Will $44 Oil Make Indices Vulnerable?
BOND MARKET RECAP
7/30/2004
September Bonds closed up 1-08 at 108-07. This
was 1-05 up from the low and 0-02 off the high.
September 10 Yr Treasury Notes finished up 0-240
at 110-230, 0-010 off the high and 0-220 up from the low.
The Treasury market deserved to rise Friday
in the face of the scheduled economic reports as GDP and Chicago Purchasing
Managers were certainly softer than expected. The employment component of the
Chicago Purchasing Managers report was especially concerning as it declined from
53.6 to 45.6 and that comes ahead of the upcoming monthly payroll report. It is
also possible that Treasury bonds were once again net spec short around the lows
of the week and that probably prompted some short covering activity following
the reports. Dampening the upward bias in Treasuries were slightly bearish
University of Michigan sentiment figures.
Technical Outlook
#BONDS (SEP) 08/02/04: 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. Near-term resistance for bonds
is at 109.00 and then again at 109.13, while swing support hits at 107.16 and
below there at 106.13. The market’s close above the 9-day moving average
suggests the short-term trend remains positive. Negative momentum studies in the
neutral zone will tend to reinforce lower price action. The next downside target
is 106.13.
T-NOTES(SEP) 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 109.19. With the close over the 1st swing
resistance number, the market is in a moderately positive position. Near-term
resistance for the T-Notes is at 111.06 and then again at 111.14, while swing
support hits at 110.08 and below there at 109.19. The market’s short-term trend
is positive on a close above the 9-day moving average.
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STOCK INDICES RECAP
7/30/2004
September S&P finished up 0.9 at 1101.1, 2.9 off
the high and 5 up from the low.
September S&P E-Mini closed up 0.75 at 1101. This
was 5 up from the low and 3 off the high.
September Dow closed up 19 at 10140. This was 70
up from the low and 5 off the high.
September Dow E-Mini finished up 21 at 10142, 4
off the high and 71 up from the low.
The stock market seemed to buckle slightly
following the disappointing economic reports but then attempted to rally into
mid session. However, in looking at the total macro economic picture the hope
for improved growth and profits is really under the gun. With energy prices
soaring, US numbers slowing, terrorism threats surfacing again and the market
recently finishing off a short covering bounce it would seem like prices are
vulnerable. Even the earnings reports out Friday seemed to be a little more
disappointing and that isn’t a good combination when one considers that nearby
crude prices are approaching $44.
Technical Outlook
#S&P500 (SEP) 08/02/04: It is a mildly bullish
indicator that the market closed over the pivot swing number. Underlying support
comes in at 1099.55 and 1093.88, with overhead resistance at 1107.45 and
1109.68. 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 1109.68.
S&P E-Mini (SEP): Stochastics are at mid-range,
but trending higher which should reinforce a move higher if resistance levels
are taken out. The next upside objective is 1109.75. The market has a slightly
positive tilt with the close over the swing pivot. Near-term resistance for the
S&P Mini is at 1107.50 and then again at 1109.75, while swing support hits at
1099.50 and below there at 1093.75. A positive signal for trend short-term was
given on a close over the 9-bar moving average.
NASDAQ (SEP) The market’s close above the 9-day
moving average suggests the short-term trend remains positive. With the close
higher than the pivot swing number, the market is in a slightly bullish posture.
The market should run into resistance at 1416.50 and above there at 1424.25 with
support at 1398.50 and 1388.25. Positive momentum studies in the neutral zone
will tend to reinforce higher price action. The next upside target is 1424.3.
MINI DOW (SEP) The market’s close above the 9-day
moving average suggests the short-term trend remains positive. The market should
run into resistance at 10181 and above there at 10201 with support at 10106 and
10051. Positive momentum studies in the neutral zone will tend to reinforce
higher price action. The next upside target is 10201. With the close higher than
the pivot swing number, the market is in a slightly bullish posture.
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CURRENCY MARKET RECAP
7/30/2004
September US Dollar finished down 3 at 9011, 12
off the high and 61 up from the low.
September Euro finished down 0.21 at 120.07, 1.06
off the high and 0.14 up from the low.
