Month: January 2018

 

E-mini S&P (March)

Yesterday’s close: Settled at 2783.50

Fundamentals: The S&P traded to 2808.50 yesterday morning and hit our major three-star resistance at 2807. The rally over the holiday weekend was on momentum alone ahead of earnings season and after a strong close to the week that saw JP Morgan gain 1.65% on Friday. As we discussed here yesterday morning, the exuberance coming into the session felt overdone. When this happens, any one thing can quickly spook the market. The looming government shutdown at the end of this week did just that. Talks in Congress hit a snag yesterday with immigration continuing to be a key argument. The S&P traded to a session low of 2769.25 before working its way back near unchanged. However, this morning the S&P is back positive on the week and news that Speaker Paul Ryan has put together a stopgap bill to keep the government open through February 16th is a key catalyst. We could see a vote tomorrow. Earnings from Bank of America and Goldman Sachs are due this morning. We also have Industrial Production data at 8:15 am CT. The Bank of Canada is expected to hike rates at 9:00 am. Fed Presidents Evans, Kaplan and Mester speak at 2:00 pm CT, 2:15 and 3:30.

Technicals: Price action slipped hard yesterday but has regained footing into this morning. On yesterday’s Midday Market Minute, we discussed buying the first test into support at 2783.50-2788.75, which was broken. However, S2 held with a low of 2769.25 and the quick bounce back gave traders flexibility to manage a loser, limit losses or turn a profit. The tape is running into first resistance this morning at 2793.50. A continued close above 2788.75 will leave the bulls with the immediate term upper hand. A close below 2783.50 will leave the market vulnerable. We have brought major three-star support up to yesterday’s low and a close below there signals a wave lower. Briefly touching on the Russell 2000, major three-star support aligns with a trend line from mid-November and the previous all-time high at 1560-1564; a close below here will open the door to strong selling.

Bias: Bullish

Resistance – 2793.50**, 2799.25*, 2807-2808.50***, 2828**, 2847.75***

Pivot – 2788.75

Support – 2783.50**, 2769-2771.75***, 2754.75**, 2736.50-2738**, 2698-2700****

 

Crude Oil (February)

Yesterday’s close: Settled at 63.73

Fundamentals: Nothing has changed on the fundamental front as traders await inventory data that begins to come into the picture later today. We discussed yesterday how this move feels overdone and should have become exhausted in an exacerbated holiday session. Brent truly achieve $70 before reversing and this seems to be enough to encourage some longs to take profits and bears to jump on board. Furthermore, with a record net-long position, anyone who wants to buy, has already bought. Today is options expiration for the February contract and this has likely had a helping hand in containing prices.

Technicals: We reintroduced a Bearish Bias yesterday but remain hesitant to put more emphasis on this until a close below major three-star support. The $63 level is critical intraday but more so for the longer-term trend on the weekly close and a move below here has the potential to encourage strong waves of liquidation back down to $60. Remember, the March contract will be front month for this weekly close.

Bias: Neutral/Bearish

Resistance – 63.78-63.96**, 64.89**, 66.87***, 68.43**

Support – 63.00-63.02***, 62.45**, 61.87**, 59.87-59.96***

 

Gold (February)

Yesterday’s close: Settled at 1337.1

Fundamentals: The Dollar continues to find some footing at the key 90 level in the Dollar Index and this will be critical for the Gold trade in the near-term. The metal retreated about 1% from its Sunday night high and now is seemingly awaiting more information. Equity markets saw short-lived pressure in the second half of yesterday which helped Gold retest its swing high. However, as stopgap budget deal could be voted on tomorrow the equity market has recovered along with the Dollar and treasuries are seeing pressure; not a great combination for Gold in the very near term. Industrial Production data is due at 8:15 am CT and Fed Presidents Evans, Kaplan and Mester speak at 2:00 pm CT, 2:15 and 3:30.

Technicals: We remain unequivocally bullish Gold in the long-term. In the near term, first support at the 1327.3-1330.5 is very important and a close below here will signal a healthy pull back. We continue to watch the 1335.8 mark and want to see a continued close above there in order to leave the bulls with the near-term edge. There is only a marginal difference between R1 and S1 but after such a strong (and awesome!) rally, the net-long position and the RSI are both overdone and it becomes ever important where the metal closes in order to hold or begin to relieve strong momentum.

