Why Copper Soared
BOND MARKET RECAP
10/8/2003
The Treasury market surprised the market with
firm action in the face of what could have been considered extremely negative
dialogue from the US Fed. In fact, the talk from the Fed over the last 24 hours
has been nothing short of glowing. Certainly weakness in the US equity market
and slightly disappointing action from a major retailer might have given the
bonds a slight lift. There is also the potential that the BOJ was intervening
again and that in turn brought forth some Treasury purchases. The first critical
economic report of the week is due out Thursday and with trade volume light due
to holiday maybe bonds were simply waffling within a range in the rally
Wednesday.
Technical Outlook
BONDS (DEC) 10/09/03: It is a slightly negative
indicator that the close was lower than the pivot swing number. Near-term
resistance for bonds is at 108.20 and then again at 109.03, while swing support
hits at 107.23 and below there at 107.09. 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 107.09.
T-NOTES(DEC) The upside closing price reversal on
the daily chart is somewhat bullish. 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 111.18. 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 112.23 and then again at 113.01, while swing support hits at 111.31 and
below there at 111.18. The market’s short-term trend is negative as the close
remains below the 9-day moving average.
STOCK INDICES RECAP
10/8/2003
The technical traders are making a big deal out
of fact that the S&P couldn’t manage to rise above the September high and then
failed. It is even more disappointing that the market failed to rally off the
glowing Fed comments on the economy. Costco earnings and stock price action was
an initial disappointment to the market and then it seemed like a profit taking
mood simply settled into position. Maybe the low volume holiday type trade
simply resulted in the bull camp holding on the sidelines.
Technical Outlook
S&P500 (DEC) 10/09/03: It is a mildly bullish
indicator that the market closed over the pivot swing number. The daily closing
price reversal down puts the market on the defensive. Underlying support comes
in at 1030.40 and 1024.80, with overhead resistance at 1040.20 and 1044.40. 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 1044.40.
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 1045.69. The market has a
slightly positive tilt with the close over the swing pivot. Near-term resistance
for the S&P Mini is at 1040.88 and then again at 1045.69, while swing support
hits at 1030.13 and below there at 1024.19. A positive signal for trend
short-term was given on a close over the 9-bar moving average.
NASDAQ (DEC) 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. It is a
slightly negative indicator that the close was lower than the pivot swing
number. The market should run into resistance at 1397.75 and above there at
1411.13 with support at 1374.25 and 1364.13. Studies are showing positive
momentum, but are now in overbought territory so some caution is warranted. The
next upside target is 1411.1.
CURRENCY MARKET
RECAP
10/8/2003
The Dollar seemed a little exhausted with the
probe to a new low somewhat tempered by White House comments that the
Administration still favored a strong Dollar policy. We are not sure how the
administration explains the fact that they want the Dollar lower against the Yen
and Yuan and stronger against most other currencies. Maybe the Dollar was
getting support off the fact that the US Fed was talking so favorable toward the
US economy. If the Dollar was being supported by the good economy talk it was
one of the few financial markets that reacted to the news, as one would expect.
Technical Outlook
YEN (DEC): The market’s close above the 9-day
moving average suggests the short-term trend remains positive. With the close
higher than the pivot swing number, the market is in a slightly bullish posture.
Swing resistance is targeted at 91.61 and above there at 91.82, with the yen
finding support around 91.22 and below there at 91.04. Studies are showing
positive momentum, but are now in overbought territory so some caution is
warranted. The next upside target is 91.82. The 9-day RSI over 70 indicates the
market is approaching overbought levels.
EURO (DEC): Momentum studies are trending higher,
but have entered overbought levels. The near-term upside objective is at 1.1833.
The market is in a bearish position with the close below the 2nd swing support
number. Swing support for the Euro comes in at 1.1729, with overhead resistance
at 1.1833. 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 gap down on the day session chart is bearish with more selling
pressure possible today.
PRECIOUS METALS
RECAP
10/8/2003
Disappointing action in the gold market was
compounded by the fact that prices remained uninspired despite a lower Dollar.
