Daily Energy and Soft Markets Commentary Thursday June 05, 2008

Transcription

1 Daily Energy and Soft Markets Commentary Thursday June 05, 2008 New Trade Recommendations - 06/05/08 CRUDE OIL: Buy July crude oil puts for 390 and then look to sell a July natural gas put for 233. Risk the combination to a net loss of $1,100. Use an objective of 800 on the long crude. For risk control traders should avoid being short the natural gas put without the long crude put position. WHEAT: Sell July Wheat 795 call at 11 cents with an objective of zero. Risk 6 cents from entry. Today's Market Roundup - 06/05/08 BONDS: TODAY'S MARKET IDEAS: PREVIOUS RECOMMENDATIONS: 1) Long 4 September Bond 111 puts from 52 and long a September Bond at ) *Short July bond 112 puts for 50 with an objective of 0. Risk the position to a June futures trade below STOCKS: TODAY'S MARKET IDEAS: CURRENCIES: TODAY'S MARKET IDEAS: ENERGIES: TODAY'S MARKET IDEAS: NEW RECOMMENDATIONS: Buy July crude oil puts for 390 and then look to sell a July natural gas put for 233. Risk the combination to a net loss of $1,100. Use an objective of 800 on the long crude. For risk control traders should avoid being short the natural gas put without the long crude put position. PRECIOUS METALS: TODAY'S MARKET IDEAS: COPPER: TODAY'S MARKET IDEAS: SOYCOMPLEX: TODAY'S MARKET IDEAS: We tried to buy into short term strength yesterday and the only change today is that this strength may not be so short term. A push to 1420 would take the July contract to the highest levels since mid March. While this might be followed by a retracement to near 1380 or lower, this looks like a buying opportunity. PREVIOUS RECOMMENDATIONS: 1) Long November soybean 1320/1460 bull call spread from 48 and also short the November soybean 1100 put from 47. Hold for an objective of 1473 in November soybeans and risk a total of 40 cents on the entire spread. 2) Long the August soybean oil call from 169 with an objective of 335. Risk to 94. CORN: TODAY'S MARKET IDEAS: The market is telling us that it intends to move back to the highs or higher. While uncertainty over weather swings both ways, the combination of a high-priced environment and potential loss of both acreage and yield may overwhelm the potential that warm weather may bring after 2-3 weeks. Aggressive traders should buy either July or December corn on setbacks of 4-5 cents inner day. Look for new highs in both contracts with 676 3/4 as next objective for December corn. PREVIOUS RECOMMENDATIONS: 1) Long 6 August corn 540 puts from 8 1/2 cents each and long 1 September corn from 620. Risk a total of 18 cents and hold for now. 2) Long Dec08 corn and short Dec10 corn at +6 Dec08 with an objective of +58 Dec08. Risk 11 cents from entry. WHEAT: TODAY'S MARKET IDEAS: Strength in corn and soybeans may prevent a serious test of the lows in wheat. The next available strategy may be to sell July wheat if rallies in corn or soybeans can pull it up to near 778. NEW RECOMMENDATIONS: Sell July Wheat 795 call at 11 cents with an objective of zero. Risk 6 cents from entry. CATTLE: TODAY'S MARKET IDEAS: Resistance for August cattle comes in at the zone with and as next support. PREVIOUS RECOMMENDATIONS: Short August cattle 104 call from 225 with an objective of zero. Risk 87 points from entry. Short the June cattle 88 put from 85 with an objective of zero. Risk to 27. HOGS: TODAY'S MARKET IDEAS: Resistance for August hogs comes in at and with and as next support.

