FuturesCom Bi-Weekly Investment Outlook # 451 June 29 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
“In the fields of observation chance favors only the prepared mind”– Louis Pasteur
Saturday June 28, 2014
7:00 AM, South Florida Beach Time.
Traders should stay nimble and stay tuned for flashes for all markets during the holiday shortened week. An economic calendar is attached to today’s Bi-Weekly along with a holiday trading schedule.
Stocks are higher on the year and year over year and into resistance, the end of the second quarter is Monday. During July, the June employment report will be watched for any growth in average hourly earnings. Over the past five years there has been very little wage growth. Perhaps a key reason why inflation and GDP growth have trended below their long-term averages for most of the past five years. Some of this may be also be reflected in the high level of the 10-Yr inflation adjusted P.E ratio (commonly known as the Shiller P.E) which is currently at 26.3, above historical mean average of 16 to 17. Bottom line is we live in a low-yield world. Every major central bank has rates at or near the zero. The ECB recently began to charge banks to park reserves there in an effort to try and force banks to increase their lending activity in order to fend off deflation. While Japan has not gone to a negative rate environment, it has been in one form or another using QE for most of the last 25 years when looked at in totality. In the U.S, last week’s PCE was disappointing. Weakness in real spending may be a result of a recent pickup in inflation. Spending on food and beverages, for example, declined an annualized 4.9% in the three months ending in May, while prices of food and beverages increased roughly 5.5% on a 3-month annualized basis. If more GDP data in the U.S softens, traders should begin to hear talk about QE4. Since the U.S Federal reserve cannot cut rates if the economy slows for whatever reason.
In Forex Markets the Euro remains a bit lower on the year. Cable is higher on the year and remains in a tight trading range. The sustained close 16960 indicates a move towards 17310 to 17380. Buy dips with tight stops. USD/CAD is still broadly range bound and a bit higher on the year. The Dollar-Yen is a trading affair and continues to weaken, but only slightly. Current Forex ranges on a historical basis are muted and we expected that to change so stay tuned for Forex Flashes and ideas during the week, especially after the month end passes.
Analysis for a variety overseas equity and foreign exchange markets are available upon request, for more detailed information please call or email a request.
Precious Metals and Energy; Gold has acted a bit better recently but remains largely sideways in the broader picture. Both silver and gold are trading affairs and should continue to get help for buyers seeking safety from stress in the Mideast. The Long term prospects of stability in that region are well in the past now. Additionally traders should be wary of a pricing in of QE4 down the road. I know it sounds crazy, but after the horrific U.S 1st quarter GDP of a decline of 2.9 % the issue I raise here is likely a topic in the towers of Washington as well. Crude oil on the other hand is currently well higher on the year. While Geopolitical issues can push crude higher into July the immediate tensions appear to have eased. Continue to look for a trading range from 103.00 to 113.00 in WTI and for Brent Crude the high side is likely higher up to 116.00 and perhaps higher into the mid 120’s. The Bull seasonal ends after the third week of July … Look for trades from both sides. Buy dips in unleaded gas…
Natural Gas should be contained on deep declines due to improving demand and a large storage deficit. Copper acts better, seasonal weakness normally abates by now and we are seeing some strength. Stay tuned for energy and precious metal trades and flashes.
Grains; There is a USDA Crop Report due out Monday. Traders should continue to prepare for the dog days of summer. Buying August Soybeans and Selling November and March continues to look attractive for trading ranges and short term trades. Wheat typically makes lows for the remainder of the year over the next month. Strong wheat spreads, harvest delays and quality concerns are supportive short term. Traders should look for a range bound trading affair to begin. Also look for December Wheat to gain on December corn. Buying December wheat and selling December corn typically makes money until approximately the third week of July. Wheat remains oversold it could bounce sharply.
