Why Energy Is Likely To Remain Lower

Technical Outlook

BONDS (MAR) 12/23/03: 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 111.03 and then again at 111.24, while swing support hits at 109.32 and below there at 109.18. 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 111.24.

T-NOTES(MAR) 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 113.17. 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 113.03 and then again at 113.17, while swing support hits at 112.11 and below there at 112.01. The market’s short-term trend is positive on a close above the 9-day moving average.

STOCK INDICES RECAP

12/22/2003

The stock-market opened weaker but managed to climb into positive territory around mid session. While U.S. officials didn’t downplay the terrorism threats, they did seem to generalize when the attacks might take place and that seemed to reduce anxiety slightly. Therefore, the stock market still has the opportunity to benefit from the pre-holiday optimism but we suspect that some of the gains Monday afternoon were fresh short buying back opening positions instead of fresh buyers rushing into the market. Many traders also suggested that economic reports due out Tuesday morning could provide a wave of buying and that lifted sentiment. It is certainly possible that stock prices benefited from the Libyan change of heart, which would seem to lower the tensions in the Middle East. It is also possible that significantly weaker energy prices provided the stock market a fundamental lift.

Technical Outlook

S&P500 (MAR) 12/23/03: With the close over the 1st swing resistance number, the market is in a moderately positive position. Underlying support comes in at 1088.55 and 1082.28, with overhead resistance at 1097.05 and 1099.28. 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 1099.28. With a reading over 70, the 9-day RSI is approaching overbought levels.

S&P E-Mini (MAR): The outside day up is somewhat positive. The market made a new contract high on the rally. The daily closing price reversal up is a positive indicator that could support higher prices. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 1102.25. The market setup is supportive for early gains with the close over the 1st swing resistance. Near-term resistance for the S&P Mini is at 1099.00 and then again at 1102.25, while swing support hits at 1086.50 and below there at 1077.25. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market is approaching overbought levels with an RSI over 70.

NASDAQ (MAR) 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. The market should run into resistance at 1440.50 and above there at 1446.25 with support at 1425.50 and 1416.25. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 1446.3.

CURRENCY MARKET RECAP

12/22/2003

The Dollar index carved out a new contract low early in the session but didn’t seem poised to continue on the downside pulse later in the session. The fact that the U.K. might also be a target of the new threats served to put pressure on the Pound and mitigate the pressure on the Dollar. However, the most significant price action of the session came in the Canadian dollar, which made a key technical and possibly a fundamental reversal. It also appeared as if the yen was attracting a wave of fresh buying interest, which is sure to pull the Bank of Japan back into action in the days ahead. However, following the economic reports Tuesday morning, the bull camp in the Dollar might be hard-pressed to deter additional selling.

Technical Outlook

YEN (MAR): 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 93.35 and above there at 93.51, with the yen finding support around 93.13 and below there at 93.07. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 93.07.

EURO (MAR): 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 1.2342. The market is in a bearish position with the close below the 2nd swing support number. Swing support for the Euro comes in at 1.2342, with overhead resistance at 1.2428. 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

12/22/2003

After showing signs of early strength, the gold market settled into a tight trading range. It is now clear that a progressively lower U.S. Dollar is necessary to satisfy the current bull camp in gold. The fact that U.S. equity prices managed to play down the fears of terrorism probably took some of the pressure off the U.S. dollar and that in turn took some of the upward bias out of the gold market. Surprisingly the silver market behaved poorly Monday, possibly because the fear of contracting physical demand that could come from the weekend terrorist threat warning. It was clear that the platinum market came under significant selling pressure and that would seem to hint at serious demand fears. However, the action Monday was the weakest action in the platinum market for at least the last 9 months and that might hint at a trend change.

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 569.8 and below there at 566.9 with resistance likely at 572.9 and 575.3. 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 572.9. The 9-day RSI over 70 indicates the market is approaching overbought levels. The downside closing price reversal on the daily chart is somewhat negative.

GOLD (FEB): Support for gold today comes in near 409.30, while resistance is pegged at 413.30. 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 409.30. 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

12/22/2003

The copper market appeared to enter into a significant corrective posture Monday morning. With year end accounting affecting exchange stock levels in the days ahead and the threat of terrorism looming, we are not surprised that many longs decided to take profits on long held positions in the action Monday. Traders should continue to watch for a year end influx of physical copper supplies to the London metals Exchange as that could catch the market in a weak posture. At least during market hours Monday, we did not see news that any of the current labor problems were being resolved, but if that’s development is seen, following the technical washout Monday, the selling could intensify.

ENERGY MARKET RECAP

12/22/2003

The energy complex saw a sea change in fundamentals Monday. Not only did Libya appear to give in to the rule of international law, but it is clear that near-term weather will remain bearish toward prices. Seeing Libya drop its resistance could remove sanctions against Libya, which in turn could help increase production from that country in the future. With the weather outlook calling for mild temperatures, the mere hint of lower transportation demand, off the renewed terrorism threat, is certainly caused for long liquidation. Considering the size of the recent fund long in the Commitment of Traders report, the market was certainly vulnerable to stop-loss selling. Therefore, the significant decline in energy prices on Monday seemed to come from several issues and most of those issues look to remain in place in the days ahead.

