Month: January 2018

E-mini S&P (March)

Yesterday’s close: Settled at 2835.25

Fundamentals: The S&P gained nearly 1% to kickoff the week. We reiterated on Friday and early yesterday while the S&P was still in the red that shorts better watch out. With strong earnings and undeniable momentum, the government shutdown ultimately brought a fear of missing out. What if the shutdown was fixed over the weekend while the market was close? It wasn’t, so the market worked higher through the session on Monday in anticipation of the stopgap deal that was reached late yesterday. The deal will keep the government running through February 8th before it presents another ‘political hurdle’. Equity markets across Asia are all up 1% while the German DAX is up about .5%. Overnight, the Bank of Japan left policy unchanged but was upbeat on inflation signaling they expect to see their 2% target sometime next year. The ECB is up next and this morning we saw strong ZEW Economic Sentiment data out of the region. After trading to a new all-time high overnight of 2842, the S&P is seeing pressure following a 7.9 magnitude earthquake in the Gulf of Alaska that has sparked tsunami warnings down the west coast of Canada and U.S.

Technicals: Previous resistance is support, 2828 is the first level we are eyeing this morning upon the pullback due to the earthquake/tsunami. We are now bringing major three-star support up to 2805.25-2807, this is a level in which we would like to buy into on the week if it presents itself. Support comes in front of it at 2814.25-2815. Our upside target of 2847.75 was not achieved with the overnight high of 2842. As we stated above, momentum is undeniable, only a close below 2805.25-2807 right now would put us on the sidelines.

Bias: Bullish

Resistance – 2842*, 2847.75***, 2869.75**

Support – 2828**, 2814.25-2815**, 2805.25-2807**, 2794.25-2797**, 2786.50**, 2769-2771.75***

 

Crude Oil (March)

Yesterday’s close: Settled at 63.57

Fundamentals: Prices elevated into the close yesterday as traders expect data this week to show a drawdown in U.S inventories for the tenth week in a row. API is due out after the bell today. The U.S Dollar has not done bears any favors; it remains at the lowest level since 2014, boosting commodity prices. However, this will be important to watch this week as the European Central Bank has a policy meeting Thursday and traders get ready for the Federal Reserve next week.

Technicals: Price action has extended above firs resistance which we adjusted to 63.80 though it settled below here yesterday; this will be crucial to watch today as traders position for inventory data. First resistance comes in today at 64.05-64.23; a close above here will encourage further buying. The big takeaway for us yesterday was another test to major three-star support and another hold. Until we see a close below this level, the bulls remain in the driver’s seat.

Bias: Bearish/Neutral

Resistance – 64.05-64.28**, 64.83-64.89**, 66.87***, 68.43**

Pivot – 63.80

Support – 62.78-63.00***, 62.43**, 61.87**, 59.96-60.45***

 

Gold (February)

Yesterday’s close: Settled at 1331.9

Fundamentals: Gold has done absolutely nothing wrong on a fundamental or technical basis for more than a month. A trader cannot fight this. That is why our Bias has remained unequivocally Bullish. However, we do believe that the Dollar is attempting to find some support at a level that can be seen in the Dollar Index at 90. The government will remain open until at least February 8th and dovishness on the Fed’s message has already mounted. As a bull, it is prudent to make sure you capitalize in one way or another with the ECB due out Thursday and the Fed next week sandwiched between key data points. The Bank of Japan left their policy unchanged last night, however, the Yen has firmed up since its low at midnight as the bank’s Outlook Report envisions inflation reaching their 2% target next year. This has been supportive for Gold. Richmond Manufacturing data is due at 9:00 am CT today and Chicago Fed President Evans, the second Fed dissenter speaks at 5:30 pm CT.

Technicals: Gold remains technically strong and pullbacks are extremely shallow. However, this does not change the fact that there is strong overhead resistance from 1350 all the way up to 1365. Support at 1326.6-1328 remains sticky and this is great for buyers. Traders should exude caution through the next week and a half. A close above 1365 will spark the next bull leg.

Bias: Bullish/Neutral

Resistance – 1340.9*, 1345**, 1350***, 1358-1365***

Pivot – 1334.9-1335.8

Support – 1326.6-1328**, 1321.6**, 1307.1-1308.9**, 1302-1303.4***

 

Natural Gas (February)

Yesterday’s close: Settled at 3.224

Fundamentals: We will continue to focus more on the February contract as we eye options expiration this week. February pushed through recent highs overnight, trading to the highest level since September 28th. We referenced here yesterday that if you are selling this market, you want to be doing so in the March. The March contract remains much more contained due to cash expectations and demand for the product now, not upon delivery at the end of February. March has not broken out above recent swing highs and in fact remains more than a quarter of a dollar from its September 28th highs. Drawdown expectations for this week’s read are near what would have been a record level before earlier this month. However, drawdowns going forward are much more subdued.

Technicals: Price action has gotten out above major three-star resistance in February which aligns with the 200-day moving average and recent highs. The next level above here is 3.43 and we believe this should keep prices contained. Over roughly the last month, strong starts to the week have dissipated through midweek, we believe this should be the case into tomorrow. However, we are concerned with the firm move out above recent highs and remain Neutral. As we stated above, traders looking to sell should do so in the March contract. In fact, we could make a case for introducing a slight Bearish Bias for the March.

Bias: Neutral

Resistance –3.43-3.446***, 3.568**

Pivot – 3.258-3.288***

Support – 3.185-3.199**, 3.115-3.134**, 3.039** 2.971-2.989***

 

10-year (March)

Yesterday’s close: Settled at 122’03

Fundamentals: We believe that there is a buy the rumor, sell the fact event into and through the three central bank meetings this week and next. Expectations for a more hawkish BoJ and ECB were put in place earlier this month. Though we expect to see a step in the more hawkish direction this year from these central banks, we do not believe they are ready quite yet. Because of this along with the technicals, we believe there to be a buying opportunity in the 10-year. Prices have firmed through the overnight and after the BoJ left policy unchanged. Although their Outlook Report expects to see 2% inflation next year, leaving policy unchanged for now has begun to bring relief in treasury prices. We expect to see more of the same from the ECB Thursday. Chicago Fed President Evans, the second dissenter, speaks today at 5:30 pm CT.

