Why The Dollar Could Attract Some Money

BOND MARKET RECAP

12/16/2003

The bonds did well to ignore the favorable US
equity market action and did well to ignore the stronger than expected US
Industrial production readings. In fact, the bond market sagged slightly on the
Industrial production but managed to rise right back to the consolidation highs
into the close. In other words, the bond traders are ok with the idea that
economic conditions in the US are going to remain the same with moderate growth
and low inflation. Apparently the low inflation outlook overcomes the fear of
growth for the Treasuries. Some Treasury analysts are suggesting that the stock
market rally is without merit and that is how bonds are holding around the
recent highs.

Technical Outlook

BONDS (MAR) 12/17/2003: The market setup is
supportive for early gains with the close over the 1st swing resistance.
Near-term resistance for bonds is at 109.24 and then again at 109.32, while
swing support hits at 109.00 and below there at 108.16. A positive indicator was
given with the upside crossover of the 9 & 18 bar moving average. 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 109.32. Daily
studies suggest buying dips today.

T-NOTES(MAR) Momentum studies are trending
higher, but have entered overbought levels. The near-term upside objective is at
112.24. With the close over the 1st swing resistance number, the market is in a
moderately positive position. 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
112.19 and then again at 112.24, while swing support hits at 112.01 and below
there at 111.20. The upside crossover (9 above 18) of the moving averages
suggests a developing short-term uptrend.

STOCK INDICES RECAP

12/16/2003

The stock market put in some very impressive
performance after what appeared to be a major failure on the charts Monday.
Apparently seeing GE reconfirm its favorable outlook gave the market confidence
and we have to think that the much stronger than expected Industrial Production
reading gave the bulls confidence. Many on Wall Street will suggest that the
rally was inspired by the confirmation that inflation at the CPI level is
no-where near becoming a problem. In fact, a Fed official actually suggested
that Inflation is still not on the radar even though the Fed is watching labor
inputs and other factors closely. In the end, status quo is apparently enough to
get traders interested in buying stocks even at new highs.

Technical Outlook

S&P500 (MAR) 12/17/2003: The close over the pivot
swing is a somewhat positive setup. Underlying support comes in at 1069.50 and
1064.10, with overhead resistance at 1077.50 and 1080.10. The close above the
9-day moving average is a positive short-term indicator for trend. Momentum
studies trending lower from overbought levels is a bearish indicator and would
tend to reinforce lower price action. The next downside objective is now at
1064.10.

S&P E-Mini (MAR): A new contract high was made on
the rally. The daily closing price reversal up is positive. Daily stochastics
turning lower from overbought levels is bearish and will tend to reinforce a
downside break especially if near-term support is penetrated. The next downside
target is 1062.31. 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
1077.63 and then again at 1080.81, while swing support hits at 1068.38 and below
there at 1062.31. The market’s close above the 9-day moving average suggests the
short-term trend remains positive.

NASDAQ (MAR) The daily closing price
reversal up is a positive indicator that could support higher prices. A negative
indicator was given with the downside crossover of the 9 & 18 bar moving
average. The market tilt is slightly negative with the close under the pivot.
The market should run into resistance at 1416.25 and above there at 1426.13 with
support at 1391.75 and 1377.13. Momentum studies trending lower at mid-range
could accelerate a price break if support levels are broken. The next downside
objective is 1377.13.

CURRENCY MARKET
RECAP

12/16/2003

The Dollar did manage a fresh contract low but
rejected part of the losses. It would seem that the US equity market is making
some positive noise and that the market is reconsidering the Saddam capture as a
temporary event. It is also possible that the Dollar was supported by a stronger-than-expected US Industrial production reading and by the idea that inflation is
going to remain low even in the face of ongoing growth in the US. The US stock
market was lifted by the idea that current conditions in the US were going to
stay the same for an extended period of time and that is a forecast that could
serve to attract some money to the Dollar.

