Why Copper Is Still Showing Strength

Technical Outlook

BONDS (MAR) 1/2/2004: The market setup is supportive for early gains with the close over the 1st swing resistance. Near-term resistance for bonds is at 112.01 and then again at 112.08, while swing support hits at 111.11 and below there at 110.28. A positive signal for trend short-term was given on a close over 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 110.28.

T-NOTES(MAR) 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 113.09. With the close over the 1st swing resistance number, the market is in a moderately positive position. 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 114.02 and then again at 114.06, while swing support hits at 113.20 and below there at 113.09. The market’s short-term trend is positive on a close above the 9-day moving average.

STOCK INDICES RECAP

2/3/2004

The stock market action is nothing less than stellar as the market managed to avoid selling pressure off a bad Challenger layoff survey and also managed to shake off the fear of the Ricin attack. We also think the stock market did a good job discounting the below expectation auto sales readings for January. In other words, the bear had plenty of reason to dominate pricing but couldn’t muster the volume. In short the macro economic outlook isn’t great but the market appears to be content to favor the bull case.

Technical Outlook

S&P500 (MAR) 1/2/2004: It is a slightly negative indicator that the close was under the swing pivot. Underlying support comes in at 1129.05 and 1125.83, with overhead resistance at 1135.95 and 1139.63. 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 objective is now at 1125.83.

S&P E-Mini (MAR): 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 1126.13. 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 1136.75 and then again at 1140.13, while swing support hits at 1129.75 and below there at 1126.13. The market’s close below the 9-day moving average is an indication the short-term trend remains negative.

NASDAQ (MAR) 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 1495.25 and above there at 1504.88 with support at 1479.75 and 1473.88. Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The next downside objective is 1473.88.

MINI DOW (MAR) The close below the 9-day moving average is a negative short-term indicator for trend. The market should run into resistance at 10509 and above there at 10545 with support at 10437 and 10401. 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 10401. It is a slightly negative indicator that the close was under the swing pivot.

CURRENCY MARKET RECAP

2/3/2004

We think the lack of coordinated opinion inside the G7 allowed the Dollar to slide Tuesday. With some G7 members suggesting that the BOJ hasn’t let the Yen absorb enough of the burden of the Dollar slide it would seem that the BOJ is on its own in defending against further Dollar declines. Therefore, the odds of a consensus decision in the coming G7 meeting, with respect to the sagging Dollar is less likely than what the market expected last week. We also have to think that the renewed threats of terrorism against the US government reconfirm an interest in shorting the Dollar.

Technical Outlook

YEN (MAR): A positive signal for trend short-term was given on a close over the 9-bar moving average. The market made a new contract high on the rally. The market has a slightly positive tilt with the close over the swing pivot. Swing resistance is targeted at 95.01 and above there at 95.18, with the yen finding support around 94.71 and below there at 94.58. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 95.18.

EURO (MAR): The crossover up in the daily stochastics is a bullish signal. The near-term upside target is at 1.2602. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing support for the Euro comes in at 1.2474, with overhead resistance at 1.2602. The close above the 9-day moving average is a positive 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

2/3/2004

While the threat of terrorism might have prompted some gold and silver buying Tuesday we suspect that the massive slide in the Dollar was the key component behind the strength in the metals. However, the gold market didn’t exactly bask in the support from the sliding Dollar and rising terrorism threats and that would seem to suggest a lackluster long interest in the yellow metal. In short it would appear that the gold market is having trouble restarting the uptrend pattern even with developments that would have sparked aggressive buying in the past.

Technical Outlook

SILVER (MAR): The market has a slightly positive tilt with the close over the swing pivot. Initial support for silver is at 607.8 and below there at 603.9 with resistance likely at 613.8 and 616.8. 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 603.9.

GOLD (APR): Support for gold today comes in near 395.90, while resistance is pegged at 405.50. 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 395.90. The close over the pivot swing is a somewhat positive setup. The close below the 9-day moving average is a negative short-term indicator for trend.

COPPER MARKET RECAP

2/3/2004

The copper market showed no signs of weakness in the face of renewed terrorism threats against the US economy which in a sense proves that the copper market is mostly focused on Chinese and Asian demand prospects. The trade seemed to add buying interest rather than lose in into the expansion of the bird flu problem and that speaks volumes for the bull trend in copper. The fact that more supply concerns are being seen appears to have countervailed the negative potential off of bird flu issues. Ford Brand sales declined 4.8% and GM sales car sales fell 17% in January and that has to dampen the demand outlook for copper but it would seem that the market really is focused on Asian, not US demand.

ENERGY MARKET RECAP

2/3/2004

The energy complex sagged Tuesday with the products seeing relatively more intense selling than crude oil. With the weekly inventory readings due out on Wednesday and the recent pattern of extreme cold we would expect to see a draw in stocks. If by chance the recent cold hasn’t pulled on stocks then the economy must be slower than expected or the US must be seeing rising crude imports. However, the market needs to watch developments in Nigeria closely as tensions there left 10 dead in the Delta. Seeing Nigerian supply slowed or halted would be just as supportive as the recent spate of refinery problems in the US. It should be noted that temperatures in the Midwest remain pretty cold through next Monday and that should support energy prices.

