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Providio's Daily Futures Market Commentary For March 23, 2012
providiotrading
post Mar 23 2012, 02:08 AM
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Currencies: 22Mar Modest US Dollar strength is coming mostly from the “commodiity currencies” on slowing Chinese economic data. However, most of the majors are in “mean reversion” mode and taking a break from recent moves higher. Volumes have bee dropping, keeping with the consolidation story.

Our previously identified factors in the ongoing stress dynamic are still there; they’re just less overt today.

Given recent action, however, one must stay cognizant of the current Technical environment. We recommend our readers stay attuned to the changes in our Technical Matrix.

Aussie:
22Mar More damaging economic data out of China and Europe is skewing the risks in the Aussie to the downside. Trend, Momentum, ROC and RSI are all headed lower. The recent increase n Volume seems to be validating the Aussie’s meaningful fall in value.

The market has fallen through flat lining 200-day moving average (1.0350) and last week’s lows and a resistance area from late January. Both should now be new resistance. There is a double bottom from mid Jan at 101.60 after the previous low was made at 100.65. Watch the developing Oversold conditions.

Important resistance is up near 1.05, where the Aussie peaked and failed this week. It would need to get up to and through there to break the cycle of lower highs and lower lows,

Seasonal Snapshot: The 5-year pattern is in a sustained rising seasonal trend until April 1st. The 15-year pattern is in a very modest falling seasonal trend until March 29. At that point it will enter a rising trend until May 4th. The 30–Year pattern is in a sideways to modestly lower biased seasonal trend until March 25th. At that point it enters into the same sustained rising trend bias until April 12th.

British: 22Mar
Sterling continues to struggle with the falling 200-day moving average at 158.50. The fourth failure to sustain a probe above and, therefore forge a higher high (above 159.92) puts the currency back on the defensive. A lower low lies below at 156.00.

Chancellor Osbourne’s budget, announces yesterday, is starting to draw fire and is not helping matters.

Trend is falling as of today, but our Momentum indicator shows positive action. The remainder of our technical indicators point to the downside.

Seasonal Snapshot: The 30yr pattern is biased to rising action until April 30. The 5 and 15 yrs are both biased sideways until the end of March, and then enter the same rising trend until April 30th.

Canadian 22Mar
Pressure from the Chinese slowdown has sent this “commodity currency” back below its falling 200-day moving average (99.96). The market has found some support at the early March low (9970), but a series of higher lows lie just below: 9945 on 27Feb; 99.40 on 16Feb and 99.20 on 30Jan.

Our Trend indicator has now joined our negative Momentum and falling Rate of Change pulling Volatility up and out of the Low range.

The 200 DMA is still falling but flattening with the recent positive action.

Seasonal Snapshot: All three patterns are sideways to modestly positive until March 29th.

Dollar Index:
22Mar Our Trend and Momentum indicators are still in negative phases. However, the market is trying to hammer out a base and regain some footing. Yesterday’s higher low and today’s modestly positive action targets a higher high above 80.72(15Mar). Trading has been centered on the modestly rising 21-day moving average. This may act as a fulcrum in direction finding. The Dollar is the safe haven under crisis market conditions.

Seasonal Snapshot: All 3 patterns exhibiting choppy conditions until about April 7th when all 3 start more sustained falling action seasonal patterns until April 30th.

Euro-FX: 22Mar
Poor headline European and German manufacturing data overnight has the currency on its heels a bit this morning. The action is still respecting the failure at what would be the right shoulder (133.00) in what seems to be a Head and Shoulders formation. The left shoulder was formed on 09Feb at 133.25; the head in late Feb near 135.00. Falling Volume on the recent rally seems to confirm the pattern. A break of the neck line (and psychological support) at 130.00 projects a move below 125.00.

The 200-day Moving Average remains well above and falling.

Seasonal Snapshot: Materially divergent patterns commence. The 5-year pattern has a choppy modestly upwardly biased tone. 1the 13-year enters a sustained, sharp falling pattern until March 29th. At that point they marry up, with both again trending higher.

Yen: 22Mar A surprise trade surplus, after expectations of a deficit, is supporting the Yen this morning and off chronically Oversold conditions. Our technical picture has been pulled positive, as well. Our Volatility measure is high and rising.

