Why The Dollar Should Give The Gold Rally Some Staying Power

Technical Outlook

BONDS (DEC) 10/23/03: Since the close was above the 2nd swing resistance number, the market’s posture is bullish and could see more upside follow-through early in the session. Near-term resistance for bonds is at 109.12 and then again at 109.23, while swing support hits at 108.02 and below there at 107.03. The market’s close above the 9-day moving average suggests the short-term trend remains positive. The cross over and close above the 40-day moving average indicates the longer-term trend has turned up. 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 109.23.

T-NOTES(DEC) The daily stochastics gave a bullish indicator with a crossover up. The near-term upside objective is at 113.02. The market’s close above the 2nd swing resistance number is a bullish indication. Near-term resistance for the T-Notes is at 112.26 and then again at 113.02, while swing support hits at 111.30 and below there at 111.11. The market’s short-term trend is positive on a close above the 9-day moving average.

STOCK INDICES RECAP

10/22/2003

The stock market sagged under the weight of disappointing dialogue toward Time Warner. While some of the bearishness Wednesday might have been generated by the actual earnings from Time Warner, it really seemed like the market was fearful of ongoing accounting investigations into the company by the SEC. It should also be noted that a number of companies managed to post favorable earnings but yet the market wasn’t in a position to see that as a bullish development.

Technical Outlook

S&P500 (DEC) 10/23/03: The market is in a bearish position with the close below the 2nd swing support number. The gap down on the day session chart is bearish with more selling pressure possible today. Underlying support comes in at 1025.50 and 1021.00, with overhead resistance at 1035.50 and 1041.00. The market’s short-term trend is negative as the close remains below the 9-day moving average. 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 1021.00.

S&P E-Mini (DEC): The key reversal down puts the market on the defensive. The market made a new contract high on the rally. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The next downside objective is 1015.06. Could see some early pressure today given the market’s negative setup with the close below the 2nd swing support. Near-term resistance for the S&P Mini is at 1039.13 and then again at 1050.56, while swing support hits at 1021.38 and below there at 1015.06. A positive signal for trend short-term was given on a close over the 9-bar moving average.

NASDAQ (DEC) The market’s close below the 9-day moving average is an indication the short-term trend remains negative. The close below the 2nd swing support number puts the market on the defensive. The market should run into resistance at 1401.75 and above there at 1414.38 with support at 1381.25 and 1373.38. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 1373.4.

CURRENCY MARKET RECAP

10/22/2003

The Dollar made a fresh contract low Wednesday and the fact that the Pound and Canadian were sharply higher would seem to confirm that the move Wednesday has some legs. Since the US equity market faded in the face of favorable earnings reports that seemed to make it easier for the Dollar to fail. We suspect that the Euro and the Swiss are going to catch the benefit of short covering buying in the coming sessions. In order to shut off the downside thrust in the Dollar the US will have to see a decline in initial claims readings or the US stock market to recover aggressively.

Technical Outlook

YEN (DEC): The market’s close above the 9-day moving average suggests the short-term trend remains positive. Since the close was above the 2nd swing resistance number, the market’s posture is bullish and could see more upside follow-through early in the session. Swing resistance is targeted at 92.27 and above there at 92.50, with the yen finding support around 91.59 and below there at 91.14. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 91.14.

EURO (DEC): The daily stochastics gave a bullish indicator with a crossover up. The near-term upside objective is at 1.1903. The market is in a bearish position with the close below the 2nd swing support number. Swing support for the Euro comes in at 1.1629, with overhead resistance at 1.1903. 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

10/22/2003

The gold market saw buying interest or short covering interest early this week and then saw some fund buying. In the action Wednesday we think the new contract low in the Dollar provided a fresh wave of buying in gold and silver. The fact that STOCK PRICES were down sharply might have given the gold a little more long interest as investors allocated some money to the “hot” market. The magnitude of the declines in the Dollar seem to suggest some follow through potential and that should give the gold rally some staying power.