2 PREVIOUS RECOMMENDATIONS: * Hit stop at on long July hogs from COTTON: TODAY'S MARKET IDEAS: Aggressive short-term traders can watch for a bounce over the near-term. PREVIOUS RECOMMENDATIONS: Short July cotton call from 97 with an objective of 0. Risk to 152. COFFEE: TODAY'S MARKET IDEAS: Look for choppy to lower trade ahead. COCOA: TODAY'S MARKET IDEAS: Resistance for Sept cocoa comes in around $2,832 then near $2,857 and again near $2,878 with support at $2,785 then at $2,770 and again near $2,737. SUGAR: TODAY'S MARKET IDEAS: Steep downtrend channel resistance comes in at today with chart resistance at It will take a move back over these levels to anticipate that a low is in place. Another leg down for October sugar counts to and this level may hold as shortterm support. PREVIOUS RECOMMENDATIONS: Long October sugar 11.50/14.50 bull call spread for 53 points and short October put at 30. Risk a total of 35 points from entry Today's Headline Summary - 06/05/08 FUNDAMENTAL: STOCKS: THE BULLS LACK CONTROL AND ARE IN NEED OF A FRESH DISTINCT CATALYST BONDS: WATCH FOR WEAK SHORT COVERING AHEAD OF CRITICAL UPCOMING DATA CURRENCIES: THE DOLLAR CONTINUES TO GAIN AGAINST THE EURO, YEN, SWISS & POUND COPPER: MORE DECLINES AHEAD AS THE DOLLAR AND SLUMPING ECONOMICS PREVAIL METALS: THE BEAR CAMP STILL HAS THE BRUNT OF MARKET FACTORS IN ITS FAVOR CATTLE: CHOPPY TO LOWER TRADE AHEAD AS FUTURES PREMIUMS DIMINISH; CASH WEAK HOGS: FEAR OF FUND LIQUIDATION AND FEAR OF SLOWER CHINA DEMAND; CHOP DOWN BEANS: BULLS MAY BE WINNING THE STRUGGLE OVER THIS SUMMER'S DIRECTION. CORN: CORN HAS DIVORCED ITSELF FROM CRUDE OIL AND LOOKS POISED FOR NEW HIGHS. WHEAT: WHEAT RESPONDING TO STRENGTH IN CORN & SOYBEANS. BASIS IS VERY WEAK. ENERGY: THE BEARS CONTROL PETROLEUM PRICES BUT NOT NATURAL GAS PRICES COTTON: COULD BE A BIT TOO OVERSOLD WITH HEAT IN WEST TEXAS EARLY IN SEASON COFFEE: CONSOLIDATION CONTINUES; LACK OF WEATHER SCARE; MORE EROSION SUGAR: STILL NO TECH SIGN OF LOW; BRAZIL SHIFTING TO MORE ETHANOL PRODUCTION COCOA: VULNERABLE TO A PULL BACK WITH OUT FRESH SUPPORTIVE CROP NEWS TECHNICAL: BEANS: Coiling pattern hints at a major trend decision directly ahead CORN: Pattern of higher lows leaves the bulls in control WHEAT: A close below $7.45 could count down to $7.29 July CATTLE: Rejection of Wednesday still leaves the bears in control HOGS: Downside breakout rejected but the bears still hold the edge SUGAR: Range down extension counts the October down to COTTON: Inside day up is hardly a clear sign of a low ENERGY: A big range down probe counts Sept crude to METALS: Go with a breakout of $900 and $875 August FORX: Near term upside targeting is seen at Sept Dollar BONDS: Down trend channel resistance in Sept Bonds is now S&P: A pattern of lower highs leaves the trend pointing down DAILY ENERGY COMPLEX COMMENTARY 06/05/08 THE BEARS CONTROL PETROLEUM PRICES BUT NOT NATURAL GAS PRICES OVERNIGHT CHANGES THROUGH 3:15 AM (CT): CRUDE +31, HEATING OIL +262, UNLEADED GAS -61 CRUDE OIL MARKET FUNDAMENTALS: The energy complex continued to slide yesterday as a bearish inventory report was the latest in a string of

3 negatives factors weighing on the complex. At times crude oil was able to trade firmer over night finding some support from news of an explosion at a Kuwait petrochemical plant and a report that Mexico's oil exports are likely to average 15% below last year's levels because of weather and other considerations. But since the incident in Kuwait has apparently not affected oil exports or refinery operations, it may not provide lasting support to crude oil and even the drop in Mexico's exports may not be enough of a supply threat given the weaker demand outlook for oil and a clearly strengthening US Dollar. While some end of the week short covering seems likely over the next two sessions, we suspect the vast number of negatives will limit the recovery potential in this market right now. In fact, with market sentiment turning increasingly more sour and the macro economic outlook not yet improving off the slide in oil prices we suspect an eventual price slide in August crude oil down to the $120 to $119 range looks possible. A higher than expected reading on natural gas storage in today's report could be the next bearish piece of news the energy markets will need to absorb. But it was clear from yesterday's price action that speculative fervor is draining from the energy complex and that gives the bear camp a near-term advantage. Seeing crude oil decline in the face of another large