Technicals: As stated above, we like positioning long the 10-year. According to our data, there was a record net-short position in the 10-year two weeks ago. The RSI is signaling oversold and after two of the biggest names in the bond market put out bearish calls, the selling has been exacerbated. Resistance does come in at 122’09-122’125, so you may not want to chase this morning’s bounce and instead buy a slight pull back.

Bias: Bullish

Resistance – 122’09-122’125**, 122’245-122’29***, 123’10-123’135**, 123’215**, 123’27-123’28**

Support – 122’015**, 121’25**, 119’20-120****

 

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 finished yesterday’s session down ½ of a cent, trading in a range of 3 ¼ cents. Funds were estimated sellers of 5,000 contracts.

Fundamentals: Recent weather in Argentina has prompted concerns over yield loss, if realized this could be a catalyst to achieve a technical breakout and encourage short covering. We have February option expiration on Friday and 350 looks to be the magnet. As of this morning there are roughly 33,000 open calls between 350 and 355. On the put side, there are roughly 27,000 open between 350 and 345. Strikes with high open interest tend to be a manet into expiration. We had mentioned in yesterday’s report that export inspections would not be released due to the government shutdown, we were then told otherwise shortly after our release, so we apologize for that. Export inspections came in at 668,944 metric tons, this compares to the expected range from 800,000-1,000,000 metric tons; last weeks was 584,389 metric tons.

Technicals: Yesterday morning corn prices were lingering at the top end of the range again, an area where expectations need to be tempered. I would love nothing more than to see corn rally, but you have to trade the market you have, not the one you want. The market rejected the top end of the range and that brings us right back down towards the 350 level which continues to be a magnet. We continue to believe there is an opportunity to trade a few pennies on either side until we get that technical breakout or breakdown.

Bias: Bearish

Resistance: 354-355**, 358-360 ½****, 366 ½-369 ¼****

Support: 345-346 ½**, 334-335 ¼***, 323-325 ¼**

 

SOYBEANS (March)

Yesterdays Close: March soybeans gaped higher on the open, finishing the session up 8 ¼ cents, trading in a range of 7 ¼. Funds were estimated buyers of 7,000 contracts.

Fundamentals: Hot and dry weather in key growing areas in Argentina sparked the gap higher yesterday and the market managed to hold ground on the back of those concerns. If we start to see moisture work into the forecast, you can expect that premium to come out of the market. Export inspections yesterday morning came in at 1,419,430 metric tons, this was above the top end of the expected range from 1,000,000-1,400,000 metric tons. Last week’s number came in at 1,231,037 metric tons. February option expiration is this Friday, it is possible that this could keep a lid on another leg higher but there’s nothing significant to report in terms of significant open interest at a specific strike (like corn).

Technicals: The market has managed to close higher for 6 of the last 6 sessions and it appears we could see number 7 today. Despite the march higher, the RSI (relative strength index) is only at 60. Technical resistance has been tested yesterday and is again being tested in the early morning session. We have defined resistance as 986 ½-987. This pocket represents the 100-day moving average and the 50% retracement (middle of the range) from the June lows to July highs. If we fail to see an extension we would not be surprised to see the market come back to support wit the first line in the sand coming in at 979 ¼, but the more significant level is 971 ¾. If you’ve been wrong for the past week and a half this is where you should consider reducing. We still think there is more upside potential but a consolidation lower would be healthy. There is seasonal buy around the corner, we will keep you posted on that when we get closer.

Bias: Neutral

Resistance: 986 ½-987***, 999-1004**

Support: 979 ¼**, 971 ¾ ***, 961 ¼-963 ¼**, 950-952 ¼***

 

WHEAT (March)

Yesterdays Close: March wheat futures gaped higher yesterday and finished up 4 cents, trading in a range of 4 ¼ cents on the day. Funds were estimated buyers of 2,000 contracts.

Fundamentals: Export inspections yesterday morning came in at 337,980 metric tons, this was within the expected range from 250,000-400,000 metric tons; last weeks was 368.651 metric tons. We know that funds have established a solid net short position, but we do not see any fundamental catalyst at this point that would spook them out just yet. Demand continues to be lackluster which will likely keep a lid on any significant rally. February option expiration is on Friday, there is nothing that sticks out in terms of strikes with significant open interest.

Technicals: The market looks like it is rounding out after trying to recover all of the loses from the most recent USDA report. First technical resistance today comes in at 429 ½, if the market can achieve a conviction close above this level, perhaps we see some short covering from funds push prices towards 443. A failure to breakout will likely lead to a test of the contract lows at 410 ½.

Bias: Bearish

Resistance: 429 ½-430**, 437**, 443-448 ¼ ****

Support: 410 ½-413 ¼***, 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.

CORN (March)

Yesterdays Close: March corn futures finished yesterday’s session down 1 cent, trading in a range of 3 ½ on the day. Funds were estimated sellers of 6,500 contracts.

Fundamentals: Yesterdays weekly EIA ethanol report showed production increased to 1,061,000 barrels per day, this was a nice rebound from last week’s drop off to 996,000 barrels; in fact, it was the largest 1 week rebound on record. Export sales this morning came in at 1,888,300 metric tons, this was well above the expected range and a silver lining for the bulls. The bulls desperately need to see a trend of better than expected exports to get more excited. Weather and crop development in South America continue to be a talking point but there is not much new news on that front. If things change for the worse, we could see that spark some short covering from the funds who have a near record short position.

Technicals: Corn futures are firmer this morning, hovering along the 50-day moving average, an indicator the market has failed to breakout above for many months now. Although the bulls should be encouraged by this week’s trade, those expectations should be tempered as this is the top of the trading range over the last month. A failure to see a conviction close above technical resistance will invite sellers back into the market and press us back towards the low end of the range which we have defined as 345-346 ½. If the bulls can chew through these levels, we could see the market “run” towards 358-360 ½; I realize that doesn’t sound all that exciting but that is the world we live in for now.

