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Old 04-05-2012, 03:21 PM
providiotrading providiotrading is offline
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Providio's Daily Futures Market Commentary for May 3, 2012

More pressure on the economic front is in the air. The ECB’s Draghi as much as said so, despite his seeming unwillingness to push for more rate cuts. So on we go to tomorrow’s monthly U.S. Payroll Report. Why so much attention to this one report we’re at a bit of a loss lately. When the last one was a big wet blanket all we saw was a steady string of bank economists march out and tell us the number weren’t that bad, and please don’t pay attention to this one off event.
The facts as we se them are that the news, while far from the debacle in 2008, are coming in with a negative slant. This can’t be looking good to a system that requires growth and a lot more jobs than what has been produced so far. Add I the stress that the Eurozone’s recession will likely cause, and there are some real reasons to worry out there.

Currencies: 03May With the approach of tomorrow’s monthly US Payroll Report, lack of directional impetus is afoot. Our view is that foreign data has been negative and US data has been uneven with a negative bias.
The ECB decided to leave rates as it for now but states they remain supportive, even in the face of a deteriorating economic environment. US data was initially supportive with a materially lower Jobless Claims number. However, this was tempered somewhat by a falling productivity number. Later on, the ISM non-Manufacturing disappointed. Additionally, New Zealand experienced worse than expected jobs data.
More of what we said earlier, uneven, negatively slanted data.
The effect is the major currencies are not moving much in early action.
The back and forth action featured throughout this year tells us that our generally “middling” Overbought/Oversold indicators (after getting quite toasty over the last couple weeks) sets the currency sector in a vulnerable spot versus the US Dollar. More downside is definitely available.
We remind readers of our recent macro notes:


“Despite the true comments that the Euro is about to experience its first monthly decline since December, in reality it has gone sideways since the bounce off January lows. One wonders, with Spain seen as falling into its 2nd recession in 3 years, if this will change? What could be the expected effect on the risk on/off nature of trading we have seen over the past 6 months? Is the US really a bastion of safety or merely the last place left to hide? How safe can the US really be when one considers the data we see as indicating a serious slowing of the “growth” story? Action should start waning as the week progresses as the US Monthly Payroll report is coming on Friday.
The real question is what is the next move by the “authorities” to stave off collapse? QE 3 has been floated as a possibility by the US Fed, and ECB functionaries have been using their LTRO and other tools to deal with a steadily growing sea of European sovereign red ink.
This further supports our common theme of the push-pull of the European and American debt/economic situations trading places on the front burner.
Risk-off trading will still tend to favor the USD and Japanese Yen.”

Aussie:
03May Our falling Rate of Change may be a session or two away from pulling our Momentum indicator negative (on a continuation basis). Longer term, it appears the Aussie may be looking at another material move lower. With the RBA dropping their overnight funding rates by 50 BP, this is not surprising.
Looking at the chart, it looks like a bearish flag is developing and the Aussie is poised to break out to the downside.
If this plays out, look for a move lower of between .0500-.0650. The flag as we’ve drawn it would break out just below 1.02, which would target an area from .9550-.9700. There are a number of sell-off lows in that area to provide support.
Our technicals point to likely lower action with Trend having turned lower, Momentum and ROC about to, and our RSI headed down. Our support at the –2 STD below the 21-day moving average comes n at near 1.0165.
We see resistance at Friday’s settlement and the +2STD (1.0400) above the 21-day moving average. This level also traces back to mid-March’s decline. We emphasize the fact that there has been exactly one settlement and only 2 probes above this level since.
Stay attuned to directional indications for global trade, especially out of Asia, as that is what Australia’s economy depends on as a commodity exporter.
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.

British:
02May Sterling is exhibiting some evidence of consolidation, as several month highs and general Euro-zone weakness are digested. General peaking action for the past week or so has he Pound pressuring the 1.6150 support level. This traces back to mid-late April and the move higher and has shown as reliable support since bouncing on 4/27. If this sets up as a consolidation before moving higher, the developing chart would target a move higher by approximately 0.045-0.050 from the break out. If it falls further, look for support near 1.60
The 200-day moving average (1.5841) continues to exhibit generally flat behavior.
Seasonal Snapshot (cash): All three patterns have a quite negative bias until the end of May.

