WhyThe Favorable Beige Book Sent Bonds Higher
BOND MARKET RECAP
10/15/2003
With the bond market probing to new lows for the
move it is clear that recent support meant little to the market. Even with the
trade seeing the stock market weaken and the expectations for initial claims
calling for an 8,000 increase the bonds remained in a downward track. The Fed
Beige book should have kept prices moving down as it suggested that the US
economy is poised to recover. However the Beige book also suggested that many
districts were still seeing softness in the labor sector and that was probably
the reason behind the late session bounce.
Technical Outlook
BONDS (DEC) 10/16/03: The swing indicator gave a
moderately negative reading with the close below the 1st support number.
Near-term resistance for bonds is at 107.03 and then again at 107.24, while
swing support hits at 105.27 and below there at 105.08. 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 105.08. Short-term indicators on the defensive. Consider
selling an intraday bounce.
T-NOTES(DEC) Daily stochastics are trending
lower, but have declined into oversold territory. The next downside objective is
now at 110.14. The market’s close below the pivot swing number is a mildly
negative setup. 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 111.22 and
then again at 112.06, while swing support hits at 110.26 and below there at
110.14. The market’s short-term trend is negative as the close remains below the
9-day moving average.
STOCK INDICES RECAP
10/15/2003
The stock market traded on both sides of
unchanged but seemed to get progressively weaker as the session wore on. The
stock market wasn’t apparently cheered on by the favorable Fed Beige book
information or the surprisingly strong Empire State manufacturing survey
readings. Maybe the first decline in retail sales in 5 months prompted profit
taking and maybe the trade feared the IBM earnings report after the close today.
We might add that IBM was recently in the position of more layoffs and that
would seem to suggest ongoing troubles at the closely watched company.
Technical Outlook
S&P500 (DEC) 10/16/03: The market’s close below
the pivot swing number is a mildly negative setup. The daily closing price
reversal down puts the market on the defensive. Underlying support comes in at
1038.05 and 1033.63, with overhead resistance at 1050.35 and 1058.23. 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 1058.23.
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 1060.81. The market tilt is
slightly negative with the close under the pivot. Near-term resistance for the
S&P Mini is at 1051.63 and then again at 1060.81, while swing support hits at
1037.38 and below there at 1032.31. 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. It is a slightly negative indicator that the
close was lower than the pivot swing number. The market should run into
resistance at 1433.00 and above there at 1453.50 with support at 1401.00 and
1389.50. Studies are showing positive momentum, but are now in overbought
territory so some caution is warranted. The next upside target is 1453.5.
CURRENCY MARKET
RECAP
10/15/2003
The Dollar was mostly strong in the early action
as US economic information and equity market action was supportive. However, as
the session wore on the Dollar seemed to soften and once the Secretary of the
Treasury talked about US policy on the Dollar, the Dollar faded. The biggest
benefactor of the action Wednesday was the Canadian Dollar. Otherwise there
wasn’t much bounce in any currency market considering the active news flow
during the session. Treasury Secretary Snow talked up the Dollar but apparently
the market isn’t buying into the standard dialogue.
Technical Outlook
YEN (DEC): 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. Swing
resistance is targeted at 91.71 and above there at 91.83, with the yen finding
support around 91.35 and below there at 91.11. 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
91.11.
EURO (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 1.1533. The market is in a bearish position
with the close below the 2nd swing support number. Swing support for the Euro
comes in at 1.1533, with overhead resistance at 1.1713. The market’s short-term
trend is negative as the close remains below the 9-day moving average. The gap
down on the day session chart is bearish with more selling pressure possible
today.
PRECIOUS METALS
RECAP
10/15/2003
The gold market failed to hold the early highs
and saw some fresh selling into the close as the Dollar managed to stay close to
the highs into the gold market close. However, later in the afternoon after the
gold closed, the US Secretary of the Treasury suggested that the US
Administration was in favor of a strong Dollar and that did send the Dollar
down. In other words, gold could have found some long interest if it had longer
trading hours. Once again there was clear divergence between gold and silver
prices, which would seem to suggest that silver is beginning to get a little
lift off the prospect of improving physical demand.