Technical Outlook

CRUDE OIL (MAR): The daily closing price reversal down is a negative indicator for prices. It is a slightly negative indicator that the close was under the swing pivot. Support for crude is keyed on 33.54 and below there at 33.25, with resistance pegged at 34.66 and 35.49. The close below the 9-day moving average is a negative short-term indicator for trend. The crossover up in the daily stochastics is a bullish signal. The near-term upside target is at 35.49.

UNLEADED GAS (MAR): A bullish signal was given with an upside crossover of the daily stochastics. The next upside objective is 104.10. The market tilt is slightly negative with the close under the pivot. Resistance today is at 104.10, while support should be found around 97.50. The market could take on a defensive posture with the daily closing price reversal down. A negative indicator was given with the downside crossover of the 9 & 18 bar moving average.

HEATING OIL (MAR):The market setup is somewhat negative with the close under the 1st swing support. Heating oil should encounter support around 89.09, with resistance is at 95.09. Short-term indicators on the defensive. Consider selling an intraday bounce. The downside crossover of the 9 & 18 bar moving average is a negative signal. The close below the 40-day moving average is an indication the longer-term trend is down. 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 89.09.

CORN MARKET RECAP

2/3/2004

The corn market closed 2 cents higher for the May contract but the close was full 3 cents off of the highs of the day. Ideas that the sell-off on Monday was overdone and fund buying of near 35000 contracts helped support. Growing concerns that the bird flu situation could slow exports and talk of some increase in export activity from Thailand and India helped to limit the buying support. Basis levels remain steady due to icing on the Illinois river. Strength in the soybean market helped provide support but the late sell-off in wheat helped to slow the fund buying support.

Technical Outlook

CORN (MAR) 1/2/2004: 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 268 3/4. There could be more upside follow through since the market closed above the 2nd swing resistance. Market resistance comes in at 277 3/4 today, with support at 268 3/4. The close below the 9-day moving average is a negative short-term indicator for trend.

SOY COMPLEX RECAP

2/3/2004

The soybean market surged higher on the session with May soybeans up 8 3/4 cents led by active buying in the oil futures with May oil at a 6-session high. Rumors that China was buying near 100,000 tons of oil from South America and talk that US crushers may take additional down time and lower the crush pace further helped support the products; especially oil. With lower crush margins in China and declining demand for meal due to a loss of the poultry export market due to bird flu could be factors for China to slow their crush pace and import more oil and less soybeans. Funds were noted buyers of near 2000 contracts for soybeans and near 2500 contracts for oil. Declining meal demand and lower crush in the US would tighten oil stocks further and could support more active oil/meal spreading over the near-term. Soybeans also found support from a jump in the basis at the gulf.

Technical Outlook

SOYBEANS (MAR) 02/04/04 The market setup is supportive for early gains with the close over the 1st swing resistance. The next area of resistance is around 809 1/2 and 814 1/2, while 1st support hits today at 795 1/2 and below there at 786 1/2. A negative indicator was given with the downside crossover of the 9 & 18 bar moving average. The market now above the 40-day moving average suggests the longer-term trend is up. Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The next downside objective is 786 1/2.

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 241.8. The upside daily closing price reversal gives the market a bullish tilt. First resistance comes in at 249.1, with support at 244.6. The close below the 9-day moving average is a negative short-term indicator for trend. The swing indicator gave a neutral reading since the market’s close was equal to the pivot number.

BEAN OIL (MAR): A negative indicator was given with the downside crossover of the 9 & 18 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 28.76. 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. Daily swing resistance is found at 30.32 and above there at 30.58. Support should be encountered at 29.41 and 28.76.

WHEAT MARKET RECAP

2/3/2004

The market closed moderately lower on the session as the fund buying seen early in the session did not show up to support wheat late in the day and a lack of interest combined with some moisture expected in the central plains helped to pressure futures. Kansas crop ratings for the first of the month were just 42% good to excellent condition as compared with 53% one month ago and this news helped support the early gains but the snow cover in the forecast for the plains helped pressure. Ukraine officials indicate the need to import 700,000 tons of wheat in the next two months with near 250,000 from the coming from Kazakhstan and the rest from optional origin. The outside day down is a negative short-term technical pattern and the close near the lows suggests more technical selling ahead.

Technical Outlook

WHEAT (MAR) 1/2/2004: The outside day down is somewhat negative. The market could take on a defensive posture with the daily closing price reversal down. 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 375 and below there at 372 1/4, with resistance levels at 385 1/2 and 393 1/4. A negative signal for trend short-term was given on a close under the 9-bar moving average. A bearish signal was triggered on a crossover down in the daily stochastics. The next downside objective is 372 1/4.

LIVE CATTLE RECAP

2/3/2004

April cattle finished lower Tuesday as cash cattle prices continued to fall and poorer packer profit margins pressured prices. Boxed beef cut-out value for lightweight carcasses dropped $1.36 to $134.69 vs $143.53 a week ago. While packer profit margins are deep in the red, slaughter was surprisingly high at 130,000 head compared to estimates ranging between 116,000 and 123,000 head. The downside was limited by a forecast for a snow storm to hit the Midwest which could stress cattle. Key support for April cattle is around 72.

