fundamental news recently is turning bullish but the technical action is hard to fade. The highest close since August 27th leaves the fund traders (net short near 12,000 contracts in the last traders report) scrambling for cover. While traders believe the move is just short-covering, we should point out that open interest is moving higher this week and was up 2115 contracts to 191,864 yesterday. March sugar experienced a major upside breakout and looks poised for a significant rally over the near-term. The market gapped higher above the 4-month downtrend channel, which is a bullish development and also penetrated the neckline of a head and shoulders bottom formation, which is also bullish.

Technical Outlook

SUGAR (MAR) 12/04/03: The gap upmove on the day session chart is a bullish indicator for trend. The market’s close above the 2nd swing resistance number is a bullish indication. Swing resistance comes in at 6.69, with support found at 6.41. The market’s short-term trend is positive on a close above the 9-day moving average. The daily stochastics gave a bullish indicator with a crossover up. The near-term upside objective is at 6.69. With a reading over 70, the 9-day RSI is approaching overbought levels.

COTTON MARKET RECAP

12/3/2003

Failure to add to recent gains triggered a lower close with some light trade house and speculative selling helping to pressure the market. Traders await evidence that China has been a key buyer of US cotton on the recent break before jumping back on to the long side. China is expected to be the primary buyer in the weekly export sales report, released before the opening. Traders are looking for sales to come in near 500,000-800,000 bales as compared with 347,900 bales last week. China has so far booked 2.869 million bales of cotton this season as compared with 551,500 bales last year by this time. China needs are significant and traders believe China may have booked near 1.2-1.5 million bales in the past few weeks which should show up on the weekly sales reports tomorrow and for the next few weeks. The USDA last month pegged China imports at 7 million bales. For shipments, traders are looking for 170,000-250,000 bales as compared with 133,400 bales last week.

Technical Outlook

COTTON (MAR) 12/04/03: 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 73.28 and then again at 74.24, while support is targeted at 71.98 and 71.64. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 74.24.