Technical Outlook
SILVER (DEC): With the close higher than the
pivot swing number, the market is in a slightly bullish posture. Initial support
for silver is at 489.5 and below there at 482.5 with resistance likely at 494.0
and 500.0. The market’s close above the 9-day moving average suggests the
short-term trend remains positive. Positive momentum studies in the neutral zone
will tend to reinforce higher price action. The next upside target is 494.0. The
daily closing price reversal up is positive.
GOLD (DEC): Support for gold today comes in near
370.08, while resistance is pegged at 376.68. Daily stochastics are trending
lower, but have declined into oversold territory. The next downside objective is
now at 370.08. Daily studies pointing down suggests selling minor rallies. The
market’s close below the 1st swing support number suggests a moderately negative
setup for today. The market’s short-term trend is negative as the close remains
below the 9-day moving average.
COPPER MARKET RECAP
10/15/2003
A massive range in copper ended with the market
pretty close to the highs of the day. We see signs of aggressive fund buying and
small spec buying but considering the rate of climb we have to think that some
hedge buying is being thrown into the equation. Considering that the Chinese
copper market was lower in its session it’s also possible that the Chinese were
noted buyers in the action Wednesday. Tight stocks and talk of some production
shut downs due to currency considerations propelled the market to new highs with
the expectation by many in the trade that even higher prices are ahead.
ENERGY MARKET RECAP
10/15/2003
The energy complex finished mostly lower despite
Venezuela beating the drum for a higher OPEC pricing band. Nigeria indicated
that they would attempt to honor that countries OPEC promises but its clear that
the pressure to lower retail prices inside the country could alter their
intentions. Expectations for the weekly inventory readings call for minor
increase in crude oil stocks and another minor decline in unleaded stocks.
Countervailing the bearish impact of a crude stocks rise were expectations that
refinery-operating rates would decline further.
Technical Outlook
CRUDE OIL (DEC): The market’s close below the
pivot swing number is a mildly negative setup. Support for crude is keyed on
31.65 and below there at 31.47, with resistance pegged at 32.08 and 32.33. The
market’s close on the 9-day moving average is neutral. .
UNLEADED GAS (DEC): The daily stochastics have
crossed over down which is a bearish indication. 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
85.33. With the close higher than the pivot swing number, the market is in a
slightly bullish posture. Resistance today is at 87.53, while support should be
found around 85.33. 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): The market’s close below the
pivot swing number is a mildly negative setup. Heating oil should encounter
support around 86.64, with resistance is at 89.04. The market’s short-term trend
is positive on a close above the 9-day moving average. 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 86.64. With a
reading over 70, the 9-day RSI is approaching overbought levels.
CORN MARKET RECAP
10/15/2003
The corn market continued to show an interest in
the recent lows and with harvest moving along quickly there would seem to be
little to prevent prices from tracking even lower. The export wire continues to
be active with another 55,000 tons sold to South Korea and expectations for the
delayed export sales report Friday to show some decent numbers. The trade
continued to respect the recent triple bottom support zone of 215 1/2 but the
market isn’t excessively oversold according to measures like the COT report.
Technical Outlook
CORN (DEC) 10/16/03: Daily stochastics are
trending lower, but have declined into oversold territory. The next downside
objective is now at 214 3/4. The market’s close below the pivot swing number is
a mildly negative setup. Market resistance comes in at 218 1/4 today, with
support at 214 3/4. The downside crossover (9 below 18) of the moving averages
suggests a developing short-term downtrend.
SOY COMPLEX RECAP
10/15/2003
The market was led lower by nearby beans as some
profit taking caught the trade overbought. There is certainly a concern that
Brazil is going to diffuse the bull case for back month bean contracts and that
is tempering the reaction of March and beyond contracts. Argentina projected its
2003-2004 planted area to be 13 to 13.5 million hectares, which is a 2-7%
increase over the prior year. Therefore, the market sees increased Brazil and
Argentine production next year. It is also clear that harvest pressures in beans
are beginning to be a consideration.
