Why The Longer-Term Trend In Oil Is Down

Technical Outlook

BONDS (SEP) 9/3/2003: 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 106.16 and then again at
107.28, while swing support hits at 104.20 and below there at 104.04. A negative
signal for trend short-term was given on a close under the 9-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 107.28.

T-NOTES(SEP) The daily stochastic’s gave a
bearish indicator with a crossover down. The next downside objective is now at
109.12. The market is in a bearish position with the close below the 2nd swing
support number. Near-term resistance for the T-Notes is at 110.24 and then again
at 111.18, while swing support hits at 109.21 and below there at 109.12. The
market’s short-term trend is negative as the close remains below the 9-day
moving average.

 

STOCK INDICES RECAP

9/2/2003

The stock market started the session out strong,
faded and then managed a recover at mid session right up to the old highs.
However, since the market didn’t punch directly through the old high at 1015.50
but stopped right at the high around mid session it is clear that the market is
paying close attention to the technicals. With the mostly better than expected
ISM readings one could be disappointed with the action Tuesday but considering
the consistency of the gains since early last week and the eventual move to a
new high for year in the action Tuesday it is clear that the path of least
resistance is still up in stocks.

Technical Outlook

S&P500 (SEP) 9/3/2003: There could be more upside
follow through since the market closed above the 2nd swing resistance.
Underlying support comes in at 1013.50 and 1000.00, with overhead resistance at
1031.50 and 1036.00. 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 1036.00. The market is becoming somewhat overbought now
that the RSI is over 70.

S&P E-Mini (SEP): Studies are showing positive
momentum, but are now in overbought territory so some caution is warranted. The
next upside target is 1016.19. 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 1012.88 and then again at 1016.19, while swing support hits
at 1002.63 and below there at 995.69. 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 (SEP) 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 has a bullish tilt coming into today’s trade with the
close above the 2nd swing resistance. The market should run into resistance at
1378.25 and above there at 1385.63 with support at 1348.75 and 1326.63. The
market is approaching overbought levels with an RSI over 70. Rising stochastics
at overbought levels warrant some caution for bulls. The next upside objective
is 1385.63.

 

CURRENCY MARKET RECAP

9/2/2003

With the Dollar opening significantly stronger
Tuesday there really wasn’t much follow through action. It seemed that the
market was anticipating a good set of numbers and then couldn’t add to the gains
once the numbers were seen. The Dollar could have been undermined by the lack of
follow through in the equity market, which seemed to pause around the old high
in the S&P. Apparently the White House tempered the rise in the Dollar by
suggesting that exchange rates should be set by the market and with the BOJ
thought to be in the process of holding down the Yen those kind of statements
seem to argue against intervention.

Technical Outlook

YEN (SEP): 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
setup is supportive for early gains with the close over the 1st swing
resistance. Swing resistance is targeted at 86.56 and above there at 86.94, with
the yen finding support around 85.64 and below there at 85.10. Rising
stochastics at overbought levels warrant some caution for bulls. The next upside
objective is 86.94. The market is approaching overbought levels with an RSI over
70.

EURO (SEP): 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 1.0763. The defensive setup, with the
close under the 2nd swing support, could cause some early weakness. Swing
support for the Euro comes in at 1.0763, with overhead resistance at 1.0909. The
close below the 9-day moving average is a negative short-term indicator for
trend. The close below the 40-day moving average is an indication the
longer-term trend is down. Some caution in pressing the downside is warranted
with the RSI under 30. More selling pressure is likely given yesterday’s gap
lower price action on the day session chart.

 

PRECIOUS METALS RECAP

9/2/2003

The gold market tried to rally but then failed to
hold the gains even though the Dollar slipped off its highs from the day. While
the US economy continues to come around there seems to be quite a bit of
inflation dialogue flowing and that seems to keep the majority of bulls invested
in gold. It was clear that silver was under more aggressive liquidation than
gold and that is surprising considering the favorable macro economic reports
released Tuesday. Silver traders specifically noted selling interest in silver
because of the soaring value of the Dollar and that is an impact we haven’t seen
for a while.

Technical Outlook

SILVER (DEC): Could see some early pressure today
given the market’s negative setup with the close below the 2nd swing support.
Initial support for silver is at 492.0 and below there at 485.5 with resistance
likely at 505.3 and 510.0. 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. The next downside objective is 485.5.

GOLD (DEC): Support for gold today comes in near
370.60, while resistance is pegged at 379.40. Daily stochastics have risen into
overbought territory which will tend to support reversal action if it occurs.
The near-term upside target is at 379.40. 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

9/2/2003

A surprising rally in copper appeared to hold
despite the US equity market falling back from its early highs and the trade
whipping up concerns of the jobless recovery off the ISM report. While most of
the ISM report was wildly supportive of the recovery tilt, the employment Index
decline keeps concern of manufacturing job losses in the coming unemployment
report. With a major copper producers talking about hedging up to 45% of its
second half production that could serve to put the brakes on additional upside
action in copper prices, especially if more producers divulge similar
intentions.

