Why The Philly Fed Is Getting Traders’ Attention

Technical Outlook

BONDS (MAR) 12/19/2003: The market setup is supportive for early gains with the close over the 1st swing resistance. Near-term resistance for bonds is at 111.17 and then again at 111.27, while swing support hits at 110.11 and below there at 109.15. 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 111.27. The market is approaching overbought levels with an RSI over 70.

T-NOTES(MAR) Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 113.14. 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 113.09 and then again at 113.14, while swing support hits at 112.21 and below there at 112.06. The market’s short-term trend is positive on a close above the 9-day moving average.

STOCK INDICES RECAP

12/18/2003

The stock market soared to more news highs in the Dow and appears to be poised for a strong continuation into the upcoming holiday period. However, the market appears to be factoring a significant improvement in the economy and might also be upgrading expectations for the remainder of the holiday sales period. It certainly didn’t hurt the bull case in stocks to see an absolutely stellar set of numbers from the Philly Fed survey. In fact, the new orders index managed the largest increase in 23 years and that is something that got the attention of the market.

Technical Outlook

S&P500 (MAR) 12/19/2003: There could be more upside follow through since the market closed above the 2nd swing resistance. Underlying support comes in at 1082.05 and 1071.93, with overhead resistance at 1095.55 and 1098.93. The close above the 9-day moving average is a positive short-term indicator for trend. The crossover up in the daily stochastics is a bullish signal. The near-term upside objective is at 1098.93. 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. A bullish signal was given with an upside crossover of the daily stochastics. The next upside target is 1099.25. The market has a bullish tilt coming into today’s trade with the close above the 2nd swing resistance. Near-term resistance for the S&P Mini is at 1095.75 and then again at 1099.25, while swing support hits at 1081.75 and below there at 1071.25. 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) 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 1446.75 and above there at 1455.88 with support at 1418.25 and 1398.88. The daily stochastics have crossed over up which is a bullish indication. The next upside objective is 1455.88. The market now above the 40-day moving average suggests the longer-term trend is up.

CURRENCY MARKET RECAP

12/18/2003

After the early comments from the ECB President that the Euro rise was holding back the pace of the European recovery the bears in the Dollar seemed to lose their incentive. It is also possible that traders couldn’t stand being short the Dollar with the US stock market rising sharply. In fact, considering the magnitude of the rise in the Philly Fed numbers we might begin to watch for signs of long-term profit taking by the shorts in the Dollar. While the ECB indicated that they would not take action against the rising Euro the subject has been thrust into the headlines.

Technical Outlook

YEN (MAR): A negative signal for trend short-term was given on a close under the 9-bar moving average. The market tilt is slightly negative with the close under the pivot. Swing resistance is targeted at 93.44 and above there at 93.66, with the yen finding support around 92.87 and below there at 92.52. A bearish signal was triggered on a crossover down in the daily stochastics. The next downside objective is 92.52.

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 1.2448. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. Swing support for the Euro comes in at 1.2312, with overhead resistance at 1.2448. 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

12/18/2003

The gold market ran to another new high before the favorable US economic information and the action in the Dollar prompted a profit-taking setback into the close. We suspect that profit taking after the new contract highs was a dominating issue but we have to wonder if the gold market didn’t reach up close to a 200,000 contract spec and fund long around the highs today. We also have to think that the stellar gains in the equity market could be robbing the gold market of interested buyers.

Technical Outlook

SILVER (MAR): The market has a slightly positive tilt with the close over the swing pivot. Initial support for silver is at 566.3 and below there at 557.9 with resistance likely at 572.2 and 579.3. 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 572.2. The market is approaching overbought levels with an RSI over 70. The outside day up is somewhat positive. The market made a new contract high on the rally. The daily closing price reversal up is a positive indicator that could support higher prices.

GOLD (FEB): Support for gold today comes in near 406.65, while resistance is pegged at 415.05. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The near-term upside target is at 415.05. 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

12/18/2003

The copper market exploded to more news highs partly because of Freeport failing to deliver copper concentrates to customers and partly because of the much stronger than expected economic readings from the US. One might also suggest that the strong upward action in the copper market was aided by the stellar rally in the US equity market. In short, the market is becoming wildly bullish which might suggest that an extreme overbought condition is already being built. Unless the strikes end, the Chinese balk at high prices or some of the major producers release stocks the bull trend looks to continue.

ENERGY MARKET RECAP

12/18/2003

The energy complex showed early indecision but then managed to rise, as it appeared as if the world economic pace was quickening and that could boost energy demand. US Philly Fed readings were very strong and the market continues to see signs that OPEC will be unbending when it comes to holding production steady until February. While a number of officials complained about soaring energy prices it would not seem like anyone is ready to make a move toward releasing reserves. According to OPEC November output was actually down 52,000 barrels per day and the daily call on OPEC supplies was +170,000 barrels. Therefore, supply is down and demand is up and that means that prices are up.