It would almost seem like the weakness in the US equity market applied some
pressure to precious metals. In the end we have to think that action in the
stock market is persistently siphoning off long interest from golf and silver.
We are actually surprised that stocks weren’t higher Wednesday given all the
favorable Fed dialogue and if the stock market does manage to soar that could
make the overly long metals players even more anxious about their positions.
Technical Outlook
SILVER (DEC): It is a slightly negative indicator
that the close was lower than the pivot swing number. Initial support for silver
is at 484.8 and below there at 482.9 with resistance likely at 487.8 and 489.3.
The market’s close below the 9-day moving average is an indication the
short-term trend remains negative. Momentum studies are declining, but have
fallen to oversold levels. The next downside target is 482.9. The downside
closing price reversal on the daily chart is somewhat negative.
GOLD (DEC): Support for gold today comes in near
374.23, while resistance is pegged at 378.03. 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 374.23. Daily studies pointing down suggests
selling minor rallies. The market’s close below the 1st swing support number
suggests a moderately negative setup for today. The market’s short-term trend is
negative as the close remains below the 9-day moving average.
COPPER MARKET RECAP
10/8/2003
The copper market soared on what we would call a
simple extension of prior day’s fundamental developments. The pace of the daily
LME copper stocks seems to justify part of the rise in copper prices especially
since outside macro economic conditions weren’t that supportive Wednesday and
yet prices managed to run higher. There is no doubt about it Chinese interest
continues to be a major component of the bull case. Seeing Nickel prices rise to
13-year highs would seem to suggest that the demand environment for industrial
metals is strong, as we doubt that Nickel is a market that benefits from
significant speculative interest.
ENERGY MARKET RECAP
10/8/2003
The weekly inventory reports showed crude stocks
to be up by 8.2 million barrels at the API and a 5.4 million barrel rise in the
DOE stats. Countervailing the bearish tilt of the crude stocks increase were
moderate declines in gasoline stocks. In fact, considering the continued decline
in refinery operating rates it would seem that the seasonal weakness in refinery
activity would continue to tighten product stocks and result in a rebuilding of
crude stocks. During the session Wednesday the trade was expecting the Nigerian
strike to go forward and that should stem the profit taking slide quickly if
that issue isn’t solved overnight.
Technical Outlook
CRUDE OIL (DEC): The market’s close below the 1st
swing support number suggests a moderately negative setup for today. Support for
crude is keyed on 29.48 and below there at 29.06, with resistance pegged at
30.33 and 30.76. The market’s close on the 9-day moving average is neutral. .
With a reading under 30, the 9-day RSI is approaching oversold levels.
UNLEADED GAS (DEC): Studies are showing positive
momentum, but are now in overbought territory so some caution is warranted. The
next upside target is 83.25. It is a slightly negative indicator that the close
was lower than the pivot swing number. Resistance today is at 83.25, while
support should be found around 78.65. The market’s close above the 9-day moving
average suggests the short-term trend remains positive.
HEATING OIL (DEC): The market’s close below the
1st swing support number suggests a moderately negative setup for today. Heating
oil should encounter support around 80.12, with resistance is at 84.02. 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 84.02. The daily closing price reversal down
puts the market on the defensive.
CORN MARKET RECAP
10/8/2003
The trade apparently saw some farmer selling
ahead of the coming USDA report. Considering the weakness in the soybean
markets, the corn correction was mild Wednesday especially since the market
managed to hold above the prior days lows. It general the trade seems to be
prepared to factor a negative USDA report for Friday morning. Expectations for
the weekly export sales in corn call for 700,000 to 900,000 tons compared to
916,000 the prior week.
Technical Outlook
CORN (DEC) 10/09/03: Daily momentum studies are
on the rise from low levels and should accelerate a move higher on a push
through the 1st swing resistance. The near-term upside objective is at 224 1/4.
The market’s close below the pivot swing number is a mildly negative setup.
Market resistance comes in at 224 1/4 today, with support at 219 1/4. The
market’s short-term trend is negative as the close remains below the 9-day
moving average.