 

ENERGY MARKET RECAP

9/2/2003

The energy complex certainly had a let down and
part of that was directly attributable to the extensive premium built into gas
prices and the extensively overdone long position in crude oil. With prices
falling below $30.00 a barrel and going to the lowest level since July 28th its
understandable that stop loss selling became some intense. We are a little
surprised that statements from a US appointed Iraqi Council suggested that the
US force needs to leave the country wasn’t a little more supportive to the
market. The gasoline market was the most overbought and therefore the magnitude
of the break Tuesday shouldn’t be seen as an indication that the bull market in
unleaded is completely eliminated.

Technical Outlook

CRUDE OIL (OCT): The close below the 40-day
moving average is an indication the longer-term trend is down. The market broke
to a new contract low. More selling pressure is likely given yesterday’s gap
lower price action on the day session chart. The defensive setup, with the close
under the 2nd swing support, could cause some early weakness. Support for crude
is keyed on 28.34 and below there at 27.72, with resistance pegged at 30.49 and
32.02. The downside crossover of the 9 & 18 bar moving average is a negative
signal. A crossover down in the daily stochastics is a bearish signal. The next
downside target is now at 27.72.

UNLEADED GAS (OCT): Momentum studies trending
lower at mid-range could accelerate a price break if support levels are broken.
The next downside objective is 79.37. Could see some early pressure today given
the market’s negative setup with the close below the 2nd swing support.
Resistance today is at 93.37, while support should be found around 79.37. The
gap lower on the day session chart is bearish and puts the market on the
defensive. 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.

HEATING OIL (OCT): The defensive setup, with the
close under the 2nd swing support, could cause some early weakness. Heating oil
should encounter support around 73.37, with resistance is at 83.17. The close
below the 9-day moving average is a negative short-term indicator for trend. The
close below the 40-day moving average is an indication the longer-term trend is
down. A crossover down in the daily stochastics is a bearish signal. The next
downside target is now at 73.37. Some caution in pressing the downside is
warranted with the RSI under 30. More selling pressure is likely given
yesterday’s gap lower price action on the day session chart.

 

CORN MARKET RECAP

9/2/2003

Export inspections for corn came in at 35.7
compared to the prior weeks tally of 23.7 million bushels and that should have
been partly supportive. The trade was more than likely pulled lower by the overt
weakness in the soybean market. Certainly the weekend rains pressured corn even
if it is debatable whether or not the rain will actually benefit the crop.
Apparently lower prices served to reduce the amount of farmer selling and that
could reduce the amount of downside follow through off the weather. Since the
corn was still net spec and fund short in the COT report, one would not expect
the market to see significant stop loss selling off the weekend rain. The fear
of another decline in crop conditions also mitigated the magnitude of the
selling Tuesday.

Technical Outlook

CORN (DEC) 9/3/2003: Daily stochastics have risen
into overbought territory which will tend to support reversal action if it
occurs. The near-term upside target is at 242 1/2. It is a slightly negative
indicator that the close was under the swing pivot. Market resistance comes in
at 242 1/2 today, with support at 236 . The upside crossover of the 9 & 18 bar
moving average is a positive signal.

 

SOY COMPLEX RECAP

9/2/2003

Weekly export inspections in soybeans were 3.40
million compared to 9.69 million the prior week and that simply combined with
bearish weather to force out another layer of long players. Since the weekend
rains are thought to have helped the crop in some areas it’s understandable that
the market washed out aggressively, especially with the soybean complex still
holding a net fund long of 6,140 contracts. The trade was also concerned that
the meal market continued to hold a rather large fund and small spec long and
with weekend rains possibly boosting oil yields in stressed areas the entire
look toward the product market was dampened.

Technical Outlook

SOYBEANS (NOV) 09/03/03 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 579 and 583 3/4, while
1st support hits today at 569 1/2 and below there at 564 3/4. A negative signal
for trend short-term was given on a close under 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 564 3/4.

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 175.0. More selling pressure is
likely given yesterday’s gap lower price action on the day session chart. First
resistance comes in at 179.9, with support at 176.6. The close below the 9-day
moving average is a negative short-term indicator for trend. The defensive
setup, with the close under the 2nd swing support, could cause some early
weakness.

BEAN OIL (DEC): 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 20.96. The swing indicator gave a moderately negative reading with
the close below the 1st support number. Daily swing resistance is found at 20.76
and above there at 20.96. Support should be encountered at 20.38 and 20.20.

 

WHEAT MARKET RECAP

9/2/2003

Weekly export inspections for wheat were for
31.09 million bushels compared to 27.65 million bushels the prior week. However,
the wheat market couldn’t begin to divorce itself from the overt weakness in the
soybean market. All the same the market didn’t completely discount the higher
wheat expect numbers because the market has been expected a gradual rise in
export volume from the US. Even European wheat prices were down Tuesday and that
is a sign that conditions are normalizing after weeks of intense volatility.

