Currencies: 22Mar Modest US Dollar strength is coming mostly from the “commodiity currencies” on slowing Chinese economic data. However, most of the majors are in “mean reversion” mode and taking a break from recent moves higher. Volumes have bee dropping, keeping with the consolidation story.
Our previously identified factors in the ongoing stress dynamic are still there; they’re just less overt today.
Given recent action, however, one must stay cognizant of the current Technical environment. We recommend our readers stay attuned to the changes in our Technical Matrix.
Aussie: 22Mar More damaging economic data out of China and Europe is skewing the risks in the Aussie to the downside. Trend, Momentum, ROC and RSI are all headed lower. The recent increase n Volume seems to be validating the Aussie’s meaningful fall in value.
The market has fallen through flat lining 200-day moving average (1.0350) and last week’s lows and a resistance area from late January. Both should now be new resistance. There is a double bottom from mid Jan at 101.60 after the previous low was made at 100.65. Watch the developing Oversold conditions.
Important resistance is up near 1.05, where the Aussie peaked and failed this week. It would need to get up to and through there to break the cycle of lower highs and lower lows,
Seasonal Snapshot: The 5-year pattern is in a sustained rising seasonal trend until April 1st. The 15-year pattern is in a very modest falling seasonal trend until March 29. At that point it will enter a rising trend until May 4th. The 30–Year pattern is in a sideways to modestly lower biased seasonal trend until March 25th. At that point it enters into the same sustained rising trend bias until April 12th.
British: 22Mar Sterling continues to struggle with the
falling 200-day moving average at 158.50.
The fourth failure to sustain a probe above and, therefore forge a
higher high (above 159.92) puts the currency back on the defensive. A lower low lies below at 156.00.
Chancellor Osbourne’s budget, announces yesterday, is
starting to draw fire and is not helping matters.
Trend is falling as of today, but our Momentum indicator
shows positive action. The remainder of our technical indicators point to the
Seasonal Snapshot: The 30yr pattern is biased to rising action until April 30. The 5 and 15 yrs are both biased sideways until the end of March, and then enter the same rising trend until April 30th.
Pressure from the Chinese slowdown has sent this “commodity currency”
back below its falling 200-day moving average (99.96). The market has found some support at the
early March low (9970), but a series of higher lows lie just below: 9945 on
27Feb; 99.40 on 16Feb and 99.20 on 30Jan.
Our Trend indicator has now joined our negative Momentum and
falling Rate of Change pulling Volatility up and out of the Low range.
The 200 DMA is still falling but flattening with the recent
Seasonal Snapshot: All three patterns are sideways to modestly positive until March 29th.
Dollar Index: 22Mar
Our Trend and Momentum indicators are still in negative phases. However,
the market is trying to hammer out a base and regain some footing. Yesterday’s higher low and today’s modestly
positive action targets a higher high above 80.72(15Mar). Trading has been centered on the modestly
rising 21-day moving average. This may act as a fulcrum in direction
finding. The Dollar is the safe haven
under crisis market conditions.
Seasonal Snapshot: All 3 patterns exhibiting choppy conditions until about April 7th when all 3 start more sustained falling action seasonal patterns until April 30th.
22Mar 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.
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.
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.
Declining Chinese factory activity and European headline (and German)
PMI data is putting a slowing global economy back in the headlines and is
therefore pressuring Petro prices. Our
technical picture of the complex is solidly negative and not Oversold.
The May Crude contract seems to be targeting the lower boundary (103.70) of our noted potential bull flag over the past three weeks. A failure to breakout above should return the market back to $100 and target the previous lows at 96.30. If the formation does play out, a classic move would rally $8-10 from the breakout. That projects to 116-118 for the May WTI Crude contract.
All three Petro stocks remain at the upper end of their
average ranges for this time of year.
Volatility is starting to rise, potentially handicapping
option purchases for protection and new positions
After a brief pause, all three Petroleum contracts’ patterns are in an
upward bias until the end of April.
NatGas: 22Mar After trying to get off the mat this
morning and sustain its upward consolidation of recent losses, NatGas is back
on the defensive, pressuring April
support at 2.235.
Our Momentum’s positive shift has pulled our Trend indicator
to rising. What was an extremely
Oversold market can now be called “middling” with our measure registering 47 as
of this writing.
