Month: November 2017

CORN (March)

Yesterdays Close: March corn futures closed up 4 ¼ cents yesterday, trading in a range of 4 ¾.

Fundamentals: Export sales this morning came in at 599,000 metric tons, this compares with the expected range from 700,000-1,100,000 metric tons; last week’s number came in at 1,085,865 metric tons. Yesterday’s weekly EIA report showed ethanol production was down slightly from the previous week. There were an estimated 105.9 million bushels of corn used last week for ethanol, this is down from 106.7 in the previous week but above last year’s 104.1 for the same time. We will continue to keep an eye on weather developments in South America, this will likely be the key price catalyst as we round out the year.

Technicals: Yesterdays move higher against the contract lows was constructive but far from bullish. We see the probability of the market trading a nickel on either side of 350 until we get a fundamental catalyst to give us a new technical direction. The December futures contract was glued to 350 and we wouldn’t be surprised to see March follow suit for the near term. Technical resistance held yesterday at 354, that will remain intact. If the market takes that out we could see short covering up towards 360 ¼ which represents the 50-day moving average, an indicator that the market has struggled to get out above since July. On the support side, 348 ¾ is the first line in the sand.

Bias: Bearish

Resistance: 354**, 360 ¼****, 367-369 ¼**, 373 ½-375****

Support: 348 ¾**, 334-335 ½***, 323-325 ¼**

 

SOYBEANS (January)

Yesterdays Close: January soybeans finished yesterday’s session down ¼ of a cent, this after trading in a range of 7 ¼ on the day.

Fundamentals: Export inspections this morning came in at 943,000 metric tons, this compares with the expected range from 800,000-1,200,000 metric tons; last week’s export sales number came towards the low end at 869,086 metric tons. The USDA did announce a sale of 263,000 metric tons to China yesterday for the 2017/2018 marketing year. The bulls will want to see a trend of higher exports in order to get this market out above technical resistance. We will continue to monitor South American weather developments as they get into the crop developmental stages.

Technicals: The market finished near unchanged yesterday after trading in a decent range. The market is stuck between technical support and resistance. We continue to be patient for better value, we see that from 982-986 ¼. This pocket represents the 50 and 100-day moving average, as well as the 50% retracement from the June lows to the July highs. If we see a close below, we could see long liquidation from funds back towards the bottom end of the range which comes in at 968. Historically we see a rally this time of year, so we continue to play the market with a long bias despite being range bound for the last three months.

Bias: Neutral/bullish

Resistance: 999-1004 ¾***, 1014**, 1021 ½****

Support: 982-986 ¼***, 968 ¼****, 957-963 ¼****

 

Wheat (March)

Yesterdays Close: March wheat futures closed up 6 cents yesterday after trading in a range of 6 ¼ cents.

Fundamentals: Export sales this morning came in at 184,000, this is not the number that the bulls wanted to see. Big global supplies and less than stellar demand has been keeping a lid on any significant rally. The bulls really want to see a fundamental shift and a trend of higher exports to help stabilize the market. A big sale here and there will not cut it, only a trend of higher demand will encourage shorts to begin covering a portion of their position.

Technicals: Wheat futures traded right up to resistance yesterday and has failed so far this morning to retain that strength, the bears will want to see follow through on the floor to confirm a failure; volume confirms price. If the market does indeed failed, we could see a run towards new contract lows below 424 ¼, we have first minor support at 428 but 422 ½ is the more significant level we have an eye on. A break and close below could lead to accelerated selling pressure, we would not be surprised to see the March contract make a run towards the $3 handle.

Bias: Bearish

Resistance: 433 ¾-435**, 445-447****, 452 ¾**

Support: 428* 422 ½***, 412 ¾**, 399-402 ¾****

 

 

For more information please contact DAW Trading at brokersedge@dawtradingdiv.com or at 877-329-0006 and visit us at http://dawtradingdiv.com/brokers-edge/ 

 

Disclaimer:

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.

By CME Group http://www.cmegroup.com/education/featured-reports/vix-yield-curve-cycle-at-the-door-of-high-volatility.html?source=rss

VIX-Yield Curve: At the Door of High Volatility?

We freely admit: Figure 1 is probably the strangest chart that you will ever see, at least in finance.  You may be wondering: did they throw blue spaghetti noodle on paper for inspiration and then write an economics article about it?  Or, have they spent too much time with disciples of psychologist Timothy Leary, a proponent of experimenting with psychedelic drugs?

Figure 1: Weirdest Chart Ever

Figure 1: Weirdest Chart Ever

We assure you that neither is the case.  The above chart represents three successive iterations of the VIX-yield curve cycle, a strange but powerful economic phenomenon that has persisted since at least the end of the 1980s and to which every fixed income and equity volatility trader should pay attention. Keep reading. We will break it down in much simpler fashion.

What goes ‘round, comes ‘round

The cycle has four phases.  As with any circular motion, where to begin is arbitrary, so we will begin at the bottom of the economic cycle and work our way to mid-stage expansion.

  1. Recession: yield curve moves from flat to steep (upward slope), equity volatility is relatively high.
  2. Early-stage recovery: yield curve remains steep, equity volatility begins to fall.
  3. Mid-stage expansion: the yield curve starts to flatten, equity volatility remains low.
  4. Late-stage expansion: yield curve becomes even flatter, equity volatility soars as fears of recession dominate investor behavior.

The VIX is the index of implied volatility on S&P 500® options and its daily time series is extraordinarily choppy.  To see its relationship with the yield curve, we smooth them both by taking a two year (500 business day) moving average and then put the results into an “X to Y” scatterplot.  The result is quite extraordinary:  consistent counter-clockwise motion.

From our arbitrary starting point in a recession, the Federal Reserve (Fed) has responded to the economic downturn with much lower short-term rates.  Steep, upward sloping yield curves with short-term rates much lower than long-term bond yields eventually are associated with an economic recovery and lower equity-market volatility.  A sustained economic expansion, with relatively low equity-market volatility makes the Fed feel comfortable about removing monetary policy accommodation and flattening the yield curve (i.e., short-term rates moving higher with stable bond yields).  A tight monetary policy, flat yield-curve environment finally is associated with an economic downturn and massive correction in the equity and credit markets which sends volatility soaring.  High volatility and a crashing economy force the Fed to lower short-term rates and ease policy in order to assist in generating an economic recovery.  Wash.  Rinse.  Repeat. (Figures 2, 3, 4).

This same four-stage cycle occurred (1) in the 1990-1999 period, ending in the “Tech Wreck” on Wall Street and an economic downturn with rising unemployment; (2) in the 2000-2008 period, ending in the spectacular “Housing Bust” and Wall Street panic, triggering sharply rising unemployment; and (3) the 2009-??? period in which we are now in stage four, with the Fed raising short-term rates, the yield curve starting to flatten, and the economic expansion looking a little long in the tooth.

