Why The Dollar Is Falling
BOND MARKET RECAP
10/7/2003
Bonds were down sharply Tuesday off fears of
increasing corporate supply. With the market already concerned about a soaring
budget deficit and the supply that goes along with that increased corporate
supply is a major problem for the bull camp. The holiday type trade probably
resulted in more aggressive liquidation than would ordinarily have taken place.
The funds were reported heavy sellers of treasuries and were probably doing so
under the guise of hedging. Considering the technical breakdown on the charts
and the lack of scheduled news, it might be difficult to shut off the selling.
Technical Outlook
BONDS (DEC) 10/8/2003: 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 108.28 and then again at
109.31, while swing support hits at 107.14 and below there at 107.03. 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 107.03.
T-NOTES(DEC) 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 111.14. The market’s close below the 1st swing
support number suggests a moderately negative setup for today. 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 112.17 and then again at 113.06, while swing
support hits at 111.21 and below there at 111.14. The market’s short-term trend
is negative as the close remains below the 9-day moving average.
STOCK INDICES RECAP
10/7/2003
Initially the stock market faded off the early
earnings reports but then managed to recover into positive ground around mid
session. It would seem that the trade is attempting to fashion negatives into
positives as the early earnings reports were accompanied by suggestions that
earnings will be even better in the 4th quarter. In other words, if the earnings
disappoint the bull camp is prepared to suggest that things are getting better
in the future. The scoreboard shows several upside earnings reports no
significantly important disappointments and a number of as expected earnings
reports. On balance the market is seeing favorable readings from corporate
America.
Technical Outlook
S&P500 (DEC) 10/8/2003: Market positioning is
positive with the close over the 1st swing resistance. The outside day up gives
the market a positive tilt. The upside daily closing price reversal gives the
market a bullish tilt. Underlying support comes in at 1030.35 and 1020.13, with
overhead resistance at 1044.65 and 1048.73. 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 1048.73. Short-term indicators
suggest buying pullbacks today.
S&P E-Mini (DEC): The outside day up and close
above the previous day’s high is a positive signal. A new contract high was made
on the rally. The daily closing price reversal up is positive. Studies are
showing positive momentum, but are now in overbought territory so some caution
is warranted. The next upside target is 1048.38. 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 1044.50 and then again at 1048.38, while swing
support hits at 1030.50 and below there at 1020.38. The market’s close above the
9-day moving average suggests the short-term trend remains positive.
NASDAQ (DEC) The outside day up is somewhat
positive. The daily closing price reversal up is a positive indicator that could
support higher prices. A positive signal for trend short-term was given on a
close over the 9-bar moving average. The market setup is supportive for early
gains with the close over the 1st swing resistance. The market should run into
resistance at 1409.50 and above there at 1416.25 with support at 1382.50 and
1362.25. Daily studies suggest buying dips today. 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 1416.25.
CURRENCY MARKET
RECAP
10/7/2003
It would seem like most countries are either in
favor of the Dollar decline or are willing to allow the downside to continue in
the near term. It is surprising that the Pound managed to setback after an early
rise and that could be because the BOE is concerned about the pace of the rise
in the Pound. In the past the G& has not wanted massive quick change in exchange
rates and the current situation would seem to be something that authorities want
to limit. However, unless coordinated intervention is rumored we would expect
Dollar losses to continue. With US bonds and stocks weaker Tuesday it is
possible that even more money decides to migrate away from the US. Given the
rise in the Yen it would not seem like the BOJ was intervening aggressively.
Technical Outlook
YEN (DEC): A positive signal for trend short-term
was given on a close over the 9-bar moving average. The market made a new
contract high on the rally. If yesterday’s gap higher on the day session chart
holds, additional buying could develop this session. The market has a bullish
tilt coming into today’s trade with the close above the 2nd swing resistance.
Swing resistance is targeted at 91.64 and above there at 92.08, with the yen
finding support around 90.78 and below there at 90.36. A bullish signal was
given with an upside crossover of the daily stochastics. The next upside
objective is 92.08. The market is approaching overbought levels with an RSI over
70.