drop in crude oil stocks yesterday wasn't too surprising since the jump in the refinery operating rate translated into bigger than expected gains in both gasoline and distillate stocks. In fact, rising product stocks in a sagging oil demand environment is certainly supporting the bear case right now and seeing India and Malaysia among other countries starting to reduce oil subsidies to consumers is helping to keep the demand outlook bearish. With OPEC production rising nearly 1% in May and US fuel demand down 1.1% at the end of last month seems to reflect a bearish change in the fundamentals. The recovery in the Dollar and expectations for the Fed to raise rates is yet another issue undermining market sentiment. In fact, we suspect a close in the Dollar Index back above the May highs could simply accelerate the selling in crude oil. But increased government interference in the futures market also seems to be having a significant additional negative impact on the energy complex. It certainly appears as if the uncertainly surrounding more government agency monitoring of the futures trading and probes into oil price manipulation have speculators on the run right now. Therefore, we see a limited scope for a price recovery in crude oil unless a significant supply threat develops. Support for Aug crude oil comes in at $120 and then again down at $ PRODUCT MARKET FUNDAMENTALS: GASOLINE: The gasoline market was throttled lower on Wednesday, as the combination of a bearish inventory report and further evidence of slumping global demand pressured the market through several key support levels. While gasoline has bounced a bit over night and some short covering seems possible after yesterday's sell off, we suspect gains will be limited given the bearish shift in the market's overall psychological setup. The extensive price break yesterday in gasoline seems less surprising when you consider that the latest COT report with options showed the combined fund and spec net long near a record level and that may still leave the market with additional selling capacity. Significant damage was done on the charts yesterday and an eventual break to $ in Aug gasoline now seems possible. The showed gasoline stocks rose nearly 3 million barrels, which was way above market expectations and this news along with further indications weaker US oil demand seemed to pull the floor out from under the gasoline market. In fact, improving profit margins for refiners last week also keeps the supply outlook negative. Furthermore, retail pump surveys have consistently shown gasoline demand declining compared to a year ago. But with the data indicating gasoline demand last week, which included the Memorial Day Holiday weekend, dropping 1.4% compared to last year seems to have convinced many traders that gasoline demand this summer may at least initially be weaker than expected. Therefore, the gasoline market may need to search for a price level that is more palatable for the US consumer to accept and that leaves the path of least resistance down and a possible near term target of $3.05 in September gasoline. HEATING OIL: Heating oil continued to follow a downward price path yesterday as a bearish inventory reading along with expectations for global oil demand to fall combined to drive the market sharply lower. Although the market was able to firm off the Kuwait news over night, we expect the market's short covering capacity will be limited by the shift in the fundamentals that seem to support the bear camp right now. The larger than expected 2.3 million barrel rise in US distillate stocks is further evidence that an inventory rebuilding cycle is occurring. The bear case is also being supported by news India and Malaysia are the latest foreign governments to lower fuel subsidies and this turn of events is beginning to severely dampen global demand expectations which is beginning to chip away at one of the key pillars that had supported heating oil to record prices this year. A recovery in the Dollar and increased government intervention are other negatives weighing on market sentiment right now. Unless global demand contraction fears begin to ease or a significant supply threat occurs, we look for Aug heating oil to eventually test retracement support near $3.46. But under current market conditions a deeper price break can't be ruled out. TODAY'S ENERGY MARKET GUIDANCE: The bear forces dominate over the bull forces. Expect more downside action until lower energy prices give the US stock market a big boost.

