Why The Recovery May Be In Trouble
BOND MARKET RECAP
9/22/2004
December Bonds closed up 0-25 at 113-26. This was
1-01 up from the low and 0-05 off the high.
December 10 Yr Treasury Notes finished up 0-095
at 113-190, 0-030 off the high and 0-155 up from the low.
The US bond market jumped higher despite
the absence of scheduled economic reports. Certainly seeing US stocks slide
aggressive at the same time that energy prices exploded to new highs suggests
that the recovery in the US is in trouble. In fact many are suggesting that the
promise of higher rates from the Fed is the primary reason for the strong upward
adjustment in bond prices and that is because the economy is less likely to
spring forward with the additional burden of soaring energy prices and higher
interest rates.
Technical Outlook
BONDS (DEC) 09/23/2004: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The close above the 9-day moving average is a positive short-term
indicator for trend. With the close over the 1st swing resistance number, the
market is in a moderately positive position. The near-term upside objective is
at 114-27. The 9-day RSI over 70 indicates the market is approaching overbought
levels. The next area of resistance is around 114-13 and 114-27, while 1st
support hits today at 113-05 and below there at 112-10.
TNOTES (DEC) 09/23/2004: Daily stochastics have
risen into overbought territory which will tend to support reversal action if it
occurs. The market’s close above the 9-day moving average suggests the
short-term trend remains positive. The close over the pivot swing is a somewhat
positive setup. The next upside target is 114-045. The market is approaching
overbought levels with an RSI over 70. The next area of resistance is around
113-295 and 114-045, while 1st support hits today at 113-095 and below there at
112-280.
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STOCK INDICES RECAP
9/22/2004
December S&P finished down 14.4 at 1112.9, 9.6
off the high and 0.5 up from the low.
December S&P E-Mini closed down 14.25 at 1113.
This was 1 up from the low and 14.5 off the high.
December Dow closed down 130 at 10092. This was 7
up from the low and 103 off the high.
December Dow E-Mini finished down 128 at 10094,
123 off the high and 8 up from the low.
The stock market finally gave up and tossed in
the towel against the rising tide of negative macro economic developments. In
addition to soaring energy prices, rising interest rates and slack scheduled
economic readings, the stock market was given the added negative of the US
threatening Iran with military action. While the Iranian situation doesn’t
appear to be serious it was clear that Wall Street was looking for an excuse to
downgrade the entire market. Rising newsprint stocks and concern toward the auto
sector were other macro economic indicators that served to foster long
liquidation in the market on Wednesday.
Technical Outlook
S&P 500 (DEC) 09/23/2004: Momentum studies
trending lower at mid-range could accelerate a price break if support levels are
broken. The close below the 9-day moving average is a negative short-term
indicator for trend. 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. The next downside target
is now at 1105.08. The next area of resistance is around 1117.95 and 1125.27,
while 1st support hits today at 1107.85 and below there at 1105.08.
SP EMINI (DEC) 09/23/2004: Momentum studies
trending lower at mid-range should accelerate a move lower if support levels are
taken out. A negative signal for trend short-term was given on a close under the
9-bar moving average. The defensive setup, with the close under the 2nd swing
support, could cause some early weakness. The next downside objective is now at
1100.88. The next area of resistance is around 1120.75 and 1131.87, while 1st
support hits today at 1105.25 and below there at 1100.88.
NASDAQ (DEC) 09/23/2004: A crossover down in the
daily stochastics is a bearish signal. Momentum studies trending lower from
overbought levels is a bearish indicator and would tend to reinforce lower price
action. The market’s close below the 9-day moving average is an indication the
short-term trend remains negative. The defensive setup, with the close under the
2nd swing support, could cause some early weakness. The next downside objective
is 1391.25. The next area of resistance is around 1423.50 and 1439.25, while 1st
support hits today at 1399.50 and below there at 1391.25.
MINIDOW (DEC) 09/23/2004: The major trend has
turned down with the cross over back below the 40-day moving average.