Technical Outlook

CRUDE OIL (FEB): The market rallied to a new contract high. The close over the pivot swing is a somewhat positive setup. Support for crude is keyed on 33.25 and below there at 32.60, with resistance pegged at 34.25 and 34.60. 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 34.60. The market is becoming somewhat overbought now that the RSI is over 70.

UNLEADED GAS (FEB): Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 96.62. The market has a slightly positive tilt with the close over the swing pivot. Resistance today is at 96.62, while support should be found around 90.42. 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.

HEATING OIL (FEB):Market positioning is positive with the close over the 1st swing resistance. Heating oil should encounter support around 92.19, with resistance is at 100.59. 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 100.59. The market is becoming somewhat overbought now that the RSI is over 70. The market rallied to a new contract high.

CORN MARKET RECAP

12/18/2003

March corn closed 2 cents lower in a fairly active session as weakness in the soybean market pressured corn prices. The corn market should have been supported by the export sales data that came in at 923,000 tons, compared to the expectations of 650,000 to 900,000 tons. Like soybeans there are some in the trade that are fearful of the technical overbought condition of the market into the holiday period and decided to take profits. The Press did report heavy fund selling Thursday and that might continue Friday because of the levels that were violated on the charts Friday. The only problem with reacting to the technical condition is that traders might be left behind by ongoing bullish fundamental developments.

Technical Outlook

CORN (MAR) 12/19/2003: 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 246 3/4. The market setup is somewhat negative with the close under the 1st swing support. Market resistance comes in at 252 1/4 today, with support at 246 3/4. The close below the 9-day moving average is a negative short-term indicator for trend. Short-term indicators on the defensive. Consider selling an intraday bounce.

SOY COMPLEX RECAP

12/18/2003

Soybeans closed 9 1/2 cents lower on the session in an active trade, as weekly export sales failed to spark continued optimism toward demand. Weekly export sales, released before the opening, came in at 240,800 tons in soybeans and that was well below the range of expectations of 400,000 to 550,000 tons. However, after the close the Chinese delegation announced that they would agree to buy 2.5 million tons and might buy an additional 2.5 million tons in the future if the price was right. The trade was only expecting 500,000 tons, not 5 million tons that may now be purchases!! Some traders reported heavy stop loss selling by the funds possible because those funds feared the upcoming readings from the COT report Friday afternoon!

Technical Outlook

SOYBEANS (JAN) 12/19/03 The close below the 1st swing support could weigh on the market. The next area of resistance is around 765 1/2 and 772 1/4, while 1st support hits today at 753 and below there at 747 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 747 1/4. Bearish daily studies indicate selling minor rallies this session.

MEAL (JAN): 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 223.2. First resistance comes in at 229.3, with support at 224.9. The close below the 9-day moving average is a negative short-term indicator for trend. The market setup is somewhat negative with the close under the 1st swing support. Short-term indicators on the defensive. Consider selling an intraday bounce.

BEAN OIL (JAN): 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 27.43. The close below the 2nd swing support number puts the market on the defensive. The gap lower on the day session chart is bearish and puts the market on the defensive. Daily swing resistance is found at 27.88 and above there at 28.11. Support should be encountered at 27.54 and 27.43.

WHEAT MARKET RECAP

12/18/2003

The wheat market closed 7 1/4 higher supported by solid export sales news and hopes that China may buy more US wheat in the near future. Weekly export sales came in at 1.012 million tons as compared with trade expectations between 500,000 and 850,000 tons and 331,400 tons necessary each week to reach the USDA projection. Cumulative sales have reached 72.8% of the USDA forecast for the season as compared with 64.4% on average for this time of the year. China was a noted buyer of 220,000 tons. Warm weather in the plains is melting the snow cover which is seen as a positive factor as well in case extremely cold weather hits before there is new cover on the areas that melt this week.

Technical Outlook

WHEAT (MAR) 12/19/2003: The market setup is supportive for early gains with the close over the 1st swing resistance. Expect near-term support around 387 1/2 and below there at 380 1/2, with resistance levels at 398 1/2 and 402 1/2. 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 380 1/2.

LIVE CATTLE RECAP

12/18/2003

February cattle closed limit down with active trade after the lower opening. Cash cattle in the panhandle traded at $92.00 which is down $3.00 from last week and which sent December cattle limit down in a hurry. Boxed-beef cut-out values were down $1.28 at mid-session to $156.47 as compared with $157.57 last week at this time. The monthly cold storage report, released after the close, showed frozen beef stocks at 371.8 million pounds as compared with 375.2 last month and 512.5 last year. The small drawdown for the month of November may be considered negative. The average trade estimate for Friday’s Cattle-on-Feed report came in at 105.1% (range 103-106) for December 1st on-feed supply. Placements for November were pegged at 99.7% (range 96-104) and marketings were estimates at near 84.7% (range 80.9-95).