4 Energy Stocks Report Crude Oil (Millions of Barrels) Week Of Opper Rate % Opper Rate % 5/30/ Gasoline (Millions of Barrels) Week Of Demand Demand 8yr Avg 5/30/ Distillates (Millions of Barrels) Week Of Demand Demand 8yr Avg 5/30/ Imports RFG Stocks Imports NATURAL GAS: It was impressive to see natural gas forge another upward price extension in yesterday's trade. However, we do have doubts that the market will be able to avoid profit taking if crude oil continues to slide and if the US Dollar continues to strengthen. In fact, with gas flows from the Independence Hub expected to be at full volume by mid-june and if today's storage report comes in higher than expected, it could at least trigger some early profit taking in natural gas. The trade is expecting an injection near 102 bcf compared to a 100 bcf gain as the 5 year average and an injection of 110 bcf last year. However, it was surprising to see the natural gas market push aside another sharp drop in crude oil yesterday, as well as news that the Independence Hub had restarted and that suggests to us something else is providing price support to natural gas beside a supportive weather outlook and the jitters over a proposed active hurricane season. In fact, when you consider that the COT report with options shows the combined fund & spec position in natural gas near a record net short level and the same positioning in crude oil shows a large net long reading may point to an unwinding of long crude oil/short natural gas spreads and this may limit the profit taking potential in the natural gas market. The price spread between natural gas and crude oil (in Btu terms) remains wide despite the sell off in crude oil and arbitrage related buying of natural gas certainly appears to be a factor supporting the bull case. With natural gas storage relatively low, forecasts for warmer temperatures in key natural gas consuming locations is also providing price support since that could raise cooling demand and in turn that could undermine efforts to rebuild natural gas stocks. With weather forecasters watching three waves in the Atlantic, the start of the hurricane season also appears to be keeping natural gas supported against the petroleum market weakness. However, it will certainly be a testament to the bull camp if natural gas can continue to trade firm and diverge from the rest of the complex. While we are certainly bullish natural gas on a long-term basis, we also realize there is a chance that outside market pressures in the short run could break Aug natural gas back down to the $12.00 to $11.80 price range. In the event that the market stays firm, the next upside targets are at $12.59 and then at $ TODAY'S MARKET IDEAS: NEW RECOMMENDATIONS: Buy July crude oil puts for 390 and then look to sell a July natural gas put for 233. Risk the combination to a net loss of $1,100. Use an objective of 800 on the long crude. For risk control traders should avoid being short the natural gas put without the long crude put position. PREVIOUS RECOMMENDATIONS: OTHER ENERGY CHARTS:

5 ENERGY COMPLEX TECHNICAL OUTLOOK: CRUDE OIL (JUL) 06/05/2008: Declining momentum studies in the neutral zone will tend to reinforce lower price action. A negative signal for trend short-term was given on a close under the 9-bar moving average. The swing indicator gave a moderately negative reading with the close below the 1st support number. The next downside objective is The next area of resistance is around and , while 1st support hits today at and below there at HEATING OIL (JUL) 06/05/2008: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The close below the 9-day moving average is a negative short-term indicator for trend. The swing indicator gave a moderately negative reading with the close below the 1st support number. The next downside objective is now at The next area of resistance is around and , while 1st support hits today at and below there at RBOB GAS (JUL) 06/05/2008: Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The close under the 18-day moving average indicates the intermediateterm trend could be turning down. The market is in a bearish position with the close below the 2nd swing support number. The next downside target is The next area of resistance is around and , while 1st support hits today at and below there at NATURAL GAS (JUL) 06/05/2008: A new contract high was made on the rally. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's close above the 9-day moving average suggests the short-term trend remains positive. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside target is at The next area of resistance is around and , while 1st support hits today at and below there at DAILY TECHNICAL STATISTICS 9 DAY RSI 14 DAY RSI 14 DAY SLOW STOCH D 14 DAY SLOW STOCH K 20 DAY M AVG 40 DAY M AVG 50 DAY M AVG 60 DAY M AVG CLOSE ENERGY COMPLEX CLAN HOAN RBAN NGAN LGAN Calculations based on previous session. Data collected 06/04/2008 Data sources can & do produce bad ticks. Verify before use. DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 ENERGY COMPLEX CLAN8 Crude Oil HOAN8 Heating Oil

6 RBAN8 RBOB Gas NGAN8 Natural Gas LGAN8 Propane Calculations based on previous session. Data collected 06/04/2008 Data sources can & do produce bad ticks. Verify before use. DAILY COCOA COMMENTARY 06/05/08 VULNERABLE TO A PULL BACK WITH OUT FRESH SUPPORTIVE CROP NEWS Although September cocoa was able to settle above the $2,800 price level yesterday, the aggressive speculative buying seen during Tuesday's session was notably absent on Wednesday. Trading turned choppy and two sided yesterday and we suspect this is a sign that the market has become short-term overbought. The rally in the Dollar and general commodity index price weakness were certainly limiting factors for the bulls yesterday. We also suspect arbitrage related selling tied to the sharp break in the pound was a factor that held the market below resistance. In fact a firmer Dollar and weaker pound seems to be pressuring cocoa a bit in the over night trade. September cocoa has rallied $269 over the last six sessions with gains tied to poor bean quality and concerns over the supply outlook for next season. But we suspect a steady news flow of crop problems may be required in order to lift cocoa significantly above $2,800 level. If a recovery in the Dollar continues on the outlook for higher interest rates it will certainly be a factor that could undermine the bull camp. Cumulative Ivory Coast arrivals are still running ahead of last year's pace, but the week to week delivery amounts are falling off and that may help limit profit taking. NY daily certified cocoa warehouse stocks fell 17,215 bags to million bags. TODAY'S GUIDANCE: A slow trading session kept September cocoa in a relatively tight range yesterday. but after seeing sharp price gains over the last week we get the sense the market may have reached a strong resistance point and may need more supportive crop news to push beyond the $2,821 to $2,832 resistance zone. While we remain long-term bullish, it won't be surprising to see September cocoa set back to the $2,737 to $2,721 price range before moving into the next higher price zone. TODAY'S MARKET IDEAS: Resistance for Sept cocoa comes in around $2,832 then near $2,857 and again near $2,878 with support at $2,785 then at $2,770 and again near $2,737. NEW RECOMMENDATIONS: PREVIOUS RECOMMENDATIONS: COCOA TECHNICAL OUTLOOK: COCOA (JUL) 06/05/2008: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The close above the 9-day moving average is a positive short-term indicator for trend. The close over the pivot swing is a somewhat positive setup. The near-term upside objective is at The next area of resistance is around 2813 and 2829, while 1st support hits today at 2779 and below there at DAILY COFFEE COMMENTARY 06/05/08

7 CONSOLIDATION CONTINUES; LACK OF WEATHER SCARE; MORE EROSION The coffee market seems to have a slight bearish fundamental bias but weather uncertainty for the next several weeks may continue to provide some underlying support. Weather bulls seem to be struggling to hold on to longs with above normal temperatures in Brazil and a lack of threatening weather on the horizon. The market inched higher in a very quiet, low volume trading session yesterday. A lack of new selling on a test of Tuesday's lows helped spark a minor bounce but the range was tight with an inside trading session. Buying was limited by the USDA forecast for a 51.1 million bag crop for Brazil which would be up 36% from