Livestock; Livestock markets are a day to day trading affair at record highs. Stay tuned for Livestock Flashes. Traders should be prepared to trade all months out to February of next year. Wholesale beef prices set new records this week. U.S. GDP declined at a 2.9% annual rate during the first quarter of 2014. Only two quarters in the last 20 years had bigger declines. If the economic decline continues, look for a drop in meat demand, especially, if consumer resistance to higher meat prices appears.
Live Cattle is extremely overbought. The USDA’s June Cattle on Feed report said during May there was a 10.1% increase in placements of cattle weighing less than 600 pounds, but an 11% decrease in placements of cattle weighing 600 pounds or more. There were 379 million pounds of beef in cold storage at the end of May. That is down 5.8% from the month before, down 21.5% compared to a year earlier, and the lowest stocks of frozen beef at the end of any month since June 2010. Last week’s cattle slaughter totaled 615,000 head, up 0.3%, but down 6.0% from the same week last year.
Average weight for steers was 852 pounds, up 2 pounds from the week before, but 1 pound lighter than last year. Friday’s USDA All Important Quarterly Hog report showed hog inventory down 5.1% and the breeding herd down 0.6% compared to a year earlier. These were lower than expected. However the Hogs were higher on the day and near record highs already and July hogs are a premium to cash. The pre-release guestimates were for the market hog inventory to be down 3.4% and the breeding herd to be up 1.6% compare to June 1, 2013. There were 575 million pounds of pork in cold storage at the end of May, 2% less than the month before and 12.7% less than a year ago. Hog slaughter last week totaled 1.91 million head, up 0.6% from the previous week, but down 5.4% compared to last year. The average live slaughter weight last week was 285.0 pounds, down 2.0 pounds from the week before and 11.0 pounds heavier than a year ago. It was the 64th week in a row that hog weights are above the year-earlier level. August Hogs historically tend to get stronger into late July after some weakness in early July.
Softs; September Cocoa made new contract highs on Friday and closed near the high of the day.
Thus Cocoa gave a weekend buy signal. October Sugar tends to rise into the Fourth of July and beyond into the Dog Days of Summer. Traders should buy dips, maintain the long posture and stay tuned for flashes. Some dryness in last January thru February’s rainy season may be reflected in lower yields. We remain friendly and while it set back sugar acts okay. Coffee is becoming interesting. While it’s only the end of June it’s worth mentioning now. Seasonally coffee tends to make lows into late July and rises into the end of the year. For trading short term, it can be sold on a rally especially after Friday’s dismal ‘end of day’ action. However, Brazil’s National Coffee Council has estimated that 35 to 40% of the harvest has been completed, a faster normal pace. Production estimates are at the low end 40.1 to 43.1 million bags. It’s possible there will be a production deficit for 2014/ 2015 season. Longer term traders should be prepared to buy dips in September and December for the pull and look for a rally back to the highs. Cotton sold off sharply and remains weak. Plentiful rain in Texas is beneficial to the crop in the U.S. However cotton held the under 7400 region and appears cheap.
Traders should stay nimble and stay tuned for Flashes and Updates in all Markets.
Onto the nitty-gritty.
THE SENSATIONAL STOCK AND BOND MARKET
DOW JONES INDUSTRIAL AVERAGE
Support should appear near 16,550.00 to 16,420.00 failure there augurs for a test of the
16,150.00 to 16, 090.00 region, where buyers should appear and contain declines.
Resistance is at 16,890.00 to 16,960.00 then 17,135.00 and the 17,310.00 to 17,380.00 region.
DOW JONES TRANSPORTS
Support should appear near 7864.00 to 7836.00 and the 7777.00 to 777.63 region.
Resistance is at 8194.00 to 8223.00 and the 8300.00 to 8314.00 region
SEPTEMBER E-MINI SP500
Resistance is at 1967.50 and the 1982.00 to 1996.00 region.
Support should appear near 1946 then 1927.50 and 1909.0 to 1902.0.
NASDAQ COMPOSITE
Resistance should appear at 4425.00 to 4446.00 and the 4503.00 to 4514.00 region.
