FuturesCom Bi-Weekly Investment Outlook # 447 May 04 2014 SP500 and Equity Indices • Bonds • Currency Trading • Forex • Precious Metals • Energy • Grains • Livestock • Coffee • Sugar • Cocoa • Cotton. Free Two Week Trial see https://futurescom.com/free-trial-2
“Accomplishments will prove to be a journey, not a destination.” -Dwight D. Eisenhower-
Saturday May 03, 2014 10:00 PM, South Florida Beach Time.
Traders should stay nimble and tune in for BW flashes and updates. Major US stock averages remain mixed on the year and the long term technicals remain bullish. However the stock markets are a mixed bag now. Traders should look for wide ranges and trading opportunities from both sides. Traders should note that increasingly volatile trading and wider ranges is typical for this time of year along with some periods of weakness in some averages. Typically the Dow gets a bit soft after the first two weeks of the month. Last week’s economic data was mixed for the economy. The U.S GDP data was weak. However U.S consumer spending is getting better. The U.S economic calendar for next week will be sent after today’s newsletter is published. Chinese economic data is due out early in the week. The Bank of England and the ECB have central bank meetings (and comments if any) on Thursday. If you need detailed economic calendars for overseas economies please send us an email or give us a call.
The U.S. nonfarm payroll data released Friday was the best since January 2012 with the lowest unemployment rate since September 2008. However the household data within the report was exceedingly weak and in fact deplorable. Bond Futures rallied off their lows of the day and closed higher on the day to set a new contract high for this June 30 Year Bond Futures contract almost giving what we call a weekend buy rule, not quite because it did not close on the highs or just a few tics off the highs…but pretty darn close.
Some adverse structural changes in the US economy need to be reversed. Monetary policy has limited effects some parts of the U.S. economy and elected officials and the ‘people’ need to make changes. U.S. Federal Reserve members have covered this in testimony and comments. In this writer’s opinion many changes such as increased stimulus for Job creation and immigration reform to allow broader growth and population increases are needed but are unlikely to occur during this mid-term election year. Spending has to be efficient and less politically motivated to reduce deficits. However the political sides are just too far apart. If things like constant bickering don’t change soon, both sides are likely to lose their jobs.
Global economies and the U.S. (especially) show somewhat better growth prospects looking ahead than many traders had anticipated earlier this year. It’s a slow and ‘better than steady’ pattern as we expected. Weather has its surprises and will likely continue to be that way. Overseas emerging economies are not contracting but many economies have issues and are tepid. Overall commodity consumption appears to be fairly strong.
Market fears over the Ukraine will likely build past the first week of the month. The Ukraine election dates are important and what happens over next few weeks will likely culminate with the eastern part of Ukraine ending up as ‘Russian property’. However the boundaries have yet to be decided and could expand from current regions of conflict.
In the Forex markets; Forex markets remain in tight ranges and should be considered trading affairs. Many economists and analysts are looking for a dollar rally, so far that has not occurred. Traders should note; any broad long-term moves in the U.S. Dollar (measured by the dollar index) normally would come at the behest of the administrative branch of the US government led by the U.S president.
The U.S dollar is down a bit on the year, and down year-over-year. Historically the dollar tends to exhibit strength into the May / June time frame. On Friday, early U.S Dollar gains just after the unemployment report were ‘given up’ later during the session. Nothing really has changed.
The Euro is above 13830 to 13770 and up tad on the year. Maintaining a posture over 13830 indicates an eventual test of 14150. Extended trading below 13770 and the Euro can test 13460, so far this has not occurred and looks less likely now even though typically the Euro can move a bit lower during May. The Swiss Franc future is above the 11300 to 11360 region. The likely upside Swiss Futures target (if an upside moves occurs) is 11640 to 11690. That would place the Dollar-Swiss into the 8590 region. Constant ‘Babble’ from ECB members and other central banks remains par for the course. Dollar-Yen needs to hold over 10320 to maintain an upward bias and so far Dollar-Yen has not even been able to reach those levels. Look for a trading range in Dollar-Yen. Dollar-Yen historically tends to show strength during the middle of May. During 2013 the Dollar-Yen peaked during Mid-May and did not exceed those prices again until the end of the year. Cable is range bound and remains in a tight trading range. The British Pound (Cable) is marginally higher on the year and unchanged on the month. Historically Cable tends to drift a bit lower towards the middle to end of May. Cable hit resistance last week we advised readers to book profits on longs and are now recommending a slightly short posture for a trade. Look for range bound Cable for now. USD/CAD is trading within the 11010 to 10960 region and is a bit lower on the month and up on the year. So far a sustained decline has not occurred and we are friendly for the near term. In Precious Metals; Long term charts for Silver and Gold remain bearish. Gold and silver bounced from nearby support and appear to be holding. Look for more trading ranges, with a slightly upward bias if they maintain current levels. Most of the speculative longs are out of the Silver and Gold. Copper acted ok and rebounded on Friday.