September Euro Dollar closed up 0.03 at 98.06.
This was 0.035 up from the low and 0.005 off the high.
September Canadian Dollar closed down 0.26 at
75.08. This was 0.08 up from the low and 0.72 off the high.
September British Pound finished up 0.41 at
181.24, 0.52 off the high and 0.37 up from the low.
September Swiss closed down 0.03 at 78.1. This
was 0.09 up from the low and 0.8 off the high.
September Japanese Yen closed up 0.59 at 89.92.
This was 0.23 up from the low and 0.28 off the high.
The Dollar was forced down a little off the weak
US economic numbers but it doesn’t seem like the Dollar is poised to come apart.
In fact, the currency markets all seem to be in the same boat with lackluster
growth prospects and little significant difference in the entire complex.
Therefore, the Dollar might see some follow through pressure but money doesn’t
seem to have anywhere specific to flow to. Weak numbers from the US Friday might
be slightly countervailed by the expectation of favorable US monthly numbers at
the end of the coming week.
Technical Outlook
#CURRENCIES 08/02/04: YEN (SEP): 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. Swing resistance is targeted at 90.18 and above there at 90.44, with
the yen finding support around 89.67 and below there at 89.42. The close under
the 40-day moving average indicates the longer-term trend could be turning down.
Momentum studies are declining, but have fallen to oversold levels. The next
downside target is 89.42.
EURO (SEP): Daily stochastics are trending lower,
but have declined into oversold territory. The next downside objective is now at
1.1910. The market is in a bearish position with the close below the 2nd swing
support number. Swing support for the Euro comes in at 1.1910, with overhead
resistance at 1.2150. 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.
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PRECIOUS METALS RECAP
7/30/2004
October Gold closed up 4 at 392.4. This was 2.3
up from the low and 1.1 off the high.
September Silver finished up 0.205 at 6.56, 0.09
off the high and 0.135 up from the low.
October Platinum closed up 0.2 at 817.9. This was
4.9 up from the low and 1.9 off the high.
The metals markets rallied aggressively and did
so without really seeing a sharp slide in the Dollar. While the Dollar was weak
and the US economic numbers were such that more Dollar weakness might be
expected the gold seemed to working higher off other issues. The terrorist
bombings certainly gave the markets a flight to quality tilt and we also suspect
that the weak payroll readings (Chicago Purchasing Managers payroll Index)
created some macro economic uncertainty. Therefore, both gold and silver saw a
more balanced bull case than has been present for many sessions. It is also a
pretty good guess that technical stop loss buying contributed the extension of
the upside.
Technical Outlook
#P-METALS 08/02/04: SILVER (SEP): 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 644.8 and below there at 632.4 with resistance likely at 657.1 and
667.3. The market’s close above the 9-day moving average suggests the short-term
trend remains positive. Negative momentum studies in the neutral zone will tend
to reinforce lower price action. The next downside target is 632.4. The gap
upmove on the day session chart is a bullish indicator for trend.
GOLD (OCT): Support for gold today comes in near
388.70, while resistance is pegged at 395.50. Daily stochastics are trending
lower, but have declined into oversold territory. The next downside objective is
now at 388.70. 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.
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COPPER MARKET RECAP
7/30/2004
September Copper finished up 1.45 at 130.80, 0.50
off the high and 1.40 up from the low.
The Copper market managed another strong rally
and did so with the help of fund buying. Normally the Dollar would have slid
under the economic information seen Friday morning, but that didn’t happen and
that means that the copper market might end up seeing more demand concern
fostered from the slack economy than demand optimism generated off the lower
Dollar. Some in the trade also suggested that ongoing decline in Shanghai and
LME copper stocks countervail the poor economic reports and leave copper in a
positive position. News that the professional trade was also buying along with
the funds is a development that hasn’t been seen recently.
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ENERGY MARKET RECAP
7/30/2004
September Crude Oil closed up 1.05 at 43.80. This
was 0.64 up from the low and 0.05 off the high.
September Heating Oil closed up 2.31 at 116.93.
This was 0.93 up from the low and 0.22 off the high.
