Why Oil Was Bid Up Today

Technical Outlook

#BONDS (SEP) 07/20/04: With the close higher than
the pivot swing number, the market is in a slightly bullish posture. Near-term
resistance for bonds is at 109.18 and then again at 109.23, while swing support
hits at 109.06 and below there at 108.31. 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 109.23. The 9-day RSI over 70 indicates
the market is approaching overbought levels.

T-NOTES(SEP) Momentum studies are trending
higher, but have entered overbought levels. The near-term upside objective is at
111.17. It is a mildly bullish indicator that the market closed over the pivot
swing number. Near-term resistance for the T-Notes is at 111.14 and then again
at 111.17, while swing support hits at 111.07 and below there at 111.03. 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.

 

STOCK INDICES RECAP

7/19/2004

The stock market seemed to have a positive bias
early in the session even after 3M earnings hurt sentiment. Despite the
disappointment off 3M earnings the market should have had enough offsetting
favorable readings from other companies to keep sentiment favorable but the
trade is simply not interested in the long side of the market. Even with the Fed
coming out with favorable macro economic dialogue (the Fed’s Minehan suggested
that the economic recovery was on solid footing) the trade seemed to worry about
future earnings and valuations.

Technical Outlook

#S&P500 (SEP) 07/20/04: The market’s close below
the pivot swing number is a mildly negative setup. Underlying support comes in
at 1093.10 and 1089.40, with overhead resistance at 1102.90 and 1109.00. 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 1089.40. With a
reading under 30, the 9-day RSI is approaching oversold levels.

S&P E-Mini (SEP): Daily stochastics declining
into oversold territory suggest the selling may be drying up soon. The next
downside objective is 1089.00. The market tilt is slightly negative with the
close under the pivot. Near-term resistance for the S&P Mini is at 1103.50 and
then again at 1110.00, while swing support hits at 1093.00 and below there at
1089.00. A negative signal for trend short-term was given on a close under the
9-bar moving average. The market is approaching over sold levels on an RSI
reading under 30.

NASDAQ (SEP) The market’s close below the 9-day
moving average is an indication the short-term trend remains negative. It is a
slightly negative indicator that the close was lower than the pivot swing
number. The market should run into resistance at 1405.00 and above there at
1418.00 with support at 1384.00 and 1376.00. The 9-day RSI under 30 indicates
the market is approaching oversold levels. Momentum studies are declining, but
have fallen to oversold levels. The next downside target is 1376.0.

MINI DOW (SEP) The market’s close below the 9-day
moving average is an indication the short-term trend remains negative. The
market should run into resistance at 10125 and above there at 10205 with support
at 10006 and 9967. Momentum studies are declining, but have fallen to oversold
levels. The next downside target is 9967. The swing indicator gave a moderately
negative reading with the close below the 1st support number. The 9-day RSI
under 30 indicates the market is approaching oversold levels.

 

CURRENCY MARKET RECAP

7/19/2004

The Dollar barely managed to stay positive to
start the week out and with the US equity market weak and the NAHB showing a
minor down tick it is a little surprising that sentiment was more negative. The
primary benefactor of the Dollar weakness Monday was the Japanese Yen which was
in a partial holiday trade. Therefore, the direction in the currency markets on
Monday was not definitive. In the end, the trade was left with a slightly
negative opinion toward the US economy.

Technical Outlook

#CURRENCIES 07/20/04: YEN (SEP): The market’s
close above the 9-day moving average suggests the short-term trend remains
positive. The gap upmove on the day session chart is a bullish indicator for
trend. A positive setup occurred with the close over the 1st swing resistance.
Swing resistance is targeted at 92.75 and above there at 92.85, with the yen
finding support around 92.53 and below there at 92.41. The daily stochastics
have crossed over up which is a bullish indication. The next upside target is
92.85. Short-term indicators suggest buying dips today.

EURO (SEP): Momentum studies are trending higher,
but have entered overbought levels. The near-term upside objective is at 1.2465.
The market is in a bearish position with the close below the 2nd swing support
number. Swing support for the Euro comes in at 1.2369, with overhead resistance
at 1.2465. 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

7/19/2004

Gold and silver started the session off with
lackluster action, tired to sell off but then showed some positive progression
toward the close. Some suggested that the silver market needed a profit taking
session after the strong gains of last week. Since the Dollar offered little in
the way of direction we can understand the sideways action in the precious
metals. Platinum was jostled around by the potential for a solution to a labor
problem at one facility and then supported by the prospect of yet another labor
problem.