Bias: Bullish

Resistance – 1335.8**, 1358-1365***

Support – 1327.3-1330.5**, 1321.6**, 1307.1-1308.9**, 1302-1303.4***

 

Natural Gas (February)

Yesterday’s close: Settled at 3.129

Fundamentals: Near month prices are up strong today as next week’s storage draw estimates (for consumption this week) ballooned due to the snow that has hit the Midwest and is heading to the east coast. Cash Natural Gas is up more than $1 today, trading above $5.

Technicals: Price action is retesting the key 3.18-3.21 level this morning. We did introduce a slight Bearish Bias yesterday but have now Neutralized this. Price action traded to a low of 3.039 but turned back north and is now covering the Sunday night gap. There is a thick wall of resistance from R1 to the 200-day moving average at 3.258 but a close above here could open the door to a bull leg higher to 3.43

Bias: Neutral

Resistance – 3.18-3.21**, 3.258***, 3.43***

Pivot – 3.115-3.129

Support – 2.971-2.989***, 2.923**, 2.893**, 2.815**, 2.734-2.7664**, 2.562***, 2.486-2.522****

 

10-year (March)

Yesterday’s close: Settled at 122’315

Fundamentals: Treasury prices stayed elevated yesterday as equity markets sold off on budget deal worries in Washington coupled with the ECB back-tracking on changing their bond-buying pledge at the meeting next week. However, this morning equity markets are back in the green and a stopgap budget deal could be voted on tomorrow. Traders want to keep an eye on Industrial Production data today at 8:15 am CT. More important to the Treasury market will be Fed speakers Evans, Kaplan and Mester ay 2:00 pm CT, 2:15 and 3:30. Chinese GDP data tonight should also be watched.

Technicals: Price action could not get out above yesterday’s early morning high on the ECB news when equity markets were selling off and this worried us on a technical basis. The bears have an edge this morning and the close will be key, a close below major four-star support will give them a path of least resistance lower in the near term. We do still believe there will be a buying opportunity in the 10-year not too far down the road. However, for now, the yield curve flattener spread is working very well.

Bias: Neutral

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

Support – 122’25-122’29****, 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.

BrokersEDGE FX Market recap 1-16-18

 

Euro (March)

Session close: Settled at 1.23165, up 88 ticks

Fundamentals: The Dollar saw renewed weakness on the session after Congress hit a snag in passing a funding bill to keep the government from shutting down at the end of the week. With this the Euro finished the session near its highs. Price action put in a high early Monday morning before retreating about a penny on comments from an ECB source that they are unlikely to remove their bond-buying pledge at their meeting next week. We discussed in Thursday evening’s FX Rundown and Sunday’s Tradable Events this Week how this and will be key to understand going forward. Regardless, if they remove the exact verbiage this month or in the near future, the market is pricing it in. Tomorrow, Eurozone CPI is due out at 4:00 am CT, US Industrial Production at 8:15, Fed President Evans at 2:00 and Kaplan at 2:15.

Technicals: The Technicals are going to be crucial at this stage as the Euro has broken out above previous highs on a multi-month bull flag pattern. We have the next key resistance level coming in at 1.2434 (multiple levels here including the 200-month moving average) and as long as price action continues to close above previous four-star resistance, now support, at 1.2180-1.22135 the path of least resistance will remain higher. On the flip side of the trade is the Dollar Index which will be crucial to watch during this breakout in the Euro. The Dollar Index is at the psychological level of 90 and there is a falling trend line support that aligns roughly here. We remain bullish the Euro because of the Euro chart, however, until the Dollar Index closes below 90, traders should tread with a degree of caution.

