Why Traders Are Concerned About Energy
BOND MARKET RECAP
10/10/2003
The stock market didn’t perform very well considering the breath of positive information
floated on the week. The trade is certainly concerned about the rise in energy prices
as crude oil prices around $32 a barrel are thought to be limiting the recovery potential.
It is also disappointing to many stock market bulls that the Dollar has resumed the
downside and that could discourage foreign buyers from moving into the US. The weekend
Press should be generally positive toward the recovery and that could set the market
up for positive traction on Monday.
Technical Outlook
BONDS (DEC) 10/13/03: With the close higher than the pivot swing number, the market
is in a slightly bullish posture. Near-term resistance for bonds is at 108.22 and
then again at 109.03, while swing support hits at 107.18 and below there at 106.27.
The market’s close below the 9-day moving average is an indication the short-term
trend remains negative. Momentum studies are declining, but have fallen to oversold
levels. The next downside target is 106.27.
T-NOTES(DEC) Momentum studies trending lower at mid-range should accelerate a move
lower if support levels are taken out. The next downside objective is now at 111.19.
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 112.25 and then again
at 113.01, while swing support hits at 112.02 and below there at 111.19. The market’s
short-term trend is negative as the close remains below the 9-day moving average.
STOCK INDICES RECAP
10/10/2003
A major probe up failed to hold and many in the trade are suggesting that the market
topped. Maybe the technical picture predicts a top but the fundamental information
is quite the contrary. Some traders suggested that the massive rise in energy prices
could serve to derail the recovery but with the Dollar stalled from its recent declines
and the US seeing an improvement in the initial claims report it is hard to get bearish
on the stock market unless there is a very negative string of earnings reports.
Technical Outlook
S (DEC) 10/13/03: It is a mildly bullish indicator that the market closed over the
pivot swing number. Underlying support comes in at 1037.55 and 1032.38, with overhead
resistance at 1044.45 and 1046.18. The market’s short-term trend is positive on a
close above the 9-day moving average. Momentum studies are trending higher, but have
entered overbought levels. The near-term upside objective is at 1046.18.
S E-Mini (DEC): The market made a new contract high on the rally. Rising stochastics
at overbought levels warrant some caution for bulls. The next upside objective is
1048.13. The market has a slightly positive tilt with the close over the swing pivot.
Near-term resistance for the S Mini is at 1045.25 and then again at 1048.13, while
swing support hits at 1036.75 and below there at 1031.13. A positive signal for trend
short-term was given on a close over the 9-bar moving average.
NASDAQ (DEC) Daily stochastics are showing positive momentum from oversold levels
which should reinforce a move higher if near-term resistance is taken out. With the
close higher than the pivot swing number, the market is in a slightly bullish posture.
The market should run into resistance at 1417.75 and above there at 1421.63 with
support at 1402.25 and 1390.63. Studies are showing positive momentum, but are now
in overbought territory so some caution is warranted. The next upside target is 1421.6.
CURRENCY MARKET RECAP
10/10/2003
The bear camp in the Dollar is certainly emboldened by the action Friday. Not only
did the Dollar avoid a short covering bounce in the face of very supportive economic
information but it managed to probe new lows after all the positive news was floated.
Some traders suggested that the Dollar won’t stop going down until the G7 decides
to do something about the situation and that could allow for significant depreciation.
The clearest development in the action Friday was the distinct upside breakout in
the Canadian which might be in for a continuation of the uptrend and an eventual
target of 78.00.
Technical Outlook
YEN (DEC): The market’s close above the 9-day moving average suggests the short-term
trend remains positive. A new contract high was made on the rally. The gap upmove
on the day session chart is a bullish indicator for trend. A positive setup occurred
with the close over the 1st swing resistance. Swing resistance is targeted at 92.37
and above there at 92.57, with the yen finding support around 92.08 and below there
at 91.99. Studies are showing positive momentum, but are now in overbought territory
so some caution is warranted. The next upside target is 92.57. The 9-day RSI over
70 indicates the market is approaching overbought levels.
EURO (DEC): Momentum studies are trending lower from high levels which should accelerate
a move lower on a break below the 1st swing support. The next downside objective
is now at 1.1702. The market is in a bearish position with the close below the 2nd
swing support number. Swing support for the Euro comes in at 1.1702, with overhead
resistance at 1.1868. 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
10/10/2003
The gold and silver markets were saved by the Dollar as the single focus of the
metals was rewarded by another new low probe in the Dollar. Some traders suggested
that the sharp rise in energy prices is sparking the fear of inflation even though
the PPI release early in the session showed mostly muted price readings. With sharply
higher soybean prices and crude oil at times $1.40 higher on the day it’s understandable
that gold and silver found favor. The fact that gold/silver and platinum all rose
shows a general favor for all of the precious metals.