Energy markets with their huge production increases in the U.S. and are unable to hold any significant rallies and continue to trade in a range bound manner. In fact the U.S is now faced with the prospect having to switch to rail cars better equipped to handle the large amount of highly explosive crude it now produces. Canada is already putting measures in place to restrict the transport of Crude Oil in many of the old rail cars because of the highly explosive nature of the type of crude being transported.
These changes in type of rail cars used will happen very soon due to numerous derailments that have produced some nasty results. Canada has already implemented some new rules. In the last six years since I first discussed the ‘up and coming boom’ in U.S Crude production on the radio show, the number of rail cars of crude in the U.S. traveling the railways has increased from 9,500 cars to 450,000 cars. However down the road we do expect to see an increase in price that normally occurs from mid to late May (for example in unleaded gas) through mid-to-late July. Traders should be looking to buy the September unleaded gas on a sharp decline in the next week and maintain the long for short-term trading in June and look to buy back end crude contracts if they become cheap enough. Seasonally buying December Crude in late May exiting in late July usually makes money. We will look closely in the next issue of BW outlook if a dip occurs since it is only early May.
The resumption of Libyan Crude Oil production has increased prospects of increased supply. But counting on increased supply from such countries as Libya, Nigeria and Venezuela in this writer’s opinion can be fleeting. None of these countries have stable political situations. Short-term and long-term economic outlooks are only improved with significant price increases in crude oil. Iran likely has a workable nuclear bomb by this time also, contrary to most written reports. Thus Crude Oil is a trading affair. Traders should stay tuned for short-term trades and look to buy weakness in the back end of Crude Oil to enable us to hold for the pull into summer. After that we can look to short at higher levels later.
Analysis for overseas equity and foreign exchange markets are available upon request. I will comment from time to time on those regions and markets around the globe in this publication, for more detailed information please call or email a request.
In the Grains; Soybeans don’t make typical final highs until sometime in June and July. Look for trading ranges in soybeans, we advised buying back end beans last week and will see how it acts. Look for a place to buy soymeal. The recent rally has been sharp and backing and filling is now occurring. Traders should look for trades on both sides of Soybeans and Corn. Seasonally Buying Sept Corn (December also after last week’s decline) tends to make money by mid-June. We are into weather markets now in grains. Buy a sharp decline in Corn.
Our long term work has shifted to friendly for Wheat. This is worth a mention now. Seasonal weakness lies directly in front of the winter wheat market, aggressive traders should consider buying weakness in the back end for a rally into late autumn. Harvest does not occur until a bit later into June, thus typically wheat prices tend to get soft now thru the middle of June. Weather has had an adverse impact on the U.S. crop. If harvest highs instead of lows occur traders may see continued upward prices of wheat. Let the orders on December Wheat work for now to buy on further strength. Stay tuned for flashes in the front end for trading from both sides. Livestock; as mentioned earlier, 288,000 jobs were added to the U.S. economy in April. More people working should be positive for meat demand, but the household survey casts a doubt. Hog weights keep setting records. The average live weight in Iowa-Minnesota last week was 287.5 pounds, a record high for the sixth consecutive week. Last week’s average was up 1.1 pounds from a week earlier and up 9.5 pounds from a year ago. Before early November, we had never seen a week with Iowa-Minnesota average live weights above 280.0 pounds. Since then we have not had a week with weights below that level.
The industry is and remains concerned that the impact of the PED on herd size going forward is going to become evident again once summer passes. We are advising longs in October for now and trading from the short side for the near term in June and July contracts. Buy August Hogs on Dips. Demand for Live Cattle may improve as spring progresses, look to some corrective activity during the next week or two after the recent run up to highs. Just to note, an expansion mentality towards the cattle herd is likely underway, however prices remain high. The April cattle on feed survey said there were 2.2% more steers on feed at the start of April than a year ago, but 5.9% fewer heifers in feedlots. The decline in heifers is likely due to increased heifer retention to increase the herd. That said, noticeable expansion could take a while and many shorts have been trapped trying to pick the top.
Seasonally, buying August cattle near Memorial Day tends to make money by the fourth of July. Look to buy a mid-month decline in a bull market. Until then cattle is a trading affair. Needless to say the Livestock markets are a day to day trading affair and traders should stay tuned for flashes.