September Unleaded Gas finished up 2.59 at
130.49, 0.61 off the high and 1.39 up from the low.
September Natural Gas finished down 0.07 at 6.11,
0.14 off the high and 0.02 up from the low.
September Propane closed up 2.25 at 81.00. This
was equal to the low and equal to the high.
The energy market started out firm and might have
seen some early support off the embassy bombings. The energy complex could have
been slightly impacted by weak US economic numbers but the trade is unwilling to
downgrade demand in the near term. The trade did see signs that the Norway Oil
Rig strike continued even after arbitration efforts. However, it is clear that
the market is fully willing to embrace ongoing threats against supply and most
traders are in a position to buy breaks even thought short term technicals are
extremely overbought.
Technical Outlook
#ENERGIES 08/02/04: CRUDE OIL (SEP): 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. The
market’s close above the 2nd swing resistance number is a bullish indication.
Support for crude is keyed on 43.46 and below there at 42.96, with resistance
pegged at 44.15 and 44.34. 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 44.34. With a
reading over 70, the 9-day RSI is approaching overbought levels.
UNLEADED GAS (SEP): The daily stochastics have
crossed over up which is a bullish indication. The next upside target is 132.30.
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.
Resistance today is at 132.30, while support should be found around 128.30. 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.
HEATING OIL (SEP): The market’s close above the
2nd swing resistance number is a bullish indication. Heating oil should
encounter support around 115.60, with resistance is at 117.90. 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 117.90. 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.
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CORN MARKET RECAP
7/30/2004
September Corn finished down 1 1/4 at 217
1/4, 4 1/4 off the high and 3/4 up from the low. December Corn closed down 1 1/2
at 225 1/2. This was 1/2 up from the low and 5 off the high.
December corn closed 6 1/2 cents lower on the
week as the collapse in soybeans and the updated weather news which was less
threatening for next week helped trigger the weak close. Shifting forecasts
leaves weather as an uncertainty for next week in the Midwest and informal talk
that yield samples in the Midwest are not showing yields as high as some
expectations helped to support short-covering. End of the month positioning also
helped support a mid-day jump in prices but there was a lack of follow-through
selling. Gulf basis was steady to firm. Traders await news from the CFTC tonight
in the Commitment-of-Traders report to view the extent of the fund net short
position. US exporters sold 110,000 tons of corn to unknown destination. Support
for December corn comes in at 225 1/2 and 220 1/2 with 231 1/2 and 233 3/4 as
resistance.
Technical Outlook
#CORN (DEC) 08/02/04: Daily stochastics are
trending lower, but have declined into oversold territory. The next downside
objective is now at 221. The market’s close below the pivot swing number is a
mildly negative setup. Market resistance comes in at 232 today, with support at
221. The market’s short-term trend is negative as the close remains below the
9-day moving average. With a reading under 20, the 9-day RSI indicates the
market is extremely oversold. The market was pushed to a new contract low.
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SOY COMPLEX RECAP
7/30/2004
August Soybeans finished down 25 at 599 1/2, 33
1/2 off the high and 1/2 up from the low. November Soybeans closed down 15 3/4
at 569. This was 1 up from the low and 13 1/2 off the high.
August Soymeal closed down 2.1 at 198.0. This was
6.0 up from the low and 6.0 off the high.
August Soybean Oil finished down 0.83 at 22, 0.98
off the high and 0.18 up from the low.
November soybeans closed 42 1/2 cents lower on
the week with December Meal down 13.30 on the week and December oil down 200.
The outlook for moisture with some heat into the Midwest next week kept the tone
bearish with trade expectations for record yields keeping the general tone in
the market bearish. Weather forecasters downgraded the extent of heat for next
week and some rains in Illinois overnight along with expectations for some hefty
thunderstorm activity for next week across the Midwest added to the bearish tone
with funds and speculators pushing the market lower. The lack of deliveries
against the August contract helped to keep the market firm. The higher trade at
the China exchange overnight failed to provide much support with a weak basis at
the gulf this week adding to the negative psychology. The oversold condition of
the market seems to be limiting the selling but November soybeans managed to
make a new low for the week. November soybean support moves down to 566 and 558
with 574 and 586 as resistance.
