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Old 11-05-2012, 02:59 PM
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Providio’s Daily Futures Market Commentary for May 11, 2012

10May A relatively quiet US Dollar seems to be leaving the individual markets to their own devices, whether fundamental (Cotton) or technical (Cocoa).

Cocoa: 10May An increase in Volume gives some validity to the positive action, but the probes lower have us concerned. The technicals are biased somewhat higher but the chart itself looks worrisome. The declining trend line drawn from the peak on 1/27 has shown itself to be a formidable resistance level as July has failed to break out above there numerous times in the ensuing 3 ½ months. With this declining level also forming a well-defined channel, a declining set of ranges has been in place.

We show our STD bands contracting. This may presage another move lower as the channels’ upper limit imposes itself. While Momentum and RSI remains rising, Trend and ROC are showing signs they are turning lower.

The July contract has found resistance at our noted falling trend line resistance (now 2363) from the 27Jan peak (2519). More weakness indicates another failure and would keep the falling channel in place, bound to the downside by 2000.

Our Volatility measure has resumed falling, now below average.

Seasonal Snapshot: The 30yr pattern consolidates before falling on 22May. The 5&15yr patterns are falling until 13May.

Coffee: 10May Very modest strength this morning has the July contract back up to the falling 21-day moving average (177.90). Yesterday morning’s probe lower marked another new low (172.20) and continues the chronic pattern of lower lows and highs. That said, the market did get a whiff of the –2STD (171.50) below the 21-day moving average, found support, rallied and settled unchanged.

Besides sustaining a break out above the average (which it has not been able to do since early Jan), the market has yet to take the next big step and make higher highs. July needs to get and stay above 184.00 to give this a shot of developing into a more bullish scenario. Rising Vietnamese exports and more speculation of a record crop are all adding pressure to the market.

That said, certified stocks at the ICE continue to drop….

Seasonal Snapshot: The 5yr pattern has a choppy, upward bias until 01June. The 15&30yr patterns consolidate before heading higher on 15May.

Cotton: 10May Record high USDA-estimated 2012-2103 world stocks are adding pressure to the now quite Oversold July contract this morning:


Our noted +-2STD Bollinger Bands are expanding and Volatility has risen to average levels.

The July contract is now below the falling –2STD (now 84.90) below the falling 21-day moving average (89.20). The current break out below the 16Apr low (86.55) is testing our noted 14Dec low (84.01). A probe below this low yields to a slippery slope in the July contract down to the Nov 2010 low (81.90)

Volume continues to increase this latest bout of weakness. However, watch the developing Oversold conditions (currently 13 vs. 12 on 14Dec)

Our Momentum indicator is sustaining last Thursday’s flip negative after being unstable throughout the last month-and-a-half’s consolidation.

Chinese demand is said to be ramping up, which has been supported by recent export numbers.

Bulging carryover stocks, increasing global production and an early start to planting are all downside risks.

Seasonal Snapshot: The July contract’s strong downward bias in all three patterns lasts well into May.

Sugar: 10May A potential second Doji Candle day indicates indecision after a month of heavy losses. This pause is occurring at the May 2011 lows where the continuous contract found substantial support and puts the market at a very interesting spot.

Our Momentum indicator is on the cusp of going positive in reaction to a trending higher Rate of Change indicator. Our Oversold indicator is heading back to the downside again after topping out at a lower higher (35 on 08May). If Sugar fails to sustain any move higher from here, we expect another round of lower lows, continuing the trend.

We feel the short side still seems to be the place to be in Sugar right now (see below).

On that note, we remind readers that the market broke below the lower boundary (21.95) of a large descending triangle on 19Apr. The ultimate projection would be to the 17.00 level. A large spec long open interest and ample supplies keeps the market vulnerable to more weakness. A backdrop of rising supplies and bumper crops is another downside risk.

Seasonal Snapshot: The 5-yr pattern continues a choppy downtrend until early June. The 15 and 30-yr patterns move higher until mid-May.

Currencies: 10May Lack of additional negative news from Europe has markets consolidating and in some cases rebounding modestly. Most of the currency markets are close to unchanged. Aussie’s ability to rebound despite weak Chinese data is noteworthy.

10May Today’s material Aussie rally is impressive if for no other reason than it I occurring in the face of the crummy Chinese trade data. However, the rally merely rebounded the Aussie up to levels where it found modest support on the way down on Monday and Tuesday.

Yesterday’s pressuring of the –3 STD under the 21-day moving average has abated. It’s back to hugging the –2 STD. The technicals remain quite negative. Despite the bounce, its chart remains in the same pattern that has seen the Aussie fall relentlessly for 2 weeks.

We reiterate the comment we made regarding the technical measured move we are seeing as a possibility if the market plays out a bearish flag follow through.

Longer term, it appears the Aussie may be looking at another material move lower. There is the break below the bear-flag in chart action and the 200-day moving average has rolled negative.

If the break below off the bear-flag plays out, classic analysis calls for a move of approximately .0600 points lower from near the break out point of 1.0240-1.0250. This would target somewhere in the area of 0.9650. This is very near the lows from 11/22/2012.

