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FuturesCom
Bi-Weekly Investment Outlook # 366
 Saturday March 26, 2011

Equity Indices • Treasuries • Forex • Precious Metals • Energy • Grains • Livestock • Softs

"Among the hazards of speculation the happening of the unexpected -I might even say the unexpectable – ranks high. There are certain chances that the most prudent man is justified in taking - chances that he must take if he wishes to be more than a mercantile mollusk--"
--Reminiscences of a Stock Operator --

 

Saturday March 26, 2011
3:00 AM South Florida Beach Time
 Since the War on ‘Moammar the Madman’, Mideast Tempest and Tsunami effects seem to be in check.  Investors and traders in all markets will most likely turn attention to the normal every day
ho hum of Economic reports, Weather, Supply and Demand, Company earnings ect ect.
However lurking in the background are more geopolitical risks for the media to froth over.  
 Equities, Energy and Forex, Metals

   In the US, GDP numbers were better than the expected, Unemployment data appear to be steadying and improving. Stocks were up strong Friday morning and then spent the afternoon in a gradual slip and gave back a bit of the gains. In the end, the major stock market averages closed higher keeping the rally intact as participants are pricing in the end of month and end of quarter window dressing.  Friday’s session lows should be viewed as support regions.  Traders should expect a more range bound trading. Stay tuned for flashes in Futures.  Traders and Investors can use the SPY and options in its place to decrease the leverage and risk.  The SP500 Index closed at 1313.80 up 0.32% for the day and up 2.70% for the week. Sellers should appear near the 1334 to 1346 region. The Dow Jones Industrial Average climbed 50 points or 0.41% friday to close at 12,220.59. Resistance remains at 12320 to 12380. Beyond that a trade to 12500 and 12680 to 12740 is likely. NASDAQ Composite closed at 2743. Friday��s price action was rejected at 2758 to 2775.
Beyond that sellers should appear near 2820 to 2829.  The Dow Transportation average closed at 5207.Back into the resistance noted in last week’s analysis. Beyond that 5259 to 5282 provides some resistance.   Home sales data for February were worse than expected across the board with all-time record lows. Home prices are falling for both existing and new homes.
       Builders need to take a vacation or risk building themselves into a very bad corner once again.
Durable goods orders for February slipped 0.9 percent.   This raises some doubt about the
strength of the U.S. manufacturing expansion. We are already seeing some pullback.  In addition there should be some concern about the type of consumer credit expansion. Credit Expansion on new loans is primarily in Student loans. Generally speaking 1 in 8 Persons in the US receive Food stamps to supplement needs and that is still not great. 

    The Federal Reserve ‘need and want’ to see inflation is possibly translating into a major threat to the sustainability of real household income growth and will become an increasing drag on corporate profits if increases in commodity and transportation prices cannot be passed on to the consumer.
Thus, investors and Wall Street  are expecting a consumer whose home values in much of the nation are still weak, to accept high costs passed on to them and not react.  I would say the reactions are all ready being seen. Darden Restaurants (DRI) fell nearly 5% today. For whatever reason, a solid restaurant stock came under significant pressure.   

    The negative economic and financial news shocks from overseas may be accumulating. The Tempest in the Middle East appears to be the biggest threat to the U.S.economic expansion. Oil and gas prices have risen broadly over the past few months, and any news report that indicates additional and more lengthy issues in the region can translate to higher oil prices into mid and end of April, FuturesCom is currently recommending long Crude oil and Unleaded Gas, Buy the ETF’s or calls to lower leverage and risk while we maintain a long posture based on the futures.  Seasonally we are in front of the strongest time of the year and see no reason to short those markets for other than a trade. Perhaps Crude will top into the Hurricane season and that’s in the summer and spring has just begun

    As the aftermath of nuclear and natural disasters continue to unfold in Japan.  A likely reduction in exports to Japan over the near term should be viewed as temporary.  Partially offsetting this negative demand shock will be an increase in sales for some U.S. products as Japanese manufacturers and utilities look for alternative supplies. As I mentioned at the onset of the meltdown and Tsunami , food and water supply issues in parts of Japan could increase U.S. export of some agricultural and energy products to Japan.    Overall, the negative impact of Japan’s disasters on the U.S. economy is expected to be small. However we will see increase government regulation and the psychological impact will last for some time and could make US consumers more wary of taking higher risks.  That’s not what the US economy needs right now.  Supply disruptions from Japan may affect manufacturing and consequently sales in the United States.  The U.S. auto industry is among the industries to watch. 

