Why Traders Were Surprised Today

Technical Outlook

BONDS (DEC) 11/10/03: 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. Near-term resistance for bonds is at 108.07 and then again at 109.11, while swing support hits at 106.05 and below there at 105.07. The market’s close below the 9-day moving average is an indication the short-term trend remains negative. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 105.07.

T-NOTES(DEC) The outside day down is a negative signal. The daily closing price reversal down puts the market on the defensive. 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 109.29. The market’s close below the pivot swing number is a mildly negative setup. Near-term resistance for the T-Notes is at 111.30 and then again at 112.23, while swing support hits at 110.17 and below there at 109.29. The market’s short-term trend is negative as the close remains below the 9-day moving average.

STOCK INDICES RECAP

11/7/2003

The stock market did not respond as one would expect given the outstanding payroll readings. With non-farm payrolls coming in more than twice the expected amount and the prior month’s payrolls being revised significantly higher one would have expected stock prices to rise sharply. Maybe the market was pulled off balance by the renewed anthrax scarce in Washington. Some traders also suggest that the pace of the upcoming holiday sales is still in question. In any regard, the market should be poised for even more gains ahead. Some traders suggested that a loss of manufacturing jobs countervailed the favorable payroll and unemployment figures. This market continues to show an upward bias but has been posting very gradual gains. In the end gradual gains might allow a longer duration rally.

Technical Outlook

S&P500 (DEC) 11/10/03: The market’s close below the 1st swing support number suggests a moderately negative setup for today. The daily closing price reversal down puts the market on the defensive. Underlying support comes in at 1045.15 and 1041.93, with overhead resistance at 1056.45 and 1064.53. The market’s short-term trend is negative as the close remains below the 9-day moving average. Momentum studies are trending higher, but have entered overbought levels. The near-term upside objective is at 1064.53.

S&P E-Mini (DEC): The market made a new contract high on the rally. The market could take on a defensive posture with the daily closing price reversal down. Rising stochastics at overbought levels warrant some caution for bulls. The next upside objective is 1068.38. The close below the 1st swing support could weigh on the market. Near-term resistance for the S&P Mini is at 1057.75 and then again at 1068.38, while swing support hits at 1043.25 and below there at 1039.38. A positive signal for trend short-term was given on a close over the 9-bar moving average.

NASDAQ (DEC) A new contract high was made on the rally. The downside closing price reversal on the daily chart is somewhat negative. The market’s close above the 9-day moving average suggests the short-term trend remains positive. The swing indicator gave a moderately negative reading with the close below the 1st support number. The market should run into resistance at 1444.50 and above there at 1461.25 with support at 1421.50 and 1415.25. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 1461.3.

CURRENCY MARKET RECAP

11/7/2003

Few traders would have expected the Dollar to be down sharply following the economic reports from the U.S. Some traders pointed to the concerns from the anthrax scare in Washington, while others suggested that fears of a higher terrorist threat rating were responsible for the selling in the Dollar. It is also possible that the Bank of Japan was intervening against the rise in the Yen, at the same time that the U.S. Federal Reserve Bank was in attempting to drive the Dollar down. Traders suggested that loss in manufacturing jobs in the U.S. has the Fed actively deflating the Dollar, in hopes of saving jobs. However, with the stellar jobs gain posted Friday morning, it would seem unlikely that the Fed is actively dealing in the market. Given that the Dollar’s been in such a sustained down trend, managed to recover with an upside break out, only to fail miserably in the face of good numbers suggests that the downtrend remains in effect.

Technical Outlook

YEN (DEC): The market’s close above the 9-day moving average suggests the short-term trend remains positive. The outside day up and close above the previous day’s high is a positive signal. The daily closing price reversal up is positive. Since the close was above the 2nd swing resistance number, the market’s posture is bullish and could see more upside follow-through early in the session. Swing resistance is targeted at 92.19 and above there at 92.57, with the yen finding support around 91.05 and below there at 90.29. The daily stochastics have crossed over up which is a bullish indication. The next upside target is 92.57.

EURO (DEC): Daily stochastics are trending lower, but have declined into oversold territory. The next downside objective is now at 1.1327. The market is in a bearish position with the close below the 2nd swing support number. Swing support for the Euro comes in at 1.1327, with overhead resistance at 1.1637. 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. The gap down on the day session chart is bearish with more selling pressure possible today.