Technical Outlook
SILVER (DEC): 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 488.0 and below there at 484.3 with resistance likely
at 490.9 and 494.0. The market’s close below the 9-day moving average is an indication
the short-term trend remains negative. The daily stochastics have crossed over up
which is a bullish indication. The next upside target is 490.9. The gap upmove on
the day session chart is a bullish indicator for trend.
GOLD (DEC): Support for gold today comes in near 371.18, while resistance is pegged
at 376.18. Daily stochastics are trending lower, but have declined into oversold
territory. The next downside objective is now at 371.18. With the close over the
1st swing resistance number, the market is in a moderately positive position. The
market’s short-term trend is negative as the close remains below the 9-day moving
average.
COPPER MARKET RECAP
10/10/2003
The copper market action was very impressive Friday as the uncertainty in the stock
market and soaring energy prices couldn’t keep copper from rising sharply. Even after
Shanghai copper stocks increased and the Chinese showed some disdain for the recent
level of prices the market shows no signs of topping. In fact some traders suggest
that US copper is once again getting support from the lower Dollar, as a lower Dollar
makes US copper prices cheaper to certain foreign buyers. Sharply lower US August
copper exports compared to last year might have given the market an added incentive
to rally.
ENERGY MARKET RECAP
10/10/2003
Pick your reason for the rally in energy prices and it is probably part of the equation.
The forecast for cold and windy temps next week seems to have whipped up the speculative
interest in the long side. Apparently North Sea loading figures for the month of
November are going to be more than 1 million barrels per day that the prior month
and that serves to tighten the supply equation. However, the majority of the buying
seems to be good old fashioned speculative fervor generated off the theme of a cold
winter. In other words, the seasonal crowd was throwing itself at the market even
if long term weather forecasting is folly. OPEC might have tempered the rally by
suggesting they might reconsider cuts if prices remained significantly above the
banding price. OPEC is certainly comfortable with significantly higher prices than
most economists and that should leave the price bias up.
Technical Outlook
CRUDE OIL (DEC): The rally brought the market to a new contract high. With the close
over the 1st swing resistance number, the market is in a moderately positive position.
Support for crude is keyed on 31.32 and below there at 30.56, with resistance pegged
at 32.67 and 33.26. The market’s close on the 9-day moving average is neutral. .
UNLEADED GAS (DEC): Studies are showing positive momentum, but are now in overbought
territory so some caution is warranted. The next upside target is 89.68. With the
close higher than the pivot swing number, the market is in a slightly bullish posture.
Resistance today is at 89.68, while support should be found around 84.28. A new contract
high was made on the rally. 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.
HEATING OIL (DEC): With the close over the 1st swing resistance number, the market
is in a moderately positive position. Heating oil should encounter support around
85.24, with resistance is at 92.84. The market’s short-term trend is positive on
a close above the 9-day moving average. Momentum studies are trending higher, but
have entered overbought levels. The near-term upside objective is at 92.84. With
a reading over 70, the 9-day RSI is approaching overbought levels. 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.
CORN MARKET RECAP
10/10/2003
An extremely dismal trade in corn violated near term support and leaves the market
trending toward a massive large net spec short position. However, with the crop numbers
Friday morning coming out much worse than the range of expectations it is surprising
that prices didn’t fall even further. The Yield was raised 1 bushel per acre over
the prior report and production was pegged at 10.207 billion bushels compared to
9.94 billion last month. The trade also noted harvest pressure on corn prices and
a lack of urgency on the tightness of the world numbers. Many corn traders would
have pressured corn even more if soybean prices weren’t discouraging selling interest
in the corn pit. The stocks to use ratio in corn is now seen at 13.6% compared to
the ultra tight 10.7% in the prior month. However, last year the stocks to use ratio
was 16.3% and yet corn prices managed a rally to $253 last spring.
Technical Outlook
CORN (DEC) 10/13/03: The daily stochastic’s gave a bearish indicator with a crossover
down. The next downside objective is now at 213 1/4. The market is in a bearish position
with the close below the 2nd swing support number. Market resistance comes in at
220 1/4 today, with support at 213 1/4. The market’s short-term trend is negative
as the close remains below the 9-day moving average. With a reading under 30, the
9-day RSI is approaching oversold levels. The gap down on the day session chart is
bearish with more selling pressure possible today.
