Why Copper Traders Are Watching The Chinese Market

Technical Outlook

BONDS (DEC) 10/31/2003: The market tilt is slightly negative with the close under the pivot. Near-term resistance for bonds is at 108.22 and then again at 109.15, while swing support hits at 107.04 and below there at 106.11. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market back below the 40-day moving average suggests the longer-term trend could be turning down. 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 109.15.

T-NOTES(DEC) 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 113.05. The market is in a bearish position with the close below the 2nd swing support number. 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 112.16 and then again at 113.05, while swing support hits at 111.12 and below there at 110.29. The market’s short-term trend is negative as the close remains below the 9-day moving average.

STOCK INDICES RECAP

10/30/2003

While the stock managed to remain positive for most of the session we categorize the action as disappointing because the numbers were good enough to spark a massive rally. Maybe the stock market was significantly overbought and maybe some traders are unwilling to accept the fact that a strong 3rd quarter GDP reading means that the 4th quarter will be strong. Certainly there were some concerning figures from ongoing claims and the help wanted Index during the action Thursday but in the end the US economy is recovering and might be recovering faster than what the stock market is giving credit for. Furthermore, the market didn’t seem to give much consideration to the fact that energy prices are starting to decline. Some traders on Wall Street were concerned that extensive losses in California would hurt insurers and the US recovery!

Technical Outlook

S&P500 (DEC) 10/31/2003: The close over the pivot swing is a somewhat positive setup. Underlying support comes in at 1043.45 and 1037.93, with overhead resistance at 1053.55 and 1058.13. 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 objective is at 1058.13.

S&P E-Mini (DEC): A new contract high was made on the rally. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 1060.81. With the close higher than the pivot swing number, the market is in a slightly bullish posture. Near-term resistance for the S&P Mini is at 1054.88 and then again at 1060.81, while swing support hits at 1042.63 and below there at 1036.31. The market’s close above the 9-day moving average suggests the short-term trend remains positive.

NASDAQ (DEC) A positive signal for trend short-term was given on a close over the 9-bar moving average. The market has a slightly positive tilt with the close over the swing pivot. The market should run into resistance at 1437.75 and above there at 1453.63 with support at 1410.25 and 1398.63. 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 1453.63.

CURRENCY MARKET RECAP

10/30/2003

The Dollar was supported by much better than expected US numbers. However, it would seem like the potential bull contingent in the Dollar wasn’t that large and that the Dollar could easily resume the downside in the coming sessions. In fact, if the Dollar couldn’t shake off the recent weakness and rise sharply in the face of the type of numbers seen from the GDP it would seem that there isn’t much risk in being short the greenback. The biggest setback on the day came in the Yen where traders suspected some week ending intervention from the BOJ in the coming overnight action.

Technical Outlook

YEN (DEC): A positive signal for trend short-term was given on a close over the 9-bar moving average. Could see some early pressure today given the market’s negative setup with the close below the 2nd swing support. Swing resistance is targeted at 92.40 and above there at 92.86, with the yen finding support around 91.72 and below there at 91.50. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 92.86.

EURO (DEC): 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 1.1516. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing support for the Euro comes in at 1.1516, with overhead resistance at 1.1766. The close below the 9-day moving average is a negative 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

10/30/2003

A major upward thrust in gold was rejected and the market finished moderately lower. We have to think that the lack of a clear-cut trend in the Dollar is part of the reason why gold failed to hold the early gains. At the highs Thursday morning of $392, we suspect that the fund and small spec long position reached a pretty excessive reading Thursday around the highs and that smells like a near term top. One would have expected the Dollar to be supported given the strong economic reports seen during the session but we doubt that the Dollar can expect that kind of support in the action Friday.

Technical Outlook

SILVER (DEC): The market tilt is slightly negative with the close under the pivot. Initial support for silver is at 509.8 and below there at 506.9 with resistance likely at 515.1 and 517.3. 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 515.1.

GOLD (DEC): Support for gold today comes in near 377.00, while resistance is pegged at 394.20. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 394.20. It is a slightly negative indicator that the close was under the swing pivot. The close below the 9-day moving average is a negative short-term indicator for trend. The daily closing price reversal down is a negative indicator for prices.