Bias: Bullish

Resistance –1.2434-1.2435**, 1.2514***, 1.2608***

Support – 1.2180-1.22135****, 1.21405**, 1.1920-1.1926***

 

Yen (March)

Session close: Settled at .90955, up 61 ticks

Fundamentals: The Yen put in another strong session and was able to capitalize on equity markets peeling back from new all-time highs; the S&P lost as much as 1% from the high before stabilizing. Dollar weakness on budget deal hurdles ultimately go the ball rolling today. However, this has been a perfect storm for Yen bulls who have been able to capitalize on long-term question marks surrounding the Dollar but also a potential Bank of Japan policy shift. Though the Yen is only a small portion of the Dollar Index, as we stated above, we believe the price action in the Dollar Index at the psychological level of 90 is crucial for the sentiment part of this trade. Machinery Orders data is due out of Japan tonight at 5:50 pm CT.

Technicals: Even on the toughest of closes, we have not wavered from our Bullish bias in the Yen and right now the trade is at a critical inflection point. Not only is the Dollar Index at the aforementioned 90 level with a 14-day RSI of 25 but the Yen is squarely facing major three-star resistance for the first time since failing a month and a half ago. Price action traded to a session high of .9100 but failed to convincingly close out above the .9060-.9092 level. Traders do want to be nimble upon a failure here as it could have quick implications, a retreat back to the .8957-.89685 level.

Bias: Bullish

Resistance – .9092***, .9164**, .9204**, .9255**

Support – .90235*, .8957-.89685**, .8896***, .8847**, .8782-.8808***

 

Aussie (March)

Session close: Settled at .7958, up 48 ticks.

Fundamentals: The Aussie has been a key beneficiary of the weaker Dollar and strong commodity prices. Furthermore, strong growth data from China as well as domestically (last week’s Retail Sales) has sent the Aussie about 6% higher in just about a month. Data again comes to the forefront for the Aussie this week and tonight Westpac Consumer Sentiment is due at 5:30 pm CT and Home Loans at 6:30 pm CT. Tomorrow though will take the cake for the week with New Homes Sales and Employment data. Also, Chinese GDP, Fixed Asset Investment, Industrial Production and Retail Sales.

Technicals: When the Aussie bottomed mid-December, within that first week we said that this feels like a low that could last through Q1. We are not calling the high in the Aussie by any means, but it sure feels like it has run too far too quick and is overdue for a pullback. The 14-day RSI has barely had a breather to dip back below 70 before this latest push. Ultimately, we are now eyeing a major long-term trend line from 2014 that comes in at let’s call lit the psychological .8000 level. Furthermore, the 200-month moving average comes in at .8037. These are substantial headwinds that should reject the first test.

Bias: Neutral/Bearish

Resistance – .8000**, .8100***

Support –.7870-.7884**, .7770-.7805**, .7686-.7691***

 

Canadian (March)

Session close: Settled at .8052, up 37.5 ticks

Fundamentals: The Canadian finished higher today as traders ready for a potential interest rate hike from the Bank of Canada at 9:00 am CT tomorrow. Though a hike is widely expected, a path that the BoC set themselves on last summer, the verbiage around this hike will be key. Even if they don’t hike, if they signal the willingness to continue down a path of tightening the Canadian Dollar should hold solid footing. With NAFTA talks lingering, we don’t believe the market is completely pricing in a hike and hence won’t be extremely disappointed if we don’t see one.

Technicals: We have completely neutralized our Bias ahead of tomorrow’s BoC. However, we still believe there is tremendous support and a great buy opportunity at the .7926-.7931 if seen. A close out above .8085 will signal the next leg higher. While .8290 brings the September high, we see .8524 in the cards this year.

Bias: Neutral

Resistance – .8021**, .8085***, .8163**, .8290***, .8524****

Support –.79675**, .7926-.7931***, .7880-.7885**, .7752-.7787***

 

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.

BrokersEDGE Livestock wrap up 1-16-18

Cattle Commentary: Cattle futures started today’s session on firm footing but prices faded until the final minute; literally. April live cattle rallied from 119.80 to 120.625 between 12:59 and 1:00pm cst. The final print today came in at 120.425, this was up .975 on the session. February futures finished the session up .775 at 118.15. We continue to have a friendly stance on cattle with April continuing to be our preference. There has been no cash trade to note this week, but packer bids are starting to come in at 118. The bulk of last weeks cash trade came in at 120, with dressed at 192. Boxed beef too a hit again today with many suggesting that the seasonal top is in.