Technical Outlook
SOYBEANS (JAN) 10/16/03: A new contract high was
made on the rally. The swing indicator gave a moderately negative reading with
the close below the 1st support number. The next area of resistance is around
756 1/2 and 760 , while 1st support hits today at 750 and below there at 747 .
The market’s close below the 9-day moving average is an indication the
short-term trend remains negative. 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 747 .
Short-term indicators on the defensive. Consider selling an intraday bounce.
MEAL (DEC): Momentum studies are trending higher,
but have entered overbought levels. The near-term upside objective is at 222.8.
First resistance comes in at 220.5, with support at 216.3. The market’s
short-term trend is positive on a close above the 9-day moving average. The
market’s close below the 1st swing support number suggests a moderately negative
setup for today. 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. The daily
stochastics have crossed over down which is a bearish indication. 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 25.95. The swing indicator gave a moderately negative
reading with the close below the 1st support number. Daily swing resistance is
found at 26.48 and above there at 26.77. Support should be encountered at 26.07
and 25.95.
WHEAT MARKET RECAP
10/15/2003
After a new low for the move the December wheat
managed to recover close to the highest levels of the last 7 sessions.
Apparently commercial buying interest stepped in and reversed the early weakness
and many suggest that the lows Wednesday represent some type of value zone. The
trade also noted some fund buying, which might be another sign of a temporary
bottom. Other traders think the bottoming had something to do with Egypt
allowing US wheat in without testing. The USDA did announce that they would
provide some wheat to schools in Afghanistan, Albania, Lebanon and Guatemala.
Technical Outlook
WHEAT (DEC) 10/16/03: The daily closing price
reversal up is positive. A positive setup occurred with the close over the 1st
swing resistance. Look for near-term support at 327 1/2 and below there at 317
1/4, with resistance levels at 341 1/2 and 345 1/4. The market’s close above the
9-day moving average suggests the short-term trend remains positive. Momentum
studies are declining, but have fallen to oversold levels. The next downside
target is 317 1/4.
LIVE CATTLE RECAP
10/15/2003
October cattle closed 260 higher on the session
and managed a new all-time high price at 103.60 with the market trading without
hitting a limit for the entire session after 7 straight limit closes into
Tuesday. December cattle closed 135 lower on the session with long liquidation
(profit-taking) seen as active, especially in the first part of the session.
While the sharply lower close is negative, the market managed to close above the
opening and the close was 212 points up from the lows of the day. Limits move to
300 points for Thursday. Boxed-beef cut-out values were up $7.16 to $1197.32
which is a new all-time high. Positioning ahead of Friday’s USDA report and
ideas that cash will not stay above $100 for long helped pressure.
Technical Outlook
CATTLE (DEC) 10/16/03: 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
88.25. It is a slightly negative indicator that the close was lower than the
pivot swing number. Support should be encountered at 90.07 and below there at
88.25. Market resistance is at 93.17 and then again at 94.45. The market’s close
above the 9-day moving average suggests the short-term trend remains positive.
LEAN HOGS RECAP
10/15/2003
December and February hogs closed limit-up in
active trade and moved to new contract highs. The market found support from
higher pork values and strong packer profit margins which could support higher
cash trade into the weekend as packers gear-up for a large slaughter. Traders
have turned much more optimistic on demand as the surge in beef values is
expected to support a shift in consumer demand to more pork and poultry. The
jump in pork cut-out values in spite of the recent increase in pork production
is seen as a positive factor for demand. Weekly average weights for
Iowa/Minnesota were pegged at 264.2 pounds, up from 262.6 and up 4.5 pounds from
last year.
Technical Outlook
HOGS (DEC) 10/16/03: With the close over the 1st
swing resistance number, the market is in a moderately positive position.
Resistance levels comes in at 62.15 and 62.72 today, while support is around
59.90 and then 58.22. The rally brought the market to a new contract high.