Figure 2: The 1990-1999 VIX-Yield Curve Cycle

Figure 2: The 1990-1999 VIX-Yield Curve Cycle

Figure 3: The 2000-2008 VIX-Yield Curve Cycle

Figure 3: The 2000-2008 VIX-Yield Curve Cycle

Figure 4: The Current VIX-Yield Curve Cycle

Figure 4: The Current VIX-Yield Curve Cycle

That is, currently, the markets are in a phase that closely resembles the mid-expansion phases seen during the mid-1990s (1994-96) and the mid-2000s (2005-06).  As already noted, the Fed has commenced removing monetary accommodation.  Yield curves are flattening.  VIX remains unperturbed at extraordinarily low levels. This phase may persist another year or so as the yield curve continues to flatten and the VIX, most likely, remains low for a while longer.  How long this lasts depends upon the Fed and the economy.  The faster the Fed tightens, the more quickly the yield curve will flatten, and the more likely the markets will move to the next phase.

The next phase is the late-stage economic expansion.  By this time the yield curve will be quite flat.  VIX will start to rise from its current two-year moving average of around 12% to much higher levels, perhaps as much as 50% to 100% higher depending on the degree to which market participants fear a future recession.  The combination of a flat yield curve and higher equity volatility will probably also blow out credit spreads and choke off lending to certain sectors of the economy, which has the potential to provoke a sharp slowdown in economic activity and then another easing cycle.

The Interplay of Fed policy and Economic Downturns

What makes this cycle tick is the interplay of Fed policy and economic downturns.  At the beginning of our cycle, rising unemployment in a recession triggers a Fed policy shift to much lower short-term interest rates.  Treasury bond yields typically decline as well with lower inflation expectations, although the drop in short-term rates far outweighs any bond rally.  Easier monetary policies are then associated with the end of the recession and start of the recovery.  At the end of the cycle in the late-stage economic expansion, it is fears of rising inflation associated with very low unemployment which is the catalyst for the Fed shifting to a tighter monetary policy.

Figure 5: Economic Downturns and T-Bill Rates

Figure 5: Economic Downturns and T-Bill Rates

While displaying some consistent themes, every “VIX – Yield Curve” cycle also responds to different external forces.  And, in some cases, the line of causality from late-stage economic expansion to recession is not so clear.

In the late 1990s, there was the exuberance of a market fueled by rising technology stock valuations even as earnings from these companies were only growing slowly.  The general view of the progression of events was that the Fed tightening triggered the “Tech Wreck” in stocks and that was the catalyst for the economic downturn.

The 2008-2009 economic disaster had a different story to tell.  This time, the 2003-2005 mid-stage expansion had featured a housing boom fueled by lax banking oversight and regulation, as well as, a 1% federal funds rate with a sharply upward sloping yield curve.  The Fed removed the monetary accommodation in 2005-2006, taking the federal funds rate to 5% and flattening the yield curve.  This action stalled the housing boom.  The straw that broke the camel’s back, or the catalyst for the deep recession, however, was the financial panic that occurred in September 2008 when the U.S. Fed and Treasury collaborated to put Lehman Brothers into bankruptcy and bail-out AIG to ensure certain other investment banks remain solvent. Compared to the previous period of rising unemployment in 2001-2003, 2008-2009 was characterized by massive de-leveraging across many sectors of the economy, leading to an exceptionally deep recession, now known as the “Great Recession”.

The current economic expansion, which started back in late 2009, is now the second longest on record in the post-WWII period.  And, it has displayed a number of different characteristics from our two previous “VIX – Yield Curve” cycles examined here.   As already mentioned, the 2008 crisis was a “financial de-leveraging” recession, which is typically deeper and does not display “V-Shaped” recoveries.  And, the slow pace of economic growth in the expansion led to the use of unconventional monetary policy (i.e., asset purchases or Quantitative Easing) by the Fed.  QE worked to raise asset prices and push volatility even lower but failed to encourage more economic growth or push inflation higher.  The QE phase distorted the shape of the yield curve by pushing bond yields lower.  The removal of monetary accommodation was delayed, although we are now observing this stage in action, and this time around it includes raising short-term rates as well as unwinding Quantitative Easing.

The last factor of note in this cycle is the persistence of low inflation.  The Fed typically views inflation as being pushed higher by low unemployment and tight labor markets, and that has not happened in this cycle, at least not yet.  Thus, the Yellen Fed has admitted to some confusion about the economic outlook and has been exceedingly cautious in raising short-term rates.  Indeed, the -Fed under Jerome Powell may even consider raising its long-term inflation target from 2% to, perhaps, 3% or 4%.  This would signal a desire by the Fed to stop raising short-term rates while it unwinds QE.  And, it might prolong the period of an upwardly sloped yield curve.

The alternative scenario is that the Fed tightens by a total of 75 basis points (bps) in 2018 (in addition to the 25 bps it has signaled for December 2017), as its “dot plot” suggests.  If rates were 100 bps or 1 percent higher by end of 2018, then that should put the current cycle on course to take a sharp right turn across the bottom of the graph. This might move up not only equity index volatility but also implied and realized volatility on all manner of products including high yield bonds, Treasuries, metals, currency and perhaps even energy and agricultural goods options.

As the saying goes: watch this space.

Figure 6: Yield Curve Anticipates Economic Downturns

Figure 6: Yield Curve Anticipates Economic Downturns

Bottom line:

  • Two-year average yield curve slopes and VIX levels move in a four-stage cycle.
  • Currently, we are in the mid-to-late expansion stage.
  • Additional Fed tightening will flatten the yield curve more, which will eventually provoke an explosion in volatility as the VIX’s average level might double from current levels.
  • It is likely the volatility will increase across a broad range of products including bonds, metals and currencies as well.

For more information please contact DAW Trading at brokersedge@dawtradingdiv.com or at 877-329-0006 and visit us at http://dawtradingdiv.com/brokers-edge/

 

Disclaimer:

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.

E-mini S&P (December)

Session close: Settled at 2626, losing one point

Fundamentals: The S&P extended gains early in the session, achieving our target of 2633.50 with a new all-time high of 2634.25. However, the picture quickly changed with tech leading a selloff. The Nasdaq lost as much as 2% with Netflix, NVIDIA and PayPal getting hammered more than 5%. Facebook lost 4% while Amazon and Alphabet both lost about 2.5% and Apple 2%. The move comes as a rotation with money moving out of tech stocks and going into banks, the XLF finished up 1.7%. This move began on Tuesday with the banking sector outperforming on comments by Jerome Powell during his confirmation hearing that Wall Street regulation is “tough enough”. The rotation also gained steam as tax-reform moves closer to getting passed and tech whose industry average tax-rate is 18.5% would not benefit on the move to 20%. The Fed’s favorite read on inflation, the PCE Price Index is due out this morning at 7:30 am CT and expectations come in at 1.4% YoY, lagging behind the 2% target. A stronger than expected read here could halt some of the dovish-Fed-led stock buying. Jobless Claims, Personal Spending and Income data is also due at 7:30. Chicago PMI is at 8:45 am CT and Dallas Fed President Kaplan speaks at noon. Traders should also keep an eye on Crude Oil with OPEC likely to announce a production deal at their meeting today.