Technical Outlook

SILVER (DEC): The cross over and close above the 40-day moving average indicates the longer-term trend has turned up. Since the close was above the 2nd swing resistance number, the market’s posture is bullish and could see more upside follow-through early in the session. Initial support for silver is at 510.5 and below there at 507.0 with resistance likely at 513.6 and 516.5. The moving average crossover up (9 above 18) indicates a possible developing short-term uptrend. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 513.6. The gap upmove on the day session chart is a bullish indicator for trend.

GOLD (DEC): Support for gold today comes in near 382.03, while resistance is pegged at 390.63. 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 390.63. The market’s close above the 2nd swing resistance number is a bullish indication. The market’s short-term trend is positive on a close above the 9-day moving average. The gap up on the day session chart gave a bullish indicator and more follow through could be seen this session.

COPPER MARKET RECAP

10/22/2003

The copper market is really in a bull posture are the overt weakness in the equity market almost had no impact on copper prices during the action Wednesday. We have to think that the precious metals action provided a boost to copper prices Wednesday even though copper has enough of a bullish fundamental story to go higher without assistance from gold. The copper market was also significantly overbought around the highs Wednesday and the equity market break might have been an excuse to take some profits in copper.

ENERGY MARKET RECAP

10/22/2003

The weekly inventory report was bearish in a surprising way as crude stocks declined and the product stocks increased by more than the initial expectations. It was also bearish that the refinery-operating rate increased significantly and that really serves to take some of the concern of tight product stocks down. The fact that distillate stocks increased ahead of the start to the North American heating season certainly serves to dampen bullish sentiment.

Technical Outlook

CRUDE OIL (DEC): The market’s close below the 1st swing support number suggests a moderately negative setup for today. Support for crude is keyed on 29.53 and below there at 29.31, with resistance pegged at 30.31 and 30.87. The market’s close on the 9-day moving average is neutral. . With a reading under 30, the 9-day RSI is approaching oversold levels.

UNLEADED GAS (DEC): Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 77.88. The close below the 2nd swing support number puts the market on the defensive. Resistance today is at 84.08, while support should be found around 77.88. The market’s close below the 9-day moving average is an indication the short-term trend remains negative.

HEATING OIL (DEC): The market’s close below the 1st swing support number suggests a moderately negative setup for today. Heating oil should encounter support around 80.31, with resistance is at 85.61. Daily studies pointing down suggests selling minor rallies. The market’s short-term trend is negative as the close remains below the 9-day moving average. 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 80.31. The outside day down is a negative signal. The daily closing price reversal down puts the market on the defensive.

CORN MARKET RECAP

10/22/2003

The corn market pushed sharply higher led by active fund and speculator short covering and high prices for the other grains. The rally in wheat prices and nearby meal values of over $232 raised the idea that corn values may be cheap.
Weekly export sales, released before the opening, are expected to come in near 750,000 – 1.0 million tons as compared with 1.675 million tons last week. In addition to the rally in the other grains, the market also found support from export news. The USDA announced daily export sales of 100,000 tons of US corn to Egypt and 231,648 tons to Japan.

Technical Outlook

CORN (DEC) 10/23/03: Daily momentum studies are on the rise from low levels and should accelerate a move higher on a push through the 1st swing resistance. The near-term upside objective is at 224 1/4. The market’s close above the 2nd swing resistance number is a bullish indication. Market resistance comes in at 224 1/4 today, with support at 215 1/4. The market’s short-term trend is positive on a close above the 9-day moving average.

SOY COMPLEX RECAP

10/22/2003

November soybeans closed sharply higher (up 19 1/2) on the session and to the highest level since September of 1997 as the demand from China appears endless and the sharp run-up in prices in China has other key world importers nervous that the demand will continue. The USDA reported daily export sales of 454,000 tons of soybeans to China and South Korea bought 50,000 tons overnight. The lack of any rationing of export demand due to the recent higher price and the frontloaded demand structure continues to support new end user buying and active bull spreading. Weekly export sales, released before the opening, are expected to come in near 750,000-1.0 million tons for soybeans, 50,000-100,000 tons for meal and 3,000-8,000 tons for oil. Weekly sales need to average 255,000 tons per week for soybeans in order to reach the USDA projection which is about half of what was announced in daily sales from the USDA.