SOY COMPLEX RECAP
10/10/2003
November soybeans closed 19 1/2 cents higher on the session but down 24 cents from
the highs and down 12 cents from the opening. The market also closed 34 cents higher
on the week and the weekly close above 711 3/4 is bullish. The USDA Crop Production
and Supply/Demand reports were bullish with soybean production pegged at just 2.468
billion bushels as compared with trade expectations at 2.578 billion bushels (range
2.525-2.618). The production forecast was down 175 million bushels from last month
and below the low end of trade expectations. The USDA was forced to lower exports
by 70 million bushels and crush by 45 million bushels in order to leave ending stocks
at just 130 million bushels (near a pipeline minimum) as compared with 169 million
last year. This represents less than 19 days of usage. The USDA revised Brazil production
up by 4 million tons to 60 million tons as compared with last year’s record at 52.5
million tons. World ending stocks were pegged at 36 million tons as compared with
last year’s record at 37.29 million tons.
Technical Outlook
SOYBEANS (NOV) 10/13/03: A new contract high was made on the rally. 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
725 1/2 and 742 3/4, while 1st support hits today at 701 1/2 and below there at 694
3/4. 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 694 3/4. The 9-day RSI over 70 indicates the market is
approaching overbought levels.
MEAL (DEC): The daily stochastic’s gave a bearish indicator with a crossover down.
Momentum studies are trending lower from high levels which should accelerate a move
lower on a break below the 1st swing support. The next downside objective is now
at 207.0. 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 216.5, with support at 209.0. 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 25.34. 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. A new contract high was made on the rally. The
gap upmove on the day session chart is a bullish indicator for trend. Daily swing
resistance is found at 26.27 and above there at 26.76. Support should be encountered
at 25.56 and 25.34. The 9-day RSI over 70 indicates the market is approaching overbought
levels.
WHEAT MARKET RECAP
10/10/2003
The USDA reports were a non-event for the wheat market and futures spent the session
following soybeans higher part of the time and corn lower at other times. The market
closed near unchanged on the session due to long liquidation selling into the close
which left December wheat down near 25 cents on the week. The monthly supply/demand
report showed a slight decline in ending stocks to 633 million bushels from 644 last
month and 491 million last year. World ending stocks were pegged at 130.17 million
tons which was up near 1 million tons from last months forecast but down from 165
million this year, 197 million last year and 204 million two years ago.
Technical Outlook
WHEAT (DEC) 10/13/03: The downside closing price reversal on the daily chart is
somewhat negative. It is a slightly negative indicator that the close was lower than
the pivot swing number. Look for near-term support at 323 and below there at 320
3/4, with resistance levels at 330 1/4 and 335 3/4. The market’s close below the
9-day moving average is an indication the short-term trend remains negative. Momentum
studies are declining, but have fallen to oversold levels. The next downside target
is 320 3/4. The 9-day RSI under 30 indicates the market is approaching oversold levels.
LIVE CATTLE RECAP
10/10/2003
October cattle closed limit up for the 5th session in a row at 97.32 which is the
highest price ever paid for cattle futures and up 750 points on the week. With cash
traders looking for cash to trade in the $99-100 range next week, December cattle
remains at a significant discount with a close at 92.25. Boxed-beef cut-out values
were up $4.70 at mid-session to $172.73 which is up from $158.18 last week at this
time. Slaughter for the week was just 640,000 head as compared with 653,000 head
last week and 706,000 head last year. The packer is finding a tighter and tighter
supply of cattle which are ready for market and weights of slaughter cattle on the
week were estimated at 1229 pounds as compared with 1274 pounds last year. As a result,
beef production for the week was down 2.4% from last week and down 13.1% from last
year.
Technical Outlook
CATTLE (DEC) 10/13/03: Studies are showing positive momentum, but are now in overbought
territory so some caution is warranted. The next upside target is 94.25. A positive
setup occurred with the close over the 1st swing resistance. Support should be encountered
at 90.92 and below there at 88.95. Market resistance is at 93.57 and then again at
94.25. The outside day up and close above the previous day’s high is a positive signal.
A new contract high was made on the rally. The daily closing price reversal up is
positive. 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.
LEAN HOGS RECAP
10/10/2003
December hogs closed 147 higher on the session and up 397 on the week. Fear of being
short any meat market with the cattle soaring to all-time highs and October cattle
locked limit for the 5th session in a row helped support active fund buying and a
lack of new selling interest. The market closed 190 points off of the lows of the
day. Slaughter for the week came in at 2.081 million heads from 2.049 million last
week and 2.02 million last year. Weekly pork production was up 1.3% from last week
and up 3.3% from last year.
