14Mar With the US economic situation apparently stabilizing and Europe’s much less certain, the chances of further US Fed easing are receding. As such, with higher implied US interest rates, the Euro and dollar relationship is directionally changing. Most other USD denominated currencies are exhibiting some level of weakness related to the US economic situation as well.
The current BOJ and ECB positions indicate the extreme level of stress we maintain is still in the global economic system. Yesterday’s story of the Chinese rare-earth export restrictions is now a formal WTO dispute. Aussie:
14Mar Another day of new lows and strong Volume as the Aussie’s negative bias continues. Trend, Momentum and its ROC, and RSI are all falling. Low Volatility speaks to a market comfortable with its direction. The Aussie’s pressure can be traced to the Chinese slow down, the above mentioned trade dispute, and the US relative strength. RSI has fallen into Oversold territory.
The 200 DMA is heading largely sideways and should act as support if the Aussie fall to its level, now 1.0358.
all 3 patterns are close to entering into sustained upwardly biased pattens. The 5-yr enters into said pattern in the next day or so. The 15 and 30 yrs are both slated for a sideways bias for the next week or so before turning higher as well. British:
14Mar Early action keeps the negative Trend in place as today’s high is a 3 ticks below yesterday’s before the market headed lower. Volume, down materially today, is indicative of consolidating action to this point. While Trend and Momentum still are negatively biased, the Momentum’s ROC does show a modest shift to a less negative profile. This should be watched, as the shift is not firmly entrenched at this point. RSI bounced as well, failing to take the Sterling into Oversold territory.
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 14Mar
The Canadian Loonie is showing strength and a resistance to downward pressure in excess of the other USD denominated currencies. Its bias is indecisive with rising (but slowing) Trend and negative and peaking Momentum. Good solid Volume validates the day’s action. RSIO has rolled over. This in conjunction with our other indicators is indicating a more pronounced negative shift.
In the absence of real bias, its price has drifted higher over the past week with some weakness showing here and there.. However, unless it breaks out above the 1.0150 level, its “rally” is suspect.
The 200 DMA is still falling, but the Loonie has maintained levels either above or around it for about 2 weeks. Additionally, this level has been a fulcrum of pricing activity going back to early Feb Seasonal Snapshot:
All three patterns are positive until mid March. Dollar Index:
14Mar Positive Trend, Momentum, ROC, and rising RSI. Volatility is Low and falling. Higher prices are indicated.
Choppy consolidation in all three patterns until mid March. Euro-FX:
14Mar With the implied rise in US rates de to the FOMC statement’s effect on the US Bond market, the Euro is suffering. All indicators point to lower action.
The 200-day Moving Average remains well above and falling.
Positive tone in all three patterns tops out on 19March. Yen:
13Mar Since the bounce a bit over a week ago, the Yen has been under relentless pressure. The the BOJ’s statement that more easing is called for, the action points lower still. Seasonal Snapshot:
The 5 yr is in a pronounced upwardly biased seasonal until March 16. Upon opening for next week, it enters into a steep falloff until April 7th. The 15 yr and 30 yr are more or less sideways in action March 16, and then they too fall.
14Mar A rise in inventories (again) has the Crude market on its heels a bit. The short-term Trend and Momentum indicators we use are both negatively biased. Additionally RSI rolled over. A modest decline in Volume takes some of the steam out of today’s decline, however. ROC’s reversal and move lower indicates somewhat accelerating lower conditions. Volatility remains low and falling. Any attempts to establish short positions should probably be accompanied by some risk mitigation strategy, like a call option purchase for protection.
Testing and holding near the still rising 21 DMA
As we have noted, a wider view shows all of our Petro 200-day Moving Averages are turning higher.
After a brief pause, all three Petroleum contracts’ patterns reinstate their upward bias around 20Mar until the end of April. NatGas:
14Mar Whether yesterday’s late session reversal will hold up is still the question. Still strong Volume today, but modestly lower gives us the impression the market is trying to make up its mind. April support remains at 2.235. If this is tested and holds again, a short-term rally may be in the works, at least to 2.50. If this level proves to be too much, look for a continuation of the negative bias.
Just breaking above there, though does not necessarily mean the decline is over. There are numerous levels above that must be breached for a true reversal to be in place. Technicals generally point to lower action, but Momentum and RSI seem to be shifting to a less negative bias.
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 with a brief pause in mid March. Equities:
14Mar All indicators are pointed higher, especially after yesterday’s FOMC statement. However, with the sudden and violent move lower in Treasuries pricing and the attendant move higher in their rates, the legs of the rally started looking a bit wobbly today. Consolidation action on modestly lower but material Volume.
Trend, Momentum, and RSI all pointed higher. Momentum looks vulnerable with no material acceleration of ROC higher.
Watch the action in the next couple of days. If this is an exhaustion high, the move down could get violent.
A sustained break of the 21-day moving 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 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. Grains:
14Mar Profit taking is causing mild selling today. Unseasonably warm weather is causing speculation of early plantings for Corn.
As a point of weather market speculation, we wonder whether the very warm winter will lead to an equally warm 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.
14Mar Corn showing rough slogging above 655. A Spinning Top candlestick as the market is finding it difficult to breach the falling 200 DMA. This despite a positive Technical picture with rising Trend, positive Momentum, and rising RSI.
Resistance showing at 660-665, support near 650. 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:
14Mar Despite some modest profit taking, May Soybeans continued its 2 month-long rally. Trend shows continued strength, but Momentum has slowed noticeably with its ROC perilously close to heading into negative territory. RSI, though, has resumed its positive march higher. Volatility is now more than 2 STD below the longer-term historical average. 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:
14Mar Wheat has been trying to break out above the 21 DMA for the last week and failed to do so today. It would seem this would be an unlikely achievement as Trend and Momentum are both falling and RSI has flat lined below 50.