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, but have entered overbought levels. The near-term
upside objective is at 62.72.
COCOA MARKET RECAP
10/15/2003
A slightly higher probe in cocoa is surprising
considering the wild range a couple sessions ago. The rise in prices might have
been fostered by trade assumptions of a 5% expansion in US 3rd quarter grind
figures. In our mind, the cocoa market was mostly factoring 3-4% gains in demand
in order to come up with the most recent ending stocks surplus forecast. Once
again the market noted light trade and spec buying, which is capable of moving
prices but only in the absence of origin selling.
Technical Outlook
COCOA (DEC)10/16/03 The market setup is
supportive for early gains with the close over the 1st swing resistance. Cocoa
should run into resistance at 1498 and above there at 1516 with support at 1462
and 1444. Momentum studies are declining, but have fallen to oversold levels.
The next downside target is 1444.00.
COFFEE MARKET RECAP
10/15/2003
December coffee closed 40 lower on the session
after the early rally attempt failed to find much in the way of new buying
interest. The short-term weather forecast looks hot and dry in Brazil but
traders are reluctant to trade the short-term weather after good rains over the
past weekend and indications of more rains in Brazil after a 5-6 day dry trend
helped keep new buyers on the sidelines. The monthly Green Coffee Association
coffee stocks report showed that stocks fell 136,520 bags for the month of
September to 6.09 million bags. Traders were looking for a decline of 50,000 to
210,000 bags so the news should have little price impact. CSCE exchange stocks
were up 5,992 bags to 4.439 million bags with 56,526 bags pending review.
Technical Outlook
COFFEE (DEC)10/16/03 The downside closing price
reversal on the daily chart is somewhat negative. The market tilt is slightly
negative with the close under the pivot. Momentum studies are declining, but
have fallen to oversold levels. The next downside objective is now at 59.90.The
Coffee contract should run into resistance at 61.80 and above there at 62.70
with support at 60.4 and 59.90. The market’s short-term trend is negative as the
close remains below the 9-day moving average.
SUGAR MARKET RECAP
10/15/2003
Sugar closed moderately higher on the session.
Producer selling was slow to develop and fund trader buying helped support a
good bounce in sugar. The market experienced good follow-through technical
buying from Monday’s daily closing price reversal. The longer-term fundamentals
still look negative but the producer selling in slower after the recent break
and the short-term cash situation is mixed. New crop sugar is still not
available from Thailand and Brazil producers seem content to wait for bids
instead of trying to move exportable surplus directly on the world market.
Russia buying has been so slow that there could be some pent-up demand if prices
were to firm up some.
Technical Outlook
SUGAR (MAR) 10/16/03: The outside day up is a
positive signal. The upside closing price reversal on the daily chart is
somewhat bullish. With the close over the 1st swing resistance number, the
market is in a moderately positive position. Swing resistance comes in at 6.22,
with support found at 5.92. The market’s short-term trend is positive on a close
above the 9-day moving average. Daily stochastics are trending lower, but have
declined into oversold territory. The next downside objective is now at 5.92.
COTTON MARKET RECAP
10/15/2003
December cotton gapped into new contract highs
and closed up 286 points on the session and near the highs of the day. Active
buying in the call options and rumors that Chinese millers are paying-up for
coverage in order to secure needs in spite of the overbought market helped
support. With commercials buyers active, fund and speculative buyers turned
active as well with the market moving to a new 5-year high for the nearby
futures. News that the US crop was only 28% harvested versus a 5-year average of
39% for this week added to the positive tone.
Technical Outlook
COTTON (DEC) 10/16/03: 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 75.53 and then again at 76.10, while support is
targeted at 73.44 and 71.92. Studies are showing positive momentum, but are now
in overbought territory so some caution is warranted. The next upside target is
76.10. The 9-day RSI over 70 indicates the market is approaching overbought
levels. A new contract high was made on the rally. The gap upmove on the day
session chart is a bullish indicator for trend.