The unknown risk is, if the nuclear situation actually gets worse and some unknown amount of land in Japan is deemed uninhabitable for a long time.  This may be playing out now as apparently all that sea-water tossed onto the Nuclear facilities has produced some corrosive effects and a breach of the Nuclear containment vessel has occurred.  

Overseas:
    Some economic indicators from around the world this week indicate that developed economies
are going thru some decreases to economic growth. However, broadly speaking global growth should continue despite recent data and volatile political winds.   The Canadian Ruling Government has fallen and elections will need to be scheduled.  Output in Canada rose above its prerecession peak in Q2 of 2010 and has been in expansion ever since. However data has been somewhat disappointing. Retail sales slipped 0.3 percent in January, with a 1.5 percent drop in sales of automobiles and parts.   It was the second straight monthly slip for Canadian retail sales. The soft sales numbers raise some concern about the outlook for consumer spending. Jobs numbers have increased in Canada the past five months, which should support spending. Traders should use weakness in Canadian Dollar to buy a dip against 10037 using the JUNE Future as a basis.  We don’t see a real reason to attempt shorts until later this year and a lot higher prices.

     In the UK GDP growth slowed to a 1.5% in Q4, retail sales fell 0.8 percent in February. We expect sales to get better and consumer attitudes to improve a bit into spring; however the participation by the UK in the Mideast Tempest has increased and could act as a drag as the events unfold.  Traders should expect rate hikes out of the Bank of England by the end of the second quarter.   In anticipation of this we can buy British Pound against 15770. Risk a close under 15670 for three days in a row.   June British Pound Futures will provide more bang for the buck to those wishing more leverage.   

 In the Eurozone the sovereign debt situation jumped back into the headlines this week. Spain is not deemed to be in danger however the housing market in Spain is a drag. An Expected rate hike has been supportive to the Euro. There are plenty of bulls eagerly awaiting the firm stance and that is now old news. Germany is doing well. France while doing well has just entered a War and repercussions are likely to be felt for a long time and may in fact lead to more bickering amongst the States of Europe.  Traders should sell Euro against 14140 for a trade, if you want leverage Sell June EC at 14070 for a trade, risk a close over 14227 for three days in a row.  The Precious Metals action on Friday was sloppy, Gold Bulls can buy a setback and Silver Traders should stay tuned to flashes for and the Morning Comments for ideas. A Setback into April is not uncommon. Consider Precious Metals as a trading affair now. 


Agricultural Markets:
  Soybean Grain Planting reports will be released on March 31st. This report will give traders and investors the first look at the supply demand scenario for 2011 to 2012 crop. Forecasts for the report are 75.3 to 75.6 acres planted. Some guestimates are as high as 76.5 to 77 acres planted last year the amount was 77.4. If the number comes in at 75.3 ending stocks would slip to 48 million bushels. This would imply that November beans would need to rise into early April to get some price balance to gain acreage from corn.  FuturesCom already is long May Beans, Traders should buy November Beans at 1322 and risk a close under 1304 for three days in a row. Use an option strategy for lower leverage and risk.  Note, if that Rally occurs and investors get comfortable into planting and prices are higher we will look for Selling chances and a possible large decline in prices of near 20 %  Which is what we really want to grab onto…Stay tuned for Flashes
Corn Traders are looking for planted acres of anywhere between 91 to 93 mil, USDA guestimate is 92 and last year it was 88.2. Thus there is still is little room for error in yields, floods and the like. We could see more of volatility and over the next few weeks. Stay tuned for Flashes in Corn      The results of USDA’s All Important March hog and pig crop survey were released on Friday. The USDA said the breeding herd was up 0.5% at the first of March and market hog numbers were up 0.6%. Spring farrowings are predicted to be down 2.6% and summer farrowings also are forecast to be 2.6% lower than last year.  Stocks of pork in cold storage were up 12% to 578 million pounds at the end of February. Which is a lot, this used to be an indicator of slow pork sales and thus a price negative. However rising stocks of frozen pork are an indicator of next month's pork exports and thus a price positive. Gee, how some things have changed!  If the Pork market turns into a 2 to 3 year bear period and it will into next year then I expect investors and traders will change their reading of news again. Eventually China is going to export lots of pork to our customers.

