Why The Bears Maintain Control Over Energy
BOND MARKET RECAP
12/23/2003
The economic numbers early Tuesday weren’t exactly stellar and with private sources showing weekly retail chain store sales to have declined for the first three weeks of December the bulls have to be given a little lift. The personal spending readings also failed to live up to expectations and therefore, we would suspect that fewer players will be interested in pressing bonds and notes. With market conditions thinning considerably toward the close and a short session Wednesday we suspect that tighter ranges will be seen. While the terrorism threat was mostly discounted Monday, that issue is a background support to bonds.
Technical Outlook
BONDS (MAR) 12/24/2003: Could see some early pressure today given the market’s negative setup with the close below the 2nd swing support. Near-term resistance for bonds is at 110.03 and then again at 111.02, while swing support hits at 108.25 and below there at 108.14. A negative signal for trend short-term was given on a close under the 9-bar moving average. A bearish signal was triggered on a crossover down in the daily stochastics. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The next downside objective is 108.14.
T-NOTES(MAR) The daily stochastics 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 111.06. 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 112.12 and then again at 113.02, while swing support hits at 111.14 and below there at 111.06. The market’s short-term trend is negative as the close remains below the 9-day moving average.
STOCK INDICES RECAP
12/23/2003
The stock market continues to climb despite a clear cut fundamental development to attach to the buying. Even with consumer spending failing to live up to expectations the market did manage new highs in the Dow and S&P into mid session. In fact, the stock market managed to gain even in the face of private retail chain store sales declining for the first three weeks of December. We have to think that holiday euphoria was dominating and that Wednesday might be the last day that the bulls have background support off the holiday spirit. Because there are economic reports to be released Wednesday the market will probably maintain decent volume for the first couple hours of trade tomorrow.
Technical Outlook
S&P500 (MAR) 12/24/2003: The close over the pivot swing is a somewhat positive setup. Underlying support comes in at 1090.55 and 1087.63, with overhead resistance at 1096.05 and 1098.63. 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 1098.63. The market is becoming somewhat overbought now that the RSI is over 70.
S&P E-Mini (MAR): A new contract high was made on the rally. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 1098.63. 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 1096.00 and then again at 1098.63, while swing support hits at 1090.50 and below there at 1087.63. 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.
NASDAQ (MAR) Rising from over sold levels, daily momentum studies would support higher prices especially on a close above resistance. The market setup is supportive for early gains with the close over the 1st swing resistance. The market should run into resistance at 1454.00 and above there at 1463.00 with support at 1434.00 and 1423.00. Daily studies suggest buying dips today. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 1463.00.
CURRENCY MARKET RECAP
12/23/2003
The Dollar index was mostly unmoved partly because US economic information was disjointed and partly because holiday conditions have pushed some traders to the sidelines. However, with the action Tuesday it would appear that the Dollar is attempting to consolidation above the recent low while the Euro continues to consolidation just below its recent highs. With the differential between the UK 3rd quarter GDP and the US 3rd Quarter GDP startling one has to wonder how the Pound continues to rise against the Dollar. UK 3rd quarter GDP came in at a muted +0.8% compared to the US reading of +8.2% it is clear that interest rate prospects are providing the main support to the Pound.
Technical Outlook
YEN (MAR): A positive signal for trend short-term was given on a close over the 9-bar moving average. The daily closing price reversal up is a positive indicator that could support higher prices. The market has a slightly positive tilt with the close over the swing pivot. Swing resistance is targeted at 93.44 and above there at 93.51, with the yen finding support around 93.26 and below there at 93.15. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 93.15.
EURO (MAR): Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The next downside target is now at 1.2335. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing support for the Euro comes in at 1.2335, with overhead resistance at 1.2407. 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. More selling pressure is likely given yesterday’s gap lower price action on the day session chart.