PRECIOUS METALS RECAP

11/7/2003

The gold market got the best of both worlds Friday morning, with favorable macro economic information and a weaker Dollar. The fact that the economy is starting to show signs of life, could increase the chance of inflation and that would be a new supporting issue for Gold. Some traders suggested gold might have underperformed in the action Friday, because the Dollar was down significantly. However, we would suspect that many would-be longs were scared to the sidelines, by the ultra strong economic numbers from the U.S. However, it would seem like the U.S. intervened to keep the dollar down and that might have tempered fresh long interest in gold. The silver market showed some upside sensitivity Friday and may now be establishing a correlation to the recovery pace. Most traders suggest that Silver was merely following gold in the action Friday. For several weeks, now the gold market has been supported by weak economic information and with the stock market failing aggressively in the face of good US numbers one has to wonder if there is some anxiety issue under the surface that just won’t go away.

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 499.6 and below there at 490.3 with resistance likely at 504.0 and 512.1. The moving average crossover down (9 below 18) indicates a possible developing short-term downtrend. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 490.3. The outside day up and close above the previous day’s high is a positive signal. The daily closing price reversal up is positive.

GOLD (DEC): Support for gold today comes in near 374.33, while resistance is pegged at 389.33. 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 374.33. With the close over the 1st swing resistance number, the market is in a moderately positive position. The market’s short-term trend is positive on a close above the 9-day moving average. The outside day up is a positive signal. The upside closing price reversal on the daily chart is somewhat bullish.

COPPER MARKET RECAP

11/7/2003

The copper market started the session in a corrective mode but managed to right the ship in the face of the U.S. numbers. However, the bear camp did see a couple negative supply stories before the opening Friday morning and that might serve to temper gains next week. Apparently copper saw some hedge selling around highs on Friday. Evidence of hedge selling could be a precursor to a restart of idled production. In the meantime the bull camp would seem to have the edge but in order to extend prices aggressively equity prices will have to show more upside capacity. Seeing a Shanghai and LME copper stocks increase it’s probably not a trend killer until we detect a pattern of rising stocks. With December copper prices touching 95.50 on Friday morning the market might become dependent on the strong economic readings. The commitment of Traders report certainly understates the magnitude of the spec and fund long in copper.

ENERGY MARKET RECAP

11/7/2003

The energy complex surprised the trade Friday with yet another significant rally. It would seem that slightly colder temperature patterns, combined with concerns of political anxiety in Nigeria sent the market soaring above critical chart support. While the plains were extremely cold Friday morning the forecast is for a warming trend. Liberia called for an increase in their OPEC production quota and that should be a limiting issue for prices. Certainly the product markets received the lion’s share of the gains on Friday and therefore those markets will have a dramatically understated Commitment of Traders fund and small spec position. According to traders in the pit, another element driving prices higher Friday was the expectation for a stronger economy. However, the stock market certainly did not hold the same attitude toward the economy. We would not sell into this market, but we would suggest that longs consider taking profits. The natural-gas market should be supported by the regular energy complex action and by the slight cooling trend. In fact, continued cool weather could in the injection season in the coming week.

Technical Outlook

CRUDE OIL (DEC): With the close over the 1st swing resistance number, the market is in a moderately positive position. Support for crude is keyed on 30.49 and below there at 30.10, with resistance pegged at 31.21 and 31.54. The market’s close on the 9-day moving average is neutral. .

UNLEADED GAS (DEC): Positive momentum studies in the neutral zone will tend to reinforce higher price action. The next upside target is 85.59. A positive setup occurred with the close over the 1st swing resistance. Resistance today is at 85.59, while support should be found around 80.69. The market’s close above the 9-day moving average suggests the short-term trend remains positive. Short-term indicators suggest buying dips today.

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 81.84, with resistance is at 85.44. Short-term indicators suggest buying dips today. 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 85.44.

CORN MARKET RECAP

11/7/2003

The corn market managed to discourage early selling efforts and close slightly higher on the day. Reports continue to flow from China about their export status and the market is having trouble reaching a firm consensus on the issue. The initial survey for the upcoming USDA report puts the average yield at 10.32 billion bushels compared to 10.20 billion in the prior report. The analyst survey suggested that yields will be 143.9 compared to a prior reading of 142.2. We suspect that part of the losses early in the week were in anticipation of a minor increase in the production in the coming USDA report. However, one would suspect exploding export sales will be a big countervailing force against higher supply. Talk that an El Nino is developing was also supporting prices in the action Friday. The development of an El Nino would impact the South African corn crop and the corn crop in South America and therefore some shorts decided to cover positions. Maybe El Nino won’t actually impact the crop but just having that type of concern present serves to hype up the spec and hedge activity in the market.