Bias: Bearish

Resistance: 358-360 ½***, 367-369 ¼****

Pivot: 352 ¼

Support: 345-346 ½**, 334-335 ¼***, 323-325 ¼**

 

SOYBEANS (March)

Yesterdays Close: March soybean futures finished yesterday’s session up 3 ½ cents, trading in a range of 8 ¼ for the day. Funds were estimated buyers of 4,000 contracts on the session.

Fundamentals: Weather concerns in South America, particularly in Argentina continue to dominate the headlines. Soybean meal has been helping the cause for soybeans and will continue to be something you want to monitor. This morning’s export sales came in at 1,240,200 metric tons, this was on the high side of expectations. As with corn and wheat, the market needs to see a better than expected exports on a consistent basis to encourage more buying.

Technicals: The market has done a fantastic job of maintaining and building on strength from last Fridays USDA report. The close above 971 ¼ is encouraging for the bulls and lends hand to a move towards are target of 984-986 ½. This pocket represents the 50 and 100 day moving average, along with the 50% retracement from the June lows to the July highs. We think this will fail on the first test, so this would be the spot to reduce some long exposure. If the bulls can chew through it in short order it will encourage short covering from funds and accelerate buying towards the $10 handle. The 200-day moving average is minor resistance at 979 this morning.

Bias: Bullish

Resistance: 979**, 984-986 ½***, 999-1004**

Support: 971 ¾ ***, 961 ¼-963 ¼**, 950-952 ¼***, 937 ½***

 

WHEAT (March)

Yesterdays Close: March wheat futures finished the session up 3 ¼ cents, trading in a range of 4 ½ cents on the day. Funds were estimated buyers of 2,500 contracts.

Fundamentals: Export sales this morning came in at 153,100 metric tons, this is well below the expected range. Export sales continue to be a disappointment for the market despite the dollar on the lows (imagine if the dollar was on the highs). The bears remain in control until we start to see a trend of better than expected demand along with crop damage. If we don’t get significant damage to the crop it is likely we continue to see a lid on prices.

Technicals: Wheat has managed to grind higher for majority of the week but that has brought us back to technical resistance which we have been defining as the 50-day moving average. We have traded above it recently but there was a lack of conviction on the price action. A conviction close above it opens the door to short covering and a run towards 444, but until then it is an opportunity to sell against.

Bias: Bearish

Resistance: 430**, 437**, 443-448 ¼ ***

Support: 410 ½-413 ¼***, 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.

E-mini S&P (March)

Yesterday’s close: Settled at 2796.25

Fundamentals: The S&P settled at the low end of its range yesterday but has recovered firmly into this morning with the technicals laying a roadmap. Equity markets seem to be either unconcerned or outright doubting that the government could shut down at midnight tonight. Let’s take a brief stroll down memory lane and visit recent price action due to political hurdles. Beginning with the Brexit, equity markets sold off sharply but began a recovery within one week. On the 2016 presidential election results, markets sold off sharply, in fact the S&P was limit down. But you would have missed it if you blinked, the S&P closed higher on the session! The lead up to the French election did cause some minor pressures but once the result was known, equity markets gapped higher on the Sunday night open; the NQ set a new all-time high. The healthcare vote was the next hurdle and yes it caused some volatility, but nothing was even accomplished and once the ship had sailed, the S&P was then setting a new all-time high. The point is, investors are looking for reasons to buy and try to do so ahead of whatever imaginable curve this market still has. What do we mean? Shorts better look out when a budget deal is reached. Today we have Michigan Consumer data at 9:00 am CT.

Technicals: The levels have played well this week with yesterday’s low of 2793.75 coming in against first key support at 2794.25. Major three-star resistance at 2807-2809.50 remains a hurdle but a close out above here combined with a budget deal should send this market on a path to 2847.75. We would like to see a close above the minor 2800 level on a psychological basis to leave the bulls with an upper-hand to close out the week. Remember, Russell 2000 major three-star level is 1562-1564, you can buy into here, but if it breaks so should the rest of the market.

Bias: Bullish

Resistance – 2807-2809.50***, 2828**, 2847.75***

Support – 2800*, 2794.25**, 2788.75-2789.25**, 2783.50-2784.50**, 2769-2771.75***

 

Crude Oil (March)

Yesterday’s close: Settled at 63.89

Fundamentals: The IEA released their Monthly Report this morning and said that this year could be a historic one with the U.S in a position to overtake Saudi Arabia and Russia as the world’s largest producer. They expect to see “relentless growth” from U.S shale with prices at these levels. Price action has responded, seeing continued pressure against a crucial support level this morning. Yesterday’s weekly EIA inventory report was on the bullish side with a drawdown of 6.86 mb nearly doubling expectations. Furthermore, the recover in production was shallow. U.S production dipped by 290,000 bpd two weeks ago but only 258,000 came back online last week (Alaska did drag this by 9,000 bpd). This gave us reason to tread the waters with caution yesterday. Today is Friday and price action has been friendly on Fridays. We began to reintroduce a Bearish Bias this week, but do remain cautious through the end of the week and until the $63 mark is closed below. However, the market could not rally on bullish news yesterday and this could signal that the record long position is finally tired out.

Technicals: We are getting a little more aggressive with our Bearish Bias. The recent consolidation from the lows on 1/12 and the highs on 1/16 has created a small wedge pattern on the daily and today’s bar has bearishly fallen through here. We want to exude caution until a close below major three-star support and the weekly trend line. A close below here could provide a relief that tests near $60. The bulls have been extremely aggressive but yesterday’s failure to maintain higher price action and failure on the retest against first resistance after that EIA read has opened the door for profit taking from smart longs.

Bias: Bearish/Neutral

Resistance – 63.90**, 64.23-64.28**, 64.83-64.89**, 66.87***, 68.43**

Support – 63.00-63.25***, 62.43**, 61.87**, 59.96-60.45***

 

Gold (February)

Yesterday’s close: Settled at 1327.2

Fundamentals: Gold has firmed up into today’s midnight budget deadline to keep the government open. The Dollar has been weak for weeks, months and all of 2017. The budget news is just the latest catalyst but let’s not interpret this as the only catalyst. Even if a deal is reached, we expect to see continued Dollar weakness. Traders should keep in mind that the next two weeks will be very critical for both the currency and Gold trade; next week is the ECB and the following week is a gauntlet of US data along with a Fed meeting. Michigan Consumer data is due at 9:00 am CT.