Technical Outlook

YEN (MAR): 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. Swing resistance is targeted
at 93.46 and above there at 93.57, with the yen finding support around 93.18 and
below there at 93.01. A bullish signal was given with an upside crossover of the
daily stochastics. The next upside objective is 93.57.

EURO (MAR): Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 1.2348. The defensive setup, with the close
under the 2nd swing support, could cause some early weakness. Swing support for
the Euro comes in at 1.2248, with overhead resistance at 1.2348. 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.
Follow-through selling is indicated by the key reversal down. The market rallied
to a new contract high. More selling pressure is likely given yesterday’s gap
lower price action on the day session chart.

PRECIOUS METALS
RECAP

12/16/2003

The gold market had to disappoint the bulls
Tuesday, as the Dollar made another new contract low but gold really didn’t seem
to be able to attract the typical buying interest. The fact that the stock
market was so strong might have pulled off some investment interest from gold
and silver. With the outlook for the US economy improving in the eyes of the US
stock market one might be a little concerned that the extremely negative view on
the Dollar is becoming suspect. Recently the gold market has slipped back into a
tight correlation with the Dollar, as other factors haven’t been causing
interday reactions in gold.

Technical Outlook

SILVER (MAR): The market has a slightly positive
tilt with the close over the swing pivot. Initial support for silver is at 560.8
and below there at 558.6 with resistance likely at 566.9 and 568.3. A positive
signal for trend short-term was given on a close over the 9-bar moving average.
Stochastics turning bearish at overbought levels will tend to support lower
prices if support levels are broken. The next downside objective is 558.6. The
market could take on a defensive posture with the daily closing price reversal
down.

GOLD (FEB): Support for gold today comes in near
405.93, while resistance is pegged at 412.13. 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 405.93. It is a slightly
negative indicator that the close was under the swing pivot. The close above the
9-day moving average is a positive short-term indicator for trend.

COPPER MARKET RECAP

12/16/2003

The copper market drove sharply higher on the
session to new contract highs and to the first close above 100 for the nearby
contract since July of 1997. The surge higher in the stock market and continued
weakness in the dollar were supportive factors. Strong economic numbers for
housing, industrial production and low consumer prices helped boost buying
support. Housing Starts rose 4.5% in November to the highest level since
February of 1984. Talk of solid commercial demand in the cash market and a new
high in the bull spreads added to the positive tone.

ENERGY MARKET RECAP

12/16/2003

The energy market managed a new high for the move
again but failed to hold all those gains. It seems as if the market is beginning
to see some political pressure from various sources regarding the lofty price of
oil but we doubt that will result in a change of heart by OPEC. With the OPEC
basket price holding well above the upper banding mechanism and approaching the
20 day mark off it wouldn’t be surprising to see a sudden back lash in prices to
take OPEC off the hook. One should remember that the market will be presented
with another weekly inventory reading on Wednesday and the pattern has been
falling crude stocks and rising product stocks.

Technical Outlook

CRUDE OIL (FEB): It is a slightly negative
indicator that the close was under the swing pivot. Support for crude is keyed
on 32.75 and below there at 32.58, with resistance pegged at 33.16 and 33.40.
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 target is at 33.40.

UNLEADED GAS (FEB): Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
92.91. The market has a slightly positive tilt with the close over the swing
pivot. Resistance today is at 92.91, while support should be found around 89.31.
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.

HEATING OIL (FEB):It is a slightly negative
indicator that the close was under the swing pivot. Heating oil should encounter
support around 90.87, with resistance is at 93.67. 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 target is at 93.67.

CORN MARKET RECAP

12/16/2003

The corn market pushed lower on the session with
a choppy, inside trading session. Weakness in the other grains and long
liquidation selling due to the overbought condition of the market helped
pressure. Before the opening, the USDA announced that Egypt bought 100,000 tons
of US wheat which failed to provide much support. The continued good weather in
Brazil and improving planting weather for Argentina helped to pressure the
market and ideas that the market is overbought added to the long liquidation
trend.