Stochastics trending lower at midrange will tend to reinforce a move lower
especially if support levels are taken out. The market’s close below the 9-day
moving average is an indication the short-term trend remains negative. The
market is in a bearish position with the close below the 2nd swing support
number. The next downside objective is now at 9992. The next area of resistance
is around 10159 and 10253, while 1st support hits today at 10029 and below there
at 9992.
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CURRENCY MARKET RECAP
9/22/2004
December US Dollar finished up 37 at 8868, 22 off
the high and 44 up from the low.
December Euro finished down 0.59 at 122.53, 0.07
off the high and 0.33 up from the low.
December Euro Dollar closed down 0.01 at 97.755.
This was 0.015 up from the low and 0.015 off the high.
December Canadian Dollar closed up 0.23 at 77.76.
This was 0.22 up from the low and 0.19 off the high.
December British Pound finished down 0.59 at
178.09, 0.25 off the high and 0.39 up from the low.
December Swiss closed down 0.37 at 79.55. This
was 0.32 up from the low and 0.05 off the high.
December Japanese Yen closed down 0.65 at 90.86.
This was 0.21 up from the low and 0.11 off the high.
While the stock market is concerned about the US
economy and the US Treasury market thinks that the US recovery is faltering the
international currency trade doesn’t seem to be put off by the forward looking
view on the US economy. Certainly seeing the US Fed promise to hike interest
rates again in November shifts the interest rate differential in favor of the
Dollar but we are surprised that the Dollar has come into vogue over that issue
alone. The Canadian Dollar showed the most significant strength on Wednesday and
that would seem to confirm its dominance over the rest of the currencies.
Technical Outlook
YEN (DEC) 09/23/2004: The major trend has turned
down with the cross over back below the 40-day moving average. Stochastics
trending lower at midrange will tend to reinforce a move lower especially if
support levels are taken out. A negative signal for trend short-term was given
on a close under the 9-bar moving average. The gap down on the day session chart
is bearish with more selling pressure possible today. The close below the 2nd
swing support number puts the market on the defensive. The next downside
objective is 90.52. The next area of resistance is around 91.02 and 91.15, while
1st support hits today at 90.70 and below there at 90.52.
EURO (DEC) 09/23/2004: Momentum studies are
trending higher but have entered overbought levels. The market’s close above the
9-day moving average suggests the short-term trend remains positive. The market
setup is somewhat negative with the close under the 1st swing support. The next
upside objective is 122.86. The next area of resistance is around 122.73 and
122.86, while 1st support hits today at 122.33 and below there at 122.07.
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PRECIOUS METALS RECAP
9/22/2004
December Gold closed down 1.1 at 409. This was
3.2 up from the low and 0.2 off the high.
December Silver finished up 0.002 at 6.375, 0.015
off the high and 0.1 up from the low.
October Platinum closed down 4.5 at 847.5. This
was 2.5 up from the low and 0.5 off the high.
The gold and silver markets were mostly weak
during the early part of the session but did manage to hold above the mid point
of the last two sessions range. It did seem like the metals were negatively
impacted by weakness in the equity market as a knuckling down in forward looking
economic sentiment is something that could deflate physical demand. Recently the
gold market has suggested that physical demand is playing a more important role
than the direction of the Dollar. With the Dollar higher again on Wednesday it
is certainly not surprising that gold and silver were showing some long
liquidation.
Technical Outlook
SILVER (DEC) 09/23/2004: Momentum studies are
trending higher from mid-range, which should support a move higher if resistance
levels are penetrated. The close above the 9-day moving average is a positive
short-term indicator for trend. The daily closing price reversal up on the daily
chart is somewhat positive. It is a mildly bullish indicator that the market
closed over the pivot swing number. The near-term upside target is at 646.9. The
next area of resistance is around 643.3 and 646.9, while 1st support hits today
at 631.8 and below there at 623.9.
GOLD (DEC) 09/23/2004: The upside crossover of
the 9 & 18 bar moving average is a positive signal. Daily stochastics have risen
into overbought territory which will tend to support reversal action if it
occurs. The market’s close above the 9-day moving average suggests the
short-term trend remains positive. The gap lower price action on the day session
chart is a bearish indicator for trend. It is a slightly negative indicator that
the close was lower than the pivot swing number. The near-term upside target is
at 411.6. The next area of resistance is around 410.7 and 411.6, while 1st
support hits today at 407.3 and below there at 404.9.
