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Currencies: 08Mar With the Greek debt-swap situation apparently going swimmingly, risk-on is back in vogue, especially in anti-USD trades, Gold, and Equities. News reports that the ECB is staying put with its key interest rate added tot his dynamic.
Then the rise in US Jobless Claims took a bit of the wind out of the sails of the USD/Euro interest rate differential trade.
March options expire tomorrow, Friday.
Aussie: 08Mar With the better news flows today easing the fears of the capital markets, risk-on bets jumped back in the train today. In the absence of any more significant new stories between this afternoon and tomorrow’s NFP report, look for action to stay on the risk-on column until then.
Technicals have turned from clearly negative to a modest positive bias and the shift in that direction seems likely to continue. It bounced out of the Oversold zone today; another indication of a shift to higher bias.
However, the 30-minute chart has what amounts to a double top (bearish pattern) at just shy of 1.0660.
Seasonal Snapshot: Divergence between the 15yr pattern (negative) and the modestly positive 5&30yr patterns ends with modestly negative tone for the first part of March.
British:08Mar Like other USD denominated currency markets, the Sterling has bounced after testing lower levels; in this case several times at 1.57. Its rally, however, has stalled out at 1.5830. Waiting for the NFP report tomorrow morning is the likely scenario until tomorrow AM.
Technicls are a mixed bag with Trend rising and Momentum still negative. Any overnight moves likely to run into resistance at about 1.5850-1.5880.
Seasonal Snapshot: Decidedly negative bias in all three patterns lasts until 10Mar.
Canadian : 08Mar After 2 days of testing the below par territory, today’s more positive news flow has the Loonie rallying up to and testing the 1.01 resistance. Outside Momentum the whole Technical p[picture has shifted to a more positive bias. Momentum’s ROC indicates it’s shifting as well. Watch the reaction after tomorrow’s morning US report.
Seasonal Snapshot: All three patterns are positive until mid March.
Dollar Index: 08Mar Yesterday’s Spinning Top appears to have been a pause and reverse. For now. Watch the reaction to tomorrow’s NFP Report.
80 seems to have set p as a major resistance level with it rejecting a rally attempt on 2/16 and then again yesterday.
Technicals have shifted to a less positive bias.
Per our comment from Monday, be wary of a Momentum shift if the RSI suddenly trends lower. Volume for the last several sessions has supported a more positive bias.
Seasonal Snapshot: Choppy consolidation in all three patterns until mid March.
Euro-FX: 08Mar No Trend line test but the Euro has held its rising trend with a series of higher lows and higher highs. Only Momentum remains as an indicator to shift to a positive bias. No longer in the Oversold range.
The 200-day Moving Average remains well above and falling, though its steepness is starting to wane.
Seasonal Snapshot: Positive tone in all three patterns tops out on 19March.
Yen: 08Mar The stall at previous highs has continued with more negative action. Today’s action leaves the Yen with it’s next to lowest settlement. With the time spent consolidating recent losses, though, it’s likely this sets the Yen up for another material move lower. Some secondaries still remain positively biased, however.
We leave Tuesday’s comment in place to provide context.
Yen’s sizable move to the upside may get traders excited. Heck, even we’re touting a seasonal trade possibility (see below). However, when viewed within the context of the last several weeks’ action, this looks less like a turn than volatile action within a consolidation pattern. While our Technicals certainly are shifting to a less negative bias, it’s still got a falling Trend, falling Momentum, and RSI is still Oversold.
Without a breakout above the 125 level, this remains in a negative pattern.
As we stated above, there seems to be a story developing of both a seasonal and Technical bounce being touted. Yen is by far our most negative USD denominated FX contract and yet it’s showing some signs of a turn. However, this is likely to be short-lived and may show up as a pausing pattern that plays out with lower action as it completes its pattern.
We focus readers’ attention on the upcoming fiscal year repatriation dynamics, typically supportive of the Yen. Please see Seasonal notes below. If our Rate of Change continues to rise, this warrants attention. Protect profits if short.
Seasonal Snapshot: All three patterns are in a consolidation phase until a turn higher on 10Mar. The upward bias is more pronounced in the 5yr pattern.
Petroleum: 08Mar Our Technicals indicate a negative tone despite the positive tilt of late. However, the chart pattern seems to be taking on a bullish pennant pattern. Testing and holding (so far) above the rising 21 DMA . If it fails to hold, a sustained move below targets the lower Bollinger Band at 101.60, which also aligns with the late Jan highs. The bullish pennant story would align with all the war talk coming out of the Middle East.
The Products’ technical picture has been more negative of late, as Crude has tried (and failed) to hold on to a rising Trend and positive Momentum. All three markets we track have “middling” Overbot/Oversold measures, so there is plenty of room to move here.
The secondaries on Trend are positive notes as is Heating Oil’s rising RSI.
As we have been noting, a wider view shows all of our Petro 200-day Moving Averages are turning higher. Our Volatilities remain Low /Very Low, but are starting to perk up. Explore option purchase strategies.
Seasonal Snapshot: After a brief pause, all three Petroleum contracts’ patterns reinstate their upward bias around 20Mar until the end of April.
