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Old 19-04-2012, 03:34 PM
providiotrading providiotrading is offline
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Providio’s Daily Futures Market Commentary For April 18, 2011

Currencies:

18Apr The light global economic data leaves the currency markets in a whippy consolidation phase ahead of tomorrow’s much anticipated Spanish 10yr auction. Poor Chinese housing data and concern over Spanish banks’ non-performing loans is offering a modestly negative tone. Watch the speculation about China easing Reserve Requirement Ratios. See below for specific news and levels.
As we have mentioned in past comments, the “authorities” will make forays into the traded markets to prevent collapse, using more than actual monetary policy execution, but also the power of the press to change market conditions. This effect is maximized as the US Fed is now in a situation where another round of QE is being publicly debated.
This is another example of 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: 18Apr The market has found resistance the last two sessions near our noted falling trend line (103.60) going back to early March. A sustained break out above would target the 38.2% retracement (1.0405) of the decline since the end of Feb. There are also plenty of additional rest stops at 50% retracement (1.0435) and the preceding series of highs: 27Mar 1.0461; 19Mar 1.0529; 08Mar 1.0552; 05Mar 1.0611.
Our Trend and Momentum indicators remain positive and recent action has shown a market clearly shifting to a much less negative technical bias but still vulnerable to negative global economic news. Volume has faltered after a strong showing on last Thursday’s rally.
On a closing basis, the market has found support at the 21-day moving average (1.0220) for the last two months. We also continue to eye the flattening 200-day Moving Average (1.0162). 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: The 5-year pattern trends generally higher until April 30th but with more day-to-day choppiness. The 15-year pattern is in a rising trend until May 4th. The 30–Year pattern is consolidating before heading higher on 01May.

British: 18Apr The market is currently testing our important 1.60 significant support and resistance level going back to late February’s peak. Additionally, during craziness of late October-early November, much of the action traded around this level. A sustained move above targets the 31Oct 1.6160. Volume has been decent on this week’s strength.
This morning’s attention was drawn to BOE meeting minutes, where any additional quantitative easing seems to be going out the window. Inflation concerns abound:
http://online.wsj.com/mdc/public/pag...3-globalEconom......
Better jobless claims are also supportive this morning….
On a closing basis, the Sterling has found decent support at the 200-day moving average (1.5840) for the last three weeks, shifting the currency’s technical bias to a less negative profile. Our Momentum indicator has joined our rising Trend.
How Sterling reacts if there is any further material weakness in the Euro is to be watched closely.
Seasonal Snapshot: All three patterns are biased to rising action until April 30.

Canadian
:18Apr Quiet consolidation of yesterday’s strong gains (on strong Volume) after BOC raised the possibility of withdrawing accommodative policy sooner than expected, based on an improving view of the global economy:
http://www.bloomberg.com/news/2012-0...nada-keeps-rat......
This morning’s release of BOC’s full outlook confirms their view.
The Canadian is testing the upper boundary of its two-and-a-half month consolidation range bound by 0.9933-1.0157. The sudden move has flipped our Momentum and Trend indicators positive. It also tests the recent (02Apr) high at 1.0096 and may put the recent “topping bias” we have noted at risk.
That said, as we have noted and from what we interpret from the BOC statement, the currency may be waiting more for a more definitive news or data from Europe, China or the U.S. as to the state of the global economy before making a definitive move outside its recent range.
Seasonal Snapshot: All three patterns are in a positive bias that lasts well into May.

Dollar Index: 18Apr The index remains entrenched in its recent range (symmetrical triangle?) bound by 78.80-80.45, with lower highs and higher lows since the end of Feb. As a result, our Trend and Momentum indicators are unstable, seemingly trying to go negative after a positive move over the last week, echoing our consolidation view. Volatility remains low and falling.
On a negative note, the highs continue to set up as the right shoulder of what could be construed to be a bearish Head and Shoulders pattern.
Watch for any evidence the Dollar is not the safe haven under crisis market conditions. This would change existing assumptions dramatically.
Seasonal Snapshot: All 3 patterns exhibiting falling action seasonal patterns until April 30th.