Looking at the Softs; Cocoa remains long term bullish. Buying October Sugar during the middle of May prior to Memorial Day tends to make money after the Fourth of July into the Dog Days of Summer. While there is ample supply of sugar, there continues to be concerns about Australian, Indian and Brazilian production due weather related uncertainties. Traders should maintain longs October sugar and buy dips, stay tuned for flashes.
Cotton remains long term friendly, Cotton is a tad lower on the month and the normally seasonal weak period is ending soon. Look for a trading range in July Cotton. December has weather concerns keeping it in an upward pattern. Nothing has changed. Coffee during bull phases can be stronger in May and June if premium builds. Seasonally Coffee tends to peak a bit into mid to late May. Traders can expect a trading affair. However, enough damage has been done to the coffee crop that traders should look for production decreases for next year’s crop and likely for the year after. Due to the wild activity coffee traders need to have ice water running thru their veins.
Onto the nitty-gritty..
THE SENSATIONAL STOCK AND BOND MARKET
DOW JONES INDUSTRIAL AVERAGE
Support should appear near 16420.00 and the 16,150.00 to 16,090.00. Below that buyers should appear near 15,760.00 to 15,690.00 and contain declines. Resistance is at 16,720.00 and the 16,890.00 to 16,960.00 region, where sellers should appear and cap a rally.
JUNE E-MINI SP500
Nearby Resistance is at the 1902.00 to 1909.00 region. Traders can sell at 1901.75 for a turn lower and risk a close over 1911 for three days in a row. Beyond that a test of 1946.00 to 1953.00 is likely and should cap a rally. Support should appear near 1865.00 to 1858.00, below that a test of 1840.00 and the 1822.00 to 1808.00 region is likely. Under that buyers should appear near the 1780.00 to 1774.00 and contain a decline. Traders can buy at 1781 for a bounce and hold for higher prices. NASDAQ COMPOSITE
Resistance should now appear at 4163.00 to 4183.00. Beyond that sellers should appear near 4238.00 to 4249.00 and cap a rally for now.
Support should appear near 4056.00 to 4046.00 and the 3992.00 to 3982.00 region. Below that buyers should appear near 3929.00 to 3909.00 and contain a decline.
JUNE E-MINI NASDAQ 100
Support should appear near 3563.00 to 3553.00 and 3503.00 to 3493.00. Below that a test of the 3443.00 to 3425.00 region is likely. Resistance is at 3613.00 to 3623.00. Beyond that sellers should appear near 3663 to 3682 and the 3734.00 to 3743.00 region cap a rally.
JUNE E-MINI RUSSELL 2000
Resistance should appear at 1136.00, a close over is friendly and augurs for a test of 1164.00 to 1169.00. Beyond that a test of 1180.50 is likely.
Support should appear near the 1101.00 to 1096.00 region. Failure there is negative and indicates a test of 1082.00.
JUNE 30 YR BONDS
Resistance should appear near 137-24 and 138-07… Beyond that sellers should appear near 139-17 and cap a rally. Support should appear near 1135-21 and 135-07, below that 134-21 should hold…
JUNE 10 YR NOTE
Resistance should appear near 125-21 and 126-07. Above that resistance is at 127-07 where sellers should appear and cap rallies.
Support should appear near 124-07 and 123-21. Below that buyers should appear at 123-07 and 122-21 to contain a decline.
THE FRENZIED FOREX FRONT
JUNE DOLLAR INDEX
Resistance should appear near 8029 to 8044 and 8119 to 8134.
Support should appear near 7864 to 7836 and the 7777 to 7763 region.
JUNE JAPANESE YEN Resistance should appear near 9821 to 9837, beyond that a test of 9921 to 9937 is likely.
Support should appear near 9737 to 9706 and 9641 to 9625 and contain a decline.
JUNE EURO CURRENCY
Support should appear near 13830 to 13770 then 13615 and the 13460 to 13340 region. Resistance should appear near 13910 and 13990. Beyond that a test of 14150 to 14210 is likely. JUNE SWISS FRANC
Resistance should appear near 11500, beyond that a test of the 11640 to 11690 region is likely.
Support is near 11360 to 11300 then 11155 and the 11010 to 10960 region. JUNE BRITISH POUND
Support should appear near 16720 and the 16550 to 16420 region.
Resistance remains near the 16890 to 16960 region. Traders can sell at 16887 and hold for lower prices, risk a close over 16967 for three days in a row.