PM Boxed Beef _ Choice _ Select

Current Cutout Values: _ 205.58 _ 199.89

Change from prior day: _ (2.45) _ (2.15)

Choice/Select spread: _ 5.69

 

Cattle Technicals

Live Cattle (April)

April live cattle continued higher to start the shortened trading week as we saw futures surge higher into the close. In our mind this was buying to cover after failing to really break down throughout the session. 120.25-120.80 was our first target, representing the 50% retracement (middle of the range) from the August lows to November highs among other indicators. The market managed to achieve a close in between which isn’t a clear breakout, but still a strong session. The next line in the san comes in at 121.55, but the more significant pocket and our intermediate term target comes in from 122.55-123.35. A failure to see follow through over the coming sessions could lead to long liquidation and would likely set up for a breakdown below 118. There is a lot of rhetoric between bulls and bears; we think it is all noise for now and will look to play a consolidated range until we see a fundamental catalyst give us a bigger technical breakout or breakdown.

Resistance: 120.25-120.80***, 121.55**, 122.55-122.95****, 123.70**

Support: 117.80-118.05****, 115.40-115.80**, 114.625-114.875**, 109.475****

 

Feeder Cattle (March)

March feeder cattle finished the day in similar fashion to the fat cattle as we saw a surge of buying in the last minutes of trading. 143.55 has been our target and the bulls achieved a close above which could lend hand to a continuation towards 146.45-147.50. This wide pocket contains several technical indicators including the 50 and 100 day moving average, along with the 50% retracement from the august lows to the November highs. This would be the spot to look at flattening if you’ve been long and looking at selling if you want to hedge. On the support side of things, 141.40 is the first line in the sand, this represents the 200-day moving average, an indicator that the March futures have never closed below.

Resistance: 144.425**, 146.45-147.50****, 149.15-149.40***

Support: 141.175-141.40**, 139.85-140.125***, 138.30-138.75****

 

Lean Hog Commentary & Technicals:

February lean hog futures finished the session up 2.10 at 73.675, a new contract high. Futures gaped higher on the open to trade in a range of 2.20 on the day. Those calling for a significant top late last week were forced to swallow their words quickly. We have been leaning towards the short side suggesting the value against contract highs seems limited. We continue to have this bias, but the bulls remain resilient as cash prices and demand have been firm over the past three weeks. The bulls would like to see more conviction on new contract high print to squeeze the shorts. A failure to get that conviction could lead to some long liquidation. First support comes in at 71.825 for the week. On the resistance side

Resistance: 74.50-75.00**, 78.50****

Support:71.825***, 69.85-70.30***, 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.

E-mini S&P (March)

Last week’s close: Settled at 2788.75

Fundamentals: Global equity markets are in rally mode. The S&P is at a new all-time high ahead of earnings season and seeing strong buying on the Russell 2000 finally breakout (see Russell target below). JP Morgan beat on Friday and gained 1.65%, it has extended another .75% into this morning. Essentially, the entire board except Facebook and GE were green ahead of the holiday weekend and those losses were easily offset by any one of their counterparts. Citigroup is due to release earnings this morning. We also have NY Empire State Manufacturing at 7:30 am CT. The hot topic of conversation has been the weaker Dollar which has undoubtedly supported some of this equity run since the start of the New Year. On the flip side, the strong Euro has held back the rally in the DAX. However, the Dollar has found some footing this morning against support and after comments that the ECB is unlikely to change their bond-buying pledge at their meeting next week. The result; the DAX is up 1% and the U.S equity markets are feeding on anything to trade higher at this point.

Technicals: The S&P traded to a high of 2803.50 on the session and is holding ground at the psychological 2800 mark. Price action has continued its fierce rally even after achieving our target of 2783.50 last week. Above here, our next level is major three-star resistance at 2807, we are not turning bearish, but we do believe some of the exuberance is overdone and this is a good level to look for the market to struggle against and consolidate. The Russell 2000 finally broke out above 1564 last week and this sets a bullseye at 1623.7. With those upside levels in mind, look for the market to take a breather this week once achieved.