Technical Outlook
#SOYBEANS (NOV) 08/02/04: The close below the 2nd
swing support number puts the market on the defensive. The next area of
resistance is around 576 and 586 1/2, while 1st support hits today at 561 1/2
and below there at 557 1/2. 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 557
1/2. The 9-day RSI under 30 indicates the market is approaching oversold levels.
MEAL (DEC): Daily stochastics are trending lower,
but have declined into oversold territory. The next downside objective is now at
170.8. First resistance comes in at 178.5, with support at 172.5. 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. With a reading under 30, the 9-day RSI is approaching oversold
levels.
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 19.61. The close below the 2nd swing support number puts the
market on the defensive. The gap lower price action on the day session chart is
a bearish indicator for trend. Daily swing resistance is found at 21.04 and
above there at 21.83. Support should be encountered at 19.93 and 19.61. The
9-day RSI under 30 indicates the market is approaching oversold levels.
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WHEAT MARKET RECAP
7/30/2004
September Wheat finished down 1/2 at 312 1/4, 3 1/4 off the
high and 2 1/4 up from the low. December Wheat closed down 3/4 at 325 1/2. This
was 2 up from the low and 3 1/2 off the high.
September closed lower for the 5th session in a
row, down 16 1/2 cents on the week. News of bumper crop conditions in the spring
wheat belt and a lack of export news kept the export tone bearish. While
cumulative exports are running strong, large crops in Europe and Eastern Europe
are expected to compete with US exporters. Basis values in the Midwest were
steady to weak this morning but gulf basis was steady as cash dealers await a
possible tender from Egypt. After hitting a new contract low the market managed
to bounce from the oversold condition. Support for September wheat comes in at
310 and 303 1/2 with 316 and 322.
Technical Outlook
#WHEAT (DEC) 08/02/04: It is a slightly negative
indicator that the close was lower than the pivot swing number. Look for
near-term support at 322 1/2 and below there at 320 1/4, with resistance levels
at 328 and 331 1/4. 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
1/4. The 9-day RSI under 30 indicates the market is approaching oversold levels.
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LIVE CATTLE RECAP
7/30/2004
October Live Cattle closed down 0.70 at 88.75.
This was 0.85 up from the low and 0.05 off the high.
October Feeder Cattle finished down 0.97 at
112.10, 0.60 off the high and 1.10 up from the low.
The market pushed sharply lower on the session
with disappointment in cash markets as the triggering factor. Cash trade in the
panhandle came in at $85.00, unchanged from last week and $2.00 below
expectations. With packer profit margins moving into the black for the first
time since June, packers were reluctant to pay higher and hurt profit margins in
spite of the tighter showlist and sharply higher beef prices on the week.
Boxed-beef cut-out values were down $1.08 to $142.26 at mid-session as compared
with $136.94 last week at this time. The close below 89.30 for October cattle
after hitting a new contract high is a weekly reversal and could signal a major
top.
Technical Outlook
#CATTLE (OCT) 08/02/04: 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
87.65. The swing indicator gave a moderately negative reading with the close
below the 1st support number. Short-term indicators on the defensive. Consider
selling an intraday bounce. Support should be encountered at 88.30 and below
there at 87.65. Market resistance is at 89.20 and then again at 89.45. The gap
lower price action on the day session chart is a bearish indicator for trend.
The market’s close below the 9-day moving average is an indication the
short-term trend remains negative.
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LEAN HOGS RECAP
7/30/2004
October Lean Hogs closed down 0.62 at 69.22. This
was 0.52 up from the low and 0.67 off the high.
February Pork Bellies finished down 1.05 at
92.95, 0.55 off the high and 0.95 up from the low.
October hogs closed 60 lower on the session with
an inside trading day. The market was up 377 points on the week but weakness in
the cattle market, a smaller than expected slaughter pace late in the week and
profit-taking from the longs helped to pressure. Slaughter was only 367,000 head
on Friday as compared with trade expectations at 370,000=380,000 head. Pork
production on the week was down slightly from the previous week but up 5.2% from
last year. Weakness in the bellies added to the negative tone.