Technicals: The target of 2633 was hit within this week and the ensuing pullback was quick and ultimately short-lived. We discussed the sell-off on our Midday Market Minute video and how the NASDAQ was leading the way but the law of round numbers that we like use for the NQ should bring support and slow down the selling at 6300. Furthermore, we discussed our first support here in the S&P at 2616-2618, the session low was 2619.75. Price action is priming to extend gains and the next resistance level we see comes in at 2648.75. We remain bullish but feel cautious after our target was hit so quickly and the beating tech took yesterday.

Bias: Bullish/Neutral

Resistance – 2633.50***, 2648.75**

Pivot – 2625-2626

Support – 2616-2618**, 2605.50*, 2594.50-2596***

 

Crude Oil (January)

Session close: Settled 55 cents from the lows at 57.30

Fundamentals: Today is the day we have been waiting for with OPEC set to announce a deal on production cuts at the conclusion of their closed-door meeting. In the last month, Oil has gained as much as 12% and longs amassed the largest position since February. In February, a selloff of at least 10% ensued in the first half of March; if everyone has bought, who is left to buy. OPEC has drunk their own Kool-Aid; their jawboning has worked for two years and yes the production cuts have helped to rebalance a massively oversupplied market. However, the emphasis that was placed on this November meeting to extend cuts that are already in place for another four months could ultimately set them up for failure. Russia wants higher Oil prices as does Saudi Arabia and every other producer. However, Russia’s breakeven is now lower than the Saudi’s and with prices near $60, not only achieving a deal but sticking to it can become more difficult with an end in sight. The aforementioned rally not only over the last month, but the last two has come partially because of the success of rebalancing but also because the emphasis on this meeting’s ability to lock in a production cut deal for another nine months after March and secure all of 2018. Now, anything less would be bearish. Furthermore, OPEC will now need their strongest verbiage yet to put behind this deal because of the March meeting that is now on everyone’s calendar and the potential cliff-hanger left from this meeting.

Technicals: Price action traded to a low of 56.75 yesterday, trading into the key level we have been talking about this week at 56.94-57.02. The move was quick and did not close below it, something needed to open the door for a move down to 55.00-55.25. With prices rising into this morning ahead of the OPEC announcement we remain bearish and believe this is an opportunity to position short with puts. Call us at 312-278-0500 to see how we are playing it. First resistance comes in today at 57.90 but the level we are watching more closely is 58.17-58.30 and a move out above here could get legs to the recent highs. Traders must be nimble today and manage risk, we could get some wild swings.

Bias: Bearish/Neutral

Resistance – 57.90**, 58.17-58.30**, 58.97***, 59.96***, 62.58**

Support – 56.94-57.02**, 56.54*, 55.00-55.25***

 

Gold (February)

Session close: Lost more than $10 and closed at 1286.2

Fundamentals: Gold failed a day sooner than we thought it potentially could. Yesterday, we discussed that the bulls were likely to cling to it near the 1294.5-1296.4 heading into today’s key read on PCE Price Index, the Fed’s favorite inflation yard stick. Expectations come in at 1.4%, far from their 2% target but this is still a critical number and can ultimately dictate much of the verbiage we get at the December meeting. We also have Jobless Claims, Personal Spending and Income data at 7:30 am CT and Dallas Fed President Kaplan talks at noon. The Dollar continues to gain ground after a revision higher on Q3 GDP yesterday and another strong read for housing with Pending Home Sales coming in better than expected. The data has been good this week, but tax-reform has also done a lot of the heavy lifting and a final vote in the Senate is expected before the end of the week. Let’s not forget that the S&P continues to make fresh all-time highs, reaching our upside call of 2633.50, which has also put pressure on the safe-haven play.

Technicals: Let’s not beat around the bush, the bears are now in the driver’s seat after the fail against major three-star resistance and the subsequent move below key support yesterday at 1289.8-1289.9 neutralized our near term expectations; the 50 and 100 day moving averages which are now at 1288.5-1291. We remain long term bullish, but traders must manage risk, a better than expected read on PCE will send prices lower. The lack of a near-term catalyst has kept the long-term bull case under wraps.

Bias: Neutral/Bullish

Resistance – 1288.5-1291**, 1304.7***, 1312.7-1316.4**, 1328-1329.4**

Support – 1268.1-1276***, 1262.8**

 

Natural Gas (January)

Session close: Settled at 3.179

Fundamentals: Prices are lower today mostly on profit taking ahead of the storage report due at 9:30 am CT. The fundamentals have not changed, and this is profit taking after whipsaw action in the last two weeks. Estimates come in at -37 bcf.

Technicals: We remain long term Bullish but were clear yesterday that the 3.201-3.245 level was going to be hard to crack and prices reached a high of 3.218; a failure to close out above here was the signal to take a little off the table on the week. We discussed the likeliness of profit taking ahead of today’s report due to the big swings in price action. Key support now comes in at 3.06 and this must hold on the session to avoid neutralizing the week. A close below 3.022 will open the door to further selling while 2.971-2981 remains a long-term level to watch on a closing basis.

Bias: Bullish/Neutral

Resistance – 3.192-3.242**, 3.321-3.358****

Support – 3.06**, 3.022**, 2.971-2.981***, 2.929**, 2.847-2.861**, 2.753-2.7565***, 2.486-2.522****

 

10-year (March)

Session close: Settled at 124’15

Fundamentals: A revision higher in GDP added to already incurred pressure on the treasury complex due tax-reform moving through the Senate budget committee on Tuesday. With another win in the Senate on Wednesday, tax-reform should be set for a final vote before the end of the week. As we have discussed in previous commentary a larger deficit will require treasury to create a larger supply in order to meet these needs. Today has been circled on our calendar due to PCE Price data due at 7:30 am CT. This is the Fed’s favorite inflation barometer and expectations are for 1.4%.

Technicals: Key support at 124’045-124’065 has held on this move lower, this will be a crucial level to watch after today’s data and through the close of the week. We remain long term bullish and the 124 level is likely to present a tremendous buy opportunity by mid-December.