EURO (DEC): Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 1.1818. The defensive setup, with the close
under the 2nd swing support, could cause some early weakness. Swing support for
the Euro comes in at 1.1688, with overhead resistance at 1.1818. 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
10/7/2003
The gold market soared in response to a new 5 1/2
year low in the US Dollar. While the gold market might be back to a “1” factor
bull market it nonetheless will see support from the Foreign Exchange action.
Uncertainty toward the US Dollar apparently helped the silver market respond and
in the end the silver reaction was more impressive than the gold rally. Given
the recent correction in gold and silver the trade might be able to muster
impressive spec buying than many would expect at least in the near term. In
order to see gold shoot higher most in the trade think that persistent news lows
will be required in the Dollar.
Technical Outlook
SILVER (DEC): The market setup is supportive for
early gains with the close over the 1st swing resistance. Initial support for
silver is at 485.5 and below there at 482.3 with resistance likely at 487.8 and
490.5. 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 482.3.
GOLD (DEC): Support for gold today comes in near
374.28, while resistance is pegged at 380.08. 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 374.28. There could be more upside
follow through since the market closed above the 2nd swing resistance. The
downside crossover of the 9 & 18 bar moving average is a negative signal. The
cross over and close above the 40-day moving average is an indication the
longer-term trend is up. Follow through buying looks likely if the market can
hold yesterday’s gap on the day session chart.
COPPER MARKET RECAP
10/7/2003
The copper market was certainly not deterred by
the slack action in the US stock market or the lack of fresh economic
information from the US. In fact, copper exploded into new high ground as if the
macro economic outlook was upgraded significantly. From the face it appears that
copper is still being driven primarily by a tight supply situation and only
recently began to pick up upside momentum off the idea that physical demand was
set to improve. Some traders suggested that the recent increase in European and
Asian copper premiums is a confirmation that demand is set to improve or has
already improved.
ENERGY MARKET RECAP
10/7/2003
It would appear that the EIA supported higher
energy prices on Tuesday. With the US government agency warning of sharply
higher prices in the event of a cold snap, the bull camp was emboldened. The EIA
also indicated world inventories would remain tight well into 2004. Apparently
the government agency expects supply to remain tight into the North American
winter. Countervailing the potential upward bias were increased production
figures from OPEC. Many traders also suggested the market was short term
overbought. Expectations for the weekly inventory call for little change in the
reports Wednesday morning.
Technical Outlook
CRUDE OIL (DEC): The upside daily closing price
reversal gives the market a bullish tilt. The close over the pivot swing is a
somewhat positive setup. Support for crude is keyed on 30.16 and below there at
29.85, with resistance pegged at 30.61 and 30.75. The market’s close on the
9-day moving average is neutral. .
UNLEADED GAS (DEC): Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
83.11. The market has a slightly positive tilt with the close over the swing
pivot. Resistance today is at 83.11, while support should be found around 79.91.
The daily closing price reversal up is a positive indicator that could support
higher prices. 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.
HEATING OIL (DEC): Market positioning is positive
with the close over the 1st swing resistance. Heating oil should encounter
support around 81.29, with resistance is at 83.79. 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 83.79. The market is becoming
somewhat overbought now that the RSI is over 70. The upside daily closing price
reversal gives the market a bullish tilt.
CORN MARKET RECAP
10/7/2003
While the December corn market seems to have
built some chart support around 220 the market is possibly going to get some
short covering ahead of the coming crop report. In looking at the last COT
report it is clear that the small spec and fund combined position is generally
leaning too far to the short side and a leveling of the position into the report
Friday would seem to favor short covering. Apparently the cash market is seeing
some tightening and that fueled a firming of the Gulf basis. Some traders think
that the farmers are holding back corn for storage and that slightly higher
prices might be needed to pull out some supply. Because cash prices are right on
the loan rate there really isn’t an incentive to move corn but that type of
incentive probably won’t spark an aggressive rally. A Dow Jones survey pegged
corn production at 10.062 compared to the last USDA reading of 9.944 billion.