Euro-FX: 18Apr Somewhat whippy consolidation as the market (and apparently the whole world) awaits tomorrow’s Spanish 10yr auction. Peripherally, this morning’s release of Spanish non-performing loans, showing a sharp rise, offered early pressure:
http://www.bloomberg.com/news/2012-0...ain-s-surging-......
However, it is a Feb number (stale) and focuses only on Spanish banks. We believe another problem lies with the larger European banks, which lent money to anyone who would take it with no regard for if they could (or would) pay. Germany is exposed in so many ways…
While the market successfully defended the “line in the sand” 1.3000, it has been unable to retake the 21-day moving average (1.3205) and, therefore, the recent highs. It’s a slippery slope below, with little to stop a sustained move until the 13Jan low (1.2627). However, this would require a break out below –2STD of the 21-day moving average, which has not happened on a closing basis since 14Dec.
Our Trend and Momentum indicators remain on the defensive, but our Rate of Change is trying to sustain a turn higher, bouncing off action from several sessions ago. Our RSI’s bounce is from an area from which the Euro has rallied materially in the past several months but is barely out of the Oversold zone.
Volatility is falling again and is now firmly in the Low range (-1 STD or lower below the 150-day Moving Average).
Seasonal Snapshot: All three patterns are trending higher until the end of April.

Yen: 18Apr More speculation about BOJ intervention has pressured the currency back below our noted Fibonacci 38.2% retracement (12360) of the Feb-Mar decline. The rising 21-day moving average (12170) should initially support any dips.
A return of the recent strength would target the 50% retracement (12510). This level coincides with a triple top (23, 24 & 28Feb) and may offer some resistance.
For amusement, we offer a story about Japan providing $60B to IMF to “shield the global economy from the European debt crisis”. We welcome any ideas on where they might get the funds. The last we saw, their public debt was over 200% of GDP:
http://www.bloomberg.com/news/2012-0...pan-will-provi......
Seasonal Snapshot: All 3 patterns are now poised to bottom and head higher until approximately April 20th.


Energies:
Petroleum:
18Apr Today’s larger than expected build to Crude oil stocks helped the June contract find resistance at the falling 21-day moving average (104.95), and is trading well off this level as of this writing. The market remains inside falling channel, bound to the downside by $100-106.10 from back to early March.
That said, the market has spent some time below the –2STD (101.05) from the 21-day moving average in late Feb and early Mar. Watch this level on more weakness.
Products continue to see weakness, but decline in stocks has helped stem the overnight weakness. New lows were registered in RBOB and supplies remain at the upper limit of their average range:
http://ir.eia.gov/wpsr/wpsrsummary.pdf
Typical of a “DOE day”, Volume has been stronger. Shorter-term charts reveal a boost on Crude weakness and the Products’ strength.
Most of our Technicals are pointing negative for all three tracked markets. RBOB has led the recent charge to the downside and is the most Oversold we have seen it this year (19Dec).
Volatility continues to rise off low/very-low levels. Iran remains a focus, but talks about their nuclear program resume on 23May in, of all places, Baghdad.
Seasonal Snapshot: After a brief pause, all three Petroleum contracts’ patterns are in an upward bias until the end of April.

NatGas:
18Apr It is amazing to think that yesterday’s 5-cent drop in the May contract constituted a 2.5% move. This was practically the spread between the bid-ask a few years ago… The slow, steady decline shows no signs of stopping, except that the significant drops have gotten much smaller in size. Our current Oversold measure sits at 22 and isn’t even close to the 9 we saw at the end of Mar. Our Trend, Momentum, and RSI still all clearly point to lower action.
There seems to be more downside available, as it isn’t materially pressuring the –2 STD (1.84) of the falling 21-day Moving Average (2.156).
We remind readers of the levels at multi year lows: Jan 2002: 1.90; Sep 2001 1.87; Feb 1999 1.62.
Look for supply issues 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: Divergence between short and long-term patterns: the 5yr pattern consolidates with a negative tone until 18April, but the 15&21yr patterns have a strong upside bias until 24Apr.


Equities:


18Apr With markets seemingly waiting for tomorrow’s heavy data releases, modest moves seem to be the order of the day. We are still seeing a generally negative bias, with the notable exception of our Trend indicator for the Dow.
Our most important comment this morning is for the broadly traded S&P. We see resistance at about 1389-1390 near-term. This is part of a broader zone from about1375-1400. This zone extends back April 1999 as an area where support and resistance characteristics are seen. The support characteristics really showed in March and August 2007. In showed support and then resistance characteristics in the volatile trading in early 2008. It was serious resistance last May when the market failed just below the lower level of the zone. The upshot is this is an important level to watch for the S&P. If this level is supported, there is a good chance the Equities will try for another push to make new highs. Any significant failure, however, may have dire consequences.
Going back tour near term commentary, as we stated above, the Dow Trend was our only positive primary directional indicator. However, our near term analysis indicates that negative bias is turning. Trend is easing off its negative trajectory and Momentum is threatening to go positive in the next week unless prices fall materially.
We see the following short-term levels as important.
S&P-Support at 1380, 1373.50, then 1363.50. Resistance at 1388.50, 1397.50, then 1405.00
Dow-Support at 12970, 12930, 12845. Resistance at 13070, 13100, 13200, then 13230
NASDAQ-Support at 2700, 2685, 2660. Resistance at 2725, 2740, 2760, then 2785.
We leave in place our comments form yesterday for some context.
Any piece of news or data that can be remotely spun positive is boosting all three of our tracked markets back inside the recent threatened probe outside –2STD of their 21-day moving averages. That said, these averages are now still rolling over negative. The Dow is leading today’s strength, probing above both the 12Apr close (12950) and the 21-day moving average. The 02Apr high (13229) lies just above. The SP is in the cusp of retaking the 12Apr close (1386) and 21-day moving average (1389.50). NASDAQ still has some work to do, where both the 12Apr close and 21-day moving average are at 2739. Our Volatility measure is rising and the 21-dayBollinger Bands are expanding.
A wider view still tells us that the recent weakness is the largest sustained move lower since late November/early December. Most of our technical indicators are still pointing negative, but our vulnerable Rate of Change is trying to sustain a move to the upside, indicating this early “relief rally” may have some legs.


Additionally, the S&P and Dow’s 200-day Moving Averages are starting to turn down and the NASDAQ 100’s is about to. On more weakness, we note that all three of our tracked markets are in a similar rhythm, but different chart levels:
S&P looks to 1340 for real support. That significant level traces back to early Feb.
Dow support at the psychological 12500 level.
NASDAQ successfully defended a probe near 2650 the last two days.
Seasonal Snapshot: The 5yr patterns of all three markets is in a pronounced upward bias until early May. The 15&30-yrs’ follow suit, but are not nearly as steep.


Grains:

18Mar An increase in Volumes adds validity to today’s action.

Corn: 18Apr Corn is still experiencing a divergence between old and new crops, albeit with a negative bias.
Factors at play include an expected early harvest and energy under pressure due to inventories.
Our technical picture remains quite negative. All our old crop indicators are falling. New Crop indicators are all falling with the exception of RSI. All RSIs remain Oversold.
The lows for old and new crops are still in danger of being tested. All crops are Oversold. Volatility, outside the current front month May12, is essentially right at the Average level.
We remain skeptical of this May’s upside until 665 is penetrated and held. Also, this is where our 200-day Moving Average sits.
Traders may wish to heed our characterization of the seasonal below.
May filled the gap below the 4/2 low. This sets up the Corn, should a bottom be put in, to head higher. We remind our readers to pay attention to weather.
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: 18Apr Soybeans continue to test support, barely finishing over the USDA report reaction settlement. A particularly important note is the fact that the May Trend has now turned lower.
With today’s moves lower, the Soybeans are now more fully biased negatively. The May’s 21-day moving average is still rising but that’s a matter of days. We see the various contracts approaching and breaching the settles highs from 3/30. Volume however is not particularly supportive of the day’s negative bias.
Until we see the market make new highs, we are suspicious of this market’s upside potential.
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: 18Apr May Wheat remains in the negatively biased column. Technicals are all pointing to lower action. Lows are either being made or are close to it depending on the month.
Both new and old crops are now Oversold. Volume was supportive of the day’s negative action.
Volatility remains quite elevated but falling.
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:

18Apr Attention continues to focus on the sovereign debt crisis in Europe, and some modestly weak US mortgage numbers (purchases index decline). Given that backdrop, today’s rather constrained Treasury rally is somewhat surprising. It’s likely the market, in the absence of any meaningful auctions this week, is waiting for tomorrow’s more robust data releases.
Bonds action seems to be consolidating just below the previously identified 142-00 resistance. Trend is easing, Momentum is waning in its strength, and ROC and RSI are mildly weak. In other words, we see consolidation activity.
Tens still seem to be in what we identified as a short-term atypical rising flag. If this plays out, look for move of approximately 2-00 higher from the breakout. Based on current information, this would take tens to new highs. Its directional indicators are behaving similarly to the Bonds. As in the Bonds above, this is consistent with a consolidating market.
Twos action today continues to reflect the recent comments out of the Fed and the underlying data stream which has been disappointing. Current trading, with no major reports today indicates its consolidating recent moves higher as well. They point to a market that has rapidly taken the risk of rate hikes out of pricing. Trend, Momentum, and RSI are still strongly positive. ROC shows a modicum of weakness but from elevated levels. It would take a serious sell-off in the Twos to take the Momentum away.