last year. The lack of colder than normal weather in the forecast in Brazil may also be limiting the speculative buying interest in coffee. Traders remain somewhat concerned that increased scrutiny from the CFTC could spark additional long liquidation selling from fund traders. Some Vietnam cargoes of coffee have been delayed due to slow loading at the ports as ports are congested and some delays are up to 3 weeks. Tightness in containers is a growing problem at many ports. A lack of threatening weather and fears that the surge in Brazil production for the June/August harvest (over 51.1 million bags, up 36%) will be followed by a bumper crop from Vietnam late this year helped to pressure. Vietnam production is expected to jump by nearly 20% this coming season. Daily exchange certified stocks were up 2,844 bags to 4.36 million bags with 61,175 bags pending review. TODAY'S GUIDANCE: The market remains stuck in the current trading range and it may take some help from weather to break-out to the upside or it may take time (deeper into harvest) to see a downside break-out. Keep a negative bias for now. September coffee resistance comes in at and with and as next support. TODAY'S MARKET IDEAS: Look for choppy to lower trade ahead. NEW RECOMMENDATIONS: PREVIOUS RECOMMENDATIONS: COFFEE TECHNICAL OUTLOOK: COFFEE (JUL) 06/05/2008: Daily stochastics are trending lower but have declined into oversold territory. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market's close below the pivot swing number is a mildly negative setup. The next downside objective is The next area of resistance is around and , while 1st support hits today at and below there at DAILY COTTON COMMENTARY 06/05/08 COULD BE A BIT TOO OVERSOLD WITH HEAT IN WEST TEXAS EARLY IN SEASON With the late recovery yesterday and follow-through buying yesterday, cotton appears to be following grain markets higher instead of reacting negatively to the US dollar firmness. This may suggest that a near-term low is in place but follow-through buying support may be hard to find unless the weather situation becomes a bit more threatening. The sluggish export pace is still a major problem for the cotton market as shipments are unlikely to be strong enough for

8 the market to avoid even lower exports and higher ending stocks for the next USDA supply/demand report. December cotton pushed lower early in the session yesterday finding selling pressure from the strong US dollar and fears of active fund selling. However, the lack of selling pressure on the test of Tuesday's lows and strength in the grain markets helped to support a bounce to near unchanged on the day into the close. Traders see slow exports and burdensome stocks as a significant obstacle to higher prices ahead and exchange stocks continue to inch higher. Certified stocks increased to 1.57 million bales from million the previous session. Traders will monitor the weekly export sales news this morning and continue to monitor crop progress. With a larger percentage of the crop in West Texas this season, the market may be a bit more sensitive to hot and dry weather in Texas early this season. There has been continued talk of long liquidation selling from speculators. Traders remain concerned with the investigation on the price run-up to the March highs. In the last COT report, index funds were still long 101,216 contracts, and trend-following funds were net long more than 18,000 contracts. Nonreportable traders were long nearly 9,000. TODAY'S GUIDANCE: December cotton may see support near with and as 1st strong resistance. TODAY'S MARKET IDEAS: Aggressive short-term traders can watch for a bounce over the near-term. NEW RECOMMENDATIONS: PREVIOUS RECOMMENDATIONS: Short July cotton call from 97 with an objective of 0. Risk to 152. COTTON TECHNICAL OUTLOOK: COTTON (JUL) 06/05/2008: Momentum studies are declining, but have fallen to oversold levels. The market's close below the 9-day moving average is an indication the short-term trend remains negative. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside objective is now at With a reading under 20, the 9-day RSI indicates the market is extremely oversold. The next area of resistance is around and 65.18, while 1st support hits today at and below there at DAILY SUGAR COMMENTARY 06/05/08 STILL NO TECH SIGN OF LOW; BRAZIL SHIFTING TO MORE ETHANOL PRODUCTION Further strength in the dollar helped ease London futures overnight but a lack of new selling interest supported New York. There is still no technical sign of a low as the market is still in the process of absorbing a large world production surplus for the 2007/2008 season. Some believe there will be a slight surplus for the coming year and others believe a slight deficit. Brazil is crushing more cane for ethanol production than for sugar production and if energy prices remain relatively high, this process may continue. October sugar pushed sharply lower on the session again yesterday led by the same forces which have pressured the market over the past several sessions. A strengthening US dollar, a general consensus that regulators will keep stricter control of funds in the future and ideas that the world surplus may be higher than expected for the coming season are all forces which have helped spark the long liquidation selling. Weakness in the energy markets added to the negative tone. Energy markets are higher overnight. The market seems to be in a fundamental position to see a significant low over the near-term but the threat that index fund margins and positioning will be more closely monitored and that the status of index funds switched to speculator and not commercial may be a factor that has added to the selling recently. While this may or may not be a factor moving foreword, the threat of this type of re-action from lawmakers has the market

9 worried. Keep in mind, index funds are long 383,887 contracts as of May 27th and a bulk of this position is classified as commercial traders. In January of 2007, index funds were long nearly 150,000 contracts. TODAY'S GUIDANCE: The market seems to be in a fundamental position to bottom but technical factors are still negative and regulatory uncertainty (along with a rising dollar) may be increasing the tendency for funds to step aside from the long side for now. TODAY'S MARKET IDEAS: Steep downtrend channel resistance comes in at today with chart resistance at It will take a move back over these levels to anticipate that a low is in place. Another leg down for October sugar counts to and this level may hold as short-term support. NEW RECOMMENDATIONS: PREVIOUS RECOMMENDATIONS: Long October sugar 11.50/14.50 bull call spread for 53 points and short October put at 30. Risk a total of 35 points from entry SUGAR TECHNICAL OUTLOOK: SUGAR (JUL) 06/05/2008: The market broke to a new contract low. A crossover down in the daily stochastics is a bearish signal. Daily stochastics are trending lower but have declined into oversold territory. The market's shortterm trend is negative as the close remains below the 9-day moving average. It is a slightly negative indicator that the close was under the swing pivot. The next downside objective is With a reading under 30, the 9-day RSI is approaching oversold levels. The next area of resistance is around 9.68 and 9.88, while 1st support hits today at 9.36 and below there at OJ TECHNICAL OUTLOOK: ORANGE JUICE (JUL) 06/05/2008: Positive momentum studies in the neutral zone will tend to reinforce higher price action. The close above the 9-day moving average is a positive short-term indicator for trend. The market tilt is slightly negative with the close under the pivot. The near-term upside target is at The next area of resistance is around and , while 1st support hits today at and below there at DAILY TECHNICAL STATISTICS 14 DAY SLOW STOCH D 14 DAY SLOW STOCH K 9 DAY 14 DAY 20 DAY 40 DAY 50 DAY 60 DAY CLOSE RSI RSI M AVG M AVG M AVG M AVG SOFTS MARKETS COMPLEX SBAN CTAN CCAN OJAN KCAN MAN Calculations based on previous session. Data collected 06/04/2008 Data sources can & do produce bad ticks. Verify before use. DAILY SWING STATISTICS

10 Contract Support 2 Support 1 Pivot Resist 1 Resist 2 SOFTS MARKETS COMPLEX SBAN8 Sugar CTAN8 Cotton CCAN8 Cocoa OJAN8 Orange Juice KCAN8 Coffee MAN8 Milk Calculations based on previous session. Data collected 06/04/2008 Data sources can & do produce bad ticks. Verify before use. ***This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of The Hightower Report is strictly prohibited.