That said, the recent BOJ easing statement is likely to shadow any rallies and it remains the most likely action is to the downside.

On another note, we saw a story today in the WSJ indicating the Yen carry trade is back in vogue. This will provide some support as investor look to buy Yen and use the funds to purchase higher yielding debt.

http://online.wsj.com/article/SB1000142405...0381290457......

Seasonal Snapshot: All 3 patterns are entering a period of profound downward trends until April 7th.

Energies:

Petroleum: 22Mar Declining Chinese factory activity and European headline (and German) PMI data is putting a slowing global economy back in the headlines and is therefore pressuring Petro prices. Our technical picture of the complex is solidly negative and not Oversold.

The May Crude contract seems to be targeting the lower boundary (103.70) of our noted potential bull flag over the past three weeks. A failure to breakout above should return the market back to $100 and target the previous lows at 96.30. If the formation does play out, a classic move would rally $8-10 from the breakout. That projects to 116-118 for the May WTI Crude contract.

All three Petro stocks remain at the upper end of their average ranges for this time of year.

Volatility is starting to rise, potentially handicapping option purchases for protection and new positions

Seasonal Snapshot: After a brief pause, all three Petroleum contracts’ patterns are in an upward bias until the end of April.

NatGas: 22Mar After trying to get off the mat this morning and sustain its upward consolidation of recent losses, NatGas is back on the defensive, pressuring April support at 2.235.

Our Momentum’s positive shift has pulled our Trend indicator to rising. What was an extremely Oversold market can now be called “middling” with our measure registering 47 as of this writing.

However, the negative fundamental outlook in the NatGas market remains in place. This puts the recent bottoming action in the positions of a possible developing Bear flag. Today’s mild weakness probes below this formation, but weak Volume undercuts its validity. If this does play out, classic chart analysis calls for a 50-60 cent lower move. This would put the NatGas into the 1.70-1.80 range some analysts are calling for as a low.

The dynamic for NatGas should shift to Spring shoulder behavior fairly soon. As the current storage is at record levels for this time of year, we expect to see storage rapidly fill and Summer supply levels should be comfortably high in June. As drilling starts to wane, care should be taken on any short side trades. A seriously hot Summer would materially increase demand as electricity usage would soar. This could shift this market to a bullish tone rapidly and unexpectedly. We feel position traders are best served by exploring trades that involve spreads of either futures calendar or selling premium.

Seasonal Snapshot: Divergence between short and long-term patterns: the 5yr pattern consolidates with a negative tone well into April, but the 15&21yr patterns have a strong upside bias.

Equities: 22Mar Our Rates of Change continue to ease and drag on our positive Momentum indicator. The Dow’s has turned negative and is still leading the weakness. SP is not too far behind.

SP and Dow futures are also back inside our 1 STD Bollinger Band and testing the 21-day moving averages. On more weakness, pay close attention to the lower end of the mid-Feb congestion area, which roughly coincides with the early March consolidation lows:

SP: 1371; 1330

Dow 12950; 12700

NASDAQ 2648; 2526

We call readers’ attention to an interesting piece on the cost of protecting the downside:

http://www.zerohedge.com/news/skewered

The VIX Index is starting to perk up after a multi-week descent to historically low levels.

On a “micro” note, we are not equity analysts, or seasoned stock investors, but we do notice a number of gaps left open on Apple’s (AAPL) daily charts all the way down $384.85 (15Dec). When considering how much of the recent S&P earnings growth has been supplied by Apple, we wonder what closing some of those gaps to the downside would do to the S&P. They recently announced a dividend and stock repurchase plan, as well. Not exactly “expansionary”. As always, we welcome any feedback…

Seasonal Snapshot: The 5yr patterns of all three markets is in a pronounced upward bias until early May. The 15&30yrs’ follow suit, but are not nearly as steep.



Grains: 22Mar All three markets we track have taken back most of their probes lower and seem to be consolidating their recent weakness. Weather continues to pose downside risks.

Our Trend indicator is sustaining its negative turn across the entire complex and should be watched closely. Volatility is starting to uncoil a bit.

We remind readers of our recent weather notes:

“As a point of weather market speculation, we wonder whether the very warm winter will lead to an equally warm, dry summer, putting pressure on the Corn crop. This may lead to a buying opportunity if a material sell-off occurs. Stay tuned for further news in this vein.”

