Providio's Daily Futures Market Commentary for March 23, 2012
Euro-FX: 22Mar[/B] 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.
Seasonal Snapshot: All 3 patterns are entering a period of profound downward trends until April 7th.
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.
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:
Seasonal Snapshot: All three patterns consolidate until they resume their down trend 05-16April.
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