SOY COMPLEX RECAP
10/8/2003
It was mostly downhill in the soybean market as a
slightly weaker opening snowballed into the close. There was initially some
light interest in the long side of oil but that didn’t sustain the market
throughout the session. Expectations for the weekly export sales report in
soybeans call for 350,000 to 500,000 tons and that compares to 701,300 the prior
week. The market is especially keen on the weekly export sales report as the
higher price action is thought to be rationing supply. The market might also be
thinking that initial crop reduction forecasts were a little overstated!
Technical Outlook
SOYBEANS (NOV) 10/09/03: The close below the 2nd
swing support number puts the market on the defensive. The next area of
resistance is around 684 and 692 1/2, while 1st support hits today at 672 1/2
and below there at 669 1/2. The market’s close below the 9-day moving average is
an indication the short-term trend remains negative. 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
669 1/2.
MEAL (DEC): Momentum studies are trending lower
from high levels which should accelerate a move lower on a break below the 1st
swing support. The next downside objective is now at 199.5. First resistance
comes in at 202.2, with support at 200.2. The market’s short-term trend is
positive on a close above the 9-day moving average. The market’s close below the
pivot swing number is a mildly negative setup.
BEAN OIL (DEC): The market’s close above the
9-day moving average suggests the short-term trend remains positive. 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 24.43. The swing indicator gave a moderately negative
reading with the close below the 1st support number. A new contract high was
made on the rally. The downside closing price reversal on the daily chart is
somewhat negative. Daily swing resistance is found at 25.20 and above there at
25.65. Support should be encountered at 24.59 and 24.43.
WHEAT MARKET RECAP
10/8/2003
Argentina rains and ongoing favorable conditions
in the US production areas foster the downside tilt and made it necessary for
the funds to continue to dump long positions. In the last COT report the funds
still held a net long of 25,000 contracts so the market might be working on a
net short in the fund and small spec combined category. High global freight
rates could mean that Asian buyers are turning to Australia rather than the US
for current needs. Expectations for the weekly export sales in wheat call for
550,000 to 750,000 tons compared to 762,800 the prior week.
Technical Outlook
WHEAT (DEC) 10/09/03: The swing indicator gave a
moderately negative reading with the close below the 1st support number. Look
for near-term support at 323 1/2 and below there at 320 1/2, with resistance
levels at 331 1/2 and 336 1/2. The market’s close below the 9-day moving average
is an indication the short-term trend remains negative. Momentum studies are
declining, but have fallen to oversold levels. The next downside target is 320
1/2. The 9-day RSI under 30 indicates the market is approaching oversold levels.
LIVE CATTLE RECAP
10/8/2003
The cattle market and feeder cattle closed
limit-up and into new contract and all-time highs for the second session in a
row. Cash cattle in the panhandle traded at $95.00 this week, up $4.00-$5.00
from last week and with further gains in the beef market, the cash outlook
remains firm in the weeks just ahead. Boxed-beef cut-out values were up $2.01 at
mid-session to $163.37 which added to the bullish tone on the floor. Slaughter
was only 111,000 head as packers are cutting back on kills. There were still
2500 unfilled buy orders for October cattle on the close with 700 in the pool
for December cattle.
Technical Outlook
CATTLE (DEC) 10/09/03: Studies are showing
positive momentum, but are now in overbought territory so some caution is
warranted. The next upside target is 91.20. 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. Support should be encountered at
90.42 and below there at 89.95. Market resistance is at 91.05 and then again at
91.20. A new contract high was made on the rally. The gap upmove on the day
session chart is a bullish indicator for trend. 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.
LEAN HOGS RECAP
10/8/2003
Hogs closed limit-up along with all of the other
meat contracts as the surge in cash cattle and beef prices has supported the
market. Cash markets were steady on the session but after the break in pork
cut-out values on the week, packers should not be too aggressive about paying
higher prices for live animals for the rest of this week unless pork values
recover. The CME 2-day Lean Index was down 43 cents to 55.19 from 59.57 last
week. Weekly average weights for Iowa/Minnesota for the week ending October 4th
came in at 262.6 pounds, up 1.3 pounds from the previous week and up 4.2 pounds
from last year. As a result, an equal number of hogs slaughtered this year would
cause pork production to be up 1.6% from last year. Funds and technicians were
active buyers on the session with the bullish chart action and all-time highs
for cattle.
