In fact, the "shorter and shallower" rally that we noted last Wednesday did not really materialize at all overnight. Apparently, there is a small problem with the constitutionali ty of what the Euro Zone Finance Ministers are trying to do:
The European currencies continue to sag toward recent lows and their -2STD below the 21-day moving averages.
The "Commodity Currencies" (Aussie & Canadian) are in the lower half of rising channels that have been in place since early June.
Support: 1.0142: 20June high
1.0075: Rising 21-day moving average
1.0050: Lower end of rising channel in place since 01June
1.0000: Psychological level and 50% retracement of the late April to early June decline.
0.9880: -2STD below 21-day moving average
0.9565: 01June low, traces back to support from last November.
Resistance: 1.0210: 200-day moving average
1.0270: +2STD above 21-day moving average.
1.0280: intermediate resistance at high trade area from 4/3, 4/12, and 5/1
1.0300: Psychological level
1.0325: Late April highs for September contract.
1.0430: Upper boundary of rising channel in place since 01June.
1.0422: 27Apr high.
Comment: Slowing Rate of Change and slowing Momentum as the gently falling 200-day moving average, which has offered resistance and rising 21-day are on a collision course.
This week's Housing and Labour surveys are just ahead.
Interestingly, and similar to the US Equity Indices, the Aussie has been in a rising channel since making the 01June recent low. A probe below the lower boundary (1.0050) targets support levels noted above.
Seasonal Snapshot (cash): The 5-year pattern's upward bias extends until the end of July.
The 15&30yr patterns fall out of bed throughout the rest of the month.
Support: 1.5500: Psychological level and support level since 6/13
1.5440 -2STD below 21-day moving average
1.5267: 01June low
1.5222 09Jan low
1.5179: Oct 2011 low
Resistance: 1.5600: 21-day moving average.
1.5745: 200-day moving average
1.5760: 20June high and +2STD (1.5770) above the 21-day moving average (1.5599).
1.5800: Psychological level and support from late March through mid-April. This is also near the 50% retracement of the late April thorough late May sell-off.
Comment: A disappointing RICS Housing number has offset a better than expected Industrial Production release and has the Sterling modestly lower as of this writing:
Our Momentum indicator went negative this morning after the recent failure to break out above 1.57. Volume has been low since last Thursday's sell off.
That said, the Sterling has found intermediate support at the series of recent lows going back to mid June (1.5450).
Seasonal Snapshot (cash): The5&30yr patterns consolidate and the 15yr tracks lower until an upward bias imposes itself on 05July and lasts until 25July.
Support: 0.9775: 21-day moving average.
0.9663: 12June low and lower boundary of rising channel in place since 01June
0.9665: -2STD below the 21-day moving average 0.9554: 04June low
Resistance: 0.9805: 38.2% retracement of the May to June decline.
0.9880: 200-day moving average and +2STD above 21-day moving average.
0.9885: 05July high.
0.9900: Upper boundary of rising chanel in place since 01June.
0.9935-0.9945: Low of Feb-Apr consolidation.
Comment: The Canadian did get a small pop from better than expected Housing starts (with upward revisions), but has settled back into a quiet consolidation since.
We still see a convergence of technical levels that are offering resistance. The Canadian is also displaying similar action as the Aussie, but inside a shallower rising channel. The upper boundary of which was also the 200-day moving average and our noted 50% retracement of the early May to early June decline.
Seasonal Snapshot (cash): The 5yr decouples from the longer-term patterns and continues higher until 25July.
Support: 82.35: 21-day moving average
81.15: -2STD below the 21-day moving average and 15June low
81.025: 21May low
79.85: 200-day moving average
Resistance: 83.60: +2STD above the 21-day moving average
83.67: 01June 2012 & 23Aug 2010 high high.
88.80 07June 2010 high.
90.35: 38.2% retracement of the July 2001 to April 2008 decline. The market came close to this level twice: Mar 2009 (89.71) & June 2010 (88.80)
Comment: Last Thursday's material technical shift toward a positive bias remains in place. A sustained break out above the early June highs needs some Volume, but should target the 85.00 level.
We remind readers that downside risks include plenty of gaps to fill all the way down to 79.615 (04May).
Seasonal Snapshot (cash):
: All three patterns exhibit a positive bias until15June. Then the 5yr's weakness until early Aug is much more pronounced than the 15&30yr's consolidation with a downward bias.
Support: 1.2285: -2 STD below the 21-day moving average.
1.2266: 09July low
1.2000: Psychological level
1.1874: June 2010 low
Resistance: 1.2400: Psychological level
1.2535: 21-day moving average.
1.2750: 18June high.
1.2780: +2STD above moving average has offered solid resistance for recent action
1.2826: 21May high.
1.2990: Falling trend line resistance from the May 2011 highs.
Comment: The Euro Zone Summit yielded another "Extend and Pretend" announcement where Spain has been given another year to get its fiscal house in order:
The market is balking.... Slightly. To this end, the Euro is riding the plunging -2STD Bollinger Band to the downside, a cause for concern if you are looking for lower prices in the short-term. However, even though our Oversold measure currently registers a 25, it is still a long way from the extreme single digits we saw throughout May-early June. If this long-developing shift has indeed turned and there is Volume behind a break out below the previous lows, we may see a test of much lower prices.