Technicals: Price action remains very favorable and this is undeniable. Pullbacks are shallow and short-lived. What is also undeniable is the overheated net-long position and a 14-day RSI that sits near 70 (though it saw some relief after yesterday). We remain unequivocally Bullish but because of this we have kept a slight Neutralization. Support levels were taken out yesterday and it did encourage a wave of selling, still, Gold has recovered very well into today. We are watching the 1335.8 level along with last week’s close of 1334.9; we would like to see the metal maintain this level on a closing basis. A move back below 1330.5 should spark a wave of selling. To the upside we have introduced another major three-star resistance at 1350, this is the trend line from the 2016 high that has slowly worked lower.

Bias: Bullish/Neutral

Resistance – 1340.9*, 1345**, 1350***, 1358-1365***

Pivot – 1334.9-1335.8

Support – 1330.5**, 1321.6**, 1307.1-1308.9**, 1302-1303.4***

 

Natural Gas (February)

Yesterday’s close: Settled at 3.189

Fundamentals: Yesterday’s storage reports showed less of a draw than expected at -183 bcf versus -199 bcf. Prices dipped but quickly recovered to settle back at the pivotal 3.199 level ahead of a weekend that had begun to price in a warmer front. As stockpile draws mounted through midweek, price action stalled technically but also as some forecasters now had temperatures rising just a little. Regardless, the mix and uncertainty are keeping a premium in the market while storage levels are seeing an unprecedented drawdown this month.

Technicals: As usual, the month of January has brought a tremendous amount of volatility in Natural Gas. However, options expiration for the February contract is next Friday and we expect volatility to begin to seep out of the market. Big bets on both sides of the market signal a nice consolidation phase ahead and around the 3.199 level. This would keep price action confined for the most part between the 100 and 200 day moving averages.

Bias: Neutral

Resistance – 3.258-3.288***, 3.43***

Pivot – 3.199

Support – 3.115-3.134**, 3.039** 2.971-2.989***

 

10-year (March)

Yesterday’s close: Settled at 122’145

Fundamentals: The 10-year is set for the lowest weekly close since June 27, 2011. This comes in the face of a potential government shutdown. Rates are truly focused on next week’s ECB Meeting and the Fed Meeting the week after. Ultimately, we believe once we get these fundamental hurdles out of the way, we could see a tremendous buy opportunity. Michigan Consumer data is due at 9:00 am CT today.

Technicals: With a close below major four-star support this week, you are either Bearish or Neutral. Price action is fishing for a bottom and we have a level to watch at 122’125. The technicals are very weak but at the same time the pendulum is swinging to one-side. Fundamentally and technically, we believe a buy opportunity is not too far around the corner.

Bias: Neutral

Resistance – 123’10-123’135**, 123’215**, 123’27-123’28**, 124’01*, 124’06-124’07

Pivot – 122’245-122’29****

Support – 122’125**, 121’25**, 119’20-120****

 

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 finished yesterday’s session up 3 ¾ cents, trading in a range of 5 on the day. Funds were estimated buyers of 17,000 contracts.

Fundamentals: Yesterdays move higher is mostly attributed to short covering funds as there was not much new news across the wires. Weather in South America continues to be watched closely as some weather models conflict each other. Outside of South American weather and crop development, we will continue to keep an eye on the trend of exports. The market needs to start seeing a trend of better than expected numbers to encourage additional short covering and invite new buying into the market. Due to the Martin Luther King holiday on Monday, the weekly exports data has been pushed back to tomorrow at 7:30am cst.

Technicals: The market is officially trading above the 50-day moving average for the first time in over a month. Though that is encouraging for bulls, we will be watching this on a closing basis as we have not seen a conviction close above this indicator since July. If we see a close above, the next resistance pocket comes in at 358 ¼-359 ¼. This pocket represents the 100-day moving average along with a key Fibonacci retracement level. The bears are still in control as we have made lower lows and lower highs over the past several months. If we fail to “breakout” we will likely see prices retreat towards the bottom end of the range which we have defined as 345-346 ½.

Bias: Bearish

Resistance: 358 ¼ -359 ¼***, 367-369 ¼****

Pivot: 352 ¼

Support: 345-346 ½**, 334-335 ¼***, 323-325 ¼**

 

SOYBEANS (March)

Yesterdays Close: March soybeans finished up 2 ½ cents yesterday, trading in a range of 8 cents on the session. Funds were estimated buyers of 2,000 contracts.

Fundamentals: With the USDA report now behind us, market participants will turn their attention back to South American weather and crop development along with weekly export data. There is not much new news to report on the weather front this morning. Due to the shortened trading week, export sales data has been pushed back to tomorrow morning at 7:30am cst. Also on trader’s radar is the soybean complex including soybean meal and soybean oil as both have shown strength recently.

Tehcnicals: March soybean futures filled the gap yesterday that was down at 962 ¾ which was followed up by buying. Bulls need to see a close above 971 ¾ soon to encourage additional short covering and new buying in the market. A close above resistance opens the door to an extension towards 984 ½-986 ½. This pocket contains several technical indicators including the 50 and 100 day moving average, along with the 50% retracement from the June lows to the July highs.

A failure to breakout will lead to pressure on prices, likely down to the bottom end of the range near 950 as technical traders exit longs because they are not getting what they want from the market. We continue to be friendly towards the market but need to see the market work higher into the weekend.

Bias: Bullish

Resistance: 971 ¾ ***, 979**, 984 ½-986 ½***, 999-1004**

Support: 950-952 ¼***, 937 ½***, 922 ¼****

 

WHEAT (March)

Yesterdays Close: March wheat futures finished yesterday’s session up 5 ¼ cents, trading in a range of 7 ¾ on the day. Funds were estimated buyers of 4,500 contracts.

Fundamentals: Wheat futures worked higher yesterday on the back of what was likely short covering on concerns of cold and dry weather in some key growing areas. It will likely still be a few weeks before we see the true effects of the recent weather on the crop. Export sales that are normally released this morning are pushed back to tomorrow due to the shortened trading week; they will be released at the normal time 7:30am cst.