Technical Outlook

CRUDE OIL (FEB): The gap down on the day session chart is bearish with more selling pressure possible today. The market is in a bearish position with the close below the 2nd swing support number. Support for crude is keyed on 31.41 and below there at 31.11, with resistance pegged at 32.34 and 32.97. The market’s short-term trend is negative as the close remains below the 9-day moving average. 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 31.11.

UNLEADED GAS (FEB): 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 85.99. The close below the 2nd swing support number puts the market on the defensive. Resistance today is at 91.79, while support should be found around 85.99. The gap lower price action on the day session chart is a bearish indicator for trend. The market’s close below the 9-day moving average is an indication the short-term trend remains negative.

HEATING OIL (FEB):The market is in a bearish position with the close below the 2nd swing support number. Heating oil should encounter support around 87.53, with resistance is at 94.33. The market’s short-term trend is negative as the close remains below the 9-day moving average. The daily stochastic’s gave a bearish indicator with a crossover down. 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 87.53. The gap down on the day session chart is bearish with more selling pressure possible today.

CORN MARKET RECAP

12/22/2003

Surprisingly the corn market opened weak and remained weak into the close. Even in the face of a surprisingly strong weekly export inspections total of 50 million bushels, prices remained near lows of the session. Even though the current sales total easily surpassed the prior week’s tally of 37 million bushels, it appeared as if the small specs were interested in moving to the sidelines. It was also clear that significantly weaker soybean prices added to the weight hanging over the corn market. With the headlines trumpeting planting progress in Argentina and some weekend rains seen in that country, some of the bullish support for corn prices seen last week was removed.

Technical Outlook

CORN (MAR) 12/23/03: 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 244 1/2. The market’s close below the 1st swing support number suggests a moderately negative setup for today. Market resistance comes in at 248 1/2 today, with support at 244 1/2. The market’s short-term trend is negative as the close remains below the 9-day moving average. Daily studies pointing down suggests selling minor rallies. The major trend is down with the cross over back below the 40-day moving average.

SOY COMPLEX RECAP

12/22/2003

Soybeans started the session out weak and finished even weaker. Weekly export inspections came in below the prior week at 31.5 million bushels and that seemed add to liquidation interest. It appears as if the magnitude of the fund and small spec long, in the commitment of Traders report prompted some longs to exit in the trade Monday particularly after the export inspections yielded little in the way of bullish support. While the press continues to trumpet the idea of a tight supply conditions in 2004, the market is overbought heading into the end of the year and therefore vulnerable to small spec liquidation. Weak pricing in the cash oil and alternative oil market might have added to the early bearish tilt in the complex, which eventually allowed prices to violate a series of support levels on the charts.

Technical Outlook

SOYBEANS (MAR) 12/23/03: 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. The next area of resistance is around 762 1/2 and 767 1/2, while 1st support hits today at 755 and below there at 752 1/2. 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 752 1/2.

MEAL (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 226.4. First resistance comes in at 230.6, with support at 228.0. The market’s short-term trend is negative as the close remains below the 9-day moving average. The market’s close below the pivot swing number is a mildly negative setup.

BEAN OIL (MAR): 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 27.13. The close below the 2nd swing support number puts the market on the defensive. Daily swing resistance is found at 27.60 and above there at 27.87. Support should be encountered at 27.23 and 27.13.

WHEAT MARKET RECAP

12/22/2003

Despite some early strength in the European wheat market, U.S. wheat prices remained down for most of the session. Weekly wheat export inspections were pegged at 12.4 million bushels versus 11.7 million bushels in the prior week. Many traders now expect the March wheat contract to fall back to the December lows, on year-end book squaring and a lack of fresh market moving fundamentals. Weather would also seem to be a slight bit negative to prices with precipitation presence in key areas and temperatures coming in most on the mild side.

Technical Outlook

WHEAT (MAR) 12/23/03: Short-term indicators on the defensive. Consider selling an intraday bounce. The swing indicator gave a moderately negative reading with the close below the 1st support number. Look for near-term support at 381 1/2 and below there at 379 1/4, with resistance levels at 389 1/2 and 395 1/4. 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 379 1/4.

LIVE CATTLE RECAP

12/22/2003

February cattle closed 117 higher in active trade as the early lower trade attracted new commercial and speculative buying. The bullish USDA Cattle report Friday, follow-through technical buying and some snow in the plains helped support. Boxed-beef cut-out values were 11 cents lower at mid-session to $153.30. The cash market news was somewhat supportive with a smaller showlist reported at most locations. After the sharp break in cash last week, many producers seem to want to hold cattle for sale into 2004 for tax purposes. Slaughter came in at 132,000 head as compared with 122,000-129,000 expected. The higher than expected slaughter is generally a sign of better than expected demand from the packer.

Technical Outlook

CATTLE (FEB) 12/23/03: The daily stochastics have crossed over up which is a bullish indication. The next upside target is 91.10. A positive setup occurred with the close over the 1st swing resistance. Consider buying pull-backs since daily studies are bullish. Support should be encountered at 88.80 and below there at 87.60. Market resistance is at 90.55 and then again at 91.10. The market’s close above the 9-day moving average suggests the short-term trend remains positive.