COPPER MARKET RECAP

10/30/2003

A major upside thrust in copper seems to leave the market in an extensively overbought technical condition and it will be very important to see just how the Chinese market reacts overnight to the significant higher price action. However, one has to think that the much stronger than expected US GDP reading helps copper justify some of the recent gains. We have to think that the COT report, adjusted for the action since Tuesday, would leave the copper market massively overbought. The weekly Shanghai copper stocks reading Friday morning will take on added importance considering that China is a major component of the bull market.

ENERGY MARKET RECAP

10/30/2003

The energy market continued to weaken as the market is apparently seeing some funds dump long crude positions. The market also seems to be thinking that OEPC is not set to enforce compliance on the November production cut and therefore the bear camp seems to have an edge. The natural gas market came under heavy selling pressure because the weekly injections continue. Some might have suggested that the injections weren’t as big as expected but yet they have continued and the annual deficit continues to narrow. The only major offset to even weaker energy prices is the fact that the macro economic conditions appear to be improving dramatically.

Technical Outlook

CRUDE OIL (DEC): More selling pressure is likely given yesterday’s gap lower price action on the day session chart. It is a slightly negative indicator that the close was under the swing pivot. Support for crude is keyed on 28.24 and below there at 28.01, with resistance pegged at 28.71 and 28.95. The market’s close on the 9-day moving average is neutral. . Some caution in pressing the downside is warranted with the RSI under 30.

UNLEADED GAS (DEC): Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The next downside objective is 75.50. Could see some early pressure today given the market’s negative setup with the close below the 2nd swing support. Resistance today is at 80.30, while support should be found around 75.50. The gap lower on the day session chart is bearish and puts the market on the defensive. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market back below the 40-day moving average suggests the longer-term trend could be turning down. The market is approaching over sold levels on an RSI reading under 30.

HEATING OIL (DEC): The market setup is somewhat negative with the close under the 1st swing support. Heating oil should encounter support around 76.92, with resistance is at 78.92. The close below the 9-day moving average is a negative short-term indicator for trend. 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 76.92. Some caution in pressing the downside is warranted with the RSI under 30. More selling pressure is likely given yesterday’s gap lower price action on the day session chart.

CORN MARKET RECAP

10/30/2003

The corn market managed a new high for the move but once again managed to trade on both sides of unchanged and that close slightly weaker. Weekly export sales came in at 1,480,000 compared to expectations of 1,000,000 to 1,350,000 tons. In other words, the sales were good but maybe expectations have been running a little strong. There continues to be bullish expectations for some type of Chinese corn export halt or at least a slow down in exports. With corn prices reaching the highest level since May it is clear that some fresh news is required to keep prices in a straight up pattern. Will soybean meal buyers begin to secure corn instead of meal, as that would seem to be necessary to continue pushing corn prices upward.

Technical Outlook

CORN (DEC) 10/31/2003: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 253 . There could be more upside follow through since the market closed above the 2nd swing resistance. Market resistance comes in at 253 today, with support at 243 . The close above the 9-day moving average is a positive short-term indicator for trend. The market is becoming somewhat overbought now that the RSI is over 70. The daily closing price reversal down is a negative indicator for prices.

SOY COMPLEX RECAP

10/30/2003

The soybean complex managed a new high for the move but then closed down moderately suggesting that prices might be short term overbought. News that China was seeking up to 2 million metric tons of soybeans from Brazilian Co-Ops and that is a sign that the buying interest continues despite such lofty pricing. Apparently the market couldn’t find fresh specs or funds to propel prices significantly higher. There were apparently reports of farmer selling Thursday and that should serve to take some of the edge off the upside. Weekly export sales came in at a whopping 1,744,000 compared to expectations of 1,000,000 to 1,600,000 tons. First notice day in beans should now bring about the potential for accentuated volatility and roll over activity. In the end some profit taking was seen and maybe that is a temporary issue considering the huge soy meal sales posted to unknown destinations early in the session.