Technical Outlook

WHEAT (DEC) 9/3/2003: The market tilt is slightly
negative with the close under the pivot. Expect near-term support around 375 and
below there at 372 1/2, with resistance levels at 379 1/2 and 381 1/2. A
positive signal for trend short-term was given on a close over 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 372 1/2.

 

LIVE CATTLE RECAP

9/2/2003

Live cattle futures closed higher across the
board, with new contract highs achieved in most of the nearby contracts. This is
basically a continuation of the trend toward stronger cash prices and the tight
supply of choice cattle, as cash traders are expecting an even higher trade this
week than last week. Early offers were $85-$86/cwt versus $83-$84 in Nebraska
last week.

Technical Outlook

CATTLE (OCT) 9/3/2003: Rising stochastics at
overbought levels warrant some caution for bulls. The next upside objective is
84.32. The market has a slightly positive tilt with the close over the swing
pivot. Support should be encountered at 82.85 and below there at 82.37. Market
resistance is at 83.82 and then again at 84.32. 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

9/2/2003

The three nearby contracts of lean hogs closed
40-42 higher today to their highest levels since mid July. Quiet, post holiday
trade was seen today, with most of the buying interest appearing to come from
funds. Today’s hog slaughter at 387,000 was above expectations at
374,000-382,000 expected, 373,000 last week and 393,000 a year ago.

Technical Outlook

HOGS (OCT) 9/3/2003: Market positioning is
positive with the close over the 1st swing resistance. Resistance levels comes
in at 55.47 and 55.67 today, while support is around 54.87 and then 54.47.
Short-term indicators suggest buying pullbacks today. 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 55.67.

 

COCOA MARKET RECAP

9/2/2003

Apparently seeing the fund short translated into
a net long at the same time that the small spec position was documented to be
bet long 2,417 contracts prompted cocoa traders to take profits and move to the
sidelines. The New York market had to be influenced by the weakness in the
London market but we think that most of the weakness Tuesday was a result of
normal profit taking and over extended short-term technicals. It is also
possible that seeing an Ivory Coast General released from custody after rumors
of possible coup attempt served to deflate tensions and send cocoa prices lower.
Apparently the trade wasn’t going to give much consideration to a talk of a
sagging production in parts of Nigeria and that is mostly because of the view
that prices were overextended coming into the session.

Technical Outlook

COCOA (DEC)09/03/03 The close below the 1st swing
support could weigh on the market. Cocoa should run into resistance at 1757 and
above there at 1773 with support at 1709 and 1677. 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 1772.50.

 

COFFEE MARKET RECAP

9/2/2003

Dec coffee continues to chop around in a well
defined range between 62 and 65 cents. Dec coffee may be developing a bottom as
the world coffee balance is forecasted to move from a 5.7 million bag surplus to
a 8.3 million bag deficit in the 2003/04 season. Roaster demand is also becoming
more active as winter approaches. Brazil is expected to stay mostly dry for
early September which keeps traders concerned over the upcoming flowering
period.

Technical Outlook

COFFEE (DEC)9/3/03 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
64.90.The Coffee contract should run into resistance at 64.40 and above there at
64.90 with support at 63.05 and 62.20. The market’s short-term trend is positive
on a close above the 9-day moving average.

 

SUGAR MARKET RECAP

9/2/2003

October sugar tried to recover from Friday’s
break, but aggressive fund selling pressured prices lower by the close. As of
Aug 26th, the funds were still net short over 32,000 contracts and look to be
exiting those positions over the past week. Sugar freight activity is slow and
buyers are waiting for lower sugar prices so cash markets are quiet. Germany’s
3rd beet test showed sugar content at 17.9% vs 14.8% last year. So far, the hot
summer in Europe has not affected the sugar crop. The next downside target for
Oct sugar is 6.00.

Technical Outlook

SUGAR (OCT) 9/3/2003: The market setup is
somewhat negative with the close under the 1st swing support. Swing resistance
comes in at 6.35, with support found at 6.09. 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 6.09. Some caution in pressing
the downside is warranted with the RSI under 30.

 

COTTON MARKET RECAP

9/2/2003

December cotton continued to track higher with
the next upside target at 60 likely to be hit this week with 61 the next
objective above there. Traders speculate that China could be a significant buyer
of US cotton since ending stocks in China are tight. Concerns over crop quality
in the Southeast & Delta remain as that region has received rain. Texas also
remains mostly dry.

Technical Outlook

COTTON (DEC) 9/3/2003: 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. Next
resistance area comes in at 59.84 and then again at 60.25, while support is
targeted at 58.94 and 58.45. Rising stochastics at overbought levels warrant
some caution for bulls. The next upside objective is 60.25.