LEAN HOGS RECAP

12/22/2003

The market pushed moderately higher finding support from follow-through technical buying and from the strength in the cattle pit. Cash markets were $2.00 lower at Peoria and the 2-day lean Index as of Dec 18th hit 49.92, down 20 cents on the session. This was the first close over the 40-day moving average since December 1st. The largest slaughter since December of 1998 last week combined with record average weights could pressure pork values this week as the market attempts to absorb the excess production. Slaughter for the day came in at 395,000 head as compared with 390,000-396,000 expected. The technical action remains short-term bullish but the cash news sloppy.

Technical Outlook

HOGS (FEB) 12/23/03: It is a mildly bullish indicator that the market closed over the pivot swing number. Resistance levels comes in at 54.15 and 54.40 today, while support is around 53.35 and then 52.80. 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 54.40.

COCOA MARKET RECAP

12/22/2003

Long liquidation continued in the cocoa market, partly because of improving political conditions at the Ivory Coast and partly because small spec longs have lost their bullish resolve. With a new low for the move Monday, cocoa prices suffered some technical damage and could be headed to the next lower support point of $1,500. Currently the cocoa market expects rebel leaders to return to the national government and that’s should increase the odds that the current main crop harvest will find its way to port without harm or delay. Apparently light industry buying Monday was not enough to overcome steady small spec selling.

Technical Outlook

COCOA (MAR)12/22/03 The market tilt is slightly negative with the close under the pivot. Cocoa should run into resistance at 1586 and above there at 1598 with support at 1558 and 1542. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 1542.00.

COFFEE MARKET RECAP

12/22/2003

The coffee market inched lower in quiet trade as producer sellers moved to the sidelines and buyers were also quiet. The outlook for tighter supplies ahead and lower than normal exports out of Brazil may help to provide underlying support but this news is offset by a larger than expected Vietnam crop. Talk of declining crop estimates in Brazil for the 2004 harvest added to the support but traders feel that it will be January or even February before more realistic assessment of the crop progress will be available. CSCE stocks at the exchange were down 5250 bags to 4.371 million bags with 22,513 bags pending review. US coffee roastings for the week ending December 13th came in at 450,000 bags which brought cumulative roastings for the year to 18.3 million bags as compared with 17.91 million last year at this time. Widespread rains are expected in Brazil coffee areas this week which should help the soils re-charge after less than expected rains this fall.

Technical Outlook

COFFEE (MAR)12/22/03 The outside day up and close above the previous day’s high is a positive signal. The daily closing price reversal up is positive. The market setup is supportive for early gains with the close over the 1st swing resistance. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside objective is now at 62.00.The Coffee contract should run into resistance at 65.20 and above there at 65.70 with support at 63.35 and 62.00. The market’s short-term trend is positive on a close above the 9-day moving average. The major trend could be turning up with the close back above the 40-day moving average.

SUGAR MARKET RECAP

12/22/2003

March sugar closed 18 lower on the session. The 3-day collapse has taken 70 points off of sugar prices as fund and speculative sellers are overwhelming the market with “throw in the towel” long liquidation selling. Friday’s COT report showed that as of December 16th, the speculator was still net long over 69,000 contracts and the weak technical action since this time has triggered more and more long liquidation sales. With cash brokers closing their books for the season, buyers are not too anxious to jump in on the longside. However, given the business seen in the past few months and the high freight rates, many buyers have been watching from the sidelines and end user stock levels are likely to be fairly tight.

Technical Outlook

SUGAR (MAR) 12/23/03: The gap lower price action on the day session chart is a bearish indicator for trend. The market’s close below the 1st swing support number suggests a moderately negative setup for today. Swing resistance comes in at 6.13, with support found at 5.77. The downside crossover (9 below 18) of the moving averages suggests a developing short-term downtrend. Daily stochastics are trending lower, but have declined into oversold territory. The next downside objective is now at 5.77. With a reading under 30, the 9-day RSI is approaching oversold levels.

COTTON MARKET RECAP

12/22/2003

March cotton continued to coil but didn’t seem to show much interest in the upside breakout that was forged Friday. The trade will see US Census November cotton consumption data Tuesday morning and that will liven up what could have been a quiet trading session. The market still can’t seem to get a sense of where the Chinese stand with respect to additional purchases and that has robbed the market of direction. In general the market was disappointed in the lack of follow through Monday but with the terrorism issue many demand driven markets paused. So far, the recent Chinese soybean sales have not provided a direct and sustained benefit to cotton prices.

Technical Outlook

COTTON (MAR) 12/23/03: 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. Next resistance area comes in at 71.08 and then again at 71.67, while support is targeted at 70.08 and 69.67. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 71.67. ORANGE JUICE (JAN)12/22/03 The sell-off took the market to a new contract low. The daily closing price reversal up is positive. The market tilt is slightly negative with the close under the pivot. Orange Juice should run into resistance at 67.50 and above there at 68.75 with support at 65.00 and 63.75. 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 63.75.