What’s Up, What’s Down: Cocoa Up, Corn Up, Pork Bellies Down
Comments for Tuesday, April 29 (reflecting back at Monday’s price action)
ENERGIES:
Higher closes for crude oil and natural gas while lower for heating oil and the RBOB. New contract highs and closes for crude oil and natural gas while the RBOB and heating oil are in bull pennants. All of the energies continue to look higher.
CURRENCIES:
Higher closes for the British Pound, Canadian Dollar, Euro FX, Swiss Franc, Aussie Dollar and Japanese Yen while obviously lower for the dollar index. Although the euro, francs and yen all closed higher they’re also in bear pennants looking lower overall. The pound settled higher again still trying to from a bottom while in a bear market. The Aussie Dollar closed higher and is also in a bear pennant. This market still is bullish overall but is forming a possible top. The Canadian Dollar settled higher this time but has strong resistance over 100. It has been in a sideways market overall since the end of January. The dollar index is in a bull pennant and is still forming a possible bottom.
MEATS:
Mixed closes for live cattle while lower for feeder cattle, hogs and sharply lower for pork bellies. New recent highs and closes for cattle, feeders and hogs. June cattle made a new recent high and close right at the low end of strong resistance. Cattle, however, should continue higher.
Feeders gapped lower and still have 2 gaps below but continue to look higher forming a possible huge bottom. Hogs look very strong with its next resistance over 7750 basis the June contract and are in a bull flag despite today’s weak close. They also have an island reversal in place. The strong closes in corn have also played a strong part in the feeders and pork sell-off. Bellies also settled sharply lower still lagging behind the other meats but forming a larger possible bottoming formation. An island reversal is still in place at the lows.
SOFTS
LUMBER: Lumber continued to follow through higher now in a possible bottom formation while hitting a strong resistance area.
ORANGE JUICE: Orange juice settled slightly. OJ still has a double top but continues to form a nice looking bottom. Orange juice also has been in a consolidation mode for a couple of months but isnow at the higher end of its trading range.
COCOA: Cocoa made a new recent high and close (middle of March) and should test its highs.
COTTON: Cotton had its lowest close since early February basis the July contract and in a decent support area at this time. Cotton is forming a possible large top and there still is an island reversal. This is not a good area technically to take a short position. In fact this market could easily rally up to 7500.
COFFEE: Coffee closed higher. The July contract needs to close over 14000 again and stay above 13000. There is strong resistance between 13500 and 14000. This market has been basically consolidating since the middle of March.
SUGAR: Sugar made a new recent low and close again now needing to hold the 1200 area basis the July contract.
INTEREST RATES:
FOMC Meeting Tuesday and Wednesday. Higher closes across the board but there are no changes technically at this time. All of the financials continue to look lower overall.
INDICIES:
The releases of the Consumer Confidence rating and the FOMC Meeting will certainly influence this sector. Higher closes across the board once again while lower for the cash Dow. All of the indices are acting like they will continue moving higher overall. The Island Reversal for the Nikkei is still in place.
METALS:
Higher closes across the board. Copper is still bullish overall while continuing in a consolidating mode over the last month. The Key Reversal for silver is still in place and in a bear pennant along with gold. Both markets should continue lower overall. Platinum also settled higher and has been consolidating since the middle of March. Stand aside for now and watch for a breakout in either direction first.
GRAINS:
Quite a divergence in the grains due to freeze scares. Sharply higher for Minneapolis, Kansas city and Chicago wheat along with corn. Also oats had a strong close while sharply lower for soybeans meal and bean oil along with rough rice. All of the wheat still look lower overall but there is plenty of room for a good size retracement due to little resistance overhead.
Corn should now test its highs due to recent fundamental news. Also, corn plantings are the furthest behind in 21 years. However the old adage ‘rain makes grain’ usually comes true. I do remember where that didn’t work one time in the 90’s but not too often. Oats settled higher and are still in a trading range needing to close over 400 to turn this market higher or below 375 basis the July contract to turn it lower.
However, keep a close eye on the corn which should pull the oats up at least in the short term. Rough rice closed down the daily $0.50 limit giving me a sell signal. The bean complex closed sharply lower again because the freeze scare doesn’t hurt the beans since it’s too early to plant beans.
However, what this means is if the corn doesn’t get planted then the farmers will turn to planting more beans which would be bearish for the bean complex. Also today’s action has given me a sell signal in the beans.
Rick Alexander has been a broker and analyst in the futures business for over thirty years. He is a Vice-President for Sales and Trading at the Zaner Group (www.zaner.com) a Chicago-based futures brokerage firm. Email Rick at ralexander@zaner.com.