Why Copper Is Sliding

Technical Outlook

BONDS (DEC) 11/20/03: 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. The swing indicator gave a moderately negative reading with the close below the 1st support number. Near-term resistance for bonds is at 110.24 and then again at 111.27, while swing support hits at 109.06 and below there at 108.23. 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 111.27.

T-NOTES(DEC) The outside day down is a negative signal. The daily closing price reversal down puts the market on the defensive. Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 114.16. The market’s close below the pivot swing number is a mildly negative setup. 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 113.23 and then again at 114.16, while swing support hits at 112.20 and below there at 112.10. The upside crossover (9 above 18) of the moving averages suggests a developing short-term uptrend.

STOCK INDICES RECAP

11/19/2003

The stock market managed a very impressive rally Wednesday and accomplished the run off a series of minor fundamental and technical developments. Maybe the Fed suggestions that the recovery progress was sustainable combined with the surprise housing starts improvement provided the majority of the buying spark but we also think that the lows today have managed to support prices on numerous occasions. Last week the market found value at today’s opening and the market has now rejected pricing below this mornings opening for two straight sessions. The Fed also suggested that a jobs producing economy is becoming a reality and that is really an issue that the bulls are very happy to embrace.

Technical Outlook

S&P500 (DEC) 11/20/03: It is a mildly bullish indicator that the market closed over the pivot swing number. Underlying support comes in at 1036.05 and 1029.38, with overhead resistance at 1046.55 and 1050.38. The downside crossover (9 below 18) of the moving averages suggests a developing short-term downtrend. The major trend could be turning up with the close back above the 40-day moving average. 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 1029.38.

S&P E-Mini (DEC): The market made a new contract high on the rally. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 1026.44. The market has a slightly positive tilt with the close over the swing pivot. The market back below the 40-day moving average suggests the longer-term trend could be turning down. Near-term resistance for the S&P Mini is at 1047.38 and then again at 1051.94, while swing support hits at 1034.63 and below there at 1026.44. A negative indicator was given with the downside crossover of the 9 & 18 bar moving average.

NASDAQ (DEC) The moving average crossover down (9 below 18) indicates a possible developing short-term downtrend. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The market should run into resistance at 1386.50 and above there at 1395.75 with support at 1365.50 and 1353.75. Momentum studies are declining, but have fallen to oversold levels. The next downside target is 1353.8.

CURRENCY MARKET RECAP

11/19/2003

After a new contract low the Dollar index managed to recover and that might be the result of the action in the US stock market and the better than expected US economic report readings. Perhaps the most significant supporting development for the Dollar were comments from two different Fed members that played up the pace of the US recovery and suggested that the US economy was primed to see jobs growth. In the end the market has to upgrade the view toward the US recovery but recently optimistic views on the US economy haven’t been able to entrench. In fact, before turning off the bear view on the Dollar the market will need to see more conclusive proof of the macro economic improvement.

Technical Outlook

YEN (DEC): The market’s close below the 9-day moving average is an indication the short-term trend remains negative. The close below the 2nd swing support number puts the market on the defensive. Swing resistance is targeted at 91.77 and above there at 92.09, with the yen finding support around 91.31 and below there at 91.17. 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 91.17.

EURO (DEC): Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 1.1966. The market is in a bearish position with the close below the 2nd swing support number. Swing support for the Euro comes in at 1.1814, with overhead resistance at 1.1966. The market’s short-term trend is positive on a close above the 9-day moving average. The gap down on the day session chart is bearish with more selling pressure possible today.

PRECIOUS METALS RECAP

11/19/2003

What the Dollar gave to gold in the prior session was basically taken away in the action Wednesday. Adding to the slight negative influence on gold were slightly favorable US economic readings and a higher US equity market. In other words, flight to quality interest was reduced Wednesday by the numbers and by the stock market action and that prompted some longs to exit gold and silver. In the end the gold and silver market continued to look directly at the Dollar and react accordingly.

Technical Outlook

SILVER (MAR): The swing indicator gave a moderately negative reading with the close below the 1st support number. Initial support for silver is at 524.5 and below there at 521.2 with resistance likely at 531.7 and 534.0. 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 531.7.

