Wednesday’s Futures Setups
As pointed out in last Tuesday’s
Futures Setups, stock index futures continue gaining confidence as they shrug
off bad news and trade optimistically higher. Safe-haven plays such as gold and
the Swiss franc fell and T-bonds
(
USZ1 |
Quote |
Chart |
News |
PowerRating) gapped lower, an ominous
sign when taken in conjunction with their Nov. 8 engulfing bar (outside day
down) and Nov. 1 hanging man (spike higher that opened and closed on its
low).
Some of T-bonds’ decline is the removal of the safe-haven premium as well,
too, but rallies in the most economically sensitive cotton and copper are the
harbingers of higher raw materials prices and first signs of inflation. As
discussed in multiple, previous Futures Markets Recaps, the situation is ripe
for inflation, despite a recent, record drop in producer prices. The forces at
play are: short-term interest rates below the inflation rate; war spending of $1
billion a month; fiscal spending, tax rebates, and corporate bailouts. Coupled
with a recession, this means fewer tax dollars will be flowing into the
Treasury’s coffers.
The Treasury said it would quit issuing the 30s, but there is a strong case
to be made to see more of an inflation premium get priced into bonds. This means
bond prices would go down to the higher interest rates required to account for
higher inflation. The immediate trend in T-bonds is down. Short below today’s
low at 109 20/32.
Stock index futures have not retraced more than three days off the Sept.
lows. The bias remains up and New 10-Day
Highs or Momentum-5
List readings in each makes
December Nasdaq 100 futures
(
NDZ1 |
Quote |
Chart |
News |
PowerRating),
S&P futures
(
SPZ1 |
Quote |
Chart |
News |
PowerRating), and
Dow futures
(
DJZ1 |
Quote |
Chart |
News |
PowerRating) all eligible for Off The Blocks
longs.
After surging out of its Off The Blocks
long, December
copper
(
HGZ1 |
Quote |
Chart |
News |
PowerRating) ran up and hit
its head on key resistance in the 68.30 area. Cover and wait for a pullback in
this momentum market. Pullback support exists at 66.50 then at 65.25.
December cocoa
(
CCZ1 |
Quote |
Chart |
News |
PowerRating) closed at 1210 and is $15 away from key
resistance at 1225. This is an area to consider shorting as this market works
off some of its overbought gains that have taken it up 23% in six days.
December wheat
(
WZ1 |
Quote |
Chart |
News |
PowerRating)
gapped down to a 20-day low. Given wheat’s quick descent from the Oct. 31 high
— three powerful down days — their inability to re-trace more than 50% of
this latest swing down, and the gap-down break of support at 281 (which also
appears will be a neckline), means this market could make a measured move, twice
the distance from the 297 head to the neckline, which projects 265 as a first
objective (see trading article Defining
Reward/Risk Ratios With Chart Setups for methods on calculating measured
moves).
January soybeans
(
SF2 |
Quote |
Chart |
News |
PowerRating) closed down 2 at 445 1/4 and first support
held just below 444. Beans need to hold 439 to keep the
immediate-trend, bullish scenario intact.
Also, currencies are set up in Turtle Soups. Expect the dollar to
pull back
and the Swiss and euro FX to rise. Trend remains up in the dollar and down in
the euro-block currencies. This is a counter-trend play.
|
Contract
|
Setup |
Direction |
Trigger |
( USZ1 | Quote | Chart | News | PowerRating) |
Topping signals, developing bearish fundamental case |
Down |
109-20 |
Stock Index Futures |
Momentum |
Up |
Off The Blocks |
Cocoa
|
Oversold | Down |
1225 resistance |
| Copper ( HGZ1 | Quote | Chart | News | PowerRating) |
Key resistance hit. Cover and renter on a Pullback |
Up |
66.50 then 65.25. |
Wheat
|
Technical breakdown |
Down |
Opening range shorts or 281 resistance for a re-short |
| Soybeans ( SF2 | Quote | Chart | News | PowerRating) |
Upward slant barely intact |
Up |
444 or 439. Must hold 439 for the immediate upside bias to remain intact. |
Define the risk before every trade and honor your stops.