The new survey on yield puts the total at 140.2 compared to a prior USDA yield
of 138.5.
Technical Outlook
CORN (DEC) 10/8/2003: Stochastics are rising from
over sold levels which is bullish and should support higher prices. The
near-term upside target is at 227 . There could be more upside follow through
since the market closed above the 2nd swing resistance. Market resistance comes
in at 227 today, with support at 219 . The close above the 9-day moving average
is a positive short-term indicator for trend.
SOY COMPLEX RECAP
10/7/2003
As opposed to corn, where short covering seems to
be the rule, the soybean market seemed to be adding additional fresh longs to
the equation ahead of the Friday USDA report. The Dow Jones survey for the
report Friday, showed the average soybean production estimate to be 2.561
compared to the last USDA figure of 2.63. The survey also pegged the yield at
35.3 versus a prior estimate of 36.4. Despite a growing spec long position in
beans the trade seems to think that the crop is going to be lowered and that
prices are going to rise sharply following the report. In other words, the trade
seems to be locked into a buy the rumor sell the fact type mode.
Technical Outlook
SOYBEANS (NOV) 10/08/03 The market has a slightly
positive tilt with the close over the swing pivot. The next area of resistance
is around 691 and 694 , while 1st support hits today at 684 1/2 and below there
at 681 . The market’s close on the 9-day moving average is neutral. Stochastics
turning bearish at overbought levels will tend to support lower prices if
support levels are broken. The next downside objective is 681 . The market is
approaching overbought levels with an RSI over 70.
MEAL (DEC): 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 199.8. First resistance comes in at
203.5, with support at 201.0. The close above the 9-day moving average is a
positive short-term indicator for trend. The close over the pivot swing is a
somewhat positive setup.
BEAN OIL (DEC): 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 24.75. A positive
setup occurred with the close over the 1st swing resistance. Daily swing
resistance is found at 25.56 and above there at 25.69. Support should be
encountered at 25.09 and 24.75. The market is approaching overbought levels with
an RSI over 70.
WHEAT MARKET RECAP
10/7/2003
The US wheat market gave almost no consideration
to stories that Chinese wheat areas are suffering severe flooding and may
require replanting. The US wheat also wasn’t getting much support from the
falling Dollar which could help to improve export demand. The trade might have
been put off by news that the US missed out on another wheat sale that was
booked with Australia. While the Chinese rain might have been considered
supportive rains in Argentina (on very dry ground) were considered negative to
prices. The European wheat market was also lower but the talk is that US wheat
is becoming more attractive.
Technical Outlook
WHEAT (DEC) 10/8/2003: 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 329 1/2 and below there at
326 1/4, with resistance levels at 335 1/2 and 338 1/4. 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 326 1/4. The market is
approaching over sold levels on an RSI reading under 30.
LIVE CATTLE RECAP
10/7/2003
Both Feeder cattle and live cattle closed
limit-up and into new contract and all-time highs as soaring cash values and
aggressive speculative buying supported the market. Cash cattle in the panhandle
traded at $94.00, up $3.00-$4.00 from last week with a $98.000 trade in
Nebraska. Boxed-beef cut-out values were up $1.85 to $160.02 which added to the
bullish tone on the floor. Slaughter was 134,000 head as compared with trade
estimates of 128,000-132,000 head. The higher than expected slaughter is an
indication of better than expected demand from packers.
Technical Outlook
CATTLE (DEC) 10/8/2003: Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
90.60. The market has a bullish tilt coming into today’s trade with the close
above the 2nd swing resistance. Support should be encountered at 88.32 and below
there at 86.95. Market resistance is at 90.15 and then again at 90.60. The
market made a new contract high on the rally. 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.