Bias: Neutral/Bullish

Resistance – 124’22**, 124’295-125’00***

Pivot – 124’15

Support – 124’045-124’065**, 123’27***

 

For more information please contact DAW Trading at brokersedge@dawtradingdiv.com or at 877-329-0006 and visit us at http://dawtradingdiv.com/brokers-edge/ 

 

Disclaimer:

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.

Cattle Commentary: Cattle futures again started the day mixed to lower but again found buying interest towards the noon hour. February live cattle ended the day up 1.00 at 126.675, this after trading in a range of 1.125 on the session. January feeder cattle ended the day up 1.30, finishing at 155.80 after trading in a range of 1.355. Todays Fed Cattle Exchange yielded 0 sales on 967 head; 117 and 118 were passed on. Looking at the developments this week, or lake thereof, it is likely we see cash near 120 and possibly higher. If we don’t see things change over the next day and a half, shorts should error on the side of caution to avoid a late Friday trade. We have seen this a few times recently and it is usually makes Mondays a little tougher for the bear camp.

PM Boxed Beef Choice Select

Current Cutout Values: 206.55 185.84

Change from prior day: -2.08 -1.36

Choice/Select spread: 20.71

 

Cattle Technicals

Live Cattle (February)

The market cruised higher today, trading at its highest price in two weeks. In yesterday’s resistance Livestock Roundup, we listed 126.65-126.975 as a key resistance pocket. This was a breakout point on October 30th and also represents a Fibonacci retracement level. The market has posted higher lows for the past three months which keeps the bulls in control. Are higher highs in the picture? If the market breaks out above this resistance pocket, we could see funds extend their long position and press us back towards the contract highs of 131.95. A failure to break out will lead to consolidation and a retest towards the bottom end of the range near 123 which also represents a retracement and the 50-day moving average, an indicator we have not closed below September 6th.

Resistance: 126.65-126.975***, 127.65-128**, 131.95****

Support: 124.35**, 123.25-123.35****, 120.70***

 

Feeder Cattle (January)

Live cattle are right at resistance, but the feeders made a move higher and closed above our pocket from 155.10-155.55. This was a significant pocket for us as it represented the middle of the range from the October 23rd lows to the November 3rd highs. This also represents previous contract highs and the breakout point in October. The next line in the sand the bulls are targeting comes in from 156.40-156.75. This pocket represents a key retracement but also new contract highs and resistance on October 25th, 26th, and 27th. If the market continues to accel above this pocket, we could see a continuation towards contract highs. The relative strength index comes in at 54, this is near neutral.

Resistance: 155.10-155.55***, 156.40-156.75**, 158.70-159.27***

Support: 153.325-153.85**, 151.75-152.075***, 148.175****

 

Lean Hog Commentary and Technicals (February)

February lean hog futures finished the day down .525 to 71, this after trading in a range of 1.625 on the session. Increased weight chatter crept back into the market which led to some liquidation. The rally over the past two weeks has been impressive as the market looks poised to retest contract highs of 73.30 (despite trading softer today). First technical support from yesterday’s report held on the first test, that pocket will remain intact for tomorrows session; that comes in from 70.30-70.675. On the resistance side it’s the same story. In yesterday’s report we had 72.45, that will remain intact.

Resistance: 72.45**, 73.30****, 74.50-75**

Support: 70.30-70.675***, 69.15**, 68.30-68.475***

 

For more information please contact DAW Trading at brokersedge@dawtradingdiv.com or at 877-329-0006 and visit us at http://dawtradingdiv.com/brokers-edge/ 

 

Disclaimer:

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.

Euro (December)

Session close: Settled at 1.18745 and up 25 ticks but bled lower into the electronic close

Fundamentals: The Euro turned down from session highs this morning after Eurozone Sentiment data missed the mark though German CPI was stable to better. The Beige Book was released out of the U.S this afternoon and strong comments on labor and an upbeat bias on inflation (relative to current bias) saying that price pressures have strengthened encouraged a lower tape in the Euro to close out the session. However, the Euro did work off early session lows despite a revision higher in U.S GDP and better Pending Home Sales. Fed Chair Yellen said that rates must rise to avoid a ‘boom or bust’ economy. She continued to express worries on inflation. This has ultimately kept the Euro pinned to unchanged on the session as we look to that inflation data tomorrow with Eurozone CPI at 4:00 am CT and US PCE Index at 7:30 am CT. German unemployment is at 2:55 am CT

Technicals: The Euro traded to a low of 1.1829 today before bouncing back to resistance at 1.1866-1.18815. As we discussed yesterday, the tape continued to consolidate lower and completed a test to support. The bulls stepped back in near the 1.18 level. With the consolidation complete, tomorrow’s inflation data will be key for the near-term edge.

Bias: Bullish

Resistance – 1.1921-1.1942***, 1.19975-1.2019**, 1.2154-1.2180****

Pivot – 1.1866-1.18815**,

Support – 1.1797-1.1823**, 1.1728-1.1730***, 1.1672**, 1.15785*, 1.1481-1.15***

 

Yen (December)

Session close: Settled at .89505 down 8 ticks

Fundamentals: The Yen worked lower for the third session but the brunt of it came on at 7:30 am CT with a slight revision high on GDP and as equity markets extended to new all-time highs and the S&P achieved our upside target of 2633.50. A retreat in equities and dull price action in the Dollar throughout the session helped the Yen to recover but the Beige Book late in the session reinvigorated the Dollar trade. Safe haven assets; the Yen, Gold, and 10-year all lost significant ground on today’s session Industrial Production data is due out of Japan tonight at 6:30 pm CT. Chinese PMIs are due at 7:00 pm CT and Yen bulls would like to see a miss here.

Technicals: Price action traded to a low of .89235 but held major three-star support at .8915 before bouncing. It is time for Yen bulls to step up. It seemed that the Euro is a few hours ahead of the Yen in its corrective phase from last weeks rally, but the hold for each against support was crucial. To begin construction the Yen must close tomorrows session back above the .8960-.89625 level.

Bias: Bullish

Resistance – .8960-.89625**, .8995**, .9018-.9045***, .9119**, .9321-.9359****

Support – .8915***, .8880-.8886**, .8800-.8828***

 

Aussie (December)

Session close: Settled at .7576 down 19 ticks

Fundamentals: Tonight is a pivotal stretch of time for the Aussie with New Home Sales due at 6:00 am CT and Building data, Housing Credit, Private Sector Credit, Private New Capital Expenditure among others due at 6:30 pm CT. China PMI’s follow at 7:00 pm CT. The bears have had an edge in the Aussie this weakness overnight coming into today set the table for another lower session.

