CRUDE PALM OIL
Crude palm oil (CPO) futures prices on the Malaysian Derivatives Exchange (MDEX) started 2003 on a bearish tone and declined sharply in the first two quarters, making new year's lows at the RM1,233 per tonne in early August. They then rebounded sharply on stronger demand and bullish soyoil prices before settling the year with solid gains at RM1,774, up RM130 or 7.9% from a year ago.
The upward recovery in the last four-and-a-half months of 2003 lifted the third-month contract from its year's lows of RM1,233 per tonne to a year’s high of RM1,865 and helped the market regain all its earlier losses and took it to its highest year-end close in five years.
Price volatility and wide market trending cycles provided ample trading financial opportunity for hedgers and speculative traders and are likely to continue into 2004. The technical outlook for the first quarter 2004 is expected to be neutral to slightly negative.
Based on the weekly bar chart, the market has an important chart support for first quarter at the RM1,750–RM1,720 levels, and is likely to come under fresh technical selling pressure if these levels are successfully violated. Bearish developments during this period could force the third-month contract to trend lower and search for a new technical bottom around the RM1,650–RM1,600 levels.
Chart resistance for the first quarter stands at RM1,800–RM1,820. Penetration of this resistance could turn the near-term chart outlook bullish and signal the continuation of the upward trend. Minor chart resistance for the first quarter is pegged at the RM1,850–RM1,900 levels.
The daily and weekly technical indicators closed the year mostly bearish and signalled the possibility of further downward correction in the first quarter 2004.
At week's close, the daily stochastics triggered the sell signal and indicated the immediate wave of the market was bearish. The daily oscillators per cent K and D closed Friday at 58.12% and 67.96 % respectively.
The weekly stochastics ended with their sell signal of Nov 28 intact and called for more downside trading in the early part of this year.
The 3- and 7-day exponentially smoothed moving-average price lines (ESA-lines) flashed the sell signal on Friday and signalled the start of a bearish phase. The 3- and 7-day ESA-lines ended lower at 1,769 and 1,772 respectively.
The daily MACD ended the week negative and triggered the sell signal on Dec 30 and finished with the MACD and trigger-line lower at 2.11 and 2.67 points respectively.
Analysis of this daily oscillator shows the market has started a bearish cycle. The monthly MACD closed the year negative at 92.74 and 94.96 points respectively and indicated the near-term trend could stay bearish.
The daily Momentum Index (MI) advanced to 101.55 points at Friday’s close and continued to indicate the market was in a positive phase. However, the monthly MI indicates the market is technically overbought.
US soybean oil futures prices on the Chicago Board of Trade trended upwards in the first five months of 2003, peaking in mid-May, and then went on a sharp decline and dropped to a year's low of 19.06 US cents per pound in mid-August.
Stronger palm oil prices and tight soyoil supplies subsequently triggered a strong bullish rally that lasted five months and pushed up prices to their highest levels since May 1998.
Trading in 2003 saw soyoil prices fluctuate widely between 21.25 and 28.70 US cents and ended the year at 27.84, up 6.59 US cents or 31.01% from a year ago.
The price outlook for the first quarter 2004 is likely to remain neutral to slightly bearish and soybean oil prices are expected to hover around the 27.25–29.50 US cents per pound range.
Adverse developments in the mad cow disease in the United States could result in a sharp drop in demand for soymeal and the reduction in soybean crushing activities could force soyoil prices to adjust higher in the early part of 2004.
At Friday’s close, the daily and weekly indicators showed the market was technically overbought and signalled the possibility of a mild technical decline in the early part of 2004.
Technically, the daily stochastics closed the year positive and indicated the market’s short-term trend was still constructive. The daily oscillators per cent K and D closed the year at 77.13% and 68.66% respectively.
The weekly stochastics triggered the sell signal and indicated a trend change on Dec 19 and stayed bearish for the near-term trend. The weekly oscillators per cent K and D closed the year at 63.42% and 75.09% respectively.
The daily MACD closed Friday negative and indicated more downside trading in the immediate term. The daily MACD and trigger-line settled the week at 0.18 and 0.20 of a point respectively.
The weekly MACD and trigger-line settled at 1.565 and 1.563 points and indicated a strong negative convergence suggesting a main trend change was about to begin.
The 3- and 7-day ESA-lines closed at 27.66 and 27.62 respectively and indicated the market’s immediate cycle was positive.
The daily Momentum Index (MI) settled higher at 101.56 points and indicated the market was still in a positive phase. The weekly MI remained bullish and signalled the main trend was still bullish.
Cocoa futures prices on the Coffee, Sugar & Cocoa Exchange in New York ended 2003 bearish with sellers dominating trading throughout the year and returned a huge portion of their previous year’s gains. Reduced political tension in Ivory Coast, the world’s largest cocoa producer, dampened sentiment.
Prices initially rose to a year's high of US$2,375 per tonne in February and then it was downhill all the way as the market slipped into a six-month bear rally and established fresh lows around the US$1,400 levels in early August.
Band trading dominated the rest of the year as prices moved within the US$1,400–US$1,750 levels before closing the year sharply lower at US$1,515, down US$489 per tonne or 24.4% on 2002.
Cocoa futures prices in the first quarter 2004 would likely continue in range-bound trading and hover around the US$1,400–US$1,700 levels. Violation of the lower band support at US$1,400 could set off fresh bearish momentum and likely send prices lower in search of a fresh trading base around the US$1,250 level. For the upper trading band at the US$1,700 level to be penetrated we would have to see fresh bullish sentiment generated particularly from Ivory Coast.
Technically, the daily stochastics closed the year negative and called for more downside trading in the first quarter 2004. The daily stochastics finished 2003 with the oscillators per cent K and D at 18.46% and 21.16% respectively.
The weekly stochastics held on to their sell signal of Dec 19 at Friday’s close and indicated the main trend was bearish.
Both the daily and weekly MACD stayed bearish at Friday’s close and indicated more bearish trading in the early part of the first quarter 2004. The daily MACD and the trigger-line settled the year at minus 0.40 and 3.68 points respectively.
The weekly Momentum Index (MI) closed the year slightly positive and closed lower at 103.00 points. Analysis of the weekly MI shows the market’s immediate-term direction is neutral to slightly positive.
Cash tin prices on the Kuala Lumpur Tin Market ended the year bullish and scored impressive gains after strong advances in the fourth quarter 2003.
World supply situation in 2003 was tight and the supply-demand equation tilted in favour of the bulls. Tin prices advanced from US$4,235 per tonne in early January and trended upward throughout the year to close at their highest levels since December 1998 at US$6,610 per tonne, up a hefty US$2,375 or 56.08% from a year ago.
The supply-demand balance is expected to remain bullish and stay in tight supply condition in the first quarter 2004.
Trading support for the first quarter 2004 is seen around the US$6,500–US$6400 levels. Upper resistance for the first three months of the year stands at US$6,900–US$7,000.
The weekly technical indicators remained bullish and signalled the market’s main trend would stay bullish in the first quarter 2004.
The weekly stochastics closed the year in the bullish extended-move zones with the oscillators per cent K and D at 100.00% and 98.52% respectively.
The 3- and 7-week ESA-line remained constructive and signalled the upward cycle was intact.The weekly MACD triggered the buy signal in late August and indicated the bullish trend could be sustained.
The Momentum Index finished the year higher at 124.01 points and indicated the market was in a bullish phase.