Technicals: The bulls have been putting up a decent fight over the last month, but the bears remain in control until we see a conviction close above technical resistance. The first line in the sand comes in at 425 ¼. A close above opens the door to a potential run at the recent highs of 437. A failure to see closes above these resistance levels will likely lead to new contract lows below 410 ½.

Bias: Bearish

Resistance: 425 ¼**, 437***, 443-448 ¼ ***

Support: 410 ½**, 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.

 

CME Group –

Five Reasons Event Risk to take Center Stage in 2018

  • 12 Jan 2018
  • By Bluford Putnam

The year 2017 saw the juxtaposition of heightened policy uncertainty with relatively complacent markets and low volatility, especially in equities.  Much of the policy uncertainty may find some answers in 2018.  It is decision time for NAFTA and Brexit.  Elections will be in the spotlight, too.  Italy in March, Mexico in July, Brazil in October, and November 2018 will see a ferociously contested U.S. election for the entire House of Representatives and one-third of the Senate.  At the Federal Reserve (Fed), the focus will be on inflation and the shape of the yield curve as it decides how aggressively to push rates higher or not.  The weather will play a role, too, as we find out if La Niña deepens and brings droughts to Brazil and Argentina or fades away quietly.

Event risk can present some interesting risk management challenges.  The two possible outcomes are typically binary in nature, like an on/off switch.  Before the event, markets may price an average of the two vastly different outcomes in terms of their impact on selected products or securities. After the event, the market’s “average” of the two outcomes will definitely not survive the outcome, as markets move quickly to price the actual outcome as it becomes known.  In these types of market environment, options can be a favored risk management tool.  In addition, if the probability of a price break or gap is substantial around the time the outcome becomes known, the options prices will add a premium for price gap expectations in addition to the typical estimate of future volatility.  This means that implied volatility calculations using models that assume price gaps/breaks do not exist (i.e., basic Black-Scholes-Merton) may over-estimate volatility by the amount of the potential price break premium.

There are also risk management considerations relative to different types of event risk.  For example, political elections have known dates and unknown outcomes.  Weather events, such as droughts, do not have known dates, but the general conditions that could result in a drought are known and can be monitored.  In these cases, markets will price potential outcomes as probabilities shift.

Here are our favorite event risk challenges for 2018.

1. Brexit, Trade, and the Irish Border

Now that the UK has agreed to pay a substantial sum to the European Union (EU), the Brexit negotiations shift to trade relations and the Irish border.  On trade, both sides have a lot to lose, and while they may seem far apart on many details, the will to find a compromise seems to be gaining traction.  On the Irish border question, it is less clear.  The Democratic Unionist Party (DUB) in Northern Ireland provides the votes in Westminster that Conservative Prime Minister Theresa May needs to remain in power.

DUB wants both an open border with Ireland and that Northern Ireland is treated exactly like Scotland, Wales, and England as part of the UK.  This presents May with a conundrum.  A workable compromise is not in sight.  If a compromise cannot be achieved, a new election in the UK and substantial FX volatility may follow.

2. Trade & Immigration

NAFTA will be front and center in Q1/2018, and any deal or no deal impacts U.S. exports of corn, beef, and natural gas to Mexico, as well as potentially destabilizing the auto industry that is tightly inter-linked across all three countries that includes Canada.  Mexico faces a critical presidential election on July 1, 2018.  It is hard to see the current Mexican government making any concessions before the election.  Canada does not face elections in 2018, but Prime Minister Justin Trudeau still must look to his future and not appear weak relative to the rhetoric coming from Washington.

For the U.S. Administration,  the achievement of passing major tax legislation in December 2017 may lead to a desire to push harder on trade and immigration issues to notch another victory or two.  Thus, the probability of the U.S. triggering the 6-month unilateral withdrawal notice clause in NAFTA has risen.

And, how the immigration dispute is settled may determine whether the Federal Government in Washington is shut down or stays open as the January 19 funding deadline approaches in the U.S. Congress.  All sides are digging in their heels; event risk is heightened.  Any last-minute theatrics around a Federal Government shutdown would activate volatility for markets in U.S. Treasury bonds, equities, and the U.S. dollar (versus euro, especially).  Market participants have grown complacent in dealing with uncertainty, so it would be the actual event (i.e., a temporary shutdown) and not the uncertainty that would create volatility in markets.

3. Elections around the Globe

As noted, there are a slew of critical elections in 2018.

The Italian elections in March will focus on the issue of budget austerity and EU policies.  This will put the euro in the headlights.

The Mexican election could put the country between a rock and a hard place, with no NAFTA compromise possible.  Here the focus is on the Mexican peso, natural gas, cattle, corn, and the Canadian dollar.

The Brazilian election could set the country on the path to further reform and economic growth or spiral the country back into political uncertainty.  Brazil’s Presidential election is potentially a two-part affair.  If no candidate gets 50% of the vote in round one, then three weeks later there is a second round pitting the top two vote-getters against each other.  The Brazilian election potentially impacts the Brazilian real, as well as commodities such as corn and soybeans.

In November, the Democratic Party in the United States will make a concerted run to take back control of the House of Representatives and deny the Republicans gains in the Senate.  A Democratically-controlled House would spell even more theatrics from Washington, impacting equities, bonds and the dollar.  In short, political event risk is back on the calendar for 2018, with a vengeance.

Election Calendar 2018
Italy Parliamentary Election Sunday, March 04, 2018
Mexico Presidential Election Sunday, July 01, 2018
Brazil Presidential Election Round #1 Sunday, October 07, 2018
Brazil Presidential Election Round #2 (if needed) Sunday, October 28, 2018
US Congressional Elections (Full House, 1/3rd Senate) Tuesday, November 06, 2018

4. Fed, Inflation, the Yield Curve and Rates

With the political election rhetoric flying in Washington, the Fed will probably want to lay low, and certainly will not want to be blamed for causing a recession.  The Fed will be debating and eyeing the shape of the yield curve.  Statistically, the yield curve is the best predictor going for future volatility and a recession should the curve flatten or become inverted.  So, unless core inflation flashes a warning sign, the Powell-led Fed may take its cues from the yield curve and halt the tightening after one or two more increases to avoid flattening the curve too much.