 But that’s likely a year or two away in the meantime exporters need to accumulate stocks of frozen pork and beef before shipping.   Typically Hogs rise from late March until Mid may or later, FuturesCom is already recommending long August Hogs and Traders should buy dips in June against 10142 and again at 9942. Traders can use options for less risk and to reduce leverage and Stay tuned for trading on both sides in the Morning Comments. Cattle futures have regained all that was lost in the Japan scare. The amount of beef in cold storage at the end of February, 468 million pounds, was up 1.3% from the month before and up 15.6% compared to a year earlier. That’s usually a negative, but not yet as investors are expecting Japan to fork up with piles of cash to pay for everything and for the US consumer to pay for $ 20.00 T-Bones... Frozen beef supplies are the largest since January 2009. Another potential negative is the rising price of energy. The national average gasoline price went above $3.60 per gallon in mid March. Typically Cattle prices peak in late March Early April for a slip back towards the end of April. If an excessive rally occurs, Traders can Sell June Cattle at 12317 for trade. Before that occurs playing the long side against 11690 to 11640 should provide trading opportunities.  Buy June Cattle at 11697 for a trade, risk a close under 11637 for three days in a row.

Coffee prices reached fresh highs this month.  The futures have now gained almost 200 % in the last two years and from a December 2008 low and are near 600 % times higher than lows seen in the middle of the last decade.  The current advance is above the historical normal for a bullish phase of nearly 160 %. Coffee’s uptrend could be nearing an end…Coffee usually declines once the Ides of March has passed. It has and coffee slipped a bit.  Traders should look for Coffee to be range bound and a trading market.  Traders can sell July Coffee at 282.00 and hold for lower prices. Go Short May Coffee if a close under 265.90 occurs.  The Global Sugar supply demand scenario has moved from one of a deficit to supply typically can dip into the first few weeks of April before a rally into June and July , we want to Sell May Sugar on a Rally for a trade against 2927.    On to the Nitty Gritty and additional trades.                         

 

                        The Sensational Stock and bond Markets
 
Dow Jones Industrial Average
 Support should appear near 12,030.00 to 11,920.00
Resistance should appear near 12,320.00 to 12,360.00.

jUNE e-Mini sp500
 Resistance should appear near the 1334.00 to 1346.00
Support should appear at near 1274.00 to 1268.00... Below that buyers should appear near
1238 to 1232... Traders can buy at 1238.20 and risk a close under 1227 for three days in a row
 
NAsdaq Composite
Resistance should appear near 2758 to 2775 and 2820 to 2829      
Support should appear near 2724 to 2716 and 2672.00 to 2663.00

jUNE E-Mini NasdaQ 100
 Resistance should appear near 2322.00 and the 2758.00 to 2775.00 region
Support should appear near 2275.00 to 2267 and the 2226.00 to 2219.00 region  
Below that buyers should appear near 2185 to 2170..Traders can buy at 2187 and risk a close under 2167 for three days in a row.
JUNE  E-Mini RUSSELL 2000
 Resistance should appear near 830.00 to 831.40 and 856.90 to 858.90   
Support should appear near 804.40 to 802.90 and 795.40 to 793.90  

JUNE 30 YR BOND
Resistance should appear near 121-07 and 121-21
Support should appear near 119-21 and 119-07

June 10 yr Note
 Support should appear near 118-21 and 118-07
Resistance is at 119-21 and 120-07                            

                               The Frenzied Forex Front
 June dOLLAR iNDEX
 Resistance should appear near  7675 to 7689 and  7763 to 7777       
Support should appear near 7601 to 7587 and 7513 to 7486   
 
June JAPANESE Yen
 Resistance should appear near 12320 to 12380 and 12680 to 12730 region
Support should appear near 12175 and the 12030 to 11920 region.
Traders can buy at 12037 and hold for higher prices.                  

June EURO currency
 Support should appear near 13830 to 13770 and 13615
Resistance should appear near the 14150 to 14210 region
Traders should go short if a close under 13987 occurs

June SWISS FRANC
 Resistance should appear near the 10960 to 11010 region
Traders can sell against 10957 for a trade, risk a close over 11017 for three days in a row.
Support should appear near the 10817 and the 10680 to 10580 region

JUNE BRITISH POUND
Support should appear near 15760 to 15690
Resistance should appear near 16090 to 16150
JUNE CanadIAN Dollar
 Resistance should appear near 10320 to 10360              
Support should appear near 10136 to 10104 and 10037 to 10021  