Canadian : 03May Very modest movement today as the Loonie waits for tomorrow’s US Jobs report. Recent action indicates either a consolidation before more action higher or a move to a more negative bias.
Trend is still pointing higher but Momentum has been decelerating for about a week. RSI has been falling for about the same week period bring its level to close to the 50 level.
1.01 presents a formidable support level going back to 4/17. This level acts as a sort of inflection point.
A sustained move below targets the –2 STD (0.9930) and the 200-day moving average (0.9955).
If the global economic outlook improves, the Loonie should be able to sustain this break out above this range. Speculation that the BOC will remove any accommodation would also be a positive factor, although their next scheduled announcement is not until 05June.
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: 03May After a modest early rally, action has fallen back into a consolidating Doji. Likely action will be near this level until after tomorrow’s US Payroll report.
Technicals point to a market shifting to a less negative profile.
We see resistance at the falling 21-day moving average near 79.53. Interim above there near 79.80 and then the psychological 80.00. We see support at 79.15, 78.90, and then 78.65.
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: 03May 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 has appeared to be setting up much the same. The support level for this action has been the 1.3000-1.3050 area.
With this said, the chart patterns set up for another such move and this would indicate a move lower by approximately 0.100-0.0150.
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. Our best advice is to trade the range and keep risk controls tight. With Volatility low, you can bracket your range with calls and puts and trade with them as your risk controls. Seasonal Snapshot: All three patterns decline until mid-May, when the 5&15yr patterns consolidate. The 30yr pushes lower until the end of June.

Yen: 03May The Yen retains its safe-haven status as weak global economic news casts a bit of a pall over risk-on markets. Since peaking Tuesday, the action has been less positive and more consolidating. On a positive note, the action is being supported 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: Modest weakness in all three patterns will turn positive for a week on 1May, then consolidation into the first part of June.


Energies:
Crude: With Crude reacting badly to th ECB’s Draghi’s “more uncertain“ comments, the complex is exhibiting negatively tinged behavior. Why wouldn’t it, supplies are ample ad demand is clearly waning in he largest market, the U.S. This was followed by OPEC’s chief calling to push the Brent market’s pricing down to $100 (from $116 now). A disappointing Payroll number would probably give the market anther shove lower.
The chart looks to be telling us to expect more downside action.
Trend just switched to negative and Momentum is close to it. RSI is now falling after peaking near the Overbot level.
Look for support near 102 and then near the lows near 101.30
See Wednesday’s comments for further context:
The rally has probed above our noted $105 old resistance (now new support) level, which traces back to mid-Feb and mid-March. Since the 3/1 through 4/10 dip, the June Crude has failed numerous times penetrate and remain above the 38.2% retracement just above $105. The 106.20 resistance level is seen near the declining trend line drawn from 2/24 settlement high through the 3/19 settlement, as well as +2STD above the 21-day moving average.
Supply disruption risks (Iran) have been driving prices higher, and economic news (slowing demand) has tended to take prices lower. We have heard multiple sources indicate the Iran premium is between $10-$15.
Support is seen at the 21-day moving average (103.90) and at various levels down to the 4/10 lows just above 101.00.
Products: 03May
RBOB RBOB continues to look lower for directional bias but had less of a relative move than Crude. That’s because the RBOB is merely continuing on its merry way down.
Technicals point lower, we think quite a bit more to go lower
Yesterday’s comments are still valid.
As the failure to stay above 3.1500 continues, our picture plays out with Gasoline likely headed below 3.000.


If the action over the past 2 weeks is an indication of a developing bearish pennant, the move could be down to the consolidation action that prevailed in late 2011. Watch Crude for directional indications.
Right now, our technical indicators point lower and the market is modestly Oversold.
Our noted support at the 23Apr low (3.0750) has held so far.
Resistance should be offered at the recent triple top (20, 23 & 24Apr) at 3.1500.
Heat followed the Crude with a sharp spike lower. Just like Crude, its technical picture has been deteriorating of late and that trend continued today.
Heating Oil’s behavior has been similar to Crude’s in magnitude. If Crude fails, Heating Oil’s pattern suggests a bearish pennant. The downside if this plays out would be a material move down to levels last seen in late 2011 (2.7775).
Seasonal Snapshot: After a brief pause, all three Petroleum contracts’ patterns are in an upward bias until the end of April.