Wheat seems to be forming an ascending triangle pattern with last week’s lows at 633 serving as rising trend line support and capped by a horizontal trend line (686) that goes back to the first of the year. One probe above (01Feb) was not sustained. If it can, watch the falling 200-day moving average at 713 to offer resistance. Our rising Rate of Change has a ways to go before it can pull Momentum positive, but our overextension measure sits mildly negative (47 out of 100), so there is some room to run.
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.
14Mar More weakness across the entire global yield curve’s price structure after yesterday’s FOMC meeting and announcement added to the negative price behavior evident earlier in the day in response to the positive Retail Sales number. Volume was much stronger yesterday and seems to be on its way to a strong day again today. The market is entering a very interesting phase… some points of note:
While this is certainly a break out below a prolonged consolidation phase, the longer dated price structure is threatening late Jan’s Oversold levels:
Bonds: Currently 27 vs. 20 on 24Jan
10yr: Currently 27 vs 24 on 24Jan
We very rarely see these measures probe below 20. In fact, one has to go back to July 2011 to find another sub-20 level (Bonds 18; 10yr 19) and that only lasted one day before commencing a 5 ½ point rally in Bonds and 4 points in the 10yr in the span of two weeks. After that, both consolidated for about two more weeks before blasting off to the wide consolidation that has been present since early November. Before that, look at the price action in April 2011, when our Oversold measure ran as low as Bonds 13 and 10yr 16, before both started a protracted, two month rally (Bonds 10 points; 10yr 8 points)…
Watch these Oversold levels for hints. Anything in the low 20’s should put readers on notice. If this time is truly “different”, it may mean some consolidation may be needed if pricing is to push further to the downside.
We also point readers’ attention to the rising 200-day moving averages in the continuous contracts:
Mar Bonds 138-10 vs 138-23 last
10yr 129-06 vs 129-18 last
These are consistent with charting the yields, as well. These may provide some near term support.
Protect profits if short and be nimble with your stops. Additionally, this may be an opportunity for directional positions, but keep stops tight or explore option purchase strategies, as Volatility is starting to expand. That said, we remind readers of our recent Volatility comments:
With the recent low Volatility, this may be the beginning (or a harbinger) of the violent breakout we warned against; especially if the US FOMC decides the market pricing is counterproductive to its monetary policy objectives. 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 is heading back lower 17-27Mar. Metals:
14Mar The dance around 1700 is over for now as Gold plumbs well below its rising 200-day moving average (1681) and 1650 psychological support. Last week’s probe below the 200-day was not sustained, but this one may have legs similar to last December’s weakness. On that move, the market tested our long-term, rising trend line support that goes back to October 2008. This currently comes in around 1580. Watch psychological support at 1600 first. There is room to run lower, as our Oversold measure currently stands at 32 vs 23 the last time it tested (29Dec). Additionally, all of our technicals point to more losses.
We remind readers of our recent Volume comments... No matter how you slice it, it has been much stronger on weakness than it has been on strength:
· Today’s weakness is confirmed by strong numbers (215k as of 11:00 EDT).
· Short-term charts show stronger numbers on the down moves, including yesterday’s dip after the Fed’s announcement.
· Last Tuesday’s $30 sell off registered around 235k contracts vs. mid 100k’s the two previous days.
· The $100 plunge on 29Feb saw 340k contracts traded, more than double the numbers for the previous week.
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.
14Mar The 21-day moving average and 200-day have converged and are both flattening. We still feel the market is in a consolidative phase with a “topping” bias until it can break out above the 09Feb high (398.95). If it can’t, we remain on guard for the 370.25 low on 17Feb.
That said, our Momentum indicator is back on the cusp of going positive, but the rest of our technical indicators now point down. The recent topping action has muted what were developing Overbot conditions.
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:
14Mar Afternoon US Dollar strength undercut yesterday’s mild bid across the complex. Watch the negative Seasonal dynamics in Cotton and Sugar, as well as Coffee. They seem to be playing themselves out. Cocoa:
14Mar Today’s weakness threatens the recent lows (2263 on 06Mar) and pushes the market toward the lower boundary (2235) of our noted rising wedge in a falling market in place since the beginning of the year. This formation is typically bearish and, if valid, projects a move down to the low 1800’s. A break out above targets the previous highs at 2800.
All three patterns show choppy consolidation until mid-March. Coffee:
14Mar The collapse below the consolidation phase that looked more like a bear flag is still in place. The weaker action these last three sessions has the May contract sagging through falling trend line support (184.40) that goes back to March 2011. Stronger Volume on the move below the formation targets a move to 175.00. Perhaps lower, as the market is now more than 61.8% (197.25) below the rally from March 2010 (128.70) to June 2011 (308.90).
That said, our Oversold measure (now at 12 out of 100) and a very large (and rising) non-commercial short open interest pose upside risks and have us on guard for a violent short-covering rally in the offing. 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. Please refer to the link on our web site for more information: Providio Trading Consultants, Inc.
Strong downward bias in the 5yr pattern while the 15&30yr patterns consolidate until 16Mar when they, too, join in the weakness. Cotton:
14Mar More weak tone to the market . The market has been using the 21-day moving average (now falling at 90.60) to cap any rallies, after probing above the day after Monday’s limit up move, but settling back below. It has also kept in a pattern of lower highs and lows since topping out in mid Jan. On that note, watch Monday’s low at 87.01. A sustained break out below targets the 14Dec low at 84.23.
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 is tipping negative. 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:
14Mar The May contract settled a few points higher than its rising 21-day moving average at 24.34 on what may be the short covering rally we were looking for. Watch for resistance there. This strength has taken the May contract off modestly Oversold levels.
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).
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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