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COPPER MARKET RECAP
9/22/2004
December Copper finished up 2.80 at 136.95, 0.25
off the high and 3.55 up from the low.
At times the copper market seemed poised to give
back all the gains but in the end the market couldn’t muster the selling
interest to keep prices down. While the funds are supposedly responsible for the
gains Wednesday it didn’t hurt US speculative sentiment to see the Chinese
copper market close limit up in the overnight action. So far the market isn’t
really intently focused on the Peru labor issue, but instead the trade seems
completely convinced that Chinese and Asian buyers are going to continue to
tighten world supplies of copper. If prices remain firm we suspect that fewer
and fewer supplies will come into the exchange.
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ENERGY MARKET RECAP
9/22/2004
November Crude Oil closed up 1.59 at 48.35. This
was 1.93 up from the low and 0.30 off the high.
October Heating Oil closed up 4.15 at 134.44.
This was 5.44 up from the low and 0.76 off the high.
October Unleaded Gas finished up 5.34 at 134.30,
1.20 off the high and 7.30 up from the low.
October Natural Gas finished up 0.02 at 5.63,
0.07 off the high and 0.12 up from the low.
October Propane closed up 0.02 at 0.83. This was
0.00 up from the low and equal to the high.
While the energy market didn’t instantly react to
the sharp decline in US oil inventories it eventually got around to the
appropriate reaction. While some traders will suggest that the draws were
temporary and could be partially reversed in coming weeks it is clear that some
production was lost and the US will not recover that lost production. With US
crude oil inventories falling by close to 13 million barrels on the week and
moving to an annual deficit there is certainly a renewed concern that winter
heating oil supplies might be critical. While the market isn’t tracking
specifically off a particular tropical storm it is deriving strength from the
concern of the next storm in the pipeline and the idea that the season is going
to yield a large number of hurricanes.
Technical Outlook
CRUDE OIL (NOV) 09/23/2004: The market rallied to
a new contract high. Momentum studies are trending higher but have entered
overbought levels. The market’s short-term trend is positive on the close above
the 9-day moving average. 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 upside objective is 50.17. With a reading over
70, the 9-day RSI is approaching overbought levels. The next area of resistance
is around 49.46 and 50.17, while 1st support hits today at 47.24 and below there
at 45.72.
UNLEADED (OCT) 09/23/2004: The market made a new
contract high on the rally. Momentum studies are trending higher but have
entered overbought levels. The market’s close above the 9-day moving average
suggests the short-term trend remains positive. The market’s close above the 2nd
swing resistance number is a bullish indication. The next upside target is
141.27. The market is approaching overbought levels with an RSI over 70. The
next area of resistance is around 138.54 and 141.27, while 1st support hits
today at 130.05 and below there at 124.28.
HEATING OIL (OCT) 09/23/2004: The market rallied
to a new contract high. Momentum studies are trending higher but have entered
overbought levels. The market’s short-term trend is positive on the close above
the 9-day moving average. 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 near-term upside objective is at 139.47. With a
reading over 70, the 9-day RSI is approaching overbought levels. The next area
of resistance is around 137.54 and 139.47, while 1st support hits today at
131.34 and below there at 127.07.
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CORN MARKET RECAP
9/22/2004
December Corn finished down 2 1/2 at 210
1/4, 3 off the high and 1/4 up from the low. March Corn closed down 2 1/4 at 220
1/2. This was 1/2 up from the low and 2 3/4 off the high.
Talk of an oversold condition helped to hold the
market steady early in the session but continued reports of higher than expected
yields and a near perfect weather forecast for harvest in the central cornbelt
and to help the crops in the north push toward maturity helped to drive the
market lower to new contract lows for the 9th session in a row. Funds were noted
sellers of near 5700 contracts. South Korea is tendering for 55,000 tons of
optional origin corn but other export news is lacking. The only crop concerns at
present would be the slow maturing crop in the northern cornbelt and a freeze
into early October might still due some damage to crops in Minnesota. In the
last USDA production report, Minnesota is expected to produce more than 1
billion bushels this season. December corn support comes in at 210 and then 206
1/4 with 212 3/4 and 215 as resistance.