Bias: Bullish

Resistance – 2807***

Support – 2783.50-2788.75**, 2769-2771.75*, 2759.25-2760***, 2750.50-2751**, 2736.50**, 2724.75-2728.75***

 

Crude Oil (February)

Last week’s close: Settled at 64.30

Fundamentals: Crude traded to a high of 64.89 over the holiday session which put it up 7.3% on the year. Strong global growth, the OPEC and non-OPEC production cap, stagnant U.S production and geopolitical tensions have all played a key role in this rally of over $10 since the start of November. This has not gone unnoticed by speculators either who have now officially accumulated a record net-long position as of the CoT report for the week ending January 9th. Inventory reads are pushed back a day due to the holiday weekend which means API is due out Wednesday after the close and EIA Thursday afternoon. After trading to a high of 70.03 last week, March Brent Crude made sure there was no doubt that $70 was achieved with a high of 70.37 before reversing about $1.

Technicals: We do not want to call this a capitulation because such is truly defined by a move on volume and though volume was strong last week, it was not outlandish. Also, we did not see tremendous volume on this move during holiday hours. However, if you look over the last year, strong volume has led into major countermoves (not uncommon in general). Tomorrow is option expiration for the February contract and this should work to keep price action subdued. Furthermore, the February contract falls off the board next Monday and this could mark a key turning point for Crude. Last week we discussed the weekly trend line and on the continuous it now comes in at about 63.30, this will be key as March becomes the front month for the weekly close and trades slightly lower than February. We are again reintroducing a slight Bearish Bias as this move feels exaggerated.

Bias: Neutral/Bearish

Resistance – 64.89**, 66.87***, 68.43**

Pivot – 64.16-64.30

Support – 63.78-63.80**, 63.00-63.02***, 62.45**, 61.87**, 59.87-59.96***

 

Gold (February)

Last week’s close: Settled at 1334.9

Fundamentals: Supporting Gold has been a complete breakdown in the Dollar. Please read our Tradable Events this Week: SPECIAL REPORT, to get details on why we are seeing immense Dollar weakness. Price action in the metal extended to a high of 1345 during holiday trading hours, the highest since topping out in September last year. After selling off hard to start the week, the Dollar has gained some footing on comments from the ECB that they do not intend to change their pledge of bond-buying at their meeting next week. In their Monetary Policy Minutes released last Thursday, the discussion eluded to this being done soon and many, including us, have speculated next week. This short-term shift does not change the long-term fundamentals we have discussed for the currencies or Gold. Today we have NY Empire State Manufacturing at 7:30 am CT and tomorrow we look to Industrial Production and Fed Presidents Evans and Kaplan.

Technicals: We have had our next resistance to the upside in Gold at 1335.8. Last week we called for this level to be achieved before Friday, the high was 1340. Price action is hugging this level after pulling back about $10 from new swing highs. The long term Technicals are extremely bullish, however, in the near term the RSI has been above 70 for almost all of 2018 and the Commitment of Traders as of the week ending January 9th show the largest speculative net-long position since the bath at the end of November. It would be prudent to lock in some gains. First key support comes in at 1327.3-1330.5 and price action will remain extremely constructive as long as this level holds.

Bias: Bullish

Resistance – 1335.8**, 1358-1365***

Support – 1327.3-1330.5**, 1321.6**, 1307.1-1308.9**, 1302-1303.4***

 

Natural Gas

Last week’s close: Settled at 3.20

Fundamentals: Natural Gas is at it again and we warned traders last week to look for this pattern. Strong price action ahead of the weekend and at the very start the week begins to dissipate. The problem here is we never opened up higher (gapped lower by 10 cents) and the Midwest is blanketed with snow and ice while temperatures on the east coast remain at or below freezing and Natural Gas has been unable to gain traction. This will be an interesting week and fundamentally we don’t see an edge on either side of the trade.