Technical Outlook

SOYBEANS (JAN) 10/31/03 The market has a slightly positive tilt with the close over the swing pivot. The next area of resistance is around 805 and 811 1/4, while 1st support hits today at 792 1/2 and below there at 786 1/4. The market’s close on the 9-day moving average is neutral. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 811 1/4. The market is approaching overbought levels with an RSI over 70.

MEAL (DEC): Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 258.8. The market rallied to a new contract high. The daily closing price reversal down is a negative indicator for prices. First resistance comes in at 256.8, with support at 252.6. The close above the 9-day moving average is a positive short-term indicator for trend. The close over the pivot swing is a somewhat positive setup. Caution is warranted with the RSI over 90 as the market may be limited on further gains.

BEAN OIL (DEC): 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 25.86. The swing indicator gave a moderately negative reading with the close below the 1st support number. Daily swing resistance is found at 26.78 and above there at 27.16. Support should be encountered at 26.13 and 25.86.

WHEAT MARKET RECAP

10/30/2003

Dec wheat fell under selling pressure sparked by a low export sales number and the expectations for rain in the Great Plains hard red winter wheat growing area. Big cancellations left net wheat sales at only 16,700 tons, shockingly lower than trade expectations which ranged between 400,000 to 700,000 tons. The rally in wheat prices looks to have priced out buyers who may now be looking at buying Canadian or Australian wheat. The European Union import quota for US wheat totaled 572,000 tonnes which helped to mitigate the declines in futures prices. The International Grain Council forecasts 2003/04 world wheat output at 556 million tons vs 567 million tons 2002/03. The IGC also puts 2003/04 world wheat stocks at 131 million tons vs 163 million tons 2002/03. Next support area for Dec wheat is between 364 to 360.

Technical Outlook

WHEAT (DEC) 10/31/2003: The market tilt is slightly negative with the close under the pivot. Expect near-term support around 364 1/2 and below there at 361 1/4, with resistance levels at 373 1/2 and 379 1/4. 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 379 1/4.

LIVE CATTLE RECAP

10/30/2003

December cattle closed 77 lower on the session and down 220 points from the highs of the day as the early rally failed to hold due to weak beef prices. Early strength was triggered by the news that panhandle cash markets were actively trading at $100, up $3.00-$7.00 over last week. However, packers had to pay higher for the live animal but boxed-beef prices remain in a downward spiral. As a result, packer profit margins moved deep into the red. This led to ideas that cash markets have peaked as the showlist might be a bit higher next week and packer demand will be down sharply unless beef prices begin to show some support. Boxed-beef cut-out values were down $1.07 to $168.13 as compared with $186.66 last week and prices over $200 early last week. Slaughter came in at just 127,000 head as compared with trade expectations at 128,000-131,000 head. Slaughter for the week reached just 493,000 head from 508,000 last week and 522,000 head last year at this time.

Technical Outlook

CATTLE (DEC) 10/31/2003: 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 93.95. The market tilt is slightly negative with the close under the pivot. Support should be encountered at 89.20 and below there at 88.10. Market resistance is at 92.12 and then again at 93.95. 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

10/30/2003

December hogs closed 10 lower on the session with two-sided trade around a 130 point range. Ideas that the market could see some strength in cash markets into next week due to improving packer profit margins helped support the early gains but weakness in the cash market, concerns with higher than expected slaughter and news that weights are running 3.1 pounds over last years pace helped pressure the market. In addition, a reversal to the downside in cattle added to the bearish tone late in the session. The CME 2-day lean index was down 80 cents to 49.59 as compared with 53.95 last week at this time. During the same time frame, pork cut-out values have been mostly steady. Slaughter this week reached 1.576 million head, up 2000 from last week but down 7000 from last years pace.

Technical Outlook

HOGS (DEC) 10/31/2003: The close over the pivot swing is a somewhat positive setup. Resistance levels comes in at 53.20 and 53.97 today, while support is around 51.90 and then 51.37. The daily closing price reversal down is a negative indicator for prices. The close below the 9-day moving average is a negative short-term indicator for trend. 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 51.37.

