Monday’s Price Actions: Oil, Cotton, Coffee, Cattle
COMMENTS FOR TUESDAY, APRIL 22, LOOKING BACK AT MONDAY’S (4/21) PRICE ACTION.
ENERGIES
Higher closes for crude and heating oil along with natural gas while lower for the Reformulated Blendstock for Oxygenate Blending gasoline (RBOB). New contract highs and closes for the crude, heat and natural gas. Even the RBOB made a new contract high (before settling lower). All of the energies contracts continue to look higher.
CURRENCIES
Higher closes for the Aussie Dollar, Euro Fx, Swiss Franc and Japanese Yen while lower for the Canadian Dollar, British Pound and dollar index contract. The euro continues to look higher with its second highest close while the franc has been consolidating in a bull market. The franc should work higher from here but does have good resistance right overhead. This will be a critical area to hold.
The yen settled higher but appears bearish and is also in a bear flag.
The pound also settled lower and, while trying to bottom at this time, is still bearish overall. The Aussie Dollar made a new contract high and close. The Canadian Dollar settled lower this time and is really difficult to call. It should continue higher but there appears to be strong resistance over 100. I would stand aside for now. There are better fish in the sea. The dollar index closed lower and is still in a down mode.
MEATS
Higher closes for feeder cattle while lower for live cattle, lean hogs and pork bellies. June cattle filled its closest gap leaving only one gap left and in a bull flag. Cattle should continue higher at this time but does have good resistance over 9375.
The reason I keep talking about gaps is because meats and grains fill around 90% of their gaps. Also there’s a new recent high (20 trading sessions) for the feeder cattle in the May contract. Feeders have 2 gaps below but are in a bull pennant and, like cattle, should continue to work higher.
Hogs settled lower filling a small part of its nearest gap. Although hogs look bullish overall they could still retrace as low as 70.00 (basis the June contract) with support starting under 72.50. Hogs also have an ISLAND REVERSAL in place. Bellies also still have an island reversal forming a possible larger bottom but continuing to look higher with 2 gaps underneath.
METALS
Gold settled higher while copper and platinum closed lower. Silver ended up sharply lower. Copper is still bullish overall while in a consolidating mode over the last couple of weeks. There also has been minor topping action so far.
The key reversal for silver is still in place which continues to look lower overall while still in a consolidation area. Today’s action at least temporarily has put a hold on its retracing action since the beginning of April.
Gold closed higher but still looks like it’s topping out overall. A critical area to hold basis the June contract is the $900 area. A lower settlement for platinum which has also been consolidating and could go in either direction.
My opinion is to stand aside in this market for now and watch for a breakout in either direction first.
SOFTS:
LUMBER: This market settled lower and continues to look very bearish.
ORANGE JUICE: Orange juice settled sharply lower and has been in a consolidation mode for a couple of months. Before today’s action orange juice was close to a buy signal but not right now.
COCOA: Cocoa closed higher in fairly quiet trading. Support is around the 240 area basis the July contract with our next objective at 2800.
COTTON: Cotton settled lower for the 4th straight trading session and is in a support it needs to hold. Closing below 6950 basis the May contract doesn’t help.Cotton isforming a possible large top and there still is an island reversal in the May contract. I don’t trade the October contract. The open interest and volume are much lower than the other months because it’s in between crop years. Slippage can be brutal!
COFFEE: Coffee closed sharply lower and is now in a major support area. The July contract needs to close over 14000 again and stay above 13000.
SUGAR: Sugar settled sharply lower and is now in the area to go long if you are bullish.
INTEREST RATES
Higher closes across the board but the eurodollars and notes are in bear pennants and the bonds are in a bear flag. All of the financials continue to look lower overall.
INDICES:
Higher closes for the S&Ps and NASDAQ while lower for the cash and Dow futures along with the NASDAQ and Nikkei. All of the indices are acting like they will resume moving higher overall. The island reversal for the Nikkei is still in place.
GRAINS
Except for oats which settled lower sharply, we saw lower closes across the board. All of the wheat contracts continue to look lower overall although Kansas City wheat has still held its support but now is near the bottom of its support area. However, Chicago and Minneapolis wheat (basis the May contract) continue to look very weak with the latter having a double bottom at 11.50 and acting like it will be tested while making lower lows and lower highs overall.
Corn had a bad close today (lowest low and close in 14 trading sessions) coming very close to a sell signal. Corn did bounce off a good support area (under 5.75) basis the May contract.
Oats also had a bad close breaking out of a bull triangle to the downside. Its next stop should be in the 3.59 area basis the May contract. Oats need to close over 4.00 to turn this market higher.
Rough rice finally had a down day but is in a bull pennant looking very strong overall.
Soybeans settled sharply lower taking away my buy signal but still setting up for a larger buy signal down the road. Soymeal also closed sharply lower and is also setting up for a large potential buy signal. However, meal’s formation is weaker than the beans at this time and needs to hold the 335-340 area basis the May contract.
Bean oil like beans is also forming a better looking bottoming formation. Still, these are potential bottoms forming and should not be construed as buys at this time.
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. For a free booklet on Rick’s favorite chart patterns, email him at ralexander@zamer.com.