Technical Outlook

CORN (DEC) 11/10/03: 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 228 1/2. The market’s close below the pivot swing number is a mildly negative setup. Market resistance comes in at 241 today, with support at 228 1/2. The market’s short-term trend is negative as the close remains below the 9-day moving average. The upside closing price reversal on the daily chart is somewhat bullish.

SOY COMPLEX RECAP

11/7/2003

The soybean market posted a very poor technical trade in the action Friday. It would seem that the rapid pace of export sales is being discounted by talk of profit-taking and higher than expected deliveries. Even more surprising in the action Friday, is that the market declined in the face of a slightly smaller production reading in an analyst survey. The average estimate of the trade pegged the coming USDA production at 2.45 billion bushels, which compares to 2.468 billion bushels in the prior USDA report. The same analyst survey, put out by Dow Jones suggested the yield in soybeans would be 33.8 compared to 34.0 in the prior report. In the end, the main selling pressure in the soybean market Friday was generated by higher than anticipated delivery intentions. In other words, some of the price support off the tight stocks issue is deflated by the delivery activity. Some traders also suggested selling pressure in the beans came from talk of higher yields in the south and east.

Technical Outlook

SOYBEANS (JAN) 11/10/03: The close below the 2nd swing support number puts the market on the defensive. The next area of resistance is around 759 and 773 1/2, while 1st support hits today at 738 and below there at 731 1/2. The market’s close below the 9-day moving average is an indication the short-term trend remains negative. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 731 1/2.

MEAL (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 235.0. First resistance comes in at 241.9, with support at 236.5. The market’s short-term trend is negative as the close remains below the 9-day moving average. The market is in a bearish position with the close below the 2nd swing support number.

BEAN OIL (DEC): 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 24.69. It is a slightly negative indicator that the close was lower than the pivot swing number. Daily swing resistance is found at 25.39 and above there at 25.63. Support should be encountered at 24.92 and 24.69. The close under the 40-day moving average indicates the longer-term trend could be turning down.

WHEAT MARKET RECAP

11/7/2003

After opening near unchanged, the wheat market found support from solid speculative buying on news of more export business to the US. The USDA announced a sale of 110,000 tonnes of US wheat to unknown destination. In addition, French wheat prices rallied sharply for the second day in a row and Ukraine officials announced the need to import near 4.2 million tonnes of grain as compared with 3.2-3.5 million as a previous expectation. Dryness in western Kansas and Argentina and talk of El Nino development added to the positive tone. Hopes of further import needs from Egypt, China and other eastern European countries was also seen as a positive factor.

Technical Outlook

WHEAT (DEC) 11/10/03: With the close higher than the pivot swing number, the market is in a slightly bullish posture. Look for near-term support at 373 1/2 and below there at 370 1/4, with resistance levels at 382 and 387 1/4. The market’s close above the 9-day moving average suggests the short-term trend remains positive. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 387 1/4.

LIVE CATTLE RECAP

11/7/2003

December cattle drove sharply higher and into new contract highs. Expanded trading limits allowed for early sharp gains as much as 270 higher on the session but profit-taking pulled the market down to close near the lows of the day but still 125 higher on the session. Sharply higher trade in the cash market and higher beef prices supported the active buying and there was even talk of producer buying led by talk of lifting of hedges. Boxed-beef cut-out values were up $1.24 to $171.15. Slaughter for the week was just 597,000 head vs. 631,000 last week and 679,000 head last year. Lower weights left beef production down 5.7% from last week and down 14.2% from last year. Average live weights are pegged at 1233 pounds, down 30 pounds from last year.

Technical Outlook

CATTLE (DEC) 11/10/03: Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 98.80. 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. Support should be encountered at 96.00 and below there at 95.50. Market resistance is at 97.65 and then again at 98.80. A new contract high was made on the rally. The gap upmove on the day session chart is a bullish indicator for trend. 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

11/7/2003

December hogs rallied to test the highs of the week led by the surge in cattle prices but the premium of December futures to the cash market helped limit the upside enthusiasm. The market remains in a two-week consolidation as traders await further gains in the cash index before rationalizing the premium. The CME 2-day lean Index through November 5th was up 53 cents to 49.20. While the index should continue to rally in the next few sessions, the December futures remain at a significant premium to the cash index which will remain a limiting factor. Cash markets were steady as packers seemed to have enough hogs for a hefty Saturday slaughter. Slaughter for the week came in at 2.146 million head as compared with 2.141 million last week and 2.089 million head last year.

Technical Outlook

HOGS (DEC) 11/10/03: It is a mildly bullish indicator that the market closed over the pivot swing number. Resistance levels comes in at 53.92 and 54.62 today, while support is around 52.85 and then 52.47. The market’s short-term trend is positive on a close above the 9-day moving average. Daily momentum studies are on the rise from low levels and should accelerate a move higher on a push through the 1st swing resistance. The near-term upside objective is at 54.62.