NatGas: 03May Ironically, just as the warm weather resumed in the Midwest, the NatGas storage numbers caused a spike higher of 7-9 cents.
Apparently, the slowdowns in production are starting to bite. Storage, however remains dramatically higher than normal for this date in the fill season’s cycle.
Our technicals do point to higher pricing ahead, though.
Look for resistance at 2.40 and then again at 2.55. Support at 2.30 and 2.25.
We leave yesterday’s comments in place for context.
With the Midwest’s cold spell breaking, NatGas’s temporary boost due to heating demand might have ended. On the hand, today’s modest washout of yesterday’s highs also fills a gap in place from the move higher. The failure o head higher was right at the +2 STD over the 21-day moving average, which is starting to bottom out.
If utilities’ switching to NatGas from coal has added additional structural demand, look for a possible rally based on hot weather this Summer.
Inventories are seen as continuing to rise, and we would expect any resumption of warmer weather to take the demand driven strength away quite rapidly.
Recent pronouncements of production cuts have not taken root yet and the pressure on prices has remained in place.
Look for supply issues to continue to dominate, as demand didn’t really materialize this year with the extremely warm winter.
We offer a story indicating a price collapse might be necessary to fix this market:
http://www.futuresmag.com/2012/04/03...l-gas-may-need......
We also remind readers of our previous “shoulder season” notes:
“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: Both long and short-term patterns are entering a period of generally sideways action with an increase of volatility around that general trend until May 14th. From then until May 19th, a falling trend is in place.

Equities:


03May More “cruddy” U.S. economic data flow ahead of tomorrow’s all important monthly US Payroll Report set all of our three tracked markets on their heels in waiting:

Challenger Layoffs 40,559 vs. Mar 37,880
Claims 365k vs. 378k expected, but last week was revised to 392k from 388k. This has become a chronic pattern.
Bloomberg Comfort Index –37.6 vs. Mar –35.8
ISM Services 53.5 vs. Mar 56.0 (and expected)

The Payroll expectations are likely to be adjusted lower given recent poor data flow.
The SP and Dow continue their struggle at the +2STD above their 21-day moving averages, as well as the previous highs.
The Dow has consolidated its seep higher, maintaining its positive bias, but falling Rate of Change is dragging on the positive Momentum. The market continues its struggle at the +2STD above its 21-day moving average, as well as the previous highs.
The S&P has essentially ceased rising and gone sideways since Friday with pretty tough resistance at about 1400. The market continues to struggle at the +2STD above its 21-day moving average, as well as the previous highs.


The NASDAQ seems to have peaked for now. Our Momentum indicator is now negative.
Since all three have been stuck inside of the 21-day Bollinger Bands for the entire year, we remind readers of the +2STD above; 21-day moving averages; and –2STD below, respectively:
June SP: 1407.50; 1380.70; 1354.30
June Dow: 13300; 12990; 12680
June NASDAQ: 2760; 2702; 2643
Seasonal Snapshot: (Cash Indices)
SP & Dow: The 5yr patterns decline precipitously into mid-May and continue on in choppy fashion until late June. The 15yr pattern is modestly weaker until 23May while the 30yr consolidates with an upward bias.
NASDAQ: The 5yr pattern’s steep decline levels off into choppy consolidation on 24May. The 15yr’s is modestly weaker during this time period. The 30yr rises until 01June.

Grains:

03May Corn and Wheat exhibited consolidating action after yesterday’s selling. Soybeans are looking at a key reversal.

Corn: 03May July took a break today consolidating after yesterday’s material sell-off. December, on the other hand is putting a multi-date bottom in. Three times in the past month+ it has tested the 525 support. If this fails to hold, look for a test to 500 ad possibly much lower.
If the crop’s planting is completed soon and the crop progress itself moves along, there is a possibility of an enormous crop. Couple that with declining fuel demand and the Corn could be setting up for a washout.
Given that, we see July’s resistance at 6.35, 6.45, and 6.60. Support levels are seen at 6.12, 6.03, and 5.95
It should be noted the recent shift is on a very fast move higher, which puts the sustainability in doubt. Volatility remains Average.
Seasonal Snapshot: 5-year heads modestly higher until Apr 5, then sideways until Apr 10. Both the 15 and 30-year patterns are entering into broad, modest declining periods until April 28. April 10-12 offers a brief, more negative period.