Technical Outlook

#P-METALS 07/20/04: SILVER (SEP): The swing
indicator gave a moderately negative reading with the close below the 1st
support number. Initial support for silver is at 649.3 and below there at 642.1
with resistance likely at 665.8 and 670.8. 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 665.8. 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.

GOLD (AUG): Support for gold today comes in near
403.50, while resistance is pegged at 408.30. Momentum studies are trending
higher, but have entered overbought levels. The near-term upside objective is at
408.30. 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

7/19/2004

The early strength in copper faded as the Dollar
remained positive and the US economic outlook continued to weaken. The Press
reported more aggressive long liquidation after the market failed to hold above
the 131 level, while others suggested that a lack of fresh strike news prompted
some long to step back from the market. Seeing the NAHB Index slide fosters
concern over future copper demand in the US but with trade expectations for the
housing reading on Tuesday mostly positive the negative macro economic outlook
should have offset. The bears certainly noted the daily increase in LME stocks,
which is against the trend seen for most of the last year.

 

ENERGY MARKET RECAP

7/19/2004

Energy prices showed almost no pause in their
upward track despite the fact that OPEC floated forecasts of higher June
production. However, OPEC also suggested that forward demand was rising and that
2005 demand would increase by 2.1%. We also think that a car bombing outside the
Iraqi police station and the offering of a bounty on the head of the new Iraqi
Prime Minister gave the bull camp even more reason to bid up prices. OPEC also
talked about having sufficient excess capacity but that seemed to dredge up the
prospect of shortages off OPEC problems. Apparently the funds were the major
buyers Monday and were probably drawn in due to technical signals on the charts.

Technical Outlook

#ENERGIES 07/20/04: CRUDE OIL (SEP): It is a
mildly bullish indicator that the market closed over the pivot swing number.
Support for crude is keyed on 41.05 and below there at 40.59, with resistance
pegged at 41.83 and 42.15. 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 42.15.

UNLEADED GAS (SEP): 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
124.73. It is a slightly negative indicator that the close was lower than the
pivot swing number. Resistance today is at 130.03, while support should be found
around 124.73. The market’s close below the 9-day moving average is an
indication the short-term trend remains negative.

HEATING OIL (SEP): It is a mildly bullish
indicator that the market closed over the pivot swing number. Heating oil should
encounter support around 108.88, with resistance is at 113.68. 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 113.68.

 

CORN MARKET RECAP

7/19/2004

The weak close in spite of the bounce in wheat
and new crop soybeans keeps the market in a decisive downtrend. The crop
continues to receive perfect weather for pollination with good soil moisture and
cool temperatures. Some areas of the mid-west need a bit of rain but traders
feel that 1/2 inch in the next week will be enough to keep crop conditions near
ideal to achieve a new record high yield. Traders are looking for tonight’s
weekly crop progress report to show crops rated in good to excellent condition
at 74%, steady against last week. The Commitment-of-Traders report with options
showed that funds had reduced their net long position to near 16,000 contracts
while small traders increased their net short to over 57,000 contracts. The
set-up is positive but the selling trend is bearish. Weekly export inspections
came in at 35.2 million bushels for soybeans as compared with trade expectations
at 30-38 million. Cumulative shipments have reached 1.612 billion bushels as
compared with 1.310 billion bushels last year at this point. December corn
support comes in at 240 1/2 with 249 and 252 1/4 as resistance.

Technical Outlook

#CORN (DEC) 07/20/04: Daily stochastics are
trending lower, but have declined into oversold territory. The next downside
objective is now at 242 1/4. The market is in a bearish position with the close
below the 2nd swing support number. Market resistance comes in at 247 3/4 today,
with support at 242 1/4. The market’s short-term trend is negative as the close
remains below the 9-day moving average. With a reading under 30, the 9-day RSI
is approaching oversold levels. The gap down on the day session chart is bearish
with more selling pressure possible today.