5. And now for the Weather…

La Niña is here.  From an ocean surface temperature perspective,  La Niña is colder than usual waters along the Pacific equator – the opposite of the warmer than usual waters occurring with El Niño.  While these two phenomena are opposites in definition, one should not assume the effects are opposite, as each event has its own special character.

This La Niña is not too strong yet, and some experts suggest it may weaken sooner than previous episodes.

Even so, meteorologists and farmers alike will be watching for signs of deepening La Niña and with it, increased possibilities of drought in the corn and soybean regions of Brazil and Argentina. La Niña, or more correctly the absence of El Niño, also increases the risk along the east coast of the U.S. and in the Caribbean of more severe hurricanes in the Fall of 2018, as was witnessed in 2017.


 

All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author(s) and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

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 (March)

Yesterday’s close: Settled at 2803.75

Fundamentals: There is no new all-time high overnight, let’s say that U.S equity markets are settling in after yesterday’s rip your face off rally. We have not wavered from our Bullish Bias this week or anytime in the recent past. Even when we exuded caution here Tuesday morning we discussed pullbacks and support levels as buying opportunities. Congress is expected to vote and pass a stopgap budget deal today, a failure to do so could bring some pressures so traders must keep an ear to the ground. Though major indices in the U.S are peeling back and ‘settling in’, the DAX is playing catch up gaining .5%. The US Dollar gained some footing late yesterday on technicals and an upbeat Beige Book along with Dallas Fed President Kaplan. The stronger Dollar brought a weaker Euro, and we have discussed here how a weaker Euro can lift European equities. Also helping is firm GDP, Fixed Asset Investment and Industrial Production data from China. We say firm because they all beat by about .1%; what a surprise. A lot of talk this morning calling these numbers fixed. We believe that the US Dollar is going to attempt to stage a consolidation higher and though we do not expect a sharp pullback in the S&P, it should keep price action in check at, around and just above yesterday’s high and our major three-star resistance at 2807. This morning we have Building Permits, Housing Starts, weekly Jobless Claims and Philly Fed at 7:30 am CT. The ECB’s Coeure speaks at 8:30 am CT.

Technicals: A new all-time high of 2809.50 is ‘settling in’ after failing to secure a close out above major three-star resistance yesterday. The market is Bullish and ultimately only a close below major three-star support at 2769-2771.75 will give us a reason to go short. Price action might not be ready to extend higher yet today, but it is likely that we see this before the weekend. The next level above here is 2828 and a close above major three-star resistance today will push the tape directionally. The Russell lagged in retracing yesterday and faces stiff resistance at 1595.8; a move out above here could get things going all around. Major three-star support remains at 1560-1564.4 and a close below here will encourage waves of selling.

Bias: Bullish

Resistance – 2807-2809.50***, 2828**, 2847.75***

Support – 2800*, 2794.25**, 2788.75-2789.25**, 2783.50-2784.50**, 2769-2771.75***

 

Crude Oil (March)

Yesterday’s close: Settled at 63.92

Fundamentals: Yesterday’s February option expiration worked to contain price action. This morning OPEC said in their Monthly Report that production increased 42,000 bpd in December per a secondary source. They revised non-OPEC supply higher due to the U.S and Canada. They reiterated that compliance was strong. They also forecasted a small uptick in demand growth for 2018. Crude had a muted initial reaction. API inventories showed a draw of 5.12 mb, this would be the ninth weekly draw in a row if confirmed by EIA today. They also reported a build of 1.782 mb in Gasoline and 609k build in Distillates. The numbers as a whole were on the bullish side with Crude drawing more and Gas building less. Today’s EIA read expects -3.536 mb Crude, +3.426 mb Gasoline and +.086 mb Distillates. Crude inventories have been drawn down by at least 4.5 mb each week for the last six weeks and this has been a tremendous catalyst in keeping prices bid. Crude production will be a key on this read as it dropped 290,000 bpd in last week’s due to the winter storm. The question today is how much production comes back online? Traders also want to keep an eye out for headlines with Nigeria as rebels have threatened attacks.

Technicals: Price action has been fairly quiet as traders await today’s EIA read. First resistance comes in at 64.23-64.28, a move out above here could attract more buyers. As price action consolidates traders should remember that Friday’s have been very supportive for Crude. Furthermore, only a close below the weekly trend line and major three-star support at 63.00-63.25 signal a potential correction, until then the bulls have a clear upper hand.

Bias: Neutral/Bearish

Resistance – 64.23-64.28**, 64.83-64.89**, 66.87***, 68.43**

Support – 63.00-63.25***, 62.43**, 61.87**, 59.96-60.45***

 

Gold (February)

Yesterday’s close: Settled at 1339.2 before selling off late in the session

Fundamentals: The Dollar stabilized late yesterday on technicals, an upbeat Beige Book and Dallas Fed President Kaplan. The Dollar Index double bottomed on the session and quickly paired losses ahead of the electronic close which sent Gold to a session low of 1326.6 and about 1% from its settlement. Price action has held ground very well into this morning and we have a big board of data at 7:30 am CT to digest; Building Permits, Housing Starts, weekly Jobless Claims and Philly Fed. As we said yesterday, we are unequivocally bullish Gold in the long-term, however, price action is due for a consolidation lower at minimum. This is what we are seeing and the technicals will be key.

Technicals: Price action breached first key support amidst strong selling but is attempting to bottom out into this morning. Ultimately, a minor correction or consolidation lower will be extremely healthy for the metal. Resistance on the session comes in at 1332.2-1334.7, near the key closing level of 1335.8, a long-term level that the bulls want to maintain a close above in order to keep the immediate-term upper hand. A close below 1327.3-1330.5 will keep selling pressures. These levels are tight, but each is important in their own respect to immediate term momentum.