Technicals: Price action traded to a high of 3.224 on Friday before settling at 3.20 and gapping lower by about 10 cents on Sunday night. Key resistance at the 3.18-3.21 level has held wonderfully while the 200-day moving average at 3.26 is unscathed. Price action nudged but failed against the trend line from the September highs and ultimately has opened the door for the bear camp this week. We have moved major three-star support slightly lower to 2.971-2.989 and think this level at minimum should be tested. There is a rising trend line from the lows and for now aligns with support at 2.923. The gap, the 100-day moving average and recent volume at the 3.115 level will bring resistance

Bias: Bearish/Neutral

Resistance – 3.115**, 3.18-3.21**, 3.262***

Support – 2.971-2.989***, 2.923**, 2.893**, 2.815**, 2.734-2.7664**, 2.562***, 2.486-2.522****

 

10-year (March)

Last week’s close: Settled at 122’30

Fundamentals: After a better than expected Core CPI read on Friday buyers of treasuries were few and far. As the morning turned, the buyers came back to the party to push price action back towards the 123 mark. After last week’s midweek steepening, the yield curve is back in flattening mode and we have discussed how we like this trade a lot. Helping to support prices this morning are comments from the ECB that they will not change their bond-buying pledge at their meeting next week. NY Fed Manufacturing data is due at 7:30 am CT and tomorrow we have Fed speak.

Technicals: Price action managed to settle the week above the major three-star level at 122’25-122’29. A failure to do so would have opened the door to strong waves of selling. The session high comes in at 123’05 and the tape is vulnerable to a recovery to 123’10-123’135. We feel last week’s prices action got overdone and there is attractive value buying down here, for this reason and our long-term belief that rates won’t head higher for longer, we have reintroduced a slight Bullish Bias.

Bias: Bullish/Neutral

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

Support – 122’25-122’29****, 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)

Last Weeks Close: March corn futures finished Fridays trade just 1 ½ cents lower, trading in a range of 4 ½ cents on the day. Funds were estimated sellers of 13,000 contracts (larger volume due to USDA report). For the week March corn futures finished the week down 4 cents, trading in a range of 6 cents. Fridays Commitment of Trader’s report showed funds have a net short position of 222,516 futures and options. Keep in mind that the CoT data is compiled, and funds have likely exceeded their previous record short of 230,556 futures and options.

Fundamentals: Last week’s USDA report had a bearish tilt to it but managed to stabilize relatively well. Quarterly stocks came in at 12.516 billion bushels and ending stocks at 2.437 billion bushels, both of which were above the average estimate. Yield and total production was also increased. The market has found stable ground in the Monday night/Tuesday morning trade as weekend rains were disappointing in parts of Brazil and Argentina.

Technicals: March corn futures made new lows following the release of Fridays USDA report but managed to close above technical support which we have outlined as 345-346 ½ for some time now. Some of that momentum has carried over into the early trade here Tuesday morning. Though we have been range bound for the better part of the last 5 months, the bears have the edge as lower highs and lower lows have been the trend. If we see a break and close below 345, we would expect to see a continuation towards 334-335 ¼. The only silver lining for the bulls is that the funds could spark a rally from short covering. If you’ve been banking on this for a while you’ve been disappointed. The funds previous record short position was reduced by 70k contracts and the market only rallied roughly 4 cents off of contract lows. If funds start reducing, it doesn’t mean the flip. The trend is your friend, and right now that is sideways. We continue to feel that there is opportunity 2-5 cents on either side of 350 until we get a breakout or breakdown; not the most exciting trade but you have to take advantage of the market you have not the one you want. First technical resistance comes in at 353, this represents the 50-day moving average. A very simple indicator but one we have not closed above since July.

Bias: Neutral

Resistance: 353-355***, 359 ¼-359 ½***, 367-369 ¼****

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

 

SOYBEANS (March)

Last Weeks Close: March soybean futures finished Fridays session up 13 ½ cents, trading in a range of 18 ¼ cents; funds were estimated buyers of 11,000 contracts on the session. For the week, March soybean futures finished the week down 7 ¼ cents, trading in a range of 27 cents. Fridays Commitment of Traders report showed that funds have a net short position of 92,835 futures and options, this is their 5th largest short position on record and the most since June when we bottomed. Keep in mind that the CoT data is compiled through Tuesday.

Fundamentals: Last week’s USDA report was moderately friendly with quarterly stocks coming in at 3.157 billion bushels, this vs the average analyst estimate of 3.181 billion bushels. Ending stocks came in at 470 million bushels, this vs the average analyst estimates of 472 million bushels. Production and yields were also lowered slightly. Some of the strength in the overnight and early morning trade is coming from follow through USDA buying along with disappointing weather in South America over the long weekend. Drier conditions persist in areas of Argentina and Brazil. If rain makes its way back into the forecast, expect that premium to come out of the market.