All our technicals point to a clear negative bias that is accelerating.

Volatility remains in the low average range but is rising.

With indications of slowing economic activity in Asia, the Aussie is likely to remain under some pressure.

Seasonal Snapshot (cash): The 5-year pattern has a negative bias until 26May.

The 15&30yr patterns chop higher until 10May, then both fall out of bed throughout the rest of the month.

10May The British Pound has stopped its severe downside probes, but that doesn’t mean it has reversed and headed higher. It remains in a negatively biased pattern, failing to get back to Tuesday’s highs, and currently having failed to maintains its price above the 1.6155 bottom put in on 5/3 and 5/4. With the Trend indicator having turned lower, Momentum just at the beginning of its run in negative territory, and RSI still falling and now below 50, this market’s negative bias remains formidable.

We look for support 1.6110, 1.6075, and 1.6050. We see resistance at 1.6160, 1.6185, and 16200.

Seasonal Snapshot (cash): All three patterns have a quite negative bias until the end of May.

10May The Loonie is stuck in consolidation like many of he other currencies. Yesterday’s possible bullish hammer is not showing signs of playing out at this time. The negative technicals, however, remain pointing South. One again, this market ran into the –2 STD below the 21-day moving average and bounced. Support is seen near .9950, at about the 200-day moving average. Additional support is seen near .9930, where it bounced from yesterday and maintained itself above since late January. We see resistance at 1.0010, near today’s highs, and then 1.0050.

We note that since peaking on 4/30, it has experienced the largest decline of the year. Its entire directional indicator set is pointing lower .

Our overextension (Oversold) indicator shows a steep decline since peaking in the Overbought column on 4/27.

Seasonal Snapshot (cash): All three patterns have a choppy, negative bias until 26May. The 30yr’s is more protracted than its shorter-term counterparts.

Dollar Index: 10May Like other currencies, the DX is set in consolidation today. After the recent rapid run up, this is not unexpected. Especially o, given the market has run into the +2 STD over the 21-day moving average. Technicals are all pointing higher, ad the RSI is quite Overbought at 84. Watch today’s chart pattern, as there is a possibility of a bearish hanging man forming.

The market is currently holding just below the 80.35 resistance. Next resistance at 80.60, then 80.75. We see support at 80.00. Below that we start seeing gaps getting filled.

We see several stopping points on any move down: 21-day moving average (79.485); -2STD (78.66) below the average; 200-day moving average (78.478).

Bigger picture, we remind readers of our past comments:

“Watch for any evidence the Dollar is not the safe haven under crisis market conditions. This would change existing assumptions dramatically.”

Seasonal Snapshot: All three patterns peak in mid-May. The 15&30yr patterns then consolidate in choppy fashion until the end of the month. The 5yr declines during this period.

Euro-FX: 10May The Euro has and probably will probably remain under pressure so long as the political crises continue to roil the Euro-zone.

Today’s action, while not falling does little to change the negative technical picture. Indicators point down and today’s action is setting up as a straight consolidation. Additionally, it has been unable to get back above the –2 STD below the 21-day moving average.

We show support at yesterday’s low, just above the 1.2900 psychological support. Below that, the –3 STD is at approx 1.2880 today.

It looks as if the long-range trading period may be over and may be seen as a 3 ½ month-long pennant. This would set the Euro up for a more material move down. A story we saw on the wires today indicated traders might be looking at the Euro falling to 1.2300. We counsel our readers to remember that any move of that magnitude will not be in straight line. Always use appropriate risk controls AND be willing to change your mind.

We leave some of Tuesday’s comments in place for context into our views and opinion.

As we noted last week, the action for several months can be characterized as several weeks of building Euro strength followed by several days of violent falling action. Each move lower has been preceded by a turn in our Momentum indicator. The last several days have been no exception. The currency is also flirting with historically Oversold conditions (currently 24 vs. 23 on 06Apr).

Our longer-term view, however, has the currency in a large consolidation range, specifically into a symmetrical triangle that extends back to early Feb, bound by 1.3000-1.3300. Last night’s decline probed below the lower boundary, but the market has since recovered this level.

Seasonal Snapshot: All three patterns decline until mid-May, when the 5&15yr patterns consolidate. The 30yr pushes lower until the end of June.

10May The Yen continues to retain its safe-haven status as weak global economic news casts a bit of a pall over risk-on markets. Today’s negative action has the June Yen falling back into an area where it struggled some o the way up. Support is seen at 12500. Resistance is seen at 12560. We see additional support at the old 1.2460 resistance.

The question is now before the market of when does the BOJ come back to the table as the Yen is rising to levels the BOJ does not want to see. With the BOJ on record as looking to weaken the Yen, when does it intervene?

Seasonal Snapshot: Mode TO vo roist weakness in all three patterns will turn positive for a week on 1May, then consolidation into the first part of June.

Disclaimer: A commodity and currency report brought to you by Providio Trading Consultants, Inc. There is risk 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.
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