JUNE CANADIAN DOLLAR
Resistance should appear near 9140 to 9156 and 9237. Support should appear near 9060 to 9044 and 8964 to 8934
JUNE AUSSIE DOLLAR
Support should appear near 9156 to 9140 and 9060 to 9044. Resistance should appear near 9316 to 9347. Beyond that a test of 9429 to 9445 is likely. Stay tuned for Forex Flashes.
THE PRECIOUS METALS
JUNE GOLD
Resistance should appear near the 1310, beyond that a test of the 1334.0 to 1346.0 region is likely.
Support should appear near 1289.00 and the 1274.0 to 1268.0 region. Below that buyers should appear near 1253.0 and contain a decline.
JULY COPPER Resistance should appear near 30920 to 31020, beyond that a test of 31940 to 32130 is likely.
Support should appear near 30450 to 30360 then 29900 and 29720 and the 29370 to 29280.
JULY SILVER
Support should appear near 1953 to 1946. Below that a test of 1909 to 1902 is likely and should hold.
Resistance is at 2034 to 2042 and the 2080 to 2089 region.
THE EXCITING ENERGIES
JULY CRUDE OIL
Resistance should appear near 10021 to 10037 and 10104 to 10136.
Support should appear near 9737 to 9706 and the 9542 to 9526 region.
JULY BRENT CRUDE OIL
Resistance should appear near 10960 to 11010. Beyond that tests of 11300 to 11360 are likely and should cap a rally.
Support should appear near the 10680 to 10580, below that buyers should appear near 10470 and the 10360 to 10320 region which should hold.
JUNE HEATING OIL
Support should appear near should appear near 28830 to 28740 and 28290 to 28200.
Resistance should appear 29720 to 29900. Beyond that a test of 30360 to 30450 is likely.
JUNE UNLEADED GAS
Support should appear 29370 to 29280 and the 28830 to 28740 region, where buyers should appear and contain a decline.
Resistance should appear near 29720 to 29900, beyond that a test of 30360 to 30450 is likely.
JULY NATURAL GAS
Resistance should appear 484.5 to 485.6, beyond that a test of 491.5 to 492.6 is likely and should cap a rally.. A close over is friendly and augurs for a test of 491.5 to 492.6
Support should appear near 469.5 and the 465.0 to 463.9 region and should hold for a bit… Below that buyers should appear near 458.2 to 457.1
THE GRANDE’ GRAINS
JULY SOYBEANS Support remains near the 1459 to 1453 region, below that buyers should appear near 1421 to 1415 and contain a decline. Traders can buy at 1422 for a bounce and hold for higher prices.
Resistance should appear near 1484 to 1496 and 1529 to 1535, beyond that a test of 1569 to 1576 is likely.
NOVEMBER SOYBEANS Support should appear near 1218 and the 1203 to 1192 region, where buyers should appear and contain a decline.
Resistance should appear near 1232 to 1238, beyond that a test of the 1268 to 1274 region is likely.
JULY SOYOIL Resistance should appear near 4238 to 4249 and 4370 to 4381. Beyond that a test of 4425 to 4446 is likely. Support should appear near 4120 to 4110 and the 4056 to 4046 region.
JULY SOYMEAL
Resistance should appear near 484.5 to 485.6, beyond that a test of 491 .5 to 492.6 is likely
Support should appear near 465.0 to 463.9. Traders can buy at 465.0 for a bounce and hold for higher prices. Below that buyers should appear near and the 458.1 to 457.1 and 451.4 to 450.3 which should hold. Trade Accordingly
JULY CORN
Support should appear near the 497 ¼ region. Below that buyers should appear near 492 ¾ to 491 ½ and the 485 ¾ to 484 ½ region which should contain declines. Resistance should appear near 512 ¾ to 513 ¾ and the 520 to 521 ¼ region. Beyond that sellers should appear near the 541 ¾ to 544 region
Traders should buy December Corn at 478 ¾ and hold for higher prices.
JULY WHEAT
Resistance should appear near 732 ¾ to 734 ¼ and should cap a rally. Beyond that a test of 748 ¾ to 751 ½ is likely. Support should appear near 708 ¾ to 707 ½ and the 700 ¼ to 699 region where buyers should appear and contain a decline. Trade Accordingly and Stay Tuned for Grain Flashes…
Traders should buy December Wheat if a close over 743 occurs
Stay tuned for Grain Flashes
THE LIVELY LIVESTOCK
JUNE CATTLE
Support should appear near 13770 and 13692… Below that buyers should appear near 13617 and contain a decline.
Resistance should appear near 13990 and the 14150 to 14210 region.