Technicals: The chart has been ugly, there’s no way to sugar coat that, but we have continued to suggest there is value at these levels. We know that funds have a rather large net short position, it often seems funds don’t hold that large of a short position in beans as opposed to corn and wheat. We recommended using cheap call options last week and to start looking at futures from 950-952 ¼. Fridays report could be the spark that gets the market going in the right direction. If we see a close back above 971 ¼, we expect to see additional momentum press prices towards our next resistance pocket from 986-986 ½. This very narrow pocket contains the 50 and 100 day moving average, along with the 50% Fibonacci retracement (middle of the range) from the June lows to the July highs. If the market fails to hold Fridays rally in the first half of the week, we expect to see 937. So often market participants only plan for an exit if the market goes their way, you must also prepare an exit for if they don’t.

Bias: Bullish

Resistance: 971 ¾**, 979**, 986-988 ¼***, 999-1004**

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

 

WHEAT (March)

Last Weeks Close: March wheat futures closed 13 ¼ cents lower on Friday, trading in a range of 17 ¼ cents. Funds were estimated to have been sellers of 10,500 contracts on the day. Expanded ranges and increased volumes were on the back of the USDA report. For the week, wheat finished down 10 ½ cents, trading in a range of 17 ¼ cents. Fridays Commitment of Traders report showed funds short 129,000 contracts, this was an increase of 1,000 contracts; keep in mind that this data is compiled through Tuesday and is likely much larger now.

Fundamentals: Wheat futures took a hit on Friday and are continuing their slide in the early morning trade as Fridays USDA report confirms the continued bearish bias from traders. Quarterly stocks came in at 1.874 billion bushels, above the average analyst estimate of 1.849 billion bushels. Ending stocks came in at .989 billion bushels, above the average analyst estimate of .959 billion bushels. Winter wheat seedlings came in at 32.608 million acres, vs estimates of 31.107 million acres. Ample global supplies and dismal demand continues to be the story that is keeping a lid on any significant rally.

Technicals: Wheat futures failed to get above our first resistance pocket this week from 434-437 ½. The bearish report opened the door to our three star support that comes in from 416 ½-420 ¾. A close below here opens the door to contract lows at 410 ½ and a possible test to the $3 handle. If the bulls are able to hold support, perhaps we consolidate; but this is a market we have been very adamant about selling on rallies. We continue to believe that is the case until we get a new fundamental catalyst to change the technical backdrop.

Bias:Bearish

Resistance: 425 ¼**, 435-437 ½**, 443-448 ¼ ***

Support: 416 ½-420 ¾***, 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.

CORN (March)

Yesterdays Close: March corn futures closed up 1 ¼ cent, trading in a range of 2 ¾ cents on the session. Funds were estimated to have been buyers of 4,500 contracts.

Fundamentals: Trade estimates are starting to circulate which is ramping up the anticipation of Fridays USDA report, arguably the biggest report of the year. The headline number will be yields, but the valuable nuggets will be in the ending stocks data. Corn yield estimates are ranging from 173.7-176.4 with the average estimate at 175.2. Trade estimates for US quarterly stocks are ranging from 12.23-12.68 billion bushels with the average estimate at 12.41 billion bushels. US ending stocks estimates are ranging from 2.26-2.52 billion bushels with the average estimate at 2.44 billion bushels. We will get updates from CONAB tomorrow on South American production.

Technicals: The market continues to hug the 350 level which continues to be a magnet for front month futures. Although it has been a trader’s paradise trading the tight range over the past several months, many market participants are looking for a new direction (other than sideways). If you are in that camp, volatility is cheap, meaning options should be on your shopping list. If we get a friendly report and a technical close above resistance, we could see continued short covering from the funds. The 50-day moving average is the first line in the sand at 353 ½, above that the market has room to run towards 359 ¼-359 ½. On the support side, a close below 345-346 ½ opens the door to 334-335 ¼.

Bias: Neutral

Resistance: 353 ½ -355 ¼***,359 ¼-359 ½***, 367-369 ¼****

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

 

SOYBEANS (March)

Yesterdays Close: March soybean futures finished down 3 ¾ cents, trading in a range of 7 ½ cents on the day. Funds were estimated to have been sellers of 3,000 contracts.