GOLD (FEB): Support for gold today comes in near 391.03, while resistance is pegged at 401.63. Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 401.63. The market’s close below the pivot swing number is a mildly negative setup. The market’s short-term trend is positive on a close above the 9-day moving average.

COPPER MARKET RECAP

11/19/2003

A massive slide in prices Wednesday surprised the trade but wasn’t unexpected as the Chinese continued to balk at current price levels. One would have expected favorable US economic numbers and some minor gains in stock prices to discourage weakness in copper prices but the copper market isn’t tracking fundamental developments as closely as it has been. Until the Chinese show up as buyers the bear camp would seem to control the direction of prices. The Press suggested that copper was significantly overbought and possibly out of buying fuel but considering the magnitude of the break off the recent high we would suspect that the technical condition of the market is becoming more balanced.

ENERGY MARKET RECAP

11/19/2003

The weekly inventory report showed moderately large builds in crude oil inventories and minimal changes in gasoline stocks. Distillate stocks showed a significant decline from the DOE but the API numbers did not confirm that decline. It should noted that both refinery operating rates increased and that could be seen as a net negative to the product markets. Also dampening sentiment in the energy markets were comments from the Kuwaiti Oil Minister who suggested that current oil prices don’t reflect current fundamentals. The Kuwaiti Oil Minister also suggested that a significant price decline might be seen in 2004 and that spooked some bull players out of position.

Technical Outlook

CRUDE OIL (JAN): The rally brought the market to a new contract high. The daily closing price reversal down puts the market on the defensive. The market’s close below the pivot swing number is a mildly negative setup. Support for crude is keyed on 31.57 and below there at 31.21, with resistance pegged at 32.57 and 33.21. 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 33.21.

UNLEADED GAS (JAN): Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 92.31. It is a slightly negative indicator that the close was lower than the pivot swing number. Resistance today is at 92.31, while support should be found around 87.11. The market’s close above the 9-day moving average suggests the short-term trend remains positive.

HEATING OIL (JAN): The market’s close below the pivot swing number is a mildly negative setup. Heating oil should encounter support around 87.21, with resistance is at 92.41. 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 92.41. The rally brought the market to a new contract high. The daily closing price reversal down puts the market on the defensive.

CORN MARKET RECAP

11/19/2003

March corn failed moderately and would appear to be ready to violate even more charts points in the coming action. The corn market was partially impacted by the massive slide in soybean prices but some suggest that harvest movement is serving to undermine corn prices. Open interest remains extremely high and the technical violation of support could foster some stop loss selling. Keep in mind the fund long in corn was pretty large coming into the week and therefore its understandable that downside action foster liquidation. Weekly export sales, released before the opening, are expected to come in near 750,000-950,000 tonnes as compared with 748,200 tonnes last week.

Technical Outlook

CORN (MAR) 11/20/03: 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 234 . The market is in a bearish position with the close below the 2nd swing support number. Market resistance comes in at 242 1/2 today, with support at 234 . The market’s short-term trend is negative as the close remains below the 9-day moving average.

SOY COMPLEX RECAP

11/19/2003

Even though the trade thinks that the trade spat with China will not affect trade interest in US beans, the market certainly acted like the Chinese issue was a bear major issue. Even though prices were down sharply there was positive demand news noted during the session with Taiwan tendering for some corn and talk that Russia might look to implement some export quotas or raise export duties on grain to ensure domestic grain supplies. While the import export news doesn’t directly impact soybean prices there are some minor countervailing developments at work in the grain markets. Weekly export sales, released before the opening, are expected to come in near 800,000-1.0 million tonnes as compared with 917,400 tonnes last week. Meal sales are thought to be 50,000-100,000 tonnes and oil sales are thought to be 5,000-10,000 tonnes.