Technical Outlook
CORN (DEC) 09/23/2004: Daily stochastics are
trending lower but have declined into oversold territory. 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. The next downside target is now at 207 3/4. The 9-day RSI under 20
suggests the market is extremely oversold. The next area of resistance is around
211 3/4 and 214, while 1st support hits today at 208 3/4 and below there at 207
3/4.
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SOY COMPLEX RECAP
9/22/2004
November Soybeans finished down 4 at 538 1/4, 6
3/4 off the high and 2 1/2 up from the low. January Soybeans closed down 3 1/4
at 546 1/4. This was 2 3/4 up from the low and 6 1/4 off the high.
December Soymeal closed down 0.6 at 161.7. This
was 1.4 up from the low and 1.1 off the high.
December Soybean Oil finished unchanged at 21.71,
0.21 off the high and 0.21 up from the low.
The market continues to see the weather forecast
into next week as bearish but the market saw some early buying from ideas
futures are oversold with some short-covering noted on the floor. There was only
a 5 cent range yesterday for November soybeans on the move to new 13-month lows
and the lack of significant follow-through selling along with oversold readings
for traditional technical indicators helped to provide some early support. Funds
were noted sellers in the second half of the session at near 1700 contracts.
Palm oil was slightly lower overnight and reports of bird flu spreading to
Cambodia added to the bearish tone. Export demand news is quiet and commercial
traders continue to speak of higher than expected yields and potential selling
of soybeans into the cash market. However, agronomists in Iowa and Illinois
suggest that producers are facing the biggest outbreak of sudden death syndrome
disease in the past 10 years due to cool and wet weather according to a report
from Reuters. Plant pathologists in Illinois this week released the results of a
statewide survey of at least five fields from each county which showed SDS near
double or triple last year. As of Sunday, only 11% of the Illinois crop was
harvested and just 3% in Iowa. Resistance for November soybeans comes in near
545 and 551 1/4 with support at 533 and 510 1/2.
Technical Outlook
BEANS (NOV) 09/23/2004: Daily stochastics
declining into oversold territory suggest the selling may be drying up soon. The
market’s close below the 9-day moving average is an indication the short-term
trend remains negative. The close below the 1st swing support could weigh on the
market. The next downside objective is now at 530 1/4. The market is approaching
oversold levels on an RSI reading under 30. The next area of resistance is
around 542 3/4 and 548 1/2, while 1st support hits today at 533 3/4 and below
there at 530 1/4.
MEAL (DEC) 09/23/2004: Momentum studies are
declining, but have fallen to oversold levels. The market’s short-term trend is
negative as the close remains below the 9-day moving average. The market’s close
below the pivot swing number is a mildly negative setup. The next downside
target is 159.2. With a reading under 30, the 9-day RSI is approaching oversold
levels. The next area of resistance is around 162.9 and 164.1, while 1st support
hits today at 160.5 and below there at 159.2.
BEANOIL (DEC) 09/23/2004: Momentum studies are
declining, but have fallen to oversold levels. 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 lower than the pivot swing number. The next
downside target is 21.29. Some caution in pressing the downside is warranted
with the RSI under 30. The next area of resistance is around 21.92 and 22.13,
while 1st support hits today at 21.50 and below there at 21.29.
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WHEAT MARKET RECAP
9/22/2004
December Wheat finished down 9 at 325 3/4, 9 3/4 off the high
and 3/4 up from the low. March Wheat closed down 8 1/4 at 337. This was 1 up
from the low and 8 1/4 off the high.
More rain in Kansas and active fund selling
helped to trigger the sharp break to the lowest close since September 9th.
Canadian weather was also considered more negative with clear skys to help
advance harvest. Traders are still concerned that the recent rally in futures
may have caused US wheat to become less competitive on the world market. News
that the Philippines bought 35,000 tons of wheat from the Ukraine helped to
trigger some of the early weakness and reminded traders of stiff competition
from the Black Sea region. The market has failed to react to news from Australia
that last weeks freeze may have caused 400,000 tons in losses to the Australia
wheat production. Funds were noted sellers of near 2500 contracts. Resistance
for December wheat comes in at 334 1/2 and 339 3/4 with support at 321 1/2 and
318.