Technicals: Add the Aussie to the list of currencies that tested and bounced from key support levels early in the session before giving up gains on US Dollar strengthening before the close. The bounce this morning against major three-star support at .7530-.7550 was tremendous and its time for the bulls to show up. Tonight’s data could give them the reason. Because of tighter ranges, resistance levels are building on top of each other with the first minor hurdle coming in at .7578-.7581, the bulls need to secure a close above .7605-.7607 to neutralize recent weakness and regain a small edge.

Bias: Bullish/Neutral

Resistance – .7578-.7581*, .7605-.7607**, .7645-.7678***, .7726-.7755**, .7824**, .7891-.7893***

Support – .7530-.7550***, .7390****

 

Canadian (December)

Session close: Settled at .7784 down 19.5 ticks

Fundamentals: Weakness in Crude did play a role in weighing on the Canadian, but it definitely was not the whole story as all currencies showed weakness against the US Dollar. We look to Current Account data out of Canada tomorrow morning though the US Dollar will again take center stage with the PCE Index being released at the same time. Traders patiently away GDP and jobs Data from Canada on Friday.

Technicals: Price action settled below major three-star support at .7790-.7803 and has continued a path lower. We have been watching this level very closely as it now gives the edge to the bears heading into the back half of the week. We are still upbeat, but price action now must hold previous swing lows and the chart will have to reconstruct from some damage done this week.

Bias: Bullish/Neutral

Resistance – .7851-.7856**, .7897**, .7950-.7960***, .8019-.8035**, .8293****

Support – .7790-.7803***, .7730-.7745**, .7671**, 7550***

 

 

For more information please contact DAW Trading at brokersedge@dawtradingdiv.com or at 877-329-0006 and visit us at http://dawtradingdiv.com/brokers-edge/ 

 

Disclaimer:

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.

Corn (March)

Yesterdays Close: March corn futures closed 2 ¼ cents lower yesterday, this after trading in a range of 3 ¼ cents on the session. Funds were estimated to have been sellers of 9,000 contracts on the day.

Fundamentals: The USDA released baseline figures for the 2018/2019 corn crop, they have plantings at 91 million acres with production at 14.52 billion bushels. This projection puts yields at 173.5. Side note: the USDA has underestimated yields by an average of 4.5 bushels per acre over the last four years. December futures go off of the board today; some analysts are suggesting that we could see prices firm post expiration. Although we may, we also may not, this is a reach for a silver lining in our minds. We will be monitoring weather developments in South America closely. Rains have worked their way into the forecast for some areas of Argentina, but weather models are suggesting it dries back up in 1 ½-2 weeks out.

Techncials: March futures have gravitated towards the 350 level recently, a big magnet for the December contract which goes off of the board today. We would not be surprised to see some consolidation around this level until we get a new fundamental catalyst to give us a breakout or a breakdown. First technical support comes in at 348 ¾, a break and close below could extend the selling pressure towards 334-335 ½. On the resistance side of things, the first line in the sand comes in at 354, but the more significant level comes in at 360 ½ this morning. This represents the 50-day moving average, although it is a simple indicator, we have not seen the market close above this since July. If the bulls can achieve consecutive closes above, we could see funds start to cover SOME of their near record short position.

Bias: Bearish

Resistance: 354**, 360 ½****, 367-369 ¼**, 373 ½-375****

Support: 348 ¾**, 334-335 ½***, 323-325 ¼**

 

SOYBEANS (January)

Yesterdays Close: January soybeans closed 2 ¼ cents lower yesterday after trading in an 8 ½ cent range on the day. Funds were estimated to have been sellers of 3,000 contracts on the session.

Fundamentals: The USDA released their baseline figures for the 2018/2019 crop yesterday. They show 91 million acres planted with production at 4.36 billion bushels. This puts their yield at 48.4; side note: the USDA has under estimated yields by an average of 2.775 bushels per acre over the last four years. Weather outlooks in Argentina became more favorable in the very near term, but some forecasts are suggesting concerns will resurface within the next two weeks as drier weather works back into the models. We will continue to monitor weather in South America and keep you updated on changes. Tomorrow morning, we will be back on schedule for the release of the weekly export sales.

Technicals: Yesterdays price action was encouraging for the bulls as prices managed to close off the lows. However, weakness has crept back into the market this morning and we could see the market make a run back towards our first technical support pocket from 982 ¾-986. This pocket represents the 50 and 100 day moving average, along with the 50% retracement (middle of the range) from the June lows to the July highs. We feel this is an opportunity to look to the long side on the first test. If we break and close below support, we could see long liquidation from the funds press us back towards the bottom end of the range at 968. As mentioned earlier in the week, the market has been mostly range bound between 970-1000 over the past three months. Although we see the market is range bound, we still have a bullish tilt in our bias for the time being.

Bias: Neutral/bullish

Resistance: 999-1004 ¾***, 1014**, 1021 ½****

Support: 982 ¾-986***, 968 ¼****, 957-963 ¼****

 

Wheat (March)

Yesterdays Close: March wheat futures closed up ¼ of a cent yesterday after trading in a range of 7 cents. Funds were estimated sellers of 500 contracts on the session.

Fundamentals: The USDA released its preliminary forecast for the 2018/2019 season yesterday, all wheat acres is at 45 million acres with production coming in at 1.815 billion bushels. The market has continued to be under pressure due to ample global supplies; nearly every continent produces wheat, and most are doing so very efficiently. We will need to see a fundamental shift in demand to help support this market.

Technicals: yesterday’s reversal off of technical support could be seen as encouraging for the bulls, but that may be reaching a bit. As mentioned earlier in the week, rallies are likely to be due to short covering and should be sold until we see a technical breakout. First technical resistance today comes in from 433 ¾-435, with the more significant levels coming in closer to the 450 level which represents recent highs and the 50-day moving average. As with corn, the 50-day moving average is a simple indicator but significant to us as we have not seen the market close above since July. Consecutive closes above could encourage new buying and not just short covering.

Bias: Bearish

Resistance: 433 ¾-435**, 445-447****, 452 ¾**, 478-479****

Support: 422 ½**, 412 ¾***, 399-402 ¾****, 390-392 ¼**

 

For more information please contact DAW Trading at brokersedge@dawtradingdiv.com or at 877-329-0006 and visit us at http://dawtradingdiv.com/brokers-edge/

 

Disclaimer:

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.

E-mini (December)

Yesterday’s close: Settled at 2626, gaining nearly 1% on its biggest day in two and a half months.