Technical Outlook
HOGS (DEC) 10/09/03: The market’s close above the
2nd swing resistance number is a bullish indication. Resistance levels comes in
at 58.92 and 59.42 today, while support is around 56.97 and then 55.52. The
market’s short-term trend is positive on a close above 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
59.42.
COCOA MARKET RECAP
10/8/2003
A massive slide in prices certainly pushed the
cocoa market toward a net spec short position. The trade evidently saw some fund
selling and origin selling and did not have the industry buying interest to
deflect the price pressure. Certainly weak handed longs were part of the failure
but we also think that commercial buyers are willing to stand back and see if
prices will fall all the way down to the July and August lows. After all the
market is justified in fearing supply considering the proximity of the main crop
harvest.
Technical Outlook
COCOA (DEC)10/09/03 Could see some early pressure
today given the market’s negative setup with the close below the 2nd swing
support. Cocoa should run into resistance at 1517 and above there at 1605 with
support at 1396 and 1363. Momentum studies are declining, but have fallen to
oversold levels. The next downside target is 1362.75.
COFFEE MARKET RECAP
10/8/2003
A new low probe with a weak close favors the bear
camp. Brazil rains might not be enough to completely end the drought fears but
in the near term the spec and fund longs might find it difficult to avoid
further losses. While extremely heavy rains are needed to really put the crop in
good position the forecast has enough events over the coming days that even
minor rainfall amounts could add up. Dry weather next week is simply not soon
enough to give fresh bull players incentive.
Technical Outlook
COFFEE (DEC)10/9/03 The close below the 1st swing
support could weigh on the market. The daily stochastics have crossed over down
which is a bearish indication. The next downside objective is now at 61.50.The
Coffee contract should run into resistance at 63.30 and above there at 64.10
with support at 62 and 61.50. The market’s short-term trend is negative as the
close remains below the 9-day moving average.
SUGAR MARKET RECAP
10/8/2003
The lowest close since January 10th leaves the
market in a decisive downtrend and the fundamental news this week has added to
the bearish supply outlook. Futures were slightly lower with a choppy, two-sided
trading session before closing slightly lower on the session with an inside-day.
Russian buyers have been quiet recently and with China and Thailand looking at
record supplies, the slower than expected demand from the world’s largest
importer has added to the bearish tone.. The Russian beet crop is expected to
come in near 18.75-19.50 million tons (according to SovEcon) as compared with
15.47 million tons last year. This, combined with the weak internal price
structure has kept buyers on the sidelines.
Technical Outlook
SUGAR (MAR) 10/09/03: The market’s close below
the pivot swing number is a mildly negative setup. Swing resistance comes in at
6.20, with support found at 5.96. The market’s short-term trend is negative as
the close remains below the 9-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 5.96.
COTTON MARKET RECAP
10/8/2003
The excessive rains into the key cotton growing
region in China was enough to trigger the sharp run to new contract highs for
the cotton market. The USDA crop Production and Supply/demand reports for Friday
are expected to show a higher US production forecast but the trade focus is
still on the size of the China crop and with flooding-type rains this week,
unharvested cotton may have been damaged. Active buying in the options pit from
a major Memphis merchant combined with higher prices in China helped support the
strong opening. Weekly export sales, released before the opening, are expected
to come in near 75,000-100,000 bales as compared with 92,900 bales last week.
Shipments are expected to come in near 100,000-150,000 bales.
Technical Outlook
COTTON (DEC) 10/09/03: The market’s close above
the 9-day moving average suggests the short-term trend remains positive. 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. Next
resistance area comes in at 69.84 and then again at 70.12, while support is
targeted at 69.04 and 68.52. The daily stochastics have crossed over up which is
a bullish indication. The next upside target is 70.12. The 9-day RSI over 70
indicates the market is approaching overbought levels. A new contract high was
made on the rally.