Keep risk controls tight.
Seasonal Snapshot (cash): The 5&15yr patterns consolidate before heading higher on 15July.
The 30yr drifts down until joining its shorter-term counterparts on 11July.
Support: 1.2577: 21-day moving average.
1.2456: -2STD below the 21-day moving average
1.2435: 16May low
1.2415: 25June low
1.2233: 20Apr low
1.1879: 15Mar low
Resistance: 1.2680: 200-day moving average.
1.2700: +2STD above 21-day moving average
Comment: Tuesday night/Wednesday morning features the BOJ decision on rates. They were expected to hold rates steady, but that may change with recent weak data... We leave last week's comment in place, but the negative "bend" in effect seems to be continuing.
The Yen is still struggling with resistance at the now falling 21-day moving average. Our Rate of Change is showing signs of topping out after rising for six straight sessions, indicative of the recent consolidation. Our Momentum indicator is still negative for the time being, a product of the recent "risk-on" dynamic which typically pressures the low-yielding Yen.
Seasonal Snapshot: All three patterns consolidate with an upward bias until 20July.
10July The sector is on its heels a bit this morning after the Norwegian government ordered arbitration to settle the oil workers' strike that was scheduled to start at midnight last night. China, the world's second largest consumer, also saw imports drop to the lowest levels since December:
The recent wide consolidation range after the 28June rally has served to take all three of our tracked markets off historically Overbought conditions and has us watching this week's foreign economic calendar focusing on European and Chinese Industry and GDP. US domestic "FedSpeak" may also give a clue about more stimulus that may be in the work.
Volatility remains Very High across the sector and Volume has fallen off ever since the 29June rally.
Watch all three of our Petro markets' 21-day moving averages for support. It is interesting to note that this average offered major resistance throughout the decline since April.
Support (continuous contract): 84.00: 06&09July double bottom.
83.05: 21-day moving average.
81.20: 21-28June consolidation highs
77.40: -2STD below 21-day moving average and 28June low.
75.71: 09Aug 2011 low
74.95: 04Oct 2011 low
Resistance (continuous contract): 87.00-86.60: June consolidation highs
88.70: +2STD above 21-day moving average.
89.30: late May consolidation lows.
89.90: 38.2% retracement of the March to June decline.
93.85: 50% retracement of the March to June decline.
Comment: A weaker, but still an "inside" day, as of this writing. Watch the double bottom formed Friday and Monday around 84.00, then the 21-day moving average at 83.00.
French Industrial Production was weaker than expected this morning, but Italy and UK's were stronger. Chinese and the European region as a whole reports on Thursday loom large ahead. Forecasts call for Chinese numbers to improve and the EuroZone to worsen. Weak releases will probably only serve to heighten speculation about more potential stimulus. However, Crude has not reacted with the Equity Indices' vigor to such news.
Our Momentum indicator remains positive, sustaining its 14June positive turn after briefly flirting with going negative, but our Rate of Change indicator is in a three-day decline.
Our Volatility measure has propelled to Very High levels and should handicap any option purchase strategies.
Seasonal Snapshot: (cash contract): All three patterns consolidate with an upward bias until a culmination high on 15July.
Options Last Trade: July: 26June; Aug: 17July; Sep: 28Aug; Oct: 25Sep; Nov: 26Oct; Dec: 27 Nov
Aug Support: 2.6950-2.7000: Lower end of the recent consolidation range.
2.6420: 29June high.
2.6045: 21-day moving average
2.4090 -2 STD below the 21-day moving average
2.4408: 21June low
Aug Resistance 2.8000: +2STD above the 21-day moving average.
2.8275: 38.2% retracement of the March to June decline.
2.8350: 200-day moving average.
2.9260: 50% retracement of the March to June decline.
Comment: Today's Doji Candle indicates indecision on this consolidation of the 29June rally above the 21-day moving average, which offered consistent resistance all the way down since early April. The rally has been capped at our noted +2STD above the 21-day moving average, for now.
These Bollinger Bands are still expanding widely, so this consolidation may be showing signs of exhaustion for the rally.
Gasoline supplies are below the lower limit of the average for this time of year and may, along with the official start of the summer driving season, be supporting prices.
Seasonal Snapshot: (cash): The 15&30yr patterns drift higher until 12July. The 5yr pattern drifts lower until the end of July.
Aug Support: 2.7030: 06&09July double bottom.
2.6488: 02July low.
2.6455: 21-day moving average.
2.5085: 25June low
2.4980: -2STD below the 21-day moving average.
Aug Resistance: 2.7930: +2 STD above the 21-day moving average.
2.7900: 05July high.
2.8170: 38.2% retracement of the March to June decline.
2.9175: 50% retracement of the March to June decline.