PRECIOUS METALS RECAP
12/23/2003
The gold market seemed to favor the upside Tuesday with many specs suggesting that they were willing to get long for the extended market closure as the increased terrorist threat is present and operating on sentiment. While the Dollar didn’t show signs of a big downside thrust it did hover around contract lows for most of the session and that also keeps the bulls interested in the long side of gold and silver. While many markets might see volume dry up Wednesday the gold and silver markets might maintain decent volatility as speculators position for the four day closure.
Technical Outlook
SILVER (MAR): The market has a slightly positive tilt with the close over the swing pivot. Initial support for silver is at 572.1 and below there at 568.5 with resistance likely at 574.6 and 577.6. 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 574.6. The market is approaching overbought levels with an RSI over 70. The market made a new contract high on the rally.
GOLD (FEB): Support for gold today comes in near 408.88, while resistance is pegged at 413.48. The crossover up in the daily stochastics is a bullish signal. The near-term upside target is at 413.48. The close over the pivot swing is a somewhat positive setup. The close above the 9-day moving average is a positive short-term indicator for trend. The upside daily closing price reversal gives the market a bullish tilt.
COPPER MARKET RECAP
12/23/2003
The copper market shook off the negative price action seen in the Asian markets overnight and acted impressively in the face of slightly disappointing US economic numbers. The trade seemed to take note of the rather large LME warehouse stock decline Tuesday morning and that seems to revive the bull case following the rather aggressive liquidation on Monday. One must remember that labor issues continue to provide support to copper prices and that type issue could be resolved without much notice.
ENERGY MARKET RECAP
12/23/2003
After rumors circulated that OPEC wasn’t prepared to raise production, in the face of a 20 day violation of the banding mechanism, the bear camp continued to maintain control over prices. With heating oil stocks holding at levels equal or slightly above year ago levels the bull camp is questioning the fact that prices were recently holding significantly above year ago levels. Furthermore with the threat of terrorism the demand issue isn’t nearly as supportive as it was before the most recent weekend! The weekly inventory reports are due out Wednesday on both the regular energy complex and the natural gas market. Natural gas prices managed a massive washout but did manage to recoil from the lows in a manner that would suggest a bottom.
Technical Outlook
CRUDE OIL (FEB): The upside daily closing price reversal gives the market a bullish tilt. It is a slightly negative indicator that the close was under the swing pivot. Support for crude is keyed on 31.58 and below there at 31.04, with resistance pegged at 32.33 and 32.54. The close below the 9-day moving average is a negative short-term indicator for trend. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 31.04.
UNLEADED GAS (FEB): Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 85.53. The market setup is supportive for early gains with the close over the 1st swing resistance. Resistance today is at 92.73, while support should be found around 85.53. The daily closing price reversal up is a positive indicator that could support higher prices. A negative signal for trend short-term was given on a close under the 9-bar moving average.
HEATING OIL (FEB):It is a slightly negative indicator that the close was under the swing pivot. Heating oil should encounter support around 87.57, with resistance is at 91.97. The close below the 9-day moving average is a negative short-term indicator for trend. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 87.57.
CORN MARKET RECAP
12/23/2003
The liquidation pattern continues with soft basis levels and a year end mentality that is serving to foster position squaring. Overt weakness in the soybean market is also spilling over to the corn and wheat markets and with the fundamentals mostly unchanged, the technical damage appears to be creating its own follow through pressure. The small spec and fund positions were certainly overly long and vulnerable to profit taking and that pattern could continue in the coming sessions.
Technical Outlook
CORN (MAR) 12/24/2003: 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 242 . The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Market resistance comes in at 246 today, with support at 242 . 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.
SOY COMPLEX RECAP
12/23/2003
The COT positioning the Soybean market was certainly vulnerable to the type of liquidation seen in the market over the past few sessions and with cash market weakness surfacing at the same time more selling might be in the cards. In fact, unless there are more big export deals or the weather creates some uncertainty the bears look to control prices. In the near term weak basis should continue to foster selling. Apparently fund selling dominated the action early but given the existing size of the fund long in beans the market is still holding a massive overbought position.