Support should appear near 4315.00 to 4304.00 and 4249.00 to 4238.00.
SEPTEMBER E-MINI NASDAQ 100
Support should appear near 3743.00 to 3734.00 and 3682 to 3663.
Resistance is at 3858.00 to 3867.00 and the 3909.00 to 3929.00 region.
SEPTEMBER E-MINI RUSSELL 2000
Resistance should appear at near 1192.00 to 1203.00 and the 1232.00 to 1238.00 region.
Support should appear near 1169.00 to 1164.00 and 1136.00 to 1130.00
SEPTEMBER 30 YR BONDS
Resistance should appear near 137-21 and 138-07, beyond that sellers should appear near 138-21 and 139-07.
Support should appear near 136-21 and 136-07. Below that buyers should appear near 135-21.
SEPTEMBER 10 YR NOTE
Resistance should appear near 125-21 and 126-07. Beyond that sellers should appear near 126-21 and 127-07.
Support should appear near 125-07 and 124-21, below that buyers should appear near 124-07 and contain a decline.
THE FRENZIED FOREX FRONT
SEPTEMBER DOLLAR INDEX
Resistance should appear near 8029 to 8044 and 8119 to 8134.
Support should appear near 7954 to 7939 and the 7864 to 7836 region.
SEPTEMBER JAPANESE YEN
Resistance should appear near 9921 to 9937, beyond that a test of 10021 to 10037 is likely.
Support should appear near 9837 to 9821 and the 9737 to 9706 region. Where buyers should appear.
SEPTEMBER EURO CURRENCY
Support should appear near 13615, a close under is negative and augurs for a test of the
13460 to 13340 region.
Resistance is at 13690. Beyond that sellers should appear near 13770 to 13830.
Traders can sell at 13687 and hold for lower prices.
SEPTEMBER SWISS FRANC
Resistance should appear near 11300 to 11360 and 11500.
Support is near 11155 and the 11010 to 10960 region.
SEPTEMBER BRITISH POUND
Support should appear near 16890 and 16720. Traders can buy at 16962 and risk a close under 16887 for three days in a row.
Resistance should appear near 17130 and the 17310 to 17380 region.
SEPTEMBER CANADIAN DOLLAR
Resistance should appear near 9429 to 9445 and the 9526 to 9542 region.
Support should appear near 9347 to 9316, a close under is negative and augurs for a test of
9156 to 9140 and 9060 to 9044.
SEPTEMBER AUSSIE DOLLAR
Support should appear near 9316 then 9237 and 9156 to 9140.
Resistance should appear near 9429 to 9445 and the 9625 to 9641 region.
THE PRECIOUS METALS
AUGUST GOLD
Resistance should appear near 1334.0 to 1346.0 and the 1377.0 to 1383.0 region
Support should appear near 1310.0 to 1304.0 and 1289.
SEPTEMBER COPPER
Resistance should appear near 31940 to 32130 and 32610 to 32700
Support should appear near 31570 to 31480 and 31020 to 30920.
SEPTEMBER SILVER
Support should appear near 2089 to 2080 and the 2042 to 2034 region.
Resistance is at 2126 to 2134 and the 2219 to 2226 region.
THE EXCITING ENERGIES
AUGUST CRUDE OIL
Support should appear near 10470 and the 10320 to 10360 region.
Resistance should appear near 10680 then 10820 and the 10960 to 11010 region.
AUGUST BRENT CRUDE OIL
Resistanceshould appear near 11640 to 11690 and the 11920 to 12030 region.
Supportshould appear near 11320 then 11155 and the 11010 to 10960 region.
AUGUST HEATING OIL
Support should appear near should appear near 29900 to 29720 and 29370 to 29280.
Resistance should appear 30360 to 30450, beyond that a test of 31480 to 31570 is likely.
AUGUST UNLEADED GAS
Support should appear 30450 to 30360 and 29900 to 29720.