COCOA MARKET RECAP

10/30/2003

The cocoa market continued to waffle within the weekly range but couldn’t really hold close to the highs. A private forecast for the 2002-2003 crop showed a 131,000 tons surplus while the 2003-2004 forecast called for a deficit of 24,000 tons. In other words, the cocoa market had reason to decline in 2003 but we should be seeing tight enough conditions in the future to forge a critical low. However, origin selling was once again noted around the highs and that is to be expected given the growing flow of harvest activity. We still don’t think enough physical supply has flowed to be confident that new lows won’t be seen in the weeks ahead.

Technical Outlook

COCOA (DEC)10/31/03 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. Cocoa should run into resistance at 1447 and above there at 1463 with support at 1412 and 1393. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 1463.25.

COFFEE MARKET RECAP

10/30/2003

December coffee closed sharply lower (down 160) on the session and to new 14 month lows with funds and speculators selling but very slow roaster or commercial buyers. The lows were just 10 points off of contract lows. Good weather in Brazil has improved the production outlook with many traders talking about estimates near 45 million bags for the 2004 crop which would be up sharply from this season but still short of the record production two years ago at 48.5 million bags. CSCE exchange stocks were up 1770 bags to 4.462 million bags with 54,616 bags pending review. There are rumors that a large commodity fund which has taken delivery of large quantities of certified stocks earlier this year may be forced to liquidate.

Technical Outlook

COFFEE (DEC)10/31/03 The market tilt is slightly negative with the close under the pivot. The daily stochastics have crossed over down which is a bearish indication. The next downside objective is now at 58.05.The Coffee contract should run into resistance at 60.80 and above there at 62.35 with support at 58.65 and 58.05. The market’s short-term trend is negative as the close remains below the 9-day moving average.

SUGAR MARKET RECAP

10/30/2003

End of month short-covering from the funds could support a bounce in sugar tomorrow as the market has had too many attempts to break to a new price level and failed. Speculative buying supported the moderate gains on the session today with the March contract up 7. With a massive net short position by the speculator, a minor jump in cash business is likely to trigger a significant jump in prices with short-covering as the foundation. Taiwan is expected to re-tender for 35,000 tons of raw sugar soon. Even if the longer-term trend is to remain down, with the world production surplus currently believed to be just 1-2 million tons, a minor shift in the supply outlook could have a significant impact on prices. In fact, FO Licht in Germany indicated a slight world production deficit for the 2003/2004 season with ending stocks projected at 69.39 million tons from 69.67 million this year.

Technical Outlook

SUGAR (MAR) 10/31/2003: Market positioning is positive with the close over the 1st swing resistance. Swing resistance comes in at 6.27, with support found at 6.07. The close above the 9-day moving average is a positive short-term indicator for trend. The cross over and close above the 40-day moving average is an indication the longer-term trend is up. 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 6.27. Short-term indicators suggest buying pullbacks today.

COTTON MARKET RECAP

10/30/2003

December cotton closed limit down. The sweeping technical reversal came in the face of bullish news for supply and demand. The extreme overbought condition of the market suggests the need for a significant technical correction, but the fundamental news continues to support prices. The weekly export sales came in at 1.457 million bales as compared with trade expectations between 400,000-600,000 bales. China bought 1.238 million of the total. The shockingly high number trigger a gap higher opening above key resistance on the monthly charts at 83.20, but the lack of new buyers after the opening and selling from a key Memphis merchant triggered active long liquidation selling. The close was 507 points down from the highs. There was a void of new buying support as the surge in buying from China had forced end users to cover needs during the rally of the past 2 1/2 months. Pakistan officials indicated a crop size of near 7.8 million bales as compared with the last USDA forecast at 8.5 million bales. In addition, China is about to issued another 500,000 tons of import quotas for 2003 in order to try to help cool domestic prices. This news would suggest aggressive new buying from China in the weeks just ahead.

Technical Outlook

COTTON (DEC) 10/31/2003: A negative signal for trend short-term was given on a close under the 9-bar moving average. Could see some early pressure today given the market’s negative setup with the close below the 2nd swing support. Next resistance area comes in at 82.27 and then again at 86.07, while support is targeted at 77.20 and 75.93. A bearish signal was triggered on a crossover down in the daily stochastics. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 75.93. 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.