JUNE AUSSIE DOLLAR
 Resistance should appear near 10237 and 10320 to 1360
Support should appear near 10136 to 10104 and 10037 to 10021        
                                    The Precious Metals
 JUNE gold
 Resistance should appear near 1438 and the 1453 to 1459 region
Support is near 1421 to 1415 and 1399..Traders can buy at 1399 and risk a close under 1371 for three days in a row     

MAY COPPER
 Resistance should appear near 45030 to 45140 and the 46390 to 46500 region      
Support should appear near 43810 to 43700 and the 42490 to 42380 region  
MAY Silver 
 Support should appear near 3682 to 3663 and the 3503 to 3493 region                    
Resistance is at 3734 to 3743 and the 3858 to 3867 region                                         

                                     The Exciting Energies  

MAY Crude Oil
Resistance should appear near 10580 to 10680,
a close over is friendly and augurs for a test of 10960 to 11010
Support should appear near 10360 to 10320 and 10136 to 10104.
Traders can buy at 10137 and Hold for higher prices     

MAY HeaTING Oil
 Support should appear near 30450 to 30360 and 29900 to 29720 region.
Resistance should appear near 30920 to 31020 and the 31480 to 31570 region                     

MAY UNLEADED Gas
 Support should appear at 20450 to 30360 and 29370 to 29320
Resistance should appear near 30920 to 31030 and the 31480 to 31570 region                    

MAY NATURAL Gas
Support should appear at 4381 to 4370 and 4249 to 4238 region     
Resistance should appear near 4695 to 47170 and 4775 to 4785                                                                   

                                 THE GRANDE’ GRAINS
 MAY SOYBEANS
Resistance should appear 1377 to 1383.         
Support should appear near 1310 to 1304.

MAY SOYMEAL
Resistance should appear near 366.2 to 368.3 and 373.4 to 374.3         
Support should appear near 344.3 to 342.5 and the 338.6 to 337.7 region        

MAY BEAN OIL
Resistance should appear near 5792 to 5805 and the 5855 to 5880 region        
Support should appear near 5504 to 5492 and the 5430 to 5418 region    
 
MAY CORN
Support should appear near 667 ¼ to 666 ¾ and 650 ¾ to 648 ¾.
Below that buyers should appear near 635 to 633 ¾        
Resistance should appear 690 ¾ to 691 ¾ and the 714 ½ to 717 ¾ region.
Beyond that sellers should appear near 732 ¾ to 734 ½                

MAY WHEAT
Resistance should appear near 759 ¾ to 760 ¼ and 773 ¾ to 777 ¾
Support should appear near 717 to 714 ¼ and the 691 ¾ to 690 ¾ region  

                                           THE LIVELY LIVESTOCK


JUNE CATTLE
should appear near 11690 to 11640 and 11500. Below that buyers should appear near the 
 11360 to 11300 region
Resistance should appear near 11815 and 11920 to 12030. Beyond that sellers should appear near the 12320 to 12380 region      

JUNE HOGS

Resistance should appear near 10577 to10682 and the 10957 to 11012 region    
Support should appear near 10237 then 10137 to 10102 and 10037 to 10022 region.

JULY HOGS

Resistance should appear near 10317 to 10362 and 10577 to10682   
Support should appear near 10137 to 10102 and 10037 to 10022 region.

                             The Satisfying Softs
 MAY COFFEE
Support should appear near 26720 to 26630. Below that a test of 25680 to 25520 is likely.   
Resistance should appear near 28200 to 28290 and the 28740 to 28830 region. Beyond that sellers should appear near 29280 to 29370 region   

 MAY COCOA
Resistance should appear near 3377 to 3386 and 3493 to 3503     
Support should appear near 3213 to 3194 and 3102 to 3092   

MAY SUGAR
Resistance is at 2820 to 2829 and 2928 to 2937  Beyond that sellers should appear near 3036 to 3043 and the 3092 to 3102 region, which should cap a rally
Support should appear near 2672 to 2663 and the 2568 to 2552 region Below that a test of 2519 to 2511 is likely  

 
MAY COTTON
Resistance should appear near 20800 to 20890. Beyond that sellers should appear near 21700 to 21850 and the 22190 to 22260 region.   
Support should appear near 19530 to 19460 and the 18820m to 18080 region

 

           --A Ship in Harbor is Safe...But that is not what ships are built for --
Happy Trading!   
Bill wil@futurescom.com  

Saturday March 26, 2011   1:00 PM South Florida Beach Time