 

SOY COMPLEX RECAP

7/19/2004

The weather outlook for scattered rains in the
middle of this week was not enough to keep traders decisively bearish and
November futures turned higher on light short-covering and new buying from
speculators. The trade does not expect much of a change in the crop conditions
for tonight’s weekly update from the USDA. South Korea is tendering for 50,000
tons of non-GMO optional origin soybeans. The COT reports with options showed a
“less” overbought condition for soybeans while the meal report had speculators
still holding a hefty net long position of over 25,000 contracts. Oil was in a
classic bearish set-up with funds net short and small specs net long. Weekly
export inspections came in at 2.329 million bushels for soybeans as compared
with trade expectations at 2-5 million. Cumulative shipments have reached 834.3
million bushels as compared with 1.01 billion bushels last year at this point.
It will take a move above the main downtrend channel for November soybeans (at
680 tomorrow) or at least above the 40-day moving average (676 1/4) to see
technical confirmation of a low. November soybean support moves up to 647 and
640 with 664 and 677 3/4 as resistance.

Technical Outlook

#SOYBEANS (NOV) 07/20/04: With the close higher
than the pivot swing number, the market is in a slightly bullish posture. The
next area of resistance is around 657 1/2 and 667 3/4, while 1st support hits
today at 638 and below there at 628 3/4. 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 up which is a bullish indication. The next upside
target is 667 3/4.

MEAL (DEC): Daily stochastics are trending lower,
but have declined into oversold territory. The next downside objective is now at
194.7. First resistance comes in at 205.6, with support at 198.5. The market’s
short-term trend is negative as the close remains below the 9-day moving
average. With the close over the 1st swing resistance number, the market is in a
moderately positive position.

BEAN OIL (DEC): The market’s close above the
9-day moving average suggests the short-term trend remains positive. Positive
momentum studies in the neutral zone will tend to reinforce higher price action.
The next upside target is 24.41. With the close higher than the pivot swing
number, the market is in a slightly bullish posture. Daily swing resistance is
found at 24.09 and above there at 24.41. Support should be encountered at 23.58
and 23.39.

 

WHEAT MARKET RECAP

7/19/2004

The closing price reversal after hitting a new
low combined with the close above the opening could attract some technical
buying in wheat. The ongoing winter wheat harvest along with weakness in corn
contributed to the early weakness but the market failed to add much to the
downside on the move to new 9-month lows. The higher close today could have the
appearance of a low as the market took out Friday’s range. News that Egypt
bought 60,000 tons of wheat helped provide some support but the trade still
seems depressed over the weak export sales last week and a few international
trades which the US seems to be loosing market share. Sri Lanka bought 130,000
tons of milling wheat from Argentina. The Commitment-of-Traders report showed
the market in a classic bearish set-up but some traders are nervous with the
hefty net short position of the fund trader and fear some short-covering ahead.
Weekly export inspections came in at 19.4 million bushels as compared with trade
expectations at 18-25 million. Cumulative shipments have reached 124.2 million
bushels as compared with 107.6 million bushels last year at this point. China
loaded out another 2.3 million bushels on the week. Support for September wheat
comes in at 333 and 330 1/2 with 338 and 343 as resistance.

Technical Outlook

#WHEAT (DEC) 07/20/04: The daily closing price
reversal up is positive. With the close higher than the pivot swing number, the
market is in a slightly bullish posture. Look for near-term support at 344 and
below there at 339 3/4, with resistance levels at 351 1/2 and 354 3/4. 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 339 3/4.

 

LIVE CATTLE RECAP

7/19/2004

August cattle closed near unchanged in choppy,
two-sided trade which October gained ground on positioning ahead of the USDA
Cattle-on-Feed report for Friday. In addition, the Cattle Inventory will also be
released on Friday. The trade came into the session optimistic that the US/Japan
negotiations would lead to a drop of the US ban soon but news stories seem mixed
with Japan representatives thinking that even if a compromise is reached soon
that trade will not be restored for months. Slaughter came in at 128,000 head as
compared with trade expectations of 118,000-126,000 head. The higher than
expected slaughter could be an indication of stronger demand from packers. Boxed
beef cut-out values were down $3.20 to $137.05 as compared with $141.05 last
week at this time.

Technical Outlook

#CATTLE (AUG) 07/20/04: Momentum studies are
declining, but have fallen to oversold levels. The next downside target is
82.07. With the close higher than the pivot swing number, the market is in a
slightly bullish posture. Support should be encountered at 82.57 and below there
at 82.07. Market resistance is at 83.65 and then again at 84.22. The market’s
close below the 9-day moving average is an indication the short-term trend
remains negative.