However, the negative fundamental outlook in the NatGas
market remains in place. This puts the recent bottoming action in the positions
of a possible developing Bear flag.
Today’s mild weakness probes below this formation, but weak Volume
undercuts its validity. If this does play out, classic chart analysis calls for
a 50-60 cent lower move. This would put the NatGas into the 1.70-1.80 range some
analysts are calling for as a low.
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.
Divergence between short and long-term patterns: the 5yr pattern
consolidates with a negative tone well into April, but the 15&21yr patterns
have a strong upside bias.
22Mar Our Rates of Change
continue to ease and drag on our positive Momentum indicator. The Dow’s has turned negative and is still
leading the weakness. SP is not too far
SP and Dow futures are also back inside our 1 STD Bollinger
Band and testing the 21-day moving averages.
On more weakness, pay close attention to the lower end of the mid-Feb
congestion area, which roughly coincides with the early March consolidation
SP: 1371; 1330
Dow 12950; 12700
NASDAQ 2648; 2526
We call readers’ attention to an interesting piece on the
cost of protecting the downside:
The VIX Index is starting to perk up after a multi-week
descent to historically low levels.
On a “micro” note, we are not equity analysts, or seasoned
stock investors, but we do notice a number of gaps left open on Apple’s (AAPL)
daily charts all the way down $384.85 (15Dec).
When considering how much of the recent S&P earnings growth has been
supplied by Apple, we wonder what closing some of those gaps to the downside
would do to the S&P. They recently
announced a dividend and stock repurchase plan, as well. Not exactly “expansionary”. As always, we welcome any feedback…
The 5yr patterns of all three markets is in a pronounced upward bias
until early May. The 15&30yrs’
follow suit, but are not nearly as steep.
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
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.
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.
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.
Relatively modest rising trend situation in all 3 patterns until
approximately April 2.
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.
Interest Rates: 22Mar
As we expected, the entire yield curve’s price structure is consolidating
recent steep losses as the Fed continues its Operation Twist. This is especially true at the long end as
the Fed is using proceeds from short-terms paper to go out further in the
curve. This has taken all three US
tracked markets well off recently extreme Oversold conditions. Volume continues its trend lower, typical of consolidation. Our rising Rates of Change still have some
work to do before they can pull Momentums positive (along with the Trend). If this time is truly “different”, it may mean
some more consolidation may be needed if pricing is to push further to the
downside… perhaps in the form of a bear flag formation? Yields are maintaining levels above the
declining 200-day moving averages. Watch
the recent upper ends of the consolidation range, a sustained break out above
(on stronger Volume) may send pricing right back from whence it came:
We also note recent lows on a reinstatement of the previous
This may be an opportunity for directional positions, but
keep stops tight or explore option purchase strategies, as Volatility is
starting to expand.
After an uptrend, all three patterns in the Bond commence a
consolidation phase with an upward bias on 28Mar that extends well into April.
The 10yr has a strong, upward bias in all three patterns
until early April.
The 2yr is heading back lower 17-27Mar.
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
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.
A month-long rally in all three patterns gave way on 05Mar to a
consolidation phase with a modest upward bias until mid April.
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
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
All three patterns consolidate until they resume their down trend
Cotton: 22Mar Higher exports are driving more
bottoming action as Momentum, Trend, and RSI have all shifted to a more
That said, the May contract ran into another round of
resistance at the still declining 21-day moving average at 89.30.
Beware of a potential bear flag formation over the last week
on declining Volume. A sustained break
out below the support (87.70) targets the 14Dec low at 84.23, then 80 cents.
Strong downward bias in all three patterns lasts well into the May
22Mar After several failed
attempts, the market is retaking the previous late Feb highs (above 25.80) on
questions about global supplies.
However, Volume continues to trend dangerously low. With Volatility
falling to near our 1 STD below level, we recommend looking at an options
purchase as a means to either protect positions or enter new ones.
On the downside, watch those mid Feb lows at 23.17. A sustained break out below targets a
descending series of lows back to mid Dec: 22.85 (01&02Feb); 22.43 (late
Dec); 22.25 (15Dec). Below these levels,
it’s anchors aweigh down to 20.40 (May 2011).
The 5&15yr patterns commenced a quite negative bias on 27Feb and
lasts until mid-April. The 21yr pattern
consolidates with a negative bias.
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