Bias: Bullish/Neutral

Resistance – 1332.2-1334.7**, 1335.8**, 1340.9*, 1345**, 1358-1365***

Pivot – 1327.3-1330.5**,

Support – 1321.6**, 1307.1-1308.9**, 1302-1303.4***

 

Natural Gas (February)

Yesterday’s close: Settled at 3.232

Fundamentals: Cash Natural Gas is down more than a $1 today from over $5. Today’s storage expectations range from -196 to -199. The month of January is already drawing significantly from storage and next week’s expectations continue to mount near previous record highs. Considering this, look for price action to respond on a bigger draw than expected. For now, the technicals have kept the tape in check.

Technicals: Price action has battled against the 3.18-3.21 level while facing the 200-day moving average just above at 3.257. Today this 3.18-3.21 level will consolidate to 3.199, a close below here will neutralize the tape. Yesterday’s session high was 3.288 before settling back in, resistance is tiring the tape but can only do so for so long. A bullish read today and close above the 200 dma will give the bulls fire power to 3.43.

Bias: Neutral

Resistance – 3.258-3.288***, 3.43***

Pivot – 3.199

Support – 3.115-3.134**, 3.039** 2.971-2.989***

 

10-year (March)

Yesterday’s close: Settled at 122’21

Fundamentals: Treasury prices were under pressure for much of the session as equity markets bounced back strongly from Tuesday’s weakness. However, the real selling through major support came in the second half of the day on an upbeat Beige Book and a hawkish Dallas Fed President Kaplan who is concerned about overheating the market and feels strongly about three hikes this year, eluding to a potential fourth. A big slate of data at 7:30 am CT includes Building Permits, Housing Starts, weekly Jobless Claims and Philly Fed. The technicals will keep pressure on this market but misses in data will neutralize the tape.

Technicals: Price action closed below major four-star support yesterday at 122’245-122’29 and this has kept pressure on the tape. However, we do see support against the lows of the session at 122’125. A consolidation back into 122’245 will help neutralize the weakness, but right now the sellers have an edge. We believe there will be a buy opportunity at some point in the near future, but this may not be until after the Fed meeting in two weeks.

Bias: Neutral

Resistance – 123’10-123’135**, 123’215**, 123’27-123’28**, 124’01*, 124’06-124’07

Pivot – 122’245-122’29****

Support – 122’125**, 121’25**, 119’20-120****

 

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.

CME Group – US 52 Week Bill Auction

CME GROUP

US: 52-Week Bill Auction

 

Tue Jan 30 10:30:00 CST 2018

Previous
Total Amount $20 B
Bid/Cover 2.91
52-Week Bill Rate 1.780%

Definition
Treasury bills are sold at public auctions every week. The 12-month bill is also known as the 52-week bill. Competitive bids at these auctions determine the interest rate paid on each issue. A group of securities dealers, known as primary dealers, are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold the bills, resell the bills to their clients or trade them with other securities firms. Typically, the New York Fed approves about 20 securities firms to be primary dealers but that number dropped sharply during the 2008 financial crisis as some were merged into other firms or went bankrupt. The Fed has been rebuilding that number regularly and the latest list can be found here. Since these are public auctions, the Treasury must announce the size, date and time of the auction every week. 52-week bills are announced on Thursday for auction the following Monday and issued (settled) on Thursday. If a Monday is a banking holiday, the bills are auctioned on Tuesday. (Department of the Treasury)

Description
Individual investors can participate in Treasury auctions either through a securities dealer (brokerage firm) or via the Treasury Direct program, which saves on brokerage commissions. But brokers commissions are often nominal (especially with discount brokers), and using a broker does eliminate a lot of paper work and other administrative hassles. Brokers facilitate the purchases and sales of Treasuries in the secondary market, which is handy for buying Treasuries at times other than scheduled auctions or for maturities other than those offered by standard new issues.

Interest rates on Treasury securities are determined in the market; the Federal Reserve does not set them. However, bond investors are sensitive to Federal Reserve policy and thus market rates will mirror policy expectations. Usually, bond market players are forward-looking and this means that interest rates on Treasury securities will move in the direction of Fed policy with a lead. As a result, one is more likely to see rising interest rates on Treasury yields during an expansion (and falling yields during economic slowdowns) in advance of policy changes by the Federal Reserve.

Primer on Treasuries
Treasury securities, Treasuries, U.S. government bonds, T-bonds, T-notes, and T-bills all refer to the same type of security: debt obligations of the United States. Maturity refers to the length of the loan to the government. Treasury bills have maturities from four weeks to 52 weeks. Cash management bills (CMBs) are auctioned occasionally, depending on the Treasury’s borrowing needs. These are often for short-term needs such as 12 to 14 days. Since 2008, the Treasury ruled that all securities it issues now have minimum denominations of $100 and must be purchased in increments of $100.

How bills work
Since they mature so quickly, bills are simply sold at a discount to their face value at maturity. The interest is the difference between the purchase price of the security and what the Treasury pays at maturity. For example, if you bought a 3-month bill for $9,800 and received $10,000 at maturity, the interest payment would be $200.

Investment Profile
Treasuries offer a measure of security unmatched by other investments – the U.S. government guarantees the initial investment (the principal) and interest payments. When Treasuries are resold in the secondary market, their prices are often significantly different than their face value since prices in the secondary market fluctuate based on the economic environment, inflation expectations, Federal Reserve policy, and simple forces of supply and demand.

CME Group – US 4-WEEK Bill Auction

  • CME Group

US: 4-Week Bill Auction

 

January 16, 2018 01:00 EST

Actual Previous
Total Amount $45 B $50 B
Bid/Cover 2.99 3.03
4-Week Bill Treasury Rate 1.295% 1.280%

Highlights
Coverage, at 2.99, was soft for the weekly 4-week T-bill auction, though end investor demand was moderately strong, with non-dealers taking down an above average 45 percent of the $45 billion offering. The awarded high discount rate, at 1.295 percent, was 1.5 basis points higher than last week’s rate.