Technical Outlook
HOGS (DEC) 10/13/03: With the close over the 1st swing resistance number, the market
is in a moderately positive position. Resistance levels comes in at 59.52 and 60.37
today, while support is around 57.07 and then 55.52. The upside closing price reversal
on the daily chart is somewhat bullish. Consider buying pull-backs since daily studies
are bullish. The market’s short-term trend is positive on a close above the 9-day
moving average. 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 60.37.
COCOA MARKET RECAP
10/10/2003
The cocoa market finished the session slightly lower and for the week basically
consolidated the massive losses posted early in the week. Apparently the funds were
heavy sellers all week long and that should make the COT report positioning released
after the close an overstatement of the fund long. There was some noted trade interest
in cocoa which is a pattern that was seen for most of the week. However, the professional
buying is extremely light as if the trade is picking at a bottom and isn’t convinced
one is in place yet.
Technical Outlook
COCOA (DEC)10/13/03 The downside closing price reversal on the daily chart is somewhat
negative. The market tilt is slightly negative with the close under the pivot. Cocoa
should run into resistance at 1483 and above there at 1509 with support at 1438 and
1419. Momentum studies are declining, but have fallen to oversold levels. The next
downside target is 1418.75.
COFFEE MARKET RECAP
10/10/2003
Another new low for the move and a trade within striking distance of the June low
leaves the market vulnerable to more selling. Apparently the market sees the recent
rains and the rains expected over the weekend as enough moisture to at least temporarily
shut down the drought threat. Even in the face of roaster buying the prices were
down and without that long interest the December contract probably would have forged
fresh contract lows. Showers were seen in almost all of the key areas and it could
now take a sustained period of dryness to rekindle any concern.
Technical Outlook
COFFEE (DEC)10/13/03 The close below the 1st swing support could weigh on the market.
Momentum studies are declining, but have fallen to oversold levels. The next downside
objective is now at 60.15.The Coffee contract should run into resistance at 61.90
and above there at 62.85 with support at 60.55 and 60.15. The market’s short-term
trend is negative as the close remains below the 9-day moving average. Daily studies
pointing down suggests selling minor rallies.
SUGAR MARKET RECAP
10/10/2003
March sugar closed 5 points lower on the session and down 51 points on the week
to close at the lowest level since January 3rd. Funds were noted sellers early in
the session but trade house buying provided some support. There is a lack of new
news in the export front as cash dealers try to cope with poor margins (from weak
cash premiums), the sharp break in prices this year and sharply higher freight rates
(in some areas record high). The high freight rates and a lack of urgency from buyers
have left the short-term price outlook bearish.
Technical Outlook
SUGAR (MAR) 10/13/03: The market’s close below the pivot swing number is a mildly
negative setup. Swing resistance comes in at 6.13, with support found at 5.83. The
downside crossover (9 below 18) of the moving averages suggests a developing short-term
downtrend. Daily stochastics are trending lower, but have declined into oversold
territory. The next downside objective is now at 5.83.
COTTON MARKET RECAP
10/10/2003
December cotton closed 174 points higher on the session and up 421 points on the
week to a new contract high. The close was up 354 points from the sharply lower opening
which was triggered by the bearish news from the USDA. US cotton production was pegged
at 17.56 million bales as compared with trader estimates near 17.128 million bales
and 16.94 million bales from last months report. In addition, traders were looking
for China cotton production to be revised lower by near 760,000 bales from last months
forecast of 25.5 million bales but the USDA left the forecast unchanged. However,
China imports were revised higher by 500,000 bales. On the other hand, US exports
were left unchanged at 12 million bales and domestic usage was revised lower by 200,000
bales to just 6.4 million bales. Ending stocks for the 2003/2004 season were revised
higher to 4.6 million bales as compared with last month’s estimate of 3.8 million
bales. Ending stocks last year were 5.38 million bales and 7.45 million the previous
year. World ending stocks were revised higher to 33.7 million bales from 32.22 million
bales which are still down from 37.31 million last year. Beliefs that China production
is down sharply due to heavy rains in October helped support the market and a bullish
reaction to bearish USDA report news is an indication of higher prices ahead.
Technical Outlook
COTTON (DEC) 10/13/03: 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 73.44 and then again at 74.47,
while support is targeted at 69.64 and 66.87. Studies are showing positive momentum,
but are now in overbought territory so some caution is warranted. The next upside
target is 74.47. The 9-day RSI over 70 indicates the market is approaching overbought
levels. The outside day up and close above the previous day’s high is a positive
signal. A new contract high was made on the rally. The daily closing price reversal
up is positive.