Soybeans: 03May Soybeans are under serious pressure. July has failed at $1500, Momentum is now negative ad accelerating down, and RSI has fallen quickly from quite Oversold to under 50. Volume has been elevated as well.
Look for support at 1465, then 1440. Resistance at 1505.
We leave yesterday’s comment in place.
As has been the case lately, Soybeans is a bit under pressure today, but much less so than Corn and Wheat. On the other hand, it did make new highs today and appears to be headed towards a lower close. While this does constitute a reversal, we don’t see the culminating Volume and serious selling pressure noteworthy of reversals. Additionally, Volatility remains near average. Support seems to be developing at the +1 STD over the 21-day moving average.
It remains hard to argue against the bullish case. News of supply issues related to South American droughts and lower US acreage is coupled with continued strong demand from China.
The worry on our part is the possibility of a series of parabolic price increases. These almost invariably result in a washout collapse. There is a small gap below the Friday’s action low of 1481 ½ and the 4/26 settlement of 1480 ¼. If this level is closed, it sets up Soybeans for more of an advance.
Pricing is getting more and more expensive which we think is worth noting.
***Of note, we are paying attention to the pricing in Soybeans as particularly high on a 10-year most active chart. We believe the Grains, in general, but Soybeans especially, are at risk of highly volatile moves over the Summer months. It is true this is nothing new during the growing season. However, the current environment, with enormous shifts in acreage allocation coupled with the global market uncertainties, makes us nervous. If you’d like to see a 10-year chart, please contact us.

We still maintain that until we see a material move higher from here, we go back to the WSJ story we highlighted from last Tuesday, 4/3:
A story we saw today on another newsletter does add a distinct note of caution to the recent action. The story noted the WSJ posted a story about the record highs in grains. It then went on to state that this type of mainstream media story typically showed up at the end of a bull rally. Additionally it stated in its opinion that the market seemed to be stretched.
Despite our worries as expressed, this market’s Technicals (as stated above) still point higher.
Volatility isn’t great for options purchases, but it isn’t very high, either.
Seasonal Snapshot: Seasonal patterns are jerking around with a modestly negative bias until approximately 4/12. On 4/12, the 5 and 15-year patterns bottom and head higher. The 5-year rises until 4/15 and the 15-year until 4/25. The 30-year is biased gently lower until 4/16, where it then shifts to a rising trend until 4/25. Upon peaking between 4/22 and 4/25, all 3 patterns drop sharply until 4/28. We will be shifting to tracking the July contract in that time frame.

Wheat: 03May Wheat spent the day consolidating just above the lows. Recent action has taken July down to pressure the lower band of a gently declining sideways pattern tracing back to January. If this level fails to hold, there is support at 550. Below that isn’t much support at all until 450. Our technicals point lower.
We leave in place our comment from 4/5 as it addresses longer-term patterns we’re noticing:
Additionally, on our Momentum measure going back to late December, each positive shift has peaked at earlier and lower. This is in a period of a modestly negative bias in what has been largely range trading.
May’s Volatility has peaked just below the High range (< 1 STD).
Pay attention to the harvest in Winter Wheat as it moves ahead of schedule due to warm weather and the plants benefit from rain in both Europe and the US.
This market has been in a gently falling bearish pattern for the last 2 months since peaking on 2/1. On a longer-term view, the bearish dynamic has been in place, albeit with a sizable range, since February 2011.
Volatility is now close to High (> 1 STD higher than Average) indicating there may be opportunities to sell premium in options.
Seasonal Snapshot: All 3 patterns enter a brief upwardly biased period until April 5th. The 5-year then continues in a pattern that ultimately peaks on April 25th. The longer 15 and 30-year patterns change direction on the 5th, entering into a very modest declining period until the same April 25th.

Interest Rates: 03May With the wait for the US Payroll report, there was little action of note today. Action was consolidative across instruments and maturities. We leave yesterday’s comments in place. As this is preceding the Friday US Payroll report, the short end is basically moving sideways in a narrow range.


We remain skeptical of any bearish tendencies with the uneven data and negative bias of late. The recent action showing rapid recovery from sell–offs and subsequent positive biases speaks to a market still spooked by recent US data and weekly doses of debt crisis news from Europe. It is interesting to note that all Interest markets’ price structure has trended positive, flirting with Overbought territory against a similar backdrop in our tracked Equities.
Bonds- Stronger Volume on the way up today counters the yesterday’s negative action off manufacturing numbers. Technicals show a slowing of the rising bias.
We show support at just above 142-00 and then again at just above 141-00. Resistance is seen at just above 143-00, 143-20 and then 144-00.