NatGas: 08Mar With Winter’s weather essentially nonexistent in the NatGas usage region, the negative action continues. Today’s action tested, and held, our noted support at 2.25. Clearly in the Oversold area of 16, it’s not clear if there is anything other than material cutbacks in production that can keep this commodity from truly collapsing. It will likely take more time and a further sell-off to materially change the supply/demand dynamic.
Resistance will now show at 2.50.
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. NatGas’ previously High Volatility is now in the Average range and falling.
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 with a brief pause in mid March.
08Mar Attention turns to the June contract. The sector shook off a disappointing Claims number with upward revisions and squirted higher today. SP & NASDAQ have retaken their 21-day moving averages after probing briefly for the first time since early December. Both are flirting with their upper Bollinger Band, as well. That said, Volume remains anemic ahead of Payroll Friday tomorrow. Forecasts call a 200k addition
Our Rate of Change indicator has flipped back to rising. Open Interest has come off a bit on recent weakness and bears watching. Incidentally, NASDAQ’s figures are the highest we have seen since May 2007.
If this year’s rally can reimpose itself, the Dow is poised for a nice move as its RSI isn’t as overextended as the S&P and NASDAQ.
Our Momentum indicators remain negative, holding on to their most protracted negative period since last November’s decline. The difference last time was that October rise and subsequent fall, in November, were MUCH steeper. Overall Volume is starting to ramp up higher, pointing to more weakness ahead.
A sustained break of these averages may target a “swing” back to their lower Bollinger Bands for starters, then the lower end of the mid-Feb congestion:
Mar SP 1337; 1330
Mar Dow 12760; 12700
Mar NASDAQ 2526
*While it is still very early, it is also interesting to note that a Fibonacci retracement of the October-March SP and Dow rallies comes in right around their 200-day moving averages: SP 1254 and Dow 11965. NASDAQ’s dynamics are different, when September’s weakness failed to make a lower low relative to mid August (1972).
Seasonal Snapshot: All three patterns for all three of our tracked markets are in a consolidation period until 19Mar or so. The 5yr is more volatile than its 15&30yr counterparts.
The 5yr patterns of all three markets then enter a pronounced upward bias until early May. The 15&30yrs follow suit, but are not nearly as steep.
08Mar Today’s action flies in the face of the day’s risk-on bias and reports of a positive bias coming out of widespread drought conditions. However, it’s likely any actual positive bias may reimpose itself after tomorrow’s Supply/Demand report. Look for indications after the 7:30 AM Central release.
Be on guard for the current negative seasonals in short-term patterns, specifically noted below.
Corn: 08Mar Early positive action gave way to covering ahead of tomorrow AM’s report. The last week’s trading has expanded the Bollinger Bands somewhat. Today’sa ction took Corn below the important 6.50 support and is close to testing the last month’s lows in the mid 620s.
Technicals remain negative.
Weakness through the 16Feb low (and rising trend line support) at 6.25 targets the 18Jan low at 6.00.
Seasonal Snapshot: The 5-Year pattern heads materially lower until March 16th. 15 and 30-year patterns trend sideways to modestly higher until March 14th. All 3 patterns bounce on March 16 for a 2-day rally peaking on March 18th.
Soybeans: 08Mar While ‘Beans have fallen materially in their degree of Overbot, they remain so. Secondaries are falling, but the Primaries remain positive. Additionally the pricing keeps chugging higher. Volume was indeterminate today. Watch tomorrow’s report.
Volatility is low and falling. Look for Options buying opportunities, whether entering anew or protecting longs.
Seasonal Snapshot: Divergence in the May contract: the 5yr pattern falls until 15Mar while the 15&30yr patterns exhibit modest strength until early April.
Wheat: 08Mar Wheat’s action remains similar to Corn, but much more regular in its range trading. Currently sitting near the lows of the range of action going back to bottoming action in late November 2011. Technicals remain firmly negative. Today’s Volume lacked conviction; not surprising given tomorrow’s report.
More weakness targets the 21Feb low at 6.28, then the 19Jan low at 6.14.
Seasonal Snapshot: The 5-year pattern is in a long negative bias until April 1. The 15 and 30-year patterns are in a shallow downward bias until March 15.
08Mar Negative action in reaction to the “improving” news flow out of Europe. Still largely range-bound trading going back several months with Bollinger Bands basically neutral today.
That said, this sector’s price structures have not been able to sustain any breaks outside of them. This underlines the chronically low Volatility environment we have been noting for some time and puts us on guard for a violent break out. In keeping with this theme, Bonds have been in a symmetrical triangle formation since the beginning of winter bound by 143-06 to 140-00.
The 10yr’s action appears to be more of an ascending triangle bound by 132-11 to the upside and rising trend line support at 130-20.
With the investment/trading landscape leaning to risk-off assets, Treasuries, not surprisingly, have again become the darling product. In addition to the risk-off dynamic, there has been a shift to Treasuries simply because there are so few AAA rated products available.
With the emerging European recession, a slowdown in China, and other signs of global economic malaise, the bid up nature of many of the products we track has come under pressure. This is against a backdrop for Treasuries of longer-term range trading at extremely low interest rates.