Corn: 22Mar More consolidation of the recent weakness. The May contract found support at rising trend line support at 635. The wider consolidation range, in place since coming off the $8 level last August is bound by 585-672. The upper end fits neatly below now gently falling 200-day moving average.

Our Trend, Momentum, and RSI indicators are all falling. Tuesday’s sizable increase in Volume validates the weakness. However, watch overall recent trending lower Volume. Additionally, it should be noted that prices ran into the 2 STD upper Bollinger Band over the last week.

Seasonal Snapshot: The 30-Year pattern heads modestly higher April 2. The 5-year and 15- years are modestly predisposed to negative action until the end of March.

Soybeans: 22Mar A probe below what we believe to be an important correction zone was somewhat short lived and the market has been able to retake its consolidation range of the last three sessions. Longer and shorter-term trend lines converge around these recent lows. A sustained fall below this level targets 1327 basis May. Below that, the gently falling 200-day moving average at 1288 may offer the next support area. We continue to monitor our technical indicators that have rolled to see if this is, in fact, under way.

Volatility is perking up, so look for Options buying opportunities, whether entering anew or protecting longs.

Seasonal Snapshot:
Relatively modest rising trend situation in all 3 patterns until approximately April 2.

Wheat: 22Mar In more consolidation action, Wheat is also testing important levels. Since bottoming near 600 in December, it has been holding above a modestly rising Trend line that runs through about 640 today. If this market can continue to consolidate near here without collapsing, there is a chance a turn could be put in and the market could resume its upward direction.

However, if this proves to be a possible developing bearish pennant and breaks out to the downside (likely on bulging supply news), a more sustained break to much lower levels is a distinct possibility.

All our indicators rolled over in the last several days leaving this market under pressure. Volatility is neutral with a level just below our Average Historical. It’s falling; though. Wheat’s Technicals are behaving on a shorter time frame than recent action has indicated. A material drop in Volume does not validate today’s action. Of particular note is the fact that Volatility moved higher into the Average range for the first time in over a month.

Seasonal Snapshot: The 5-year and 15-year patterns are in a falling trend until April 2. The 30-year pattern is sideways until March 22, and then it enters the same falling pattern.

Interest Rates: 22Mar
As we expected, the entire yield curve’s price structure is consolidating recent steep losses as the Fed continues its Operation Twist. This is especially true at the long end as the Fed is using proceeds from short-terms paper to go out further in the curve. This has taken all three US tracked markets well off recently extreme Oversold conditions. Volume continues its trend lower, typical of consolidation. Our rising Rates of Change still have some work to do before they can pull Momentums positive (along with the Trend). If this time is truly “different”, it may mean some more consolidation may be needed if pricing is to push further to the downside… perhaps in the form of a bear flag formation? Yields are maintaining levels above the declining 200-day moving averages. Watch the recent upper ends of the consolidation range, a sustained break out above (on stronger Volume) may send pricing right back from whence it came:

Bonds: 137-00

10yr: 129-00

2yr: 110-01

We also note recent lows on a reinstatement of the previous weakness:

Bonds 135-05

10yr 127-23

2yr 109-27.5

This may be an opportunity for directional positions, but keep stops tight or explore option purchase strategies, as Volatility is starting to expand.

Seasonal Snapshot: After an uptrend, all three patterns in the Bond commence a consolidation phase with an upward bias on 28Mar that extends well into April.

The 10yr has a strong, upward bias in all three patterns until early April.

The 2yr is heading back lower 17-27Mar.

Metals:

Gold: 22Mar
The market has fallen below the lower end of our noted bear flag formation (1647) and made a new recent low overnight (1631.6) after pushing below the 200-day moving average last week. Our Rate of Change is back to falling, making our technical indicators unanimously negative.

There is room to run lower, as our Oversold measure currently stands at 29 vs 23 the last time it tested rising trend line support that extends back to Oct 2008 (29Dec). Weakness below on stronger Volume projects down to this support line (1589) we have been watching for a while. Watch psychological support at 1600 first.