The +1 STD (currently 144-15) above the 21-day moving average has been acting as a rising support level since early April. Volatility is quite Low, approaching the Very Low level we regard as more conducive to option buying strategies.
Tens (10-Yr Notes)- Tens’ action remains confined largely within a rising channel since 4/9. While our Trend indicator is peaking, as is the RSI, the bias is still clearly positive. The late Jan/early Feb resistance seems to be holding a lid over the Tens for now. There have been 3 forays higher and 3 times it has failed to stay above the 132-10 level. While this has happened, the market is also finding the +1 STD over the 21-day moving average is acting as resistance. Volatility conditions are similar to Bonds.


Twos (2-Yr Notes)- Not much change from yesterday’s comment so we will leave that in place.
With the uneven negatively biased data, the Twos are probing back into the range that defines the upper levels of pricing from late January and early February.
The support we identified at 110-07 remains in place. We see 110-08.75 as a legitimate resistance level above.


Twos have receded from their recent Overbot levels as their rise has slowed.
Like the other tracked Treasuries, its action of late has served to ease the recent positive bias. Its pricing (similar to the Tens above) has been largely within a rising channel since 4/11.
Bunds (10-yr) With Europe reportedly experiencing recessionary conditions everywhere except Germany, it s no wonder the Bunds are trending higher. With the material move higher today, Momentum and Trend resumed their rising trajectories. It will be interesting to see the reaction to Friday’s US Payroll Report. Volatility remains below the Low level we regards as the 1st indicator in support of options buying strategies.


Schatz (2-yr) With news of recessionary conditions in much of Europe, the Schatz is likely to keep a positive price bias in place as the ECB attempts the same Houdini act the US Fed is trying. We see support neat 110.53 and resistance at 110.625.
June12 Eurodollar Our Trend indicator crossed the 21-day moving average last week and now the moving average has turned higher as well. Look for a move modestly higher in the nearby Eurodollars, but the upside is going to be limited due to the zero-rate bound and the Eurodollar’s correlation with the Fed’s (and other CBs) overnight rates.


Our directional indicators are starting to lean toward peaking action. Richmond Fed President Jeffrey Lacker’s comments shed some doubt as to Ben Bernanke’s stated expectations of the current monetary policy for another 2 years. This, coupled with any positively skewed data may put some pressure on the shorter termed instruments like Eurodollars and Twos.
As the June expiration approaches on this contract, its volatility should contract as its implied interest rate contracts to near the overnight rate.


For context into our thinking regarding the debt markets, we invite you to read one our recent comment, as it includes several days’ postings.
http://techtalk.providiotrading.com/...ter/?req=viewd......
Seasonal Snapshot:


Bonds: 15 and 30-yr patterns are modestly negative until April 28th. The 5-yr pattern moves in a generally, sideways pattern for the same period. On April 28th, all 3 start a move higher until about May 6.
Tens: move modestly lower until the above April 28th where they all move higher to the same May 6.
Twos: 3 patterns show negative bias into Apr 26th for a day or 2. Upward bias ensues until May 1 then volatile seasonals with no clear directional bias in any pattern until May 13. At that point, the 15 and 21-yr patterns clearly point higher until June 3. The 5-yr pattern peaks on May 8th and then trends lower until June 14th. The short-term has a brief upward bias from May 18-20th.


Metals:

As expected, ECB left rates unchanged and Draghi’s press conference seems to be carefully hinting that they remain at the ready if more slowing becomes evident.
With both Europe and the US showing weakness on the jobs front, and the Dollar rallying, metals are under pressure.


Gold:
03May The market remains under pressure, sustaining Tuesday’s failure at falling trend line resistance (1665) and probing below the falling 21-day moving average (1650). We note the last rally was to a lower high than the previous one, which was lower than the one preceding it. This has been the pattern since the $80 plunge on 29Feb.
Rising trend line support from the late Dec lows (1528.6) forms the lower boundary (1630) of a symmetrical triangle. The upper boundary is much higher (1745), extending back to last Sep high (1928.3).


We are closely watching our noted, rising trend line support that extends back to Oct 2008 that comes in around 1623. A probe below this level may test the previous lows (1613 on 04Apr), but may set the table for a move well below 1600 psychological support and back to those late Dec levels at 1528.6).
Our primary directional indicators remain positively biased, but they have also been unstable… flipping between positive and negative… rising and falling… since mid March. Indeed, our secondaries, especially Rate of Change, point to a slowing and turning environment. RSI’s turn has taken it from just shy of Overbot to 59. This indicates the Momentum battle is being won by the bears.
If the positive dynamics reassert themselves, we see resistances at the previous series of highs: 1681.3 on 12Apr; 1605.4 on 02Apr; 1699.6 on 27Mar; 1720 on 12Mar.
Seasonal Snapshot: All three patterns consolidate with a downward bias until the end of April, then modest strength into the last half of May.