Technical Outlook

CATTLE (FEB) 12/19/2003: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The next downside objective is 87.20. Could see some early pressure today given the market’s negative setup with the close below the 2nd swing support. Support should be encountered at 87.47 and below there at 87.20. Market resistance is at 88.62 and then again at 89.50. A negative signal for trend short-term was given on a close under the 9-bar moving average.

LEAN HOGS RECAP

12/18/2003

February hogs closed lower on the session and into new contract lows as weakness in the cash market and continued excess production concerns helped pressure. Cash markets were $1.00 lower and traders have an increase concern for pork prices into next week if slaughter reaches 2.2 million head this week. In addition, hog weights are already at a record high. With traders looking for a peak weekly slaughter for the season and with solid profit margins from the packer, the trade was not overly concerned with the higher slaughter pace. However, when slaughter is high and weights move to new highs at the same time, the fundamental signal has bearish implications. The monthly cold storage report, released after the close, showed frozen belly stocks at 33.88 million pounds as compared with trade estimates in the 28.4-33.0 million pound range. Last years stocks were just 18.1 million pounds so the high end release should trigger more weakness on the opening. .

Technical Outlook

HOGS (FEB) 12/19/2003: The market setup is somewhat negative with the close under the 1st swing support. Resistance levels comes in at 51.82 and 52.17 today, while support is around 51.07 and then 50.67. The market broke to a new contract low. Short-term indicators on the defensive. Consider selling an intraday bounce. 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 50.67.

COCOA MARKET RECAP

12/18/2003

The cocoa market fleshed out an inside session but managed a higher low in the Trade Thursday. The trade noted a story from Dow Jones that projected an arrival of 900,000 tons of cocoa for the main crop, which is a slightly lower expectation than the prior estimate. While the lower arrival target appears to be support because the total is 85,000 to 65,000 tons below the initial projection some supply is known to be moving through atypical channels. However, the differential would seem to be great enough to provide some support to prices in harvest.

Technical Outlook

COCOA (MAR)12/19/03 The market tilt is slightly negative with the close under the pivot. Cocoa should run into resistance at 1597 and above there at 1609 with support at 1570 and 1555. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 1555.25.

COFFEE MARKET RECAP

12/18/2003

Slightly weak action in coffee would seem to point to even more losses ahead or at least a retest of 61.70. Brazilian exports to December 16th totaled 886,547 bags, which is significantly below the same pace in November. However, the market just isn’t in a position to be concerned about tight supplies and the bull camp looks to remain in control. Light fund selling in coffee seemed to be the dominating issue of the session. With the locals also seen as sellers it would appear that some book squaring was taking place. Exchange stocks at the CSCE down 5,110 bags to 4.3 million bags which 31,660 pending review.

Technical Outlook

COFFEE (MAR)12/19/03 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 61.75.The Coffee contract should run into resistance at 63.90 and above there at 64.75 with support at 62.4 and 61.75. The market’s short-term trend is negative as the close remains below the 9-day moving average. The major trend is down with the cross over back below the 40-day moving average.

SUGAR MARKET RECAP

12/18/2003

The outside-day down and lowest close since December 2nd leaves the market vulnerable to significant long liquidation selling over the near-term. News of possible Russian buying supported the early gains but producer selling turned active and the market pushed low enough to attract trade and speculative long liquidation selling. With speculators holding a net long position of near 66,000 contracts in the last COT report, and a tendency to liquidate into the end of the year, the selling is likely to intensify, especially if support levels are violated. Traders think that Russia may have already booked 200,000-300,000 tons for the first quarter and the fact that the market pushed lower on the week illustrates the weak underlying structure.

Technical Outlook

SUGAR (MAR) 12/19/2003: The outside day down gives the market a bearish tilt. The daily closing price reversal down is a negative indicator for prices. The market setup is somewhat negative with the close under the 1st swing support. Swing resistance comes in at 6.64, with support found at 6.32. 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 6.32. Short-term indicators on the defensive. Consider selling an intraday bounce.

COTTON MARKET RECAP

12/18/2003

March cotton closed 104 lower on the session with an out-side day down which turns the short-term technical picture bearish. Weekly export sales came in at 207,500 bales as compared with expectations between 150,000 to 175,000 bales and 117,300 bales necessary each week to reach the USDA projection. China bought 53,400 bales on the week which is a positive sign for demand ahead, but the market was not impressed. China has bought 3.052 million bales from the US this season as compared with 650,900 bales last year at this time.

Technical Outlook

COTTON (MAR) 12/19/2003: 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 70.05 and then again at 71.10, while support is targeted at 68.61 and 68.22. A bearish signal was triggered on a crossover down in the daily stochastics. The next downside objective is 68.22. 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)12/19/03 The close below the 1st swing support could weigh on the market. Orange Juice should run into resistance at 66.70 and above there at 67.30 with support at 65.70 and 65.30. 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 65.3.