Technical Outlook
SOYBEANS (MAR) 12/24/03 The gap lower on the day session chart is bearish and puts the market on the defensive. Could see some early pressure today given the market’s negative setup with the close below the 2nd swing support. The next area of resistance is around 753 and 760 1/2, while 1st support hits today at 741 1/2 and below there at 737 1/2. A negative indicator was given with the downside crossover of the 9 & 18 bar moving average. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 737 1/2.
MEAL (MAR): Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The next downside target is now at 222.7. More selling pressure is likely given yesterday’s gap lower price action on the day session chart. First resistance comes in at 226.0, with support at 223.4. The downside crossover of the 9 & 18 bar moving average is a negative signal. The defensive setup, with the close under the 2nd swing support, could cause some early weakness.
BEAN OIL (MAR): 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 27.00. It is a slightly negative indicator that the close was lower than the pivot swing number. The gap lower on the day session chart is bearish and puts the market on the defensive. Daily swing resistance is found at 27.40 and above there at 27.52. Support should be encountered at 27.14 and 27.00.
WHEAT MARKET RECAP
12/23/2003
The weight of the soybean break spilled onto the wheat market and with several key support levels violated and an overly long small spec and fund position, it’s not surprised that a capital break unfolded. Even after the market saw a Chinese wheat purchase of Australian wheat, one would have expected prices to respect support, as that continues to point to ongoing international demand. Maybe some see the US missing out on a sale to China, as a negative, but it should be a positive that China is at least in the market for supplies after their big upward revision of years past.
Technical Outlook
WHEAT (MAR) 12/24/2003: The gap lower on the day session chart is bearish and puts the market on the defensive. Could see some early pressure today given the market’s negative setup with the close below the 2nd swing support. Expect near-term support around 364 and below there at 360 , with resistance levels at 377 and 386 . A negative signal for trend short-term was given on a close under the 9-bar moving average. Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The next downside objective is 360 .
LIVE CATTLE RECAP
12/23/2003
Mad cow disease is suspected in a single cow in Washington state. This is the first-ever reported case in the US.
The 3-day recovery bounce of 370 points stalled out right on the 20-day moving average of 90.82 yesterday but February cattle managed to close 100 higher on the session. Commercial and speculative buying was noted on the session as there was a general feeling that beef prices may recovery just after the holidays. Boxed-beef cut-out values were down 61 cents to $152.08. Packer bids emerged at $88.00-$89.00 with offers at $94.00 as compared with cash trade last week at $91-$93. The smaller showlist in the panhandle helped support the rally this week but with bearish packer profit margins and a slow kill schedule in the next two weeks, demand is weak. For the second session in a row, however, slaughter (131,000 head) came in higher than expectations at 128,000-132,000 head.
Technical Outlook
CATTLE (FEB) 12/24/2003: 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 91.62. The market setup is supportive for early gains with the close over the 1st swing resistance. Daily studies suggest buying dips today. Support should be encountered at 90.07 and below there at 89.25. Market resistance is at 91.27 and then again at 91.62. A positive signal for trend short-term was given on a close over the 9-bar moving average. The market now above the 40-day moving average suggests the longer-term trend is up.
LEAN HOGS RECAP
12/23/2003
The technical action deteriorated somewhat for February hogs with the close below the opening which was 67 lower on the session. Weakness in the cash markets and quick profit-taking from the longs helped pressure the market. For the weekly cold storage report, traders were looking for an in-movement of 1.8-2.8 million pounds. The slower slaughter schedule for this week and what appears to be an able supply of market-ready hogs added to the bearish tone. Actual slaughter came in at 391,000 head as compared with trade estimates at 392,000-395,000 head. Cash hogs are called steady to .50 lower for Wednesday. The CME 2-day Lean Index for the period ending December 19th was 49.75, down 17 points on the day.
Technical Outlook
HOGS (FEB) 12/24/2003: The market setup is somewhat negative with the close under the 1st swing support. Resistance levels comes in at 53.45 and 53.87 today, while support is around 52.70 and then 52.37. The close above the 9-day moving average is a positive short-term indicator for trend. 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 53.87.