Technical Outlook

SOYBEANS (JAN) 10/23/03: The gap upmove on the day session chart is a bullish indicator for trend. Since the close was above the 2nd swing resistance number, the market’s posture is bullish and could see more upside follow-through early in the session. The next area of resistance is around 758 1/2 and 762 1/4, while 1st support hits today at 745 1/2 and below there at 736 1/4. The market’s close above the 9-day moving average suggests the short-term trend remains positive. The daily stochastics have crossed over up which is a bullish indication. The next upside target is 762 1/4. The 9-day RSI over 70 indicates the market is approaching overbought levels.

MEAL (DEC): Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 237.2. The rally brought the market to a new contract high. The gap up on the day session chart gave a bullish indicator and more follow through could be seen this session. First resistance comes in at 235.3, with support at 229.8. The market’s short-term trend is positive on a close above the 9-day moving average. The market’s close above the 2nd swing resistance number is a bullish indication. With a reading over 70, the 9-day RSI is approaching overbought levels.

BEAN OIL (DEC): The market’s close above the 9-day moving average suggests the short-term trend remains 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 26.08. Since the close was above the 2nd swing resistance number, the market’s posture is bullish and could see more upside follow-through early in the session. The gap upmove on the day session chart is a bullish indicator for trend. Daily swing resistance is found at 26.77 and above there at 26.90. Support should be encountered at 26.36 and 26.08.

WHEAT MARKET RECAP

10/22/2003

December wheat closed 14 cents higher on the session and above the 40-day moving average for the first time since September 4th. The prospects for rain next week in the central plains diminished and private forecasters saw no rain in the 10-day models for Western Kansas. On top of the US weather situation, planting conditions were poor for the winter wheat crop in China and food prices in general in China have increased and on top of active buying of soybeans, oil, meal on the world market, there was indications of China looking to buy some wheat as well. While traders are not counting on China imports, the interest is helping to turn the trade psychology. Weekly export sales, released before the opening, are expected to come in near 350,000-500,000 tons as compared with 423,600 tons last week.

Technical Outlook

WHEAT (DEC) 10/23/03: The gap upmove on the day session chart is a bullish indicator for trend. Since the close was above the 2nd swing resistance number, the market’s posture is bullish and could see more upside follow-through early in the session. Look for near-term support at 348 and below there at 339 3/4, with resistance levels at 360 1/2 and 364 3/4. The market’s close above the 9-day moving average suggests the short-term trend remains positive. The cross over and close above the 40-day moving average indicates the longer-term trend has turned up. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 364 3/4.

LIVE CATTLE RECAP

10/22/2003

December cattle closed limit-down as local and speculative long liquidation selling remained active for much of the session. Fears of collapsing demand for US beef due to the steep rise in prices of the past few weeks was enough to trigger another round of long liquidation selling. Cash markets have still not traded actively on the week with bids emerging at $95.00 and offers near $100. Boxed-beef prices at mid-session came in down $4.30 cents to $191.00. Slaughter came in at 131,000 head which was the high end of the estimates (124-131) and suggests firm packer demand to keep the pipeline active which is a bit supportive.

Technical Outlook

CATTLE (DEC) 10/23/03: Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 86.10. The swing indicator gave a moderately negative reading with the close below the 1st support number. Short-term indicators on the defensive. Consider selling an intraday bounce. Support should be encountered at 86.40 and below there at 86.10. Market resistance is at 87.57 and then again at 88.45. The market’s close below the 9-day moving average is an indication the short-term trend remains negative.

LEAN HOGS RECAP

10/22/2003

December hogs closed limit down for the second session in a row and the market is now down 735 points off of last weeks highs. Cash markets were down sharply and traders indicated another steep drop in pork cut-out values for tonight with noon product quotes down sharply. The Canadian hog report indicated active breeding herd and a recent pig crop of much higher than last years pace but the supply of market hogs down sharply from last year. The report helps confirm suspicions that a major flow of feeder pigs from Canada have moved into the US supply. This helps explain why the USDA reports would suggest slaughter should be running near 1-2% under last years pace but actual slaughter in the past few weeks has run near 2-5% above last years pace. Weekly average weights for Iowa/Minn for the week ending October 18th came in at 265 pounds as compared with 264.2 last week and 261.1 pounds last year.