Technical Outlook

CORN (MAR) 12/17/2003: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The near-term upside target is at 256 1/2. It is a slightly negative
indicator that the close was under the swing pivot. Market resistance comes in
at 256 1/2 today, with support at 247 1/2. The downside crossover of the 9 & 18
bar moving average is a negative signal.

SOY COMPLEX RECAP

12/16/2003

Soybeans closed 9 cents lower on the session and
the lowest close for March Soybeans since December 5th with a more active flow
of speculative long liquidation selling and a lack of much commercial support on
the break. Weakness in the cash basis at the gulf and indications that China
demand not be too strong in the short run helped pressure. With poor crush
margins, the Chinese are expected to make a “token” purchase at their Chicago
trip and if 1.5 million tons are purchased, the purchase is likely for new crop
soybeans delivered in the 4th quarter of 2004.

Technical Outlook

SOYBEANS (JAN) 12/17/03 The close below the 1st
swing support could weigh on the market. The next area of resistance is around
771 1/2 and 779 1/4, while 1st support hits today at 757 and below there at 750
1/4. 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. A bearish signal was triggered on a
crossover down in the daily stochastics. The next downside objective is 750 1/4.
Bearish daily studies indicate selling minor rallies this session.

MEAL (JAN): A crossover down in the daily
stochastics is a bearish signal. The next downside target is now at 224.9. First
resistance comes in at 229.8, with support at 226.5. The close below the 9-day
moving average is a negative short-term indicator for trend. It is a slightly
negative indicator that the close was under the swing pivot.

BEAN OIL (JAN): A positive signal for trend
short-term was given on a close over 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 27.59. The swing indicator gave a
moderately negative reading with the close below the 1st support number. Daily
swing resistance is found at 28.44 and above there at 28.69. Support should be
encountered at 27.89 and 27.59.

WHEAT MARKET RECAP

12/16/2003

The wheat market closed 3 cents higher after an
early move to the lowest level since November 20th. The close above the opening
was positive as the market seems to be focused on the weather situation as the
market turned up at the same time that the weather situation shifted in the
plains. After several snow events in the recent past which helped provide snow
cover and helped improve soil moisture, a switch to a drier and warmer forecast
helped turn the market up. South Korea bought 25,000 tons of optional origin
feedwheat and Morocco announced a tender for 110,000 tons of optional origin
wheat.

Technical Outlook

WHEAT (MAR) 12/17/2003: 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. Expect
near-term support around 385 and below there at 379 , with resistance levels at
393 1/2 and 396 . A negative indicator was given with the downside crossover of
the 9 & 18 bar moving average. Daily stochastics declining into oversold
territory suggest the selling may be drying up soon. The next downside objective
is 379 .

LIVE CATTLE RECAP

12/16/2003

February cattle opened higher but closed sharply
lower on the session with the shift to a warmer and drier forecast for the
plains as the primary bearish factor. Talk of lower cash markets this week
helped pressure the market into mid-session with packer bids showing up at
$90-$91 and offers at $97 as compared with $95.00 trades late last week.
Concerns that another storm on the east coast will just reduce near-term beef
demand added to the negative tone. Boxed-beef cut-out values were up $.48 at
mid-session to $159.02.

Technical Outlook

CATTLE (FEB) 12/17/2003: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
next downside objective is 87.87. The market tilt is slightly negative with the
close under the pivot. Support should be encountered at 88.35 and below there at
87.87. Market resistance is at 90.05 and then again at 91.27. The market could
take on a defensive posture with the daily closing price reversal down. A
negative signal for trend short-term was given on a close under the 9-bar moving
average.

LEAN HOGS RECAP

12/16/2003

February hogs broke out the downside of the
recent consolidation as the continued flow of more hogs than expected moving to
slaughter plants continues to attract new selling from funds and long
liquidation selling from speculators who were looking for the production to peak
and prices to bottom in late November. Until there is evidence that slaughter
levels are coming down or until the premium of futures to cash has deflated, the
market is not oversold. Traders expecting a slow-down in slaughter into the
early December time frame were disappointed to see another daily slaughter this
week at 395,000 head which is near capacity for the industry. The CME 2-day Lean
Index came in at 49.91 for the period ending December 12th which was down 24
cents from the previous session. Slaughter came in at 390,000 head.