 

LEAN HOGS RECAP

7/19/2004

The market closed moderately higher on the
session with a minor recovery bounce from last week’s sharp break. Active bull
spreading was noted with talk of the discount to the cash market and better than
expected cash market tone helping to support the strong gains in August hogs.
Cash markets were mostly steady to as much as $2.00 higher at some locations
which was a better scenario than traders expected prior to the opening.
Slaughter came in at 385,000 head as compared with trade expectations of
381,000-388,000 head. The CME 2-day lean index for the period ending July 15th
came in at 79.56, up 7 cents from the previous session and up from 79.18 one
week previous. The Index was near 63.00 last year at this time.

Technical Outlook

#HOGS (AUG) 07/20/04: The market’s close above
the 2nd swing resistance number is a bullish indication. Resistance levels comes
in at 74.72 and 75.00 today, while support is around 73.72 and then 73.00. 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 73.00.

 

COCOA MARKET RECAP

7/19/2004

The cocoa market once again managed an impressive
upside performance as it rose to the highest level since the end of February.
Once again the Press noted aggressive fund buying which wasn’t discouraged by
trade selling. It is still unclear what the main basis for the bull market in
cocoa is other than long interest by the funds. According to the last COT report
the funds and small specs were net short but given the $130 rally since the
report was measured, we suspect that the net spec short is totally leveled and
is now slightly long.

Technical Outlook

COCOA (SEP) 07/20/04 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 1580 and above there at 1590 with support at
1552 and 1534. The 9-day RSI over 70 indicates the market is approaching
overbought levels. Studies are showing positive momentum, but are now in
overbought territory so some caution is warranted. The next upside target is
1590.00.

 

COFFEE MARKET RECAP

7/19/2004

The coffee market managed to respect the prior
days low and close near the upper end of the last ten days consolidation
pattern. However, with the local trade dominating action and the small specs
recently dumping weather positions it is possible that coffee will see even more
consolidation ahead. Mild weather forecasts for Brazil are negative but
continued rain might delay harvest and discourage some selling interest. Only
minor roaster buying gives the market the impression that the recent lows offer
only minimal support to prices.

Technical Outlook

COFFEE (SEP) 7/20/04 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 73.00.
The Coffee contract should run into resistance at 72.55 and above there at 73.00
with support at 71.3 and 70.50. The market’s short-term trend is positive on a
close above the 9-day moving average.

 

SUGAR MARKET RECAP

7/19/2004

October sugar closed firmer, but the market
traded sideways within Friday’s range amid low volume. While the market is
overbought, support around 8.20 continues to hold as the longer-term
fundamentals are positive. The fundamental news out on Monday, however, was not
enough to push Oct sugar through recent highs. Thailand plans to conduct a Quota
B sale of 400,000 metric tons of raw sugar to trade houses for export & delivery
in 2005. Prices in the sale are expected to become a standard for Thai business
going forward. There is speculation that Thailand’s 2004/05 cane crop could be
under 60 million tons vs 64.48 million last year as a result of drought. Cash
business has been slow, but Syria plans to purchase white or raws on July
28thwhile both Iraq and Libya also need sugar. There are reports that India’s
crop to be harvested in September could be below 15 million tons due to a lack
of rain last year and the market is anticipating India to be a net importer of
sugar this year.

Technical Outlook

#SUGAR (OCT) 07/20/04: It is a mildly bullish
indicator that the market closed over the pivot swing number. Swing resistance
comes in at 8.36, with support found at 8.18. The market’s short-term trend is
positive on a close above 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 8.18.

 

COTTON MARKET RECAP

7/19/2004

The Cotton market inched higher in quiet trade
but did manage the highest close since July 9th. More rain in the forecast for
West Texas and trade expectations that that crop conditions remain favorable for
the weekly crop progress report were offset by ideas that the market is already
too oversold and due for a technical bounce. Funds hold a hefty net long
position in the traders report. Traders are beginning to show some concerns for
production in India (due to poor consistency of the monsoons) and for production
in China (due to flooding) and there was talk of lower production forecasts for
next months supply/demand report. Certified cotton stocks deliverable against
the exchange continued to drop and reached 120,820 bales as of July 16th from
122,684 bales the previous session.

Technical Outlook

#COTTON (OCT) 07/20/04: 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. Next resistance area comes in at 47.85 and then again at 48.08,
while support is targeted at 47.15 and 46.68. Daily stochastics are showing
positive momentum from oversold levels which should reinforce a move higher if
near-term resistance is taken out. The next upside target is 48.08. The 9-day
RSI under 30 indicates the market is approaching oversold levels. The daily
closing price reversal up is positive.