What’s Up, What’s Down: Crude Oil Sharply Up, Dollar Up, Aussie Dollar Sharply Down
(Looking Ahead to Today by reflecting back at Monday’s price action)
ENERGIES
Sharply higher closes for the crude and heating oil along with the RBOB but lower for the natural gas this time. Natural gas continues to look very bullish and the crude, heat and RBOB are all in bull pennants and should test their highs.
GRAINS
Reports Today: CROP PRODUCTION. US SUPPLY & DEMAND. Only corn settled higher while Minneapolis, Kansas City and Chicago wheat closed sharply lower. Rough rice, soybeans, bean oil and soymeal ended up lower. Most of the grains, except for all wheat, settled near unchanged after being sharply higher Sunday night ahead of Tuesday’s crop report. I still have buy signals for Kansas city and Chicago wheat but Minneapolis has been in a sideways pattern with a minor bias to the downside.
Corn made a new all-time contract high and close for the 3rd day in a row. Oats had a huge trading range like the rest of the grains but did make a new recent high before selling off sharply to close over $0.05 lower. Still oats have been in roughly a $0.50 trading range since the beginning of April and need to close over 425 basis the July contract unless I get a different type of formation.
Rough rice settled slightly lower which is really something for this market lately. Rice is now trying to form a bottom but still bearish overall. Soybeans made a new recent high before selling off to close a few cents lower. Beans still look to move higher unless the crop report disagrees. Meal did not make a new recent higher before settling lower but is in a bull flag looking to continue higher along with the rest of the bean complex. Finally oil also made a new recent high closing slightly lower but looking higher overall.
CURRENCIES
Sharply higher for the dollar index and higher for the British pound while lower for the Euro Fx, Swiss Franc, Japanese Yen and Aussie Dollar (sharply lower). The euro is now in a sideways pattern with no true direction at this time while the franc still looks like a bottom is in place with resistance at the 900-1000 area basis the September contract. The yen rallied up and then broke sharply settling near its lows continuing to look lower overall. The yen has been gradually working lower since its highs back on March 17th with support around the 9400. The Canadian Dollar had the same type of action as the yen continuing to work lower. The Aussie Dollar closed sharply lower and the rest of the week’s action could tell us a lot about this currency. I will be particularly interested in Tuesday’s action.
The pound on the other hand made a new recent high before settling back and closing around midrange. The pound has been trying to form a bottom since the first week in April but hasn’t been able to break out- at least not yet. Also it has been gradually working lower overall at the same time. The dollar broke sharply at first and then rallied to close strong. This was the opposite action as the yen and Canadian Dollar. A close over 7400 basis the September contract would be very significant for the bulls
INTEREST RATES
Sharply lower for the eurodollar and lower for the bonds and notes. The eurodollars had their largest drop in quite a while giving me a sell signal due to the fact it doesn’t look the feds will lower rates any time soon if at all. The bonds are in a large bear pennant and notes are still bearish but still in possible bottom formation and hanging on by a thread.
INDICES
Reports Today: U.S. TRADE BALANCE. Higher closes for the cash and Dow futures along with the S&P’s and Nikkei while lower for the Nasdaq. The cash and Dow futures along with the S&P’s still look lower overall. However the Nasdaq still needs to hold the 19500 area to continue looking higher. The Nikkei, however, continues to be moving gradually higher overall.
MEATS
Lower closes for live and feeder cattle along with lean hogs and pork bellies. Cattle are still bullish making higher highs and higher lows since April but trying to form a possible top especially after today’s action gapping lower. However, this same pattern has happened twice before in May and June resulting in rallies to new contract highs although the August contract was hurt by today.
Feeders closed very weak again heating towards the 110 area basis the August contract. Hogs settled very weak again with very little support below. Bellies also closed lower and are in a bear pennant with no support below and very close to contract lows.
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. If you would like a free booklet explaining the charts mentioned above, email Rick at ralexander@zaner.com.