Technical Outlook

HOGS (FEB) 12/17/2003: The defensive setup, with
the close under the 2nd swing support, could cause some early weakness.
Resistance levels comes in at 52.42 and 53.27 today, while support is around
51.07 and then 50.57. The market broke to a new contract low. 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 50.57.

COCOA MARKET RECAP

12/16/2003

A sharp decline in cocoa prices has to throw the
market into a liquidating posture. The fact that harvest supply is flowing gives
the washout added importance. While the market could have found some support off
the prediction of a slightly smaller Nigerian 2003-2004 crop (a decline of
10,000 tons) it was clear that the selling pressure Tuesday was overwhelming.
Since the market wasn’t overly long in the last COT report the big break off the
December high probably already has the spec and fund position net short after
the washout Tuesday.

Technical Outlook

COCOA (MAR)12/17/03 The gap lower price action on
the day session chart is a bearish indicator for trend. Could see some early
pressure today given the market’s negative setup with the close below the 2nd
swing support. Cocoa should run into resistance at 1595 and above there at 1621
with support at 1552 and 1535. Negative momentum studies in the neutral zone
will tend to reinforce lower price action. The next downside target is 1535.25.

COFFEE MARKET RECAP

12/16/2003

After Monday’s sharp sell-off, March coffee seems
to have found some support above the 62 level. The funds were still sellers, but
roaster buying appeared to help provide a floor under the market. While supplies
should be tightening in the future, current availability of supplies keeps
roasters as casual buyers leaving the market vulnerable to selling. The inside
day, however is an indication the selling may be drying up as funds have been
lightening their net short position.

Technical Outlook

COFFEE (MAR)12/17/03 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 61.50.The Coffee contract should run into resistance at
63.10 and above there at 63.70 with support at 62 and 61.50. The market’s
short-term trend is negative as the close remains below the 9-day moving
average.

SUGAR MARKET RECAP

12/16/2003

The inside-day rally does not change the
technical damage done to the sugar market on Monday with a gap lower opening to
start the week and a gap of the steep uptrend channel. The weaker technical
signals combined with the already sloppy cash fundamental news may have turned
the trend down in sugar and at this stage the market is seems to be in a
position to attract producer selling and discourage new buying in the cash
market. Buyers seemed to be un-interested with sugar down near 625 so after the
5-week rally, it seems unlikely that buyers will turn active in the first few
days of bearish price action. However, producer sellers may need to take
advantage of the recent rally in order to hedge stocks.

Technical Outlook

SUGAR (MAR) 12/17/2003: The close over the pivot
swing is a somewhat positive setup. Swing resistance comes in at 6.64, with
support found at 6.42. The close below the 9-day moving average is a negative
short-term indicator for trend. 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 6.42.

COTTON MARKET RECAP

12/16/2003

March cotton closed slightly higher in quiet
trade. March was up 26 on the session but closed below the opening which is
slightly disappointing. Traders do not know if volatility will pick up or slack
off with holiday-type volume already creeping into the daily news. The lack of
news is keeping trade slow and while traders look foreword to 2 4-day weekends
ahead, traders are not so certain if China buyers will take a vacation or not.
If volume is slow, even smaller orders could cause a boost in volatility.

Technical Outlook

COTTON (MAR) 12/17/2003: 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 70.50 and then again at
71.32, while support is targeted at 69.35 and 69.02. 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 71.32. The outside
day down is somewhat negative. The market could take on a defensive posture with
the daily closing price reversal down. ORANGE JUICE (JAN)12/17/03 The sell-off
took the market to a new contract low. The market tilt is slightly negative with
the close under the pivot. Orange Juice should run into resistance at 66.60 and
above there at 67.40 with support at 65.40 and 65.00. The 9-day RSI under 30
indicates the market is approaching oversold levels. 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 65.