Fundamentals: Equity markets kept the party going yesterday keying off Powell, tax-reform and Consumer Confidence. At Jerome Powell’s Fed Chair confirmation hearing he didn’t off-road the path that Yellen has laid out which is favorable, however, comments that Wall Street regulations are ‘tough enough’ was very supportive. The S&P gave up a chunk of the session gains on news that North Korea fired a ballistic missile, but it was tax-reform that came to the rescue. The Senate budget committee had enough votes to move the tax bill to a full vote later this week. Right when one might think that the market has priced in tax-reform it proves doubters wrong and extends gains in the face of North Korea reminding the world that they have enough distance on a missile to potentially reach the US mainland. There are two things that traders should not underestimate from yesterday’s move; Consumer Confidence and technicals (see below). Consumer Confidence yesterday morning was the highest since November 2000, a nice positive ahead of the holiday season. Today is another jammed packed day with Yellen testifying to congress at 9:00 am CT. First, we have NY Fed President Dudley at 7:30 am CT along with the Q3 revision on GDP. Pending Home Sales is due at 9:00 am and San Francisco Fed President Williams speaks at 11:45.

Technicals: Yesterday we saw some very supportive fundamentals, but we also saw a North Korea scare that ultimately did not derail things. That is why traders should not underestimate the technicals at work, we have been calling for this breakout since last week and how the close out above resistance at 2594.50-2596 signals a technical move to our next upside target at 2633.50 before the end of this week. Its Wednesday morning and we have an early high of 2629.75. We are not calling for the rally to stop on this achievement, but we are evaluating price action and fundamentals through today’s session and right now we do not want to throw out a level above here just to throw one out.

Bias: Bullish

Resistance – 2633.50***

Pivot – 2600

Support – 2616-2618**, 2605.50*, 2594.50-2596***

 

Crude Oil (January)

Yesterday’s close: Settled yesterday at 57.99 but traded lower into electronic close

Fundamentals: This week is about OPEC and not only their decision on extending production cuts but the verbiage behind such. However, we still got to play the inventory game and right now price action is swinging ahead of today’s official EIA data. API yesterday showed a surprise build of 1.8 mb when a draw of over 2mb was expected. This sent prices south ahead of the electronic close. Gasoline offset some of the pressure by showing a draw of 1.5 when a build of the same number was expected. The build in Crude does come as a surprise given the TransCanada shutdown, however, API did report a draw of 3.2 mb at Cushing, Oklahoma and this is a strong reason why prices are not lower into this morning. Expectations for EIA today come in at -2.3 mb Crude, +.23 mb Distillates and +1.2 mb Gasoline. The Cushing number on this read will be critical and so will production which is at the highest level on record.

Technicals: As we discussed in yesterday Midday Market Minute, previous support is now resistance and 58.09-58.14 did the work to keep price action in check ahead of API with a high of 58.11 through yesterday’s session. Support at 57.50 is acting fairly strong but we will keep that as a minor level with a strong focus on 56.94-57.02. We discussed yesterday how this level is near a three-star in that it will encourage strong selling once it is taken out.

Bias: Bearish/Neutral

Resistance – 58.97***, 59.96***, 62.58**

Pivot – 58.09-58.14

Support – 57.50*, 56.94-57.02**, 56.54*, 55.00-55.25***

 

Gold (February)

Yesterday’s close: Settled at 1299.2

Fundamentals: Surprisingly enough, safe havens were not the focus yesterday in the wake of North Korea launching a ballistic missile that can reach the U.S mainland. Instead, tax-reform got pushed through the Senate budget committee which sends it to a full vote this week. The Dollar remains bid and is also keying off the strongest Consumer Confidence read since November of 2000. The S&P had its strongest session since mid-September and given all of this, Gold remains extremely constructive. The metal has been constructive since last December’s three hikes for 2017 became priced in and the Fed has spoken of a more ‘gradual’ pace in the second half of this year. The next Fed Chair Powell gave more of the same in his confirmation hearing yesterday. Today we look to what is likely Yellen’s last testimony to congress at 9:00 am CT. First, we have NY Fed President Dudley and the revision of Q3 GDP at 7:30 am CT. Pending Home Sales are due at 9:00. Tomorrow will be another crucial day with reads on inflation from both the U.S and Europe.

Technicals: Price action has held the 1296.4 level very well and traded to a low of 1294.5 yesterday in the face of the Consumer Confidence read. The metal must get out and close above 1304.7 this week and if it cannot it faces potential consolidation lower ahead of jobs data next week. This major three-star resistance level will spark a tremendous repositioning sparking fresh buying while squeezing shorts.

Bias: Bullish

Resistance – 1304.7***, 1312.7-1316.4**, 1328-1329.4**

Support – 1294.5-1296.4**, 1289.8-1289.9**, 1268.1-1276***

 

Natural Gas (January)

Yesterday’s close: Settled at 3.128

Fundamentals: Its happening, the weather projections have caught the bear camp offsides and now we are seeing a squeeze. Estimates on tomorrow’s storage data are coming back in a little at -36/-37 bcf. Prices are climbing with the early reads on next week’s storage estimates showing a slightly rising draw as the weather turns colder than anticipated and we head into a potentially earlier start for the dead of winter. Further supporting prices are comments from Southern California Gas Co. that they won’t be able to provide gas to all their customers if the cold hits the area and this is also due to reserves lower than forecast.

Technicals: Price action is above resistance at the 3.163 level this morning and running it the 3.20-3.245 ahead of tomorrow’s storage. We would expect to see some profit taking from the bull camp ahead of tomorrow, but we remain long term bullish and the reversal this week should really be just the start of higher price action to come. Only a close back below 3.12 will neutralize the tape with a move back below 3.056-3.063 signaling a near term failure.

Bias: Bullish/Neutral

Resistance – 3.163**, 3.201-3.245**, 3.321-3.36****

Support – 3.12**, 3.056-3.063**, 3.017-3.028**, 2.971-2.981***, 2.929**, 2.847-2.861**, 2.753-2.7565***, 2.486-2.522****

 

10-year (December)

Yesterday’s close: Settled at 125’01

Note: Traders should be moving to March and today is the last day on here we will use December

Fundamentals: As we discussed with Gold, safe-haven assets were not a concern in the wake of North Koreas missile launch. Tax-reform moving to a full Senate vote this week has helped lift the Dollar, send stocks higher and offset safe haven demand. Yellen’s testimony to congress will be the center of today’s session and it should be very interesting at is likely her last. NY Fed President Dudley speaks along with the release of the revision of Q3 GDP at 7:30 am CT. Pending Home Sales are at 9:00. Many traders are really awaiting tomorrows’ inflation read from both Europe and the U.S.

Technicals: We remain Neutral in the near term but long term Bullish. Price action is pushing below first support this morning at 124’27 and the key level to watch is 124’16-124’19; a lower swing low and close below here will put the bears in the driver’s seat in front of upbeat tax-reform hopes. Only a close out above 125’015-125’04 will give the bulls an edge.