AUGUST CATTLE Support should appear near 13537 and the 13460 to 13340 region and should contain a decline.
Resistance should appear near 13770 to 13830, beyond that a test of 13990 is likely.
JUNE HOGS
Support should appear near 12175 and the 12030 to 11920 region… Below that buyers should appear near 11817. Traders can buy at 11822 for a bounce and hold for higher prices.
Resistance should appear near 12257 and the 12320 to 12380 region and should bring in sellers and cap a rally.
AUGUST HOGS
Support should appear near 12030 to 11960 and 11817 which are likely to contain a decline. Below that buyers should appear near 11690 to 11640. Traders can buy at 11707 and hold for higher prices. Resistance should appear near 12320 to 12380, beyond that a test of 12680 to 12740 is likely.
Stay tuned for Livestock flashes.
THE SATISFYING SOFTS
JULY COFFEE
Resistance should appear near 20800 to 20890, beyond that a test of 21260 to 21340 is likely.. A close over is friendly and augurs for a test of 21700 to 21850 and eventually the 22190 to 22260 region.
Support should appear near 19960 to 19820 and 18650 to 18580. Below that buyers should appear near 18220 to 18080 and contain a decline.
JULY COCOA
Resistance should appear near 2928 to 2937, a close over is friendly and augurs for a test of 2972 to 2990.
Support should appear near 2883 to 2874 and the 2829 to 2820 region.
JULY SUGAR
Resistance is near 1774 to 1780 and 1808 to 1822 and should cap rallies for now. Support should appear near 1738 to 1731..Below that buyers should appear near the 1696 to 1689 region and contain a decline.
JULY COTTON
Support should appear near 9347 to 9316 and 9156 to 9140. Resistance is at 9429 to 9445 and the 9706 to 9737 region.
Traders should buy December Cotton 8412 SCO
Stay tuned for Flashes and Updates in all Markets
–A Ship in Harbor is Safe…But that is not what ships are built for –
Happy Trading!
Bill wil@futurescom.com
Sunday May 04, 2014 2:45 PM South Florida Beach Time
THIS PUBLICATION IS SUBJECT TO REVISIONS AND CONTAINS THE VIEW AND OPINIONS OF THE AUTHOR, EXCEPT WHERE OPINIONS ARE ATTRIBUTED TO OTHER SOURCES. WRITTEN PERMISSION IS REQUIRED PRIOR TO ANY DISTRIBUTION OR REPRODUCTION. FUTURES AND FOREIGN EXCHANGE TRADING IS RISKY AND CAN CAUSE SUBSTANTIAL FINANCIAL LOSS. THE USE OF OPTIONS AND OPTION TRADING INVOLVES A HIGH DEGREE OF RISK. THE USE OF STOPS MAY NOT LIMIT LOSSES TO INTENDED AMOUNTS. SPREAD POSITIONS MAY NOT BE LESS RISKY THAN OUTRIGHT FUTURES POSITIONS, FOREIGN EXCHANGE AND OPTIONS. TRADING FUTURES AND FOREIGN EXCHANGE ON MARGIN CARRIES A HIGH LEVEL OF RISK AND MAY NOT BE SUITABLE FOR ALL INVESTORS. PLEASE TRADE WITH CAPITAL YOU CAN AFFORD TO LOSE. PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. NO SOLICITATION IS MADE HERE FOR INDIVIDUALS TO BUY OR SELL FUTURES CONTRACTS, FOREIGN EXCHANGE OR OPTION MARKET. SOURCES ARE BELIEVED TO BE RELIABLE BUT NO ASSURANCE IS MADE FOR ACCURACY. READERS ARE SOLEY RESPONSIBLE FOR HOW THEY USE THE INFORMATION AND FOR THEIR RESULTS. YOU SHOULD BE AWARE OF ALL THE RISKS ASSOCIATED WITH FUTURES AND FOREIGN EXCHANGE AND SEEK ADVICE FROM AN INDEPENDENT FINANCIAL ADVISOR IF YOU HAVE ANY DOUBTS, THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FUTURES AND FOREIGN EXCHANGE TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. INTERNET RISKS ; THERE ARE RISKS ASSOCIATED WITH UTILIZING AN INTERNET BASED SERVICE INCLUDING BUT NOT LIMITED TO, FAILURE OF HARDWARE, SOFTWARE AND INTERNET CONNECTION, FUTURESCOM EMPLOYS BACK-UP SYSTEMS AND CONTINGENCY PLANS TO MINIMIZE THE POSSIBILITY OF SYSTEM FAILURE