Pay attention to Volume, it seems stronger on this morning’s early sell offs and may confirm the bear flag, trending lower in this consolidation phase. It has also been much stronger on the sell offs (14Mar, 06Mar, 29Feb) after topping out in late Feb.

To the upside, old support (the lower end of our bear flag formation at 1647) may be new resistance. The upper boundary of the formation (1676), then the rising 200-day moving average (1688.5) may also offer resistance. A sustained rally through targets 1715-1720, where the market struggled throughout the first half of March.

The seasonal downward bias is coming to a close, as per below.

Seasonal Snapshot:
The 30yr pattern points down all the way until the end of March. The 15yr pattern has joined the 5yr’s consolidation well into April.

Copper: 22Mar
All of our technicals continue to point to lower pricing, but when taking a longer view, Copper remains in “decision mode”. We are somewhat troubled by the pattern of lower highs, but this has been accompanied by higher lows (consolidation) since topping out in mid Feb.

Momentum continues to play games with us… flipping back and forth after failing to fully go positive two weeks ago (again). The inability to break out above the 09Feb high (398.95) targets rising trend line support (372.00) back to 17Feb, then the 370.25 low on 17Feb. Weakness through these levels in the short-term would most likely send the market back to Oversold levels (currently 38 vs 30 on 20Feb & 25 on 15Dec).

Although Volume seems stronger on today’s weakness, it has been trending generally lower for the last month.

Seasonal Snapshot: A month-long rally in all three patterns gave way on 05Mar to a consolidation phase with a modest upward bias until mid April.

Softs: 22Mar Modest US Dollar strength and negative outside forces presaged a weak start across the sector.

Cocoa: 22Mar Scattered showers provided some relief for continuing fears of a drought in main producer Côte d'Ivoire. Recent action topped out at a level that is consistent with the falling Trend line originating on 1/27/12. This failure to continue the rally keeps the market in its recent consolidation range and tilts our Rate of Change and Momentum negative again. This likely targets the lows in the vicinity of 2150.

Our Trend indicator is pointing gently higher, but our Momentum has had some bumps in the road, flipping back and forth since early Feb. This underlines our noted consolidation range (2140-2520).

Take this into account when approaching a position decision.

Seasonal Snapshot:
The longer-term 15&30yr patterns are in a falling mode until 10Apr while the 5yr consolidates with a modestly weak bias.

Coffee: 22Mar The recent shift to positive Momentum was short lived as the market continues its pattern of decline, consolidate, decline. Falling Volume did not validate the higher trades, falling sharply. The psychological 175.00 level now seems to be in the cards.

Steep declines to multi-year low prompts us to widen charts out a bit. In doing that, we note the 50% Fibonacci retracement of the Dec 2001-May 2011 rally at 173.70. Additionally, the market topped out at 169.80 in Feb 2008 before commencing its run to $3.00.

Roasters should investigate low (but rising) Volatility to investigate option strategies to protect upside risks. Please refer to the link on our web site for more information:

http://techtalk.providiotrading.com/newsle...req=viewd......

Seasonal Snapshot:
All three patterns consolidate until they resume their down trend 05-16April.

Cotton: 22Mar Higher exports are driving more bottoming action as Momentum, Trend, and RSI have all shifted to a more positive profile.

That said, the May contract ran into another round of resistance at the still declining 21-day moving average at 89.30.

Beware of a potential bear flag formation over the last week on declining Volume. A sustained break out below the support (87.70) targets the 14Dec low at 84.23, then 80 cents.

Seasonal Snapshot: Strong downward bias in all three patterns lasts well into the May contract’s expiration.

Sugar: 22Mar After several failed attempts, the market is retaking the previous late Feb highs (above 25.80) on questions about global supplies. However, Volume continues to trend dangerously low. With Volatility falling to near our 1 STD below level, we recommend looking at an options purchase as a means to either protect positions or enter new ones.

On the downside, watch those mid Feb lows at 23.17. A sustained break out below targets a descending series of lows back to mid Dec: 22.85 (01&02Feb. 22.43 (late Dec. 22.25 (15Dec). Below these levels, it’s anchors aweigh down to 20.40 (May 2011).

Seasonal Snapshot: The 5&15yr patterns commenced a quite negative bias on 27Feb and lasts until mid-April. The 21yr pattern consolidates with a negative bias.

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