COCOA MARKET RECAP

11/7/2003

The cocoa market forged an extension on the upside Friday morning, and appeared to be headed to a new higher trading range. In reaching the highest price since early October, it would appear that a fundamental shift has taken place in cocoa. The Press reported small spec and fund short-covering but it would appear that something else is operating in the marketplace. The energy complex might have received support from political tensions in Nigeria and that same influence might have supported cocoa prices. Cocoa warehouse stocks in New York were down 6,346 bags to a level of 1.2 million bags. So far, higher prices have not noticeably increased origin selling and that might be the sole source of the rally.

Technical Outlook

COCOA (DEC)11/10/03 The outside day up and close above the previous day’s high is a positive signal. The daily closing price reversal up is positive. The market has a bullish tilt coming into today’s trade with the close above the 2nd swing resistance. Cocoa should run into resistance at 1534 and above there at 1559 with support at 1465 and 1421. Studies are showing positive momentum, but are now in overbought territory so some caution is warranted. The next upside target is 1558.75.

COFFEE MARKET RECAP

11/7/2003

The coffee market continued to favor the upside track in Friday’s action and even managed the highest close since October 29th. However, the bottom of the October consolidation would seem to offer significant overhead resistance to further gains. Limiting prices on the rally Friday were reports from Nicaragua that their 2003-2004 exports would be unchanged to up as much 10%. However, the trade continues to lack a clear dominating theme but it would appear that prices have become cheap enough that the sellers are less interested in pressing the market around the recent lows. We suspect that short term technicals and the Commitment of Traders data will discourage fresh selling early next week. It is important to note that the market did see fresh roaster buying around lows Friday and that is also a factor that could discourage selling next week.

Technical Outlook

COFFEE (DEC)11/10/03 The market has a slightly positive tilt with the close over the swing pivot. Momentum studies are declining, but have fallen to oversold levels. The next downside objective is now at 59.00.The Coffee contract should run into resistance at 60.90 and above there at 61.20 with support at 59.8 and 59.00. The market’s short-term trend is positive on a close above the 9-day moving average.

SUGAR MARKET RECAP

11/7/2003

The weekly closing price reversal FOR March sugar (new low/higher close) could attract significant fund short-covering early next week, especially if short-term resistance at 610 is violated. The longer-term fundamental set-up for the market is still somewhat bearish but prices are cheap, the market is oversold and the longer-term supply outlook is always an uncertainty. For now, Brazil production next year looks bearish and the harvest of the Northeast Brazil sugar crop is moving ahead swiftly and being process quickly. Brazil exports in October were near 1.43 million tonnes, down 16% from September according to a key Brazilian shipping agent. Breaking the October lows this month resulted in a further downside of only 5 points before the recovery bounce which indicates a loss of downside momentum.

Technical Outlook

SUGAR (MAR) 11/10/03: With the close over the 1st swing resistance number, the market is in a moderately positive position. Swing resistance comes in at 6.15, with support found at 5.99. The market’s short-term trend is positive on a close above the 9-day moving average. The daily stochastics gave a bullish indicator with a crossover up. The near-term upside objective is at 6.15. Consider buying pull-backs since daily studies are bullish.

COTTON MARKET RECAP

11/7/2003

The cotton market rejected the 75› level in the December contract and showed signs of life in the action Friday. While many traders feel the market is damaged technically, one can hardly argue with the bull camp on any return to the 7820 level. It goes without saying that exports continue to underpin this market, but the question becomes how much will buyer’s pay for future purchases. Will some in the trade suggest the most to gain Friday were technically orientated it would seem that recent price weakness has not resulted in a decline of open interest. Therefore, belongs are apparently willing to stand up against corrections. For the market to build reject early options related selling in close moderately higher on the session should countervailed the recent bear tilt. Is also possible that cotton prices received support from the favorable micro economic affirmation released information from the U.S. Friday morning. Keep in mind, Chinese cotton demand might be more of a function of U.S. economic activity than of Chinese economic activity. In other words the Chinese buy cotton in order to sell products to the U.S.

Technical Outlook

COTTON (DEC) 11/10/03: The market’s close below the 9-day moving average is an indication the short-term trend remains negative. A positive setup occurred with the close over the 1st swing resistance. Next resistance area comes in at 78.55 and then again at 79.27, while support is targeted at 76.00 and 74.17. Negative momentum studies in the neutral zone will tend to reinforce lower price action. The next downside target is 74.17.