Technical Outlook
WHEAT (DEC) 09/23/2004: The daily stochastics
gave a bearish indicator with a crossover down. Stochastics trending lower at
midrange will tend to reinforce a move lower especially if support levels are
taken out. The market’s short-term trend is negative as the close remains below
the 9-day moving average. The close below the 1st swing support could weigh on
the market. The next downside objective is now at 317 1/2. The next area of
resistance is around 331 and 338 1/2, while 1st support hits today at 320 1/2
and below there at 317 1/2.
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LIVE CATTLE RECAP
9/22/2004
October Live Cattle closed down 0.80 at 84.85.
This was 0.35 up from the low and 1.65 off the high.
October Feeder Cattle finished down 0.07 at
112.45, 0.95 off the high and 0.75 up from the low.
The cattle market pushed sharply lower into the
close with an out-side trading session as the early rally failed to attract new
buying support with traders waiting for news of cash market trade or news
regarding Japanese beef exports. A lack of news for both of these factors
contributed to some of the weakness. In addition, news that National Beef
Packing halted slaughter operations at 2 of their plants and traders view the
action as another bearish demand factor. Poor profit margins are thought to be
the main reason for the slaughter slow-down. As a result, slaughter came in at
just 109,000 head as compared with trade expectations at 120,000-126,000 head.
Boxed-beef cutout values (600-750 choice) were up $1.02 on the day at
mid-session to $137.98 as compared with $134.95 last week at this time.
Technical Outlook
CATTLE (OCT) 09/23/2004: Stochastics are at
mid-range but trending higher, which should reinforce a move higher if
resistance levels are taken out. The market’s short-term trend is negative as
the close remains below the 9-day moving average. The outside day down is
somewhat negative. The defensive setup, with the close under the 2nd swing
support, could cause some early weakness. The near-term upside objective is at
87.170. The next area of resistance is around 85.850 and 87.170, while 1st
support hits today at 83.870 and below there at 83.200.
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LEAN HOGS RECAP
9/22/2004
October Lean Hogs closed down 0.30 at 74.15. This
was 0.75 up from the low and 0.40 off the high.
February Pork Bellies finished down 0.85 at
100.37, 0.95 off the high and 0.50 up from the low.
Weakness in pork product prices on Wednesday
afternoon and a sharp drop in loin prices clashed with the overbought condition
of the market to cause the first lower close in the past 10 sessions for October
hogs. The market bounced into the close to keep losses to a small amount on the
session with positioning ahead of the cold storage report and Friday’s USDA Hogs
and Pigs report. The CME 2-Day Lean index for the period ending September 20th
was up $.82 to 75.78 as compared with 71.83 one week previous. Traders believe
the index will be up near 77 cents tomorrow. The USDA monthly cold storage
report, released after the close, showed end of August bellies in cold storage
at 15.1 million pounds as compared with trade estimates at 11.0 to 13.8 million
pounds. Last years stocks were 17.9 million pounds. The news should trigger a
break in bellies on the opening.
Technical Outlook
HOGS (OCT) 09/23/2004: Studies are showing
positive momentum but are now in overbought territory, so some caution is
warranted. The market’s close above the 9-day moving average suggests the
short-term trend remains positive. It is a slightly negative indicator that the
close was lower than the pivot swing number. The next upside objective is
75.200. The market is approaching overbought levels with an RSI over 70. The
next area of resistance is around 74.700 and 75.200, while 1st support hits
today at 73.600 and below there at 72.920.
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COCOA MARKET RECAP
9/22/2004
December Cocoa finished up 34 at 1526, 17 off the
high and 15 up from the low.
A massive gap up move in cocoa was apparently
sparked by aggressive commercial buying and that might be a sign that some
traders are expecting some damage to the crop off the dryness. With the Press
also reporting the Funds to be heavy buyers the market is getting support from a
number of sources. Sometimes the commercial buyers have a little insight on the
condition of the crop and by them stepping up and paying up on a rally that has
to be seen as a bullish indication.