Bias: Neutral/Bullish

Resistance – 125’015-125’04**, 125’07*, 125’19**, 125’255**, 126’01**, 126’15***

Support – 124’27**, 124’16-124’19**, 124’00**, 122’22-122’29***

 

 

For more information please contact DAW Trading at brokersedge@dawtradingdiv.com or at 877-329-0006 and visit us at http://dawtradingdiv.com/brokers-edge/

Disclaimer:

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.

Cattle Commentary: Cattle futures spend the first half of their day under pressure but found buyers step in the market towards the noon hour to elevate prices back towards the unchanged line. February live cattle finished the session down .275 at 125.775, this after trading in a 1.50 range. Feeder cattle saw similar price action with the January contract closing up .10 at 154.55, this after trading in a range of 1.60 on the day. News so far this week has been limited, that could start to shift tomorrow. Tomorrows Fed Cattle Exchange has 967 head listed. Last week there were 955 listed with 119 passed on and none sold. Majority of last weeks cash trade was 118-120.

PM Boxed Beef Choice Select

Current Cutout Values: 208.68 187.20

Change from prior day: -.94 -.08

Choice/Select spread: 21.43

 

Cattle Technicals

Live Cattle (February)

Live cattle futures spent majority of the morning under pressure, testing yesterday’s lows but failing to break down below. That failure to break down opened the doors for buyers to step in and press prices back towards the unchanged level. 126.65-126.975 will be a big pocket of resistance, a breakout and close above could encourage funds to step back in on the buy side. A failure to break out will lead to continued consolidation which could encourage long liquidation from the funds who still hold a sizable net long position. First support comes in at 124.35, but the more significant pocket comes in from 123.25-123.35. This represents a key Fibonacci retracement level from the August lows to the November highs, as well as the 50-day moving average, an indicator we have not closed above since September 7th when we started the rally from 114.

Resistance: 126.65-126.975***, 127.65-128**, 131.95****

Support: 124.35**, 123.25-123.35****, 120.70***

 

Feeder Cattle (January)

January feeder cattle looked like they were going to roll over but failed to get more selling momentum below our first support pocket from 153.45-153.85. The inability to break lower and the lack of new news invited some buyers into the market in the afternoon session. The market is now right back where we were yesterday and just a stones throw away from key technical resistance from 155.10-155.55. This represents the middle of the range from the October 23rd lows to the November 3rd highs. This also represents previous contract highs and the breakout point in October. A failure to breakout will form a head and shoulders which is a bearish technical pattern. However, we mentioned yesterday looking for a failure on the first test and that is what we got, the bad news is we are right back at this level and a breakout and close above will extend the rally and keep the bull trend intact.

Resistance: 155.10-155.55***, 156.40-156.75**, 158.70-159.27***

Support: 153.325-153.85**, 151.75-152.075***, 148.175****

 

Lean Hog Commentary and Technicals (February)

February lean hogs accelerated higher today after taking out key technical resistance from 70.30-70.675, this propelled the market closer to our next resistance at 72.45. Previous resistance will now become support from 70.30-70.675. We are very impressed with the rally from the lows just two weeks ago; that is code for we did not see this move coming. We could continue to rally from these current levels but do not see a fundamental catalyst that offers much more room above the contract highs that were made on November 1st.

 

Resistance: 72.45**, 73.30****, 74.50-75**

Support: 70.30-70.675***, 69.15**, 68.30-68.475***

 

For more information please contact DAW Trading at brokersedge@dawtradingdiv.com or at 877-329-0006 and visit us at http://dawtradingdiv.com/brokers-edge/ 

 

Disclaimer:

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.

Euro (December)

Session close: Settled down 64 ticks at 1.18495

Fundamentals: The biggest U.S Consumer Confidence read since November 2000 added to early pressure on the Euro. Jerome Powell did comment about normalizing rates, but we didn’t get anything unexpected. North Korea fired a ballistic missile this afternoon and the Euro began seeing pressure right around this time. However, shortly after this, the Senate committee passed the tax-reform bill which moves it to a full vote later this week; supportive to the Dollar. Tomorrow is another busy day with French GDP and Spanish CPI early before German CPI data at 7:00 am CT. New York Fed President Dudley speaks at 7:30 am CT along with the revision of Q3 GDP. Current Fed Chair Yellen testifies to congress on the state of the economy at 9:00 am CT and Pending Home Sales are due out then. German Bundesbank President Weidman speaks at 11:00 am CT and San Francisco Fed President Williams at 11:45 am CT. The Beige Book is due at 1:00 pm CT. Fresh news each day is driving the tape and Thursday is no slouch either. Right now, the Dollar bulls have an edge as the tax-reform vote comes into focus potentially Thursday.

Technicals: We remain long term bullish the Euro and though price action took out key support it was not by much. Ultimately, this signals a consolidation lower to the 50 and 100 day moving averages at the next support at 1.1797-1.1823. If this level is achieved, we believe the long-term Euro bulls will begin to show back up at the 1.18 mark and with supportive data we could see a paring of this week’s losses.

Bias: Bullish

Resistance – 1.1921-1.1942***1.19975-1.2019**, 1.2154-1.2180****

Pivot – 1.1866-1.18815**,

Support – 1.1797-1.1823**, 1.1728-1.1730***, 1.1672**, 1.15785*, 1.1481-1.15***

 

Yen (December)

Session close: Lost 46.5 ticks settling at .8969

Fundamentals: This was a disappointing session for Yen bulls on many fronts. Fundamentally, North Korea launched a ballistic missile and the Yen, an expected fear gauge despite the missiles vicinity to Japan, barely pressed higher. U.S tax-reform took precedent and the Yen finished the session on the lows after the Senate pushed their tax bill to a full vote set for later this week. Earlier in the session Japan’s monthly review stated that the economy is continuing to grow at a moderate pace. There have been some clear positives from the economic data side, but the verbiage didn’t lean in that direction. Retail Sales is due out tonight at 5:50 pm CT and tomorrow will be a crucial day with a slew of reads. A very strong day for equity markets also did not help the bull case for the Yen, however, we have been bullish both the S&P and the Yen and see reasons for both of them to rise at the same time.

Technicals: Yesterday’s bull flag failed to follow through, essentially giving up all the gains. Major three-star resistance at the .9045 level has held strong and the band of two three-star resistances has kept price action in check. The 14-day RSI did reach 65 just as it did with the Euro, though this is not truly overbought it is high nonetheless. However, the Yen has so far held much better than the Euro did after reaching this point. Major three-star resistance is now .9018-.9045; a close out above here is needed to squeeze the massive short position. Major three-star support now comes in at .8915 and this level will signal a hold of the recent uptrend.