LEAN HOGS RECAP
10/7/2003
December hogs opened the session down 70 points
due to weak cash fundamental news including hefty pork production and a continue
flow of pigs from Canada. However, December hogs closed 85 higher on the session
as the limit-up trade in the cattle pit brought about a steady flow of fund
buying in the hog and belly markets. Cash hogs were steady at many locations.
The weekly cold storage report showed that 53,000 pounds of bellies moved out of
cold storage for the week as compared with trade expectations of 0-600,000
pounds moving out. Loins and hams were lower on the mid-day wire which would
suggests another down in the pork cut-out value report released later today.
Technical Outlook
HOGS (DEC) 10/8/2003: Market positioning is
positive with the close over the 1st swing resistance. Resistance levels comes
in at 57.00 and 57.75 today, while support is around 54.90 and then 53.55.
Short-term indicators suggest buying pullbacks today. 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 57.75.
COCOA MARKET RECAP
10/7/2003
The cocoa market tired to forge a minor upside
rally but couldn’t muster significant follow through volume. The market digested
a private supply and demand forecast without much fanfare and that is because
the new predictions were not that different than what the market was expecting.
A number of private forecasts are calling for a minor surplus in the coming crop
but that could narrow with a minor setback in the main crop or be eliminated if
the grind continues to improve from the recent recession lows. Keeping the cocoa
market in a slightly weakened posture are stories that physical cocoa is
beginning to arrival slowly to Ivory Coast ports.
Technical Outlook
COCOA (DEC)10/08/03 The market has a slightly
positive tilt with the close over the swing pivot. Cocoa should run into
resistance at 1570 and above there at 1592 with support at 1529 and 1510.
Negative momentum studies in the neutral zone will tend to reinforce lower price
action. The next downside target is 1510.25.
COFFEE MARKET RECAP
10/7/2003
An inside day in coffee leaves the coffee market
vulnerable follow the gap lower trade to start the week. In other words, the
coffee market couldn’t reject the big slide that started the week. Apparently
roasters are not showing signs of stepping up forward coverage despite lower
prices and that seems to leave the market weak. The forecast for rains remain in
the forecast and that could leave the market in a position to revisit the
September lows and possibly even the June lows in the December contract. The
crop certainly isn’t made with the prediction of coming rain but the edge is
really taken off the bull case.
Technical Outlook
COFFEE (DEC)10/8/03 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
64.05.The Coffee contract should run into resistance at 63.70 and above there at
64.05 with support at 63 and 62.65. The market’s short-term trend is negative as
the close remains below the 9-day moving average.
SUGAR MARKET RECAP
10/7/2003
March futures hit a new 10 month low and nearby
futures to the lowest level since August of 2002 as the bearish supply
fundamentals in the market continue to encourage large traders to press the
short side and small traders to exit there net long position. Big crops in
Brazil, Thailand and China have led to increasing supply of exportable sugar on
the world market and to a decline in demand from China, at times a major
importer. With the Brazil harvest winding down soon, traders believe the
center-south cane crop is up 6-7% from last year.
Technical Outlook
SUGAR (MAR) 10/8/2003: It is a slightly negative
indicator that the close was under the swing pivot. Swing resistance comes in at
6.30, with support found at 5.90. 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 5.90.
COTTON MARKET RECAP
10/7/2003
After hitting a contract high and a 5-year high
for the nearby futures on the opening, December cotton closed 46 lower on the
session and near 100 points off of the highs. The reversal from a contract high
is a bearish technical signal and could attract some technical selling and long
liquidation selling ahead of the USDA crop Production and Supply/demand reports
for Friday. Trade focus is still on the size of the China crop and with
flooding-type rains moving into key China growing regions into the weekend,
further damage is possible as Friday’s USDA production forecast will be for
conditions as of October 1st.
Technical Outlook
COTTON (DEC) 10/8/2003: 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 68.56 and then again at 69.30, while support is targeted at 67.51
and 67.20. 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 67.20. The market made a new contract high on the rally. The market could
take on a defensive posture with the daily closing price reversal down.