Technical Outlook

SOYBEANS (JAN) 11/20/03: The swing indicator gave a moderately negative reading with the close below the 1st support number. The next area of resistance is around 760 1/2 and 777 1/4, while 1st support hits today at 737 and below there at 730 1/4. The market’s close below the 9-day moving average is an indication the short-term trend remains negative. The daily stochastics have crossed over down which is a bearish indication. The next downside target is 730 1/4. Short-term indicators on the defensive. Consider selling an intraday bounce.

MEAL (JAN): Daily stochastics are trending lower, but have declined into oversold territory. The next downside objective is now at 223.1. First resistance comes in at 234.8, with support at 226.3. The market’s short-term trend is negative as the close remains below the 9-day moving average. The market is in a bearish position with the close below the 2nd swing support 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 27.06. The close below the 2nd swing support number puts the market on the defensive. Daily swing resistance is found at 26.54 and above there at 27.06. Support should be encountered at 25.81 and 25.60.

WHEAT MARKET RECAP

11/19/2003

March wheat closed 23 lower on the session and the 4-day break has given back 50% of the rally from October 15th to November 14th. Speculators were caught heavily net long with most of the rise in open interest coming after November 10th so new buyers were quickly under water and long liquidation selling was extremely active. While Egypt bought US wheat in their optional origin tender and the USDA announced that Romania bought 110,000 tonnes of US wheat before the opening, the threat of retaliation by China in the trade dispute was enough to trigger the liquidation. The fate of the assumed 1 million tonne purchase of US from China is now in serious question. Unlike soybeans or cotton, the short-term demand in China for wheat is not too great and China may just avoid US in their wheat buying in the weeks just ahead. Estimates of fund selling were near 6000 contracts by late in the session. Weekly export sales, released before the opening, are expected to come in near 500,000-700,000 tonnes as compared with 537,400 tonnes last week.

Technical Outlook

WHEAT (MAR) 11/20/03: The gap lower price action on the day session chart is a bearish indicator for trend. The close below the 2nd swing support number puts the market on the defensive. Look for near-term support at 364 1/2 and below there at 357 , with resistance levels at 389 and 406 . The market’s close below the 9-day moving average is an indication the short-term trend remains negative. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 357 .

LIVE CATTLE RECAP

11/19/2003

December cattle opened 117 points higher on the session and closed 150 lower (limit-down) in active trade as weakness in the pork market and ideas that cash cattle may trade lower this week helped trigger active long liquidation selling. A lack of bids from feedlots in the cash market and ideas that the snowstorm may not be as threatening as first believed helped pressure. Cattle slaughter was only 112,000 head as compared with trade expectations at 126,000-129,000. Lower than expected slaughter could mean that packer demand is on a decline. Slaughter for the week reached 354,000 head from 378,000 last year at this time. Boxed-beef cut-out values at mid-session were up 87 cents to $170.55.

Technical Outlook

CATTLE (FEB) 11/20/03: Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 87.50. The close below the 2nd swing support number puts the market on the defensive. Support should be encountered at 88.17 and below there at 87.50. Market resistance is at 90.70 and then again at 92.55. 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. The market’s close below the 9-day moving average is an indication the short-term trend remains negative.

LEAN HOGS RECAP

11/19/2003

December and February hogs closed limit-down after a steady opening as longs turned bearish and long liquidation persisted due to continued hefty pork production and surprisingly lower pork values this week. The drop in pork cut-out values on Tuesday, new lows for the move for the ham market and fears that pork production will remain high helped trigger the active selling. The 2-day lean index was down 56 to 49.21. Weekly average weights from Iowa/Minnesota for the week ending November 15th came in at 265.7 pounds, down .2 from last week but still up 1.3 pounds from last year at this time. For Thursday’s USDA monthly cold storage report, traders are looking for end of October belly stocks to come in near 20.0 million pounds (range 18.2-21.0) as compared with 10.4 million pounds last year. Slaughter came in at 393,000 head which brought weekly slaughter to 1.169 million head from 1.137 million last week and 1.161 million last year.

Technical Outlook

HOGS (FEB) 11/20/03: The market is in a bearish position with the close below the 2nd swing support number. Resistance levels comes in at 55.85 and 57.27 today, while support is around 53.92 and then 53.42. The market’s short-term trend is negative as the close remains below the 9-day moving average. Daily stochastics are trending lower, but have declined into oversold territory. The next downside objective is now at 53.42. With a reading under 30, the 9-day RSI is approaching oversold levels.