Bias: Bullish

Resistance – .9018-.9045***, .9119**, .9321-.9359****

Pivot – .8995

Support – .8915***, .8880-.8886**, .8800-.8828***

 

Aussie (December)

Session close: Lost 11 ticks settling at .7595

Fundamentals: The Aussie took a hit along with all currencies against the Dollar but held the second best behind the British Pound. The range was somewhat subdued today as traders key in on a big day of data tomorrow evening for the Aussie along with Chinese PMI’s.

Technicals: With last week’s hold and reversal against support just below here, the .7530-.7550 level is now a three-star support level. The slower consolidation lower is more due to the US Dollar, but price action must regain the .7605-.7607 level to remain constructive.

Bias: Bullish/Neutral

Resistance – .7645-.7678***, .7726-.7755**, .7824**, .7891-.7893***

Pivot – .7605-.7607

Support – .7530-.7550***, .7390****

 

Canadian (December)

Session close: Lost 34.5 ticks on the session settling at .78035

Fundamentals: The Bank of Canada’s Financial Stability Review did not bring any surprises but was upbeat on housing and economic conditions. BoC Governor Poloz continued to express patience in further tightening as they want to wait and see how the moves this summer will impact growth and inflation. The Raw Materials Purchase Index came in stronger than expected this morning, but the Canadian Dollar bled lower on a stronger U.S Dollar.

Technicals: Price action is facing major three-star support head on at .7790-.7803 and it held through today’s session. Holding this level will be key in building a platform to go retest swing highs. However, there was a clear failure with a lower high. The Trend line from the September highs also now comes in as support and aligns with .7790-.7803, the Canadian Dollar is at an inflection point heading into tomorrow.

Bias: Bullish/Neutral

Resistance – .7851-.7856**, .7897**, .7950-.7960***, .8019-.8035**, .8293****

Support – .7790-.7803***, .7730-.7745**, .7671**, 7550***

 

For more information please contact DAW Trading at brokersedge@dawtradingdiv.com or at 877-329-0006 and visit us at http://dawtradingdiv.com/brokers-edge/ 

 

Disclaimer:

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.

CORN (March)

Yesterdays Close: March corn futures traded in a 4-cent range to start the week, closing the session down 2 ¾ cents. Funds were estimated to have been sellers of 13,000 contracts.

Fundamentals: Export inspections yesterday morning came in at 639,000 metric tons, this was close to the middle of the expected range from 550,000-750,000 metric tons; last week we saw 660,000 metric tons. South American weather will be one of the big catalysts for price as we look to round out the year. Dry weather over the intermediate term is starting to cause some concern for late planted corn. Fund positioning has been another big talking point over the past month and will continue to be until they reduce their position. Yesterdays Commitment of Traders report showed funds holding a short position of 210,466 contracts, a reduction from the previous report but still the third largest short position ever. Weekly crop progress for those of you still keeping track was released yesterday. Corn is 95% harvested, this is 3% behind last year’s pace.

Technicals: Prices have given back gains over the last two sessions with that momentum spilling into the early morning session. The RSI (relative strength index) is drifting lower with a read of 36 this morning; typically, a reading below 30 represents first signs of exhaustion on the sell side. 348 ¾ is the line in the sand as key technical support, if the market breaks below we could see the market take another leg lower. The next support pocket comes in from 334-335 ½. On the resistance side of things, the market has a lot of work to do. 354 is the first line in the sand, but bulls will want to see consecutive closes above 361 to encourage short covering from funds.

Bias: Bearish

Resistance: 354**, 361****, 367-369 ¼**, 373 ½-375****

Support: 348 ¾**, 334-335 ½***, 323-325 ¼**

 

SOYBEANS

Yesterdays Close: January soybeans traded in an 11-cent range yesterday, finishing the session up 2 ¾ cents. Funds were estimated to have been buyers of 4,000 contracts.

Fundamentals: Export inspections yesterday came in at 1,579,000 metric tons, this was on the low end of the expected range from 1,500,000-1,800,000 metric tons; last weeks was 2,276,000 metric tons. As with corn, we will continue to keep a close eye on developments in South America. Argentina is now estimated to be 41% planted, this lags their average pace. Brazils planting is estimated to be 84% complete, up 11% from the previous week; this is a point above last year and 5 above the five-year average. If we see weather concerns arise in either Argentina or Brazil arise, we could see a premium come into the market. Yesterdays Commitment of Traders report showed that funds had reduced their net long position by 2,406 contracts, putting their net position at a modest 20,144.

Technicals: The market has recovered nicely from 968 over the past two weeks, but the bulls still need to see more. We were on RFD-TV yesterday suggesting that resistance from 999-1004 ¾ would be a spot for a producer to consider reducing risk. Sure, we could breakout, but this is the top end of the three-month range which provides an opportunity to be proactive in our minds. This pocket contains trendline resistance, a key Fibonacci retracement, the psychological $10.00 level, along with other technical indicators. Technical support comes in from 983-985 ¾, this pocket represents the 50 and 100 day moving average, along with the 50% retracement (middle of the range) from the June lows to the July highs. If the market continues to hold above this pocket on a closing basis we will continue to have a bullish bias. A break and close below opens the door to 968 ¼. If you look at a one-year chart you can see this has been a significant area for the market, it also represents a key retracement, recent lows.

Bias: Neutral/bullish

Resistance: 999-1004 ¾***, 1014**, 1021 ½****

Support: 983-985 ¾***, 968 ¼****, 957-963 ¼****

 

WHEAT (March)

Yesterdays Close: March wheat futures traded in a 7-cent range yesterday before closing 5 ½ cents lower and making new contract lows. Funds were estimated sellers of 5,000 contracts on the day.

Fundamentals: Yesterdays export inspections came in at 345,000 metric tons, this was closer to the top end of the expected range from 200,000-400,000 metric tons; last weeks was 260,000 metric tons. Ample supplies and lackluster demand continues to weigh heavy on the market. Yesterdays crop progress report showed that winter wheat conditions are at 51% good/excellent, this is down 1 point from the previous week. Yesterday’s Commitment of Traders report showed that funds were near flat from the previous report, their net short position stands at 108,666 contracts.

Technicals: The bears continue to drop the hammer on the market with March futures posting new contract lows yesterday. That lower trade has led to minor weakness in the early morning trade. The bulls have A LOT of work to do to this chart that looks like a technical graveyard. 433 ¾-435 is the first line in the sand they want to see a close above, but they have plenty of work to do beyond that. We continue to suggest selling rallies until we see consecutive closes above more significant technical resistance. The RSI (relative strength index) is at 34 which suggests the market may be getting exhausted on the short term, but we would not be surprised to see the $3 handle in this March contract.

Bias: Bearish

Resistance: 433 ¾-435**, 445-447****, 452 ¾**, 478-479****

Support: 422 ½**, 412 ¾***, 399-402 ¾****, 390-392 ¼**

 

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