Technical Outlook
#HOGS (OCT) 08/02/04: The market’s close below
the pivot swing number is a mildly negative setup. Resistance levels comes in at
69.82 and 70.47 today, while support is around 68.62 and then 68.07. 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 70.47.
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COCOA MARKET RECAP
7/30/2004
September Cocoa finished down 18 at 1645, 15 off
the high and 25 up from the low.
The cocoa market softened in what many think was
a classical profit taking action. During the session Friday the Ivory Coast
indicated that export declarations for the season had reached 1.261 million tons
and that wouldn’t suggest to us that any shift has taken place in the ending
stocks for the last crop. However, the main focus of the market continues to be
on the next main crop and dryness in some key production areas. We suspect that
the weekly COT report dramatically understated the net spec and fund long
position in cocoa. Some in the Press were suggesting that as much as ¼ of the
recent rally was sparked by the funds but we would think that it was a much
larger percentage.
Technical Outlook
COCOA (SEP) 08/02/04 The market tilt is slightly
negative with the close under the pivot. Cocoa should run into resistance at
1665 and above there at 1683 with support at 1625 and 1603. The 9-day RSI over
70 indicates the market is approaching overbought levels. 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
1602.50.
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COFFEE MARKET RECAP
7/30/2004
September Coffee closed down 1.20 at 66.45. This
was 0.25 up from the low and 1.30 off the high.
September coffee closed 120 lower on the session
and down 340 lower on the week as fund selling and a lack of fundamental news to
offset the selling helped push the market sharply lower. Ideal weather for
harvest is expected over the next week and concerns for the quality of the
Brazil crop have diminished. A lack of a weather threat and the bearish
technical action has kept the market in a steep downtrend.
Technical Outlook
COFFEE (SEP) 8/2/04 There could be some early
pressure today given the market’s negative setup with the close below the 2nd
swing support. The 9-day RSI under 30 indicates the market is approaching
oversold levels. Momentum studies are declining, but have fallen to oversold
levels. The next downside objective is now at 65.15. The Coffee contract should
run into resistance at 67.20 and above there at 68.25 with support at 65.65 and
65.15. The market’s short-term trend is negative as the close remains below the
9-day moving average.
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SUGAR MARKET RECAP
7/30/2004
October Sugar closed unchanged at 8.28. This was
0.17 up from the low and 0.02 off the high.
October sugar closed unchanged on the session and
up 27 points on the week as the mid-day sharp break found trade house and
speculative support and the jump in London futures late added to the bounce of
17 points off of the lows into the close. Libya is expected to tender for near
100,000 tons of white sugar net week which might have helped support the London
market. Traders still await more active buying from Russia as imports have been
surprisingly slow this season. In fact, Russia has produced just 1.965 million
tons of refined sugar from imported raw sugar so far this year (through July
28th) which is down 32% from last years pace.
Technical Outlook
#SUGAR (OCT) 08/02/04: It is a mildly bullish
indicator that the market closed over the pivot swing number. Swing resistance
comes in at 8.43, with support found at 8.05. 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 8.43.
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COTTON MARKET RECAP
7/30/2004
October Cotton finished up 0.10 at 43.83, 0.37
off the high and 0.33 up from the low.
December cotton closed higher on the session
after hitting a new contract low which could attract some short-covering next
week. The selling pressures slowed on the collapse with some light
short-covering into the end of the month helping to provide support. A
University of Missouri think tank group (FAPRI) indicated that the US cotton
crop is on track for production near 18.8 million bales as compared with the
last USDA forecast of 18.0 million bales. Traders await the
Commitment-of-Traders which might show a hefty net short position from funds.
Technical Outlook
#COTTON (OCT) 08/02/04: The market’s close below
the 9-day moving average is an indication the short-term trend remains negative.
It is a slightly negative indicator that the close was lower than the pivot
swing number. Next resistance area comes in at 44.18 and then again at 44.54,
while support is targeted at 43.48 and 43.14. Momentum studies are declining,
but have fallen to oversold levels. The next downside target is 43.14. The 9-day
RSI under 30 indicates the market is approaching oversold levels.