Technical Outlook
COCOA (DEC) 09/23/2004: Rising from oversold
levels, daily momentum studies would support higher prices, especially on a
close above resistance. The market’s short-term trend is positive on the close
above the 9-day moving average. Follow through buying looks likely if the market
can hold yesterday’s gap on the day session chart. 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 near-term upside target is at
1558. The next area of resistance is around 1542 and 1558, while 1st support
hits today at 1510 and below there at 1495.
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COFFEE MARKET RECAP
9/22/2004
December Coffee closed up 1.90 at 83.55. This was
2.40 up from the low and 0.45 off the high.
After a steady opening, December coffee found a
surge in fund and speculative buying to support the strong close. It was the
highest close since June 16th. Producers in parts of coffee producing areas are
growing more concerned with tree stress as rains have been light or not at all
for the past 6 weeks and temperatures soared to near 104 degrees for the first
day of spring. While traders are hopeful that seasonal rains arrive in early
October to trigger tree flowering but a hot and dry forecast for the next week
helped to support. In addition, traders believe that the 2005/2006 production
would be hurt due to excessively wet weather earlier this year. NYBOT certified
stocks were down 18,276 bags to 5.034 million bags with 56,219 bags pending
review.
Technical Outlook
COFFEE (DEC) 09/23/2004: Rising stochastics at
overbought levels warrant some caution for bulls. The close above the 9-day
moving average is a positive short-term indicator for trend. The market has a
bullish tilt coming into today’s trade with the close above the 2nd swing
resistance. The next upside target is 85.90. The 9-day RSI over 70 indicates the
market is approaching overbought levels. The next area of resistance is around
84.95 and 85.90, while 1st support hits today at 82.15 and below there at 80.25.
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SUGAR MARKET RECAP
9/22/2004
October Sugar closed up 0.17 at 7.76. This was
0.15 up from the low and equal to the high.
Like a number of other exotic or soft commodity
markets the sugar market saw an influx of fund buying. However, like a number of
other soft commodities the sugar market also saw signs of commercial buying. The
trade was rife with rumors of Indian buying and that would certainly provide the
impetus to ratchet prices higher. Other traders suggested that Middle Eastern or
North African buyers might have become more active and that would certainly
increase the long interest in the spec camp if that is proven to be true.
Technical Outlook
SUGAR (MAR) 09/23/2004: The cross over and close
above the 40-day moving average indicates the longer-term trend has turned up.
Stochastics trending lower at midrange will tend to reinforce a move lower
especially if support levels are taken out. A positive signal for trend
short-term was given on a close over the 9-bar moving average. It is a mildly
bullish indicator that the market closed over the pivot swing number. The next
downside target is 8.33. The next area of resistance is around 8.63 and 8.68,
while 1st support hits today at 8.45 and below there at 8.33.
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COTTON MARKET RECAP
9/22/2004
October Cotton finished up 1.20 at 51.40, 0.20
off the high and 0.90 up from the low.
Cotton prices showed signs of adjusting upward
Wednesday and apparently managed the pulse up on fund buying. Fund buying seemed
to be rampant but even more important is the fact that the market managed to
rally even in the face of trade selling. While the market indicated that renewed
storm threats prompted some of the buying we doubt that the market can expect to
see as direct of a hit as the last storm and manage the landfall at as critical
of a time in the crop cycle, Certainly open bolls are still a major issue but
one has to wonder if the market is capable of responding to hurricane
influences. Most traders suggest that the storm track will have to be farther to
the west to effectively send prices into a long upward thrust.
Technical Outlook
COTTON (DEC) 09/23/2004: The market now above the
40-day moving average suggests the longer-term trend has turned up. Momentum
studies are still bearish but are now at oversold levels and will tend to
support reversal action if it occurs. A negative signal for trend short-term was
given on a close under the 9-bar moving average. 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 downside target is now at
47.60. The next area of resistance is around 49.79 and 50.39, while 1st support
hits today at 48.39 and below there at 47.60.