Seasonal Snapshot: Looking at the June contracts. While the Bond and 10yr’s 15&30yr patterns consolidate, the 5yr pattern is in an up trend until 21Mar.
The 2yr has a strong, upward bias in all three patterns until early March, then consolidate in broad fashion before heading back lower 17-27Mar.
Gold: 08Mar Gold fell to, tested, and held (so far) the still rising 200 DMA. Today’s action, though is far from clear in its bias. Within the context of the last week+ post crash trading, today’s high is still a lower one in a series of highs going back to 3/1. The key spot here is the key psychological round number at 1700. 1706.5 is another key spot as it was a twice tested low about a month ago. Technical bias remains negative but the secondaries have bounced.
We remain troubled by Volume. No matter how you slice it, it has been much stronger on weakness than it has been on strength:
· Short-term charts show stronger numbers on the down moves.
· Tuesday’s $30 sell off registered around 235k contracts vs. mid 100k’s the two previous days.
· Last Wednesday’s $100 plunge saw 340k contracts traded, more than double the numbers for the previous week.
· Yesterday’s and today’s Volume showed below 180k contracts, back to well below the 200K level.
This puts us on alert that Gold may not be “out of the woods” yet. We also focus readers’ attention on the negative seasonal dynamic noted below.
We remind readers about last December’s action. After trading well above for a long time, the market fell to the 200-day moving average (1625) and kept going… to 1565. Our Oversold measure plummeted to 12. Our current Oversold measure is 28, as of this writing. If looking to “bottom fish”, watch the current 200-day moving average (1676) to buy strength back up through it, but KEEP RISK CONTROLS TIGHT. Otherwise, pay close attention to our Rate of Change for signs of a potential turn in the current negative Momentum and Trend.
A failure through this general area initially targets psychological support at 1650, then 1600. Rising trend line support that goes back to October 2008 comes in at 1590 or so.
The psychological 1700 level and the (now falling) 21-day moving average (1735) should offer near term resistance.
Seasonal Snapshot: The 30yr pattern points down all the way until the end of March. The 15yr pattern point modestly lower until 17Mar, when it joins the 5yr’s consolidation well into April.
Copper: 08Mar the current bounce off of yesterday’s lows has may testing both the declining 200 DMA and now declining 21 DMA. Technical bias remains clearly negative and RSI Oversold And falling is a warning to longs.
We continue to view the recent failure to make a new high as a negative. A lower low (370.25 on 17Feb) lies just below current levels. Our Momentum indicator never went positive and all of our technical indicators now point down. The recent topping action has muted what were developing Overbot conditions.
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: 08Mar Modest pressure remains on the sector, awaiting Payroll Friday. Watch the US Dollar tomorrow for an inverse reaction in Softs.
*We call readers’ attention to strong seasonal dynamics in Cotton and Sugar, as well as a weaker dynamic in Coffee.
Cocoa: 08Mar Unable to sustain a move below rising trend line support near 2225, Cocoa probed back up to its upper Bollinger Band today.
Weakness targets the previous low at 2144. A key inflection point runs through about 2260 with pricing ranging around it by about 20 points. Look for the market to sustain a break below that level, consistent with breaking the aforementioned trend line, to indicate more negative pressure.
Seasonal Snapshot: All three patterns show choppy consolidation until mid-March.
Coffee: 08Mar See saw type day to essentially settle in a Doji Candle, indecisive day
Watch if the market can retake the falling Trend line, now at 193.20. If consolidation fails at this level, look for a possible rout and collapse as hot funds money exits positions en masse.
The 200-day Moving Average has been falling since late November.
*Roasters should look to take advantage of low (but rising) Volatility to investigate option strategies to protect upside risks. Pleas refer to the link on our web site for more information:
Seasonal Snapshot: Strong downward bias in the 5yr pattern while the 15&30yr patterns consolidate until 16Mar when they, too, join in the weakness.
Cotton: 08Mar Modest pressure despite today’s weak US Dollar.
With the effects of India’s Cotton export ban decision confusion washing through this volatile market, the longer term negative Technicals seem to be imposing themselves and RSI sits in the middling range.
May Support should come in at Friday’s low of 8780. 9180 is a good spot to see resistance.
A return to the negatively biased bear flag projects a move down to the 85.50 level. Below this, the previous 14Dec low at 84.25 would be in jeopardy.
Seasonal Snapshot: Strong downward bias kicks off in the 5yr pattern first (05Mar) and is followed by the 15&30yr patterns (11Mar) and lasts well into the May contract’s expiration.
Sugar: 08Mar A negative bias continues to impose itself. Even with a modest Crude rally, this market’s early positive action was rejected and selling left it down on higher Volume. The Volume added to the failure to get above the 21 DMA in confirming the negative bias. Today’s move takes May into the upper region of the consolidation area from early/mid February. Look for support near 2365. 2450 is the overhead resistance.
Our notes about a potential violent move and expansion of extremely constricted Bollinger Bands may be coming to fruition. Pay particular attention to our seasonal dynamic noted below.
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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Past performance is not indicative of future results.