Definition
Treasury bills are sold at public auctions every week. Competitive bids at these auctions determine the interest rate paid on each issue. A group of securities dealers, known as primary dealers, are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold the bills, resell the bills to their clients or trade them with other securities firms. Typically, the New York Fed approves about 20 securities firms to be primary dealers but that number dropped sharply during the 2008 financial crisis as some were merged into other firms or went bankrupt. The Fed has been rebuilding that number regularly and the latest list can be found here. Since these are public auctions, the Treasury must announce the size, date and time of the auction every week. Four-week bills are announced on Monday for a Tuesday auction and are issued (settled) on Thursday of the same week. If a Monday is a banking holiday, the bills are auctioned on Wednesday. (Department of the Treasury)

Description
Individual investors can participate in Treasury auctions either through a securities dealer (brokerage firm) or via the Treasury Direct program, which saves on brokerage commissions. But brokers commissions are often nominal (especially with discount brokers), and using a broker does eliminate a lot of paper work and other administrative hassles. Brokers facilitate the purchases and sales of Treasuries in the secondary market, which is handy for buying Treasuries at times other than scheduled auctions or for maturities other than those offered by standard new issues.

Interest rates on Treasury securities are determined in the market; the Federal Reserve does not set them. However, bond investors are sensitive to Federal Reserve policy and thus market rates will mirror policy expectations. Usually, bond market players are forward-looking and this means that interest rates on Treasury securities will move in the direction of Fed policy with a lead. As a result, one is more likely to see rising interest rates on Treasury yields during an expansion (and falling yields during economic slowdowns) in advance of policy changes by the Federal Reserve.

Primer on Treasuries
Treasury securities, Treasuries, U.S. government bonds, T-bonds, T-notes, and T-bills all refer to the same type of security: debt obligations of the United States. Maturity refers to the length of the loan to the government. Treasury bills have maturities from four weeks to 52 weeks. Cash management bills (CMBs) are auctioned occasionally, depending on the Treasury’s borrowing needs. These are often for short-term needs such as 12 to 14 days. Since 2008, the Treasury ruled that all securities it issues now have minimum denominations of $100 and must be purchased in increments of $100.

How bills work
Since they mature so quickly, bills are simply sold at a discount to their face value at maturity. The interest is the difference between the purchase price of the security and what the Treasury pays at maturity. For example, if you bought a 3-month bill for $9,800 and received $10,000 at maturity, the interest payment would be $200.

Investment Profile
Treasuries offer a measure of security unmatched by other investments – the U.S. government guarantees the initial investment (the principal) and interest payments. When Treasuries are resold in the secondary market, their prices are often significantly different than their face value since prices in the secondary market fluctuate based on the economic environment, inflation expectations, Federal Reserve policy, and simple forces of supply and demand.

 

CORN (March)

Yesterdays Close: March corn futures closed 1 ¼ cents higher yesterday, trading in a range of 3 ¼ cents on the day. Funds were estimated buyers of 6,500 contracts.

Fundamentals: Export inspections yesterday morning came in at 584,389 metric tons, this was below the estimated range from 700,000-1,000,000 metric tons. It was also below last weeks read of 849,226 metric tons. There is a lot of corn out there and there has been a lack of demand the chew through it all. People continue to talk about the potential for a short covering rally from the funds, but that will take a fundamental catalyst. Right now, all eyes are on South America, and though there are some concerns of dry conditions it does not seem to be a serious issue at the moment.

Technicals: The market consolidated yesterday after a choppy Friday trade following the USDA report. First technical resistance comes in from 350 ½-352 ¼. If you’ve been reading the reports, you know that these levels have been moving lower as the market continues to post lower highs and lower lows. 352 ¼ represents the 50-day moving average, something that we have been referencing for the better part of the last three months as resistance. This is an indicator we have not seen a conviction close above this level since July. If the bulls can achieve that it will open the door to 358 ½-359 ¼. On the surface it doesn’t seem like a big rally but in context it is a decent run. A break and close below 345 opens the door to our support pocket from 334-335 ¼.

Bias: Neutral/Bearish

Resistance: 350 ½-352 ¼***, 358 ½-359 ¼***, 367-369 ¼****

Support: 345-346 ½**, 334-335 ¼***, 323-325 ¼**

 

SOYBEANS (March)

Yesterdays Close: March soybeans finished yesterday’s session up 4 ¼ cents, trading in a range of 6 ¾ cents on the day. Funds were estimated buyers of 5,000 contracts.

Fundamentals: Export inspections yesterday came in at 1,231,037 metric tons, this was towards the top end of the expected range from 1,000,000-1,300,000 metric tons. This was also above last weeks read of 1,183,089 metric tons. Yesterday was the release of the December NOPA crush report, that came in at 166.382 million bushels which marks a new record for December; analyst estimates were for 15.385 million bushels. The market has some wind in its sail which is giving the bulls some renewed confidence. Weather and crop developments will continue to be monitored in South America as drier conditions could be worrisome.

Techncials: We have been friendly on beans recently, but we need to see a conviction close above 971 ¼ to get more enthusiastic. If the bulls can achieve a close above this level, we would not be surprised to see short covering from the funds take us to 985-986 ½. This pocket contains several technical indicators including 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 is unable to chew through first resistance in the near future, we expect to see a consolidation back towards the bottom end of the range near 950.

Bias: Bullish

Resistance: 971 ¼***, 979**, 985-986 ½***, 999-1004**

Support: 950-952 ¼***, 937 ½***, 922 ¼****

 

WHEAT (March)

Yesterdays Close: March wheat futures finished the session down 4 ¼ cents, trading in a range of 9 ½ cents on the day. Funds were estimated sellers of 5,500 contracts.

Fundamentals: Export inspections yesterday morning came in at 368,651 metric tons, this was towards the top end of the expected range from 200,000-400,000 metric tons. This was also above last week’s read of 234,418. The market has been kept under pressure by ample global supply and dismal demand. As of now, it does not appear that trend is going to continue which is why we continue to have a bearish bias on any attempted rally. The colder dry temperatures helped put some premium in the market but that has quickly evaporated with the help of Fridays USDA report affirming supply concerns.

Technicals: The market failed to achieve a conviction close above the 50-day moving average last week which could have encouraged funds to start covering shorts. This will continue to be a key resistance indicator going forward, it comes in at 430 ¼. First resistance this morning comes in at 425 ¼. If the bears can defend resistance, we expect to see new contract lows sooner rather than later.

Bias: Neutral/Bearish

Resistance: 425 ¼**, 430 ¼***, 443-448 ¼ ***

Support: 410 ½**, 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.

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