Comment: Similar to RBOB, Heating Oil is in a consolidation pattern since the 29June pop above the +2STD above the 21-day moving average. It does, however, have a slightly more negative bias inside this recent consolidation, essentially splitting the difference between the more Overbought RBOB and "middling" WTI Crude.
Seasonal Snapshot:(Cash) The 30yr pattern's weakness decouples from the stronger shorter-term patterns (until mid-July) and continues lower until mid July.
Aug Support: 2.785: Rising trend line support since 14June rally.
2.70: 21-day moving average.
2.53: 06June high. Old resistance/new support for the 15June low.
2.215: 14June low
2.32: -2STD below 21-day moving average.
2.175: 20Apr low
Aug Resistance: 2.885: Mid May peak
3.07-3.08: +2STD above 21-day moving average and 200-day moving average.
3.315: 38.2% retracement of the June 2011 to April 2012 decline.
Comment: The tug of war may be coming to a close, on a technical level. Today's lows again tested rising trend line support that extends back to action after the 14June pop higher. Although it has probed above several times. the August contract is also still struggling with the mid-late May peak around the 2.90 level. One side has "gotta give"...
Friday's action revealed a bearish engulfing Candlestick pattern, on moderate Volume, indicating a potential reversal of recent gains may be in store.
This wide consolidation has our Overbought indicator (64) now "middling" and looking for direction. Our Rate of Change indicator is in its third day of decline, showing signs of leveling off and dragging on our positive Momentum.
Recent above normal temperatures are projected to last for the foreseeable future, serving to increase cooling demand supplied by natgas turbines. This speaks to bulging supplies and turns attention to Thursday's storage report, expected to show a smaller injection to storage.
Seasonal Snapshot: All three patterns chop lower, then higher before starting a period of protracted weakness from 16June-22July.
METALS: Options Last Trade:Aug: 26July; Sep: 28Aug; Oct: 25Sep
10July We were stopped out of our Sunday night Gold short at a small loss. We will look to re-short at our noted falling trend line resistance, currently at 1617. Support 1554.8: -2STD below the 21-day moving average. 1551: Rising trend line from the 15May low (1529) 1525-1530: Horizontal trend line that extends back to the previous low (26Sep 1532.7). 1500: Psychological support 1478.3 to 1462.5: Cluster of lows between 02May & 27June. 1456.8: 38.2% retracement of the Oct 2008- Sep 2011 rally Resistance: 1597.8: 21-day moving average. 1600: Psychological level. 1617: Falling trend line in place since the $90 drop on 29Feb. 1641.2: +2STD above 21-day moving average 1666: 200-day moving average Comment: Gold is modestly higher early this morning. Our Momentum indicator is still on the cusp of going negative again. Our indicator's instability of the two weeks speaks to the consolidative-type trading action. More weakness targets important support in the low to mid-1500's, particularly the lower boundary of our giant descending triangle. The formation extends back to the Sep 2011 high (1923.7). The upper boundary currently comes in around 1705. The bounce off our noted support level at the 26Dec low (1523.9) forms our horizontal trend line noted above and the lower boundary of the triangle.
Seasonal Snapshot: All three patterns are in sync for the next month: rising until 20July, then falling until 31July.
First Notice: Sep: 31Aug; Dec: 30Nov
10July Support (continuous): 3.3950: 21-day moving average 3.2585: -2STD below the 21-day moving average has acted as a brake. Also rising trend line from the June 2010 low (2.7200) through the Oct 2011 lows (299.40) 3.2380: 04June low 3.2325: 15Dec 2011 low 3.2040: 25Nov 2011 low 3.0915: 20Oct 2011 low 2.9940: 03Oct 2011 low Resistance (continuous): 3.4775: 18June high 3.5320: +2STD above 21-day moving average 3.5280: The 38.2% retracement of the April to May decline and also clusters around the upper end of a brief consolidation range in late May. 3.5720: 200-day moving average Comment: Copper is still consolidating last Friday's large losses, but finding support at its rising 21-day moving average. The best description we can think of for our technical indicators is "unstable", underlining the wide consolidation the market has been in since May. Additionally, our RSI is "middling". This week's US economic calendar is on the light side, but foreign releases include notable European & Chinese Industrial Production and Chinese GDP. While any market reaction to weakness SHOULD be negative, it has recently taken on the pattern of "making the case" for more intervention, goosing the market higher. The smattering of "FedSpeak" this week underlines this potential. If the market can actually probe below the 21-day moving average, watch the -2STD below, as it has served as a "brake" on weakness and aligns with the June lows.
Seasonal Snapshot: All three patterns rally until the beginning of August.
Disclaimer: The information presented in this report is taken from sources we believe to be reliable and accurate. This information is not guaranteed as to accuracy or completeness. The opinions expressed are based on our best judgment at the time of writing and are subject to change without notice. These opinions should not be construed as an inducement or advice to enter into any Futures or Options on Futures transaction except where explicitly stated. There is risk of substantial loss in trading futures and options. One's financial suitability should be considered carefully before placing any trades. Past performance is not indicative of future results.
Related to Providio's Daily Futures Market Commentary for 07/10/12