Bunds (10-yr) remain consolidating at highs, not surprising given the current circumstances in Europe’s debt crisis. ROC and RSI show a modest waning of the strength of the positive signals.
Schatz (2-yr) shows a similar pattern with modestly more negative action in the past week.
Our June12 Eurodollar is consolidating recent gains as it shook off a previous bearish bias. Trend, Momentum, ROC, and RSI are all pointed higher. The next tracked month out, Sept. is similar.

For context into our thinking regarding the debt markets, we invite you to read our comments posted yesterday as it includes several day’s 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 are basically sideways until April 19. They then move modestly lower until the above April 28th where they all move higher to the same May 6.
The 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:

Gold: 18Apr Our technical picture remains weak as Gold has found some resistance at its 21-day moving average (currently 1656) since breaking below on Monday.
The market failed to make a higher high (1682.8 on 02Apr) last week and is still in a falling channel from early Mar, currently bound by 1600-1677. Since then, after an initial foray into negative territory on the 29Feb plummet, which lasted until 27Mar, our primary Trend and Momentum indicators have been unstable, but it should be noted that our Trend is falling and Momentum is on the cusp of going negative. We remain quite interested in how the market acts if it can probe down to our long watched rising trend line (1605) from Oct 2008.
The market has been supported by the –2STD (currently 1625) from its 21-day moving average. Bollinger Bands are generally expanding and our Volatility measure is rising, but still at low levels.
Seasonal Snapshot: All three patterns consolidate with an upward bias until 23April.

Copper: 18Apr Modest weakness this morning from concerns in Europe are taking center stage with a lack of global economic data. Yesterday’s uninspiring US Industrial Production and weak Housing Starts also keeps the pressure on.
Our Trend and Momentum indicators have been negatively biased since early Apr and Volume has been generally stronger on this weakness. We still think that until we see a concerted, sustained change in what has been a recently unstable Rate of Change, we can expect additional probes lower. This recent dip has thus far respected rising trend line support near the –2STD (359.00) from the 21-day moving average (377.95). This shorter-term average remains on the cusp of falling below the 200-day (376.40) again after moving above in mid Feb.
Seasonal Snapshot: All our patterns are coming to the end of a consolidation near highs and then a modest lower bias until April 28th


Softs:

18Apr Attention is now shifting to July contracts with deliveries approaching.

Cocoa: 18Apr July’s positive run ended today, but the material drop in Volume is indicative of indecision. All our directional indicators remain positively predisposed with a modest waning today with the negative action. In redrawing our declining Trend line a bit lower (more data points), we see its resistance coming in at about 2365. Before there, 2300 looms as a psychological level. We see 2235, and then 2170 as support.
To give some context on this move, last Tuesday, 4/10, Cocoa was very Oversold at 15.46. It was still Oversold as of Thursday at 30.54. Now it’s pushing to Overbot at 70.
Our Volatility measure is right at Average.
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: All three patterns’ tone have turned positive until 26Apr.

Coffee:
18Apr A material drop in Volume gives Coffee a day off from the relentless selling. Our directional indicators remain negatively biased. The restrained day’s range and lower volume speak to consolidation. The recent negative action keeps this market at it’s –2 Standard Deviation on the declining 21-day moving average. As we stated in yesterday’s comment, if the reversion to a negative bias continues, much lower prices are likely the result.
Seasonal Snapshot: The 5-yr pattern continues in its falling Trend until April 26th. The 15 and 30-yr patterns turn higher on 4/16 until 4/22. Then it drops until April 26th.

Cotton: 18Apr A material move higher coupled with a material increase in Volume validates a notion of a possible reversal. This is a material change from yesterday’s comment.
Trend remains negative, but Momentum is shifting to a likely positive bias this week. ROC will go positive too, as its falling nature was actually fairly shallow of late. RSI is trending higher and is no longer Oversold.
Our identified Support is at 8840 and 9000. We see resistance at 9040 and 9230.
Seasonal Snapshot: The July contract’s strong downward bias in all three patterns lasts well into May.

Sugar: 18Apr An increase in Volume lends credence to today’s extension of negative action. Technicals remain negative however, with all our directional indicators illustrating continued deterioration. We show resistance at 2265, 2280, and 2325. Support is today’s lows of 21.95. This traces all the way back to the 12/15 lows. Below here, we see support all the way down to 21.00.
One point of note referring back to recent comments is that the bearish flag has now completed its measured move lower.
A large spec long open interest and ample supplies keeps the market vulnerable to more weakness.
Seasonal Snapshot: The 5-yr pattern continues its move to lows on May 8th. The 15 and 30-yr patterns bottom on 4/16, then head higher until April 25th, where they start falling until May 5th.

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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