COCOA MARKET RECAP
12/23/2003
Another new low for the move in cocoa leaves the market in a weak posture but we would have to think that the brunt of the political selling has about run its course. However, with origin selling expected to continue into harvest the path of least resistance might be down. Since the Press noted continued small spec selling in the action Tuesday it is possible that the new low for the move put the cocoa market into a net spec short position. Arrivals into Ivory Coast ports were pegged at 439,000 tons, which is still down 12% versus year ago levels but we have to think that harvest flow will begin to pick up and the gap will continue to narrow.
Technical Outlook
COCOA (MAR)12/24/03 The market tilt is slightly negative with the close under the pivot. Cocoa should run into resistance at 1555 and above there at 1569 with support at 1533 and 1525. Momentum studies are declining, but have fallen to oversold levels. The next downside target is 1524.50.
COFFEE MARKET RECAP
12/23/2003
The coffee market inched lower with quiet, low volume trade. Many roasters are slowing operations for repairs for the holiday season and the market faces two, 4-day weekends ahead. Industry buying emerged near the lows to help support. The good rains in Brazil are helping to replenish soil deficits and has eased fears of a crop problem next year. This leaves the trade with the general perception that there will be a significant world production surplus for the 2004/2005 season. The large Vietnam harvest which is near complete has helped to offset some tightness in Brazil after the lower crop this season. Brazil exports for December 1st through 19th came in at 1.049 million bags according to the Brazil Green Coffee Exporters Council as compared with 1.295 million bags for the same period last month.
Technical Outlook
COFFEE (MAR)12/24/03 The market tilt is slightly negative with the close under the pivot. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside objective is now at 62.65.The Coffee contract should run into resistance at 64.45 and above there at 65.05 with support at 63.25 and 62.65. The downside crossover (9 below 18) of the moving averages suggests a developing short-term downtrend.
SUGAR MARKET RECAP
12/23/2003
The market inched lower in quiet trade as the early weakness failed to attract new technical selling from speculators and light trade house buying helped support. A mid-day bounce to 6.00 failed to attract new buying as well and the market drifted back to close 4 lower on the session. Taiwan Sugar corp. rejected offers to buy 35,000 tons at their tender indicating offers were too high. The market seems to be searching for a price level which might attract some new buying from end-users who have been waiting for a break to extend coverage and the hand-to-mouth buying of the past several months has left end-user stocks tight.
Technical Outlook
SUGAR (MAR) 12/24/2003: It is a slightly negative indicator that the close was under the swing pivot. Swing resistance comes in at 6.06, with support found at 5.74. 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 5.74. Some caution in pressing the downside is warranted with the RSI under 30.
COTTON MARKET RECAP
12/23/2003
March cotton closed 2 ticks higher in quiet trade ahead of the holiday period ahead. The range was under 100 points as buyers and sellers are taking a wait and see attitude. The trade is still waiting to see if there is increased business to China over the near-term. Trade house buying supported the early bounce after the bullish monthly cotton consumption report and talk that the weak dollar should help support improving export news ahead. Terrorist fears persist in economic sensitive markets like cotton but a lack of new news on the issue kept the trade quiet. The National Cotton Council reported on Tuesday that the November annualized mill usage was at 6.64 million bales which was higher than the previous month at 6.16 million bales, but down from 7.6 million last year. The uptick in usage is a positive development for the market which has suffered from a constant decline in domestic usage for the past several years.
Technical Outlook
COTTON (MAR) 12/24/2003: A positive signal for trend short-term was given on a close over the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. Next resistance area comes in at 71.06 and then again at 71.58, while support is targeted at 70.15 and 69.76. 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 71.58. ORANGE JUICE (JAN)12/24/03 The market tilt is slightly negative with the close under the pivot. Orange Juice should run into resistance at 66.50 and above there at 66.80 with support at 66.10 and 66.00. The market’s short-term trend is negative as the close remains below the 9-day moving average. 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 66.8.