Traders can buy at 30470 and hold for higher prices.
Resistance should appear near 30920 to 31020, beyond that a test of 31940 to 32130 and the 33190 to 33280 region is likely.
AUGUST NATURAL GAS
Resistance should appear 4.503 to 4.514 and the 4.639 to 4.650 region.
Support should appear near 4.315 to 4.304 and 4.183 to 4.163 where buyers should appear and contain declines… Traders should look to buy September if lower levels are tested…
THE GRANDE’ GRAINS
AUGUST SOYBEANS
Support should appear near 1361 ½ and the 1346 to 1334 region, where buyers should appear and contain a decline, under that 1310 to 1304 should hold.
Resistance should appear near 1383 and the 1415 to 1421 region where sellers should appear and cap a rally. Trade Accordingly
NOVEMBER SOYBEANS
Support should appear near the 1203 to 1192 region, below that a test of 1169 to 1164 is likely.
Resistance should appear near 1232 to 1238. Beyond that sellers should appear near 1268 to 1274.
AUGUST SOYOIL
Resistance should appear near the 4110 to 4120 and the 4238 to 4248 region.
Support should appear near 3929 to 3909 and the 3806 to 3795 region.
AUGUST SOYMEAL
Resistance should appear near 450.3 to 451.4 and the 457.1 to 458.2 region.
Support should appear near 438.1 to 437.0, below that a test of 431.5 to 430.4 is likely.
DECEMBER SOYMEAL
Resistance should appear near 404.6 to 405.6
Support should appear near 380.6 to 379.5
SEPTEMBER CORN
Support should appear near the 438 ¼ to 437 1/4 and the 418 ¼ to 416 ¼ region, which should hold and bring in buyers…
Resistance should appear near 450 ¼ to 451 ¼ and the 457 ¼ to 458 ¼ region. Beyond that a test of 469 ½ to 471 ¾ is likely.
SEPTEMBER WHEAT
Support should appear near 580 ½ to 579 ¼ and 572 ¾ to 571 ¾
Resistance should appear near 602 ¾ to 603 ¾ and the 616 ½ to 619 region.
THE LIVELY LIVESTOCK
AUGUST CATTLE
Support should appear near 14960 to 14840 and 14530 to 14590
Resistance should appear near 15290 to 15350 and the 15690 to 15760 region.
OCTOBER CATTLE
Support should appear near 15350 to 15210 and the 14960 to 14840 region.
Resistance should appear near 15690 to 15760 and the 16090 to 16150 region.
AUGUST HOGS
Support should appear near 12890 then 12740 to 12680 and the 12380 to 1320 region.
Resistance should appear near 130 to 13100 and the 13340 to 13460 region.
OCTOBER HOGS
Support should appear near 11010 to 10960 and 10680 to 10580
Resistance should appear near 11300 to 11360 and 11640 to 11690
THE SATISFYING SOFTS
SEPTEMBER COFFEE
Resistance should appear near 18080 to 18220 and 19020 to 19090.
Support should appear near the 16960 to 16890 and the 16550 to 16420 region. Below that buyers should appear near 16150 to 16090 and should bring out buyers and contain a decline.
Stay tuned for flashes…
SEPTEMBER COCOA
Resistance should appear near 3148 to 3157. Beyond that sellers should appear near 3194 to 3213.
Support should appear near 3045 to 3036 and the 2990 to 2972 region.
OCTOBER SUGAR
Resistance is near the 1858 to 1865 region. A close over is friendly and augurs for a test of 1902 to 1909.
Support should appear near 1822 to 1808 and the 1780 to 1774 region where buyers should appear and contain a decline.
DECEMBER COTTON
Support should appear near 7342 to 7328 and the 7170 to 7143 region.
Resistance is at 7576 to 7601 and the 7763 to 7777 region.
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 June 29, 2014 12:00 Noon South Florida Beach Time
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