Technical Outlook

HOGS (DEC) 10/23/03: The market is in a bearish position with the close below the 2nd swing support number. Resistance levels comes in at 54.07 and 54.65 today, while support is around 53.30 and then 53.10. The gap down on the day session chart is bearish with more selling pressure possible today. The market’s short-term trend is negative as the close remains below the 9-day moving average. 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 53.10.

COCOA MARKET RECAP

10/22/2003

The funds started cocoa prices off in a negative pattern by selling into the London opening. Apparently the cocoa trade sees the support off the Ivory Coast price support mechanism ending and that cleared the way for some increased speculative selling interest. Too much supply is assumed to be on the way and the trade would seem to be headed back down to the recent contract lows. Even the presence of industry buying failed to stem the losses Wednesday and that would seem to favor the bear camp.

Technical Outlook

COCOA (DEC)10/23/03 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. The close below the 1st swing support could weigh on the market. Cocoa should run into resistance at 1414 and above there at 1447 with support at 1360 and 1339. Momentum studies are declining, but have fallen to oversold levels. The next downside target is 1339.00. Short-term indicators on the defensive. Consider selling an intraday bounce.

COFFEE MARKET RECAP

10/22/2003

December coffee closed 60 lower on the session with a quiet two-sided trade. The market moved to a new 10 session high before the buying slowed and funds were noted sellers late in the session. Cash market news is quiet and Brazil producers do not seem too active and roasters also seem quiet as well. The International Coffee Organization begged the 2002/2003 coffee crop at 118.8 million bags which would be a 37 year high in production. Consumption in 2002 was pegged at 108.8 million bags as compared with 108.3 million in 2001. Early indications for the 2003/2004 crop is near 100.1-102.4. Brazil looks rainy into the next few days before more rain hits next week. CSCE exchange stocks were up 2,796 bags to 2.447 million bags with 62,423 bags pending review.

Technical Outlook

COFFEE (DEC)10/23/03 The downside closing price reversal on the daily chart is somewhat negative. The market tilt is slightly negative with the close under the 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 63.60.The Coffee contract should run into resistance at 62.55 and above there at 63.60 with support at 61.1 and 60.70. The market’s short-term trend is positive on a close above the 9-day moving average.

SUGAR MARKET RECAP

10/22/2003

Trade and producer selling emerged in London and spread to New York to pressure sugar prices. The market tested the high end of the recent trading range this week before closing 10 lower on the session and 14 points off of the highs of the day. Traders were hoping for good news from the Taiwan tender (perhaps a higher quantity) but the tender to buy 35,000 tons of raw sugar was postponed. The market may have just moved sideways in the past few weeks to help correct the oversold condition and if producer selling emerges below 6.00, the market could be poised for another leg down. Beginning stocks are high to start the season with a world production surplus for the 2002/2003 season near 6 million tons.

Technical Outlook

SUGAR (MAR) 10/23/03: 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 5.85. 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. The next downside objective is now at 5.85. Daily studies pointing down suggests selling minor rallies.

COTTON MARKET RECAP

10/22/2003

December cotton closed 228 higher on the session and into new contract highs and new 5-year highs for the nearby futures. Some signs that the China market was settling down was expected to pressure New York futures but news of serious pest problems in Pakistan (the worlds 4th largest producer) helped trigger active buying. Weekly export sales, released before the opening, are expected to come in near 250,000-325,000 bales as compared with 319,000 bales last week at this time. Last weeks sales were a marketing year high.

Technical Outlook

COTTON (DEC) 10/23/03: The market’s close above the 9-day moving average suggests the short-term trend remains positive. Since the close was above the 2nd swing resistance number, the market’s posture is bullish and could see more upside follow-through early in the session. Next resistance area comes in at 79.15 and then again at 80.28, while support is targeted at 76.04 and 74.06. The daily stochastics have crossed over up which is a bullish indication. The next upside target is 80.28. The 9-day RSI over 70 indicates the market is approaching overbought levels. A new contract high was made on the rally.