Technical Outlook

CATTLE (APR) 1/2/2004: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The next downside objective is 72.10. The market tilt is slightly negative with the close under the pivot. Support should be encountered at 72.47 and below there at 72.10. Market resistance is at 73.27 and then again at 73.70. A negative signal for trend short-term was given on a close under the 9-bar moving average.

LEAN HOGS RECAP

2/3/2004

April hogs closed 65 lower on the session with an inside trading day which is normally a negative signal when the inside session occurs after a move to a high. Fears that hog producers may have backed-up hogs in the country due to recent bitter cold weather and that the market will need to absorb increased marketings when the hogs move onto the market this week helped pressure the market. Continued hopes of increasing exports ahead due to mad cow/bird flu problems provided underlying support. Cash hogs came in steady but traders are looking for some weakness to develop unless pork cut-outs continue in the uptrend. The CME 2-day lean index was up for the period ending January 30th came in at $57.96, up $.29 on the day and up from $55.97 on January 23rd. Slaughter came in at 382,000 head which was below trade expectations.

Technical Outlook

HOGS (APR) 1/2/2004: It is a slightly negative indicator that the close was under the swing pivot. Resistance levels comes in at 59.82 and 60.50 today, while support is around 58.87 and then 58.60. 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 60.50.

COCOA MARKET RECAP

2/3/2004

The cocoa market waited until late in the session to rally and ended up posting a massive upside adjustment. Since light buying was not countered by the typical origin selling (or spec selling for that matter) the market managed more gains than would have been seen otherwise. It would also seem like Industry buyers chased after the market as it rose through some key technical areas. We also have to wonder if increased tensions in Nigeria provided a backdrop of long interest even if the brunt of the cocoa flow is situated inside the Ivory Coast.

Technical Outlook

COCOA (MAR)02/04/04 The gap upmove on the day session chart is a bullish indicator for trend. 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 1629 and above there at 1645 with support at 1572 and 1531. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 1531.25.

COFFEE MARKET RECAP

2/3/2004

May coffee prices closed lower as an early round of fund and roaster buying was not enough to overcome producer sales. Fund profit taking was also a factor later in the session as some fund traders begin to exit long positions, which according to the last COT report is at a very large net long number. The positioning of traders in the COT report would suggest that it will be hard to maintain higher prices in May coffee. However, the market is also holding up well and price breaks have been shallow so far. There seems to be good roaster demand even at these prices. Unless the perception begins to change regarding tight supplies, coffee prices may not break very far if roaster demand stays firm. Exports from Costa Rica for the marketing year through January rose 8% from a year ago.

Technical Outlook

COFFEE (MAR)2/4/04 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. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside objective is now at 72.85.The Coffee contract should run into resistance at 75.80 and above there at 77.45 with support at 73.5 and 72.85. The market’s short-term trend is negative as the close remains below the 9-day moving average.

SUGAR MARKET RECAP

2/3/2004

March sugar closed 3 lower on the session but 10 off the highs of the day. The market continues to chop around in a 6-week trading range as the bearish short-term cash fundamentals and aggressive selling from funds pushed the market to new lows last week but the market managed to jump back up into the range. Rallies have been met with origin selling pressures from Brazil and other key producers and ideas that prices are too cheap have supported the bounces off of the low end of the trading range. However, the lack of new cash business on the breaks suggests that key end users do not see the current price level as cheap. Prices may need to move low enough to attract new business and low enough to absorb the hefty stocks situation from Brazil. In addition, traders expect an even larger crop in Brazil for the coming season which could add to the burdensome stocks situation for sugar and for ethanol stocks.

Technical Outlook

SUGAR (MAR) 1/2/2004: The close over the pivot swing is a somewhat positive setup. Swing resistance comes in at 5.90, with support found at 5.64. 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 5.64.

COTTON MARKET RECAP

2/3/2004

May cotton ended sharply lower for the second straight session on continued concern over China purchases and reports of higher world production of cotton going forward. The International Cotton Council forecasted China’s 2004/05 cotton crop at 6.2 million tones, which would be up about 21% from this year. This news comes on the heels of the National Cotton Council’s high prospective plantings estimate which raises concerns of rising world cotton supplies. With the market’s technical structure breaking down, May cotton is now in a position to test the November, 2003 low.

Technical Outlook

COTTON (MAR) 1/2/2004: 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 69.85 and then again at 70.43, while support is targeted at 67.95 and 66.63. Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The next downside objective is 66.63. The daily closing price reversal up is a positive indicator that could support higher prices. ORANGE JUICE (MAR)2/4/04 The market tilt is slightly negative with the close under the pivot. Orange Juice should run into resistance at 62.00 and above there at 62.70 with support at 60.90 and 60.50. The market’s short-term trend is negative as the close remains below the 9-day moving average. Momentum studies are declining, but have fallen to oversold levels. The next downside objective is now at 60.5.