COCOA MARKET RECAP

11/19/2003

We are a little surprised by the upside action Wednesday in the face of physical flow stories from Nigeria and hints that the Nigerian crop is showing good quality. It would seem that weather conditions are such that harvesting activity is going to speed up and that could certainly limit prices on the upside in the coming weeks. However, in order to see overall cocoa prices soften it will take news of decent supply flow from the Ivory Coast. Apparently some short funds decided to cover positions and that temporarily gave the market support. We would be surprised to see cocoa prices rise above the November highs unless the trade was focusing in on violence at the Ivory Coast.

Technical Outlook

COCOA (MAR)11/20/03 The daily closing price reversal up is positive. The market setup is supportive for early gains with the close over the 1st swing resistance. Cocoa should run into resistance at 1574 and above there at 1586 with support at 1536 and 1510. The daily stochastics have crossed over up which is a bullish indication. The next upside target is 1586.00. Short-term indicators suggest buying dips today.

COFFEE MARKET RECAP

11/19/2003

Coffee attempted an upside breakout but failed to hold the gains and settled slightly below the prior sessions close. The industry players were buyers and that seemed to prevent the market from drifting too far off the opening levels. The ICO released some estimates on world crops Wednesday suggesting that 03-04 production would decline to 100-103 million bags as compared with 118.92 in 2002-2003. The ICO also suggested that coffee consumption in 02-03 was up by 2.5 million bags. In other words, the off year production cycle decline is anticipated in the ICO numbers and that should help the coffee market respect recent price lows.

Technical Outlook

COFFEE (MAR)11/20/03 The downside closing price reversal on the daily chart is somewhat negative. 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 63.90.The Coffee contract should run into resistance at 63.15 and above there at 63.90 with support at 61.95 and 61.50. The market’s short-term trend is negative as the close remains below the 9-day moving average.

SUGAR MARKET RECAP

11/19/2003

The highest close since early October combined with a hefty net short position of fund traders leaves the market vulnerable to more short-covering support over the near-term. The close above 638 for March sugar leaves 656 as next resistance. Even though Egypt cancelled a tender for 40,000 tonnes over the weekend, cash dealers believe they will be booking several cargoes of sugar over the next few weeks. Cuba plans to produce near 2.6-2.7 million tonnes for the 2003/2004 season as compared with 2.1-2.2 million tonnes last year. From this point, we would think the speculative buying will slow and the producer selling will pick up.

Technical Outlook

SUGAR (MAR) 11/20/03: With the close over the 1st swing resistance number, the market is in a moderately positive position. Swing resistance comes in at 6.47, with support found at 6.31. 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 6.47. Consider buying pull-backs since daily studies are bullish.

COTTON MARKET RECAP

11/19/2003

March cotton closed 47 higher on the session with an inside trading day. Trade house buying supported the market ahead of the weekly sales report and ahead of first notice day for the December contract, both on Thursday. Ideas that the trade dispute with China will not have much of an impact on the sales data helped traders forget about the possibility of China retaliation against US imposed tariffs on China textiles and may have given traders a false sense of security. Talk that the China delegation which cancelled their trip might soon reschedule may have also provided some support. Weekly export sales, released before the opening, are expected to come in near 200,000-300,000 bales as compared with 448,800 bales last week. It seems unlikely that the serious trade dispute will be resolved quickly and without more retaliation from China so we would think that the market may have to absorb more bearish news ahead.

Technical Outlook

COTTON (MAR) 11/20/03: The market’s close below the 9-day moving average is an indication the short-term trend remains negative. With the close higher than the pivot swing number, the market is in a slightly bullish posture. Next resistance area comes in at 77.44 and then again at 78.07, while support is targeted at 75.89 and 74.97. The cross over and close above the 40-day moving average indicates the longer-term trend has turned up. Momentum studies are declining, but have fallen to oversold levels. The next downside target is 74.97.