Copper: 03May More disappointing jobs data keeps Copper under pressure. Much like Gold, its technical profile remains primarily positive but with an undercurrent of weakening strength. Look for support at the falling 200-day moving average (37190). The 21-day moving average, now turning lower, will also provide some support. This is in the low 370s.
Our secondary indicators Rate of Change and RSI have turned to falling biases. Volume is increasing today with the move lower.


Below the above noted support, look for major support at 3.6335, where the market has repeatedly tested, on a closing basis, dating back to 11Apr. Resistance is seen at 3.8375, and multiple levels up to 3.96.
Seasonal Snapshot: The 5yr pattern has a steep negative bias until 17May. The longer-term 15 & 30yr patterns have a volatile, but negative bias until the end of May.

Softs:
Cocoa: 03May The July contract is still respecting the falling trend line resistance but is maintaining prices over the 2320 level. The 2300-2320 zone traces its status as support/resistance back to early December.
All our technicals are either pointing or turning higher. If it can breakout above that declining trend line, it will have a chance of probing he multiple minor resistance areas up to 2500.
If it fails look for prices to trend lower. The recent rally failed to make a higher high (2435 on 21Mar) after a lower low (2058 on 10Apr).


Our Volatility measure is rising into above average levels.
We are now entering a period when more physical product is coming to market.
A previous comment’s Cocoa remarks for context:


If this rally fails to go higher, and the previously identified triangle imposes itself as a continuation pattern, the formation projects a move down to 1460, similar to the action after last fall’s prolonged consolidation. A test of the Dec low at 2005, and psychological support is first in line. ICE exchange stocks at 5yr highs should keep a negative tone to the market.
Seasonal Snapshot: A weak bias in the 15&26yr patterns lasts until May. The 5yr consolidates with a slight upward bias until 10May.

Coffee: 03May Coffee is finally showing some reasonable signs of bottoming action
A 4-cent sell off in about 5 minutes gave away the double top from the last two sessions and the previous, late April highs…. all around 185.50. The market is back below its falling 21-day moving average (179.90).
Our technicals still points to higher action. However, it has yet to take the next big step and make higher highs. Yesterday’s falling Volume may be repeated again today. July really has to get and stay above 184.00 to give this a shot of developing into a more bullish scenario.
The low of the 25-27Apr congestion area comes in at 175.25. A sustained break out below targets the previous low at 173.90 (16Apr).


Poor earnings from Green Mountain Coffee Roasters (released after yesterday’s close), as well as rising Vietnamese exports and more speculation of a record crop are all adding pressure to the market.
That said, and quite interestingly, certified stocks at the ICE continue to drop….
Seasonal Snapshot: The 5yr pattern has a choppy, upward bias until 01May. The 15&30yr patterns consolidate before heading higher on 15May.

Cotton: 03May Still consolidating day with another Doji and fairly low Volume. Not much to say today, so we leave Tuesday’s comment in place.


Add decent rains to help the better planting season start, as well as India lifting the ban on exports and the market is staying on the defensive today, back below the 21-day moving average (90.15) where it had found support for the past week.


The market has been in a generally falling channel that traces back to last June’s peak. The upper boundary comes in at 94.00. More recent falling trend line resistance from the 07Feb high (99.70) comes in at 92.30. The last month-and-a-half’s consolidation, albeit with a modestly negative bias, has rendered our longer-term Trend and Momentum indicators unstable and looking for direction. After trending lower during the rally, Volume returned in a big way on yesterday’s decline.
On the downside, watch the –2STD (86.80) from the 21-day moving average. The market has found support (and resistance, for that matter inside these Bollinger Bands throughout the first part of this year.


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:
03May Despite the negative price action, exacerbated by the recent push to new lows, our Rate of Change indicator has been rising since 20Apr. Our Oversold indicator currently reads 11 vs. late April’s single digit readings, so there may be some more downside in this market, but be on guard for a short covering rally. Protect profits if short. Very-low Volatility may make option purchase strategies a viable alternative.
Please read some of yesterday’s comment for context.
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 mar

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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