Fundamentals: Market participants continue to gear up for Fridays USDA report which is arguably one of if not the biggest report of the year. Yield numbers will be the headline number, but ending and quarterly stocks will be the more significant numbers. Quarterly stocks estimates range from 2.96-3.31 billion bushels with the average coming in at 3.19 billion bushels. US Ending stocks estimated range is from .425-.595 billion bushels with the average of .445 billion bushels. Weather in South America will continue to be monitored. Rains are coming in and going out of forecasts on a continued basis, this has led to a bit of a choppy trade here to start the week.

Technicals: The market has been chopping around between 960 and 970 give or take for the last week and a half, likely shaking out a lot of week shorts and longs as we head into Fridays USDA report. 971 ¾ continues to be the first line in the sand the bulls want to close above. If they can achieve this, we will likely see funds start to cover their short position and press prices back towards 986-988 ¼. This pocket contains a handful of indicators including the 50 and 100 day moving average, along with the 50% retracement or the middle of the range from the June lows to the July highs. On the support side, there isn’t a while lot until 950-952 ¼, this would be the most ideal spot to look long futures. If you wanted long exposure ahead of the report without worrying about swings in futures, consider looking in the options market.

Bias: Neutral

Resistance: 971 ¾**, 977-979 ¼**, 986-988 ¼***, 999-1004**

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

 

WHEAT (March)

Yesterdays Close: March wheat futures finished up 4 ¾ cents yesterday, trading in a range of 8 ½ cents. Funds were estimated buyers of 4,000 contracts.

Fundamentals: The market has been working higher on some colder temperatures and drier weather are coming back into the forecast over the weekend. On top of that, we also have an important USDA report on Friday that is likely prompting some short covering. US quarterly stocks estimates range from 1.80 billion bushels to 1.91 billion bushels with the average at 1.85 billion bushels. US ending stocks are estimated to come in from .855 billion bushels to .987 billion bushels with the average estimate at .96 billion bushels.

Technicals: March wheat futures are testing the 50-day moving average again in the early morning trade. The fact that the market has not rejected prices again from this level could lead to some short covering. If the bulls can achieve a conviction close above, we could see funds cover shorts and press prices towards 443-448 ¼. Baring any significant change in fundamentals, we think this would set up for an excellent opportunity to sell. Bears wan to defend 435-437 ½ on a closing basis to prevent short covering.

Bias: Bearish

Resistance: 435-437 ½ ***, 443-448 ¼ ***, 459-461 ¼**

Support: 416 ½-420 ¾**, 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.

E-mini S&P (March)

Yesterday’s close: Settled at 2752.25

Fundamentals: Equity markets are directly under pressure due to rising treasury yields. The S&P hit our major three-star resistance on the high yesterday while the NQ hit our target on its high, all major indices backed off into the close. If you were in contact with our trade desk late yesterday, we reminded you of our concern for the Russell 2000 and how the repeated failure to close out above 1564 presented a sell opportunity with stops above session highs. CPI data from China missed the mark last night which has helped pressures. However, the true story here is all about treasury yields as the 10-year prices are reaching the lowest level since 2011. China is still a part of this story as Bloomberg has reported that “officials reviewing China’s foreign-exchange holdings have recommended slowing or halting purchases of U.S Treasuries”. Though equity markets are only beginning to see true effects right now, the treasury selling kicked into high gear on Monday night after the BoJ announced that it will trim its bond purchases in issues longer than 10 years. We are in the camp that we don’t believe treasury yields will rise for longer (yields are the inverse of treasury prices), however, when pertaining to equity markets the key factor is the velocity in which yields rise; a quick rise will encourage pressure on equities. Import and Export Price Index is due at 7:30 am CT. Chicago Fed President Charles Evans, a Fed dissenter, speaks today at 8:00 and Wholesale Inventories are at 9:00. St. Louis Fed President James Bullard speaks at 12:30 pm CT.

Technicals: We have completely Neutralized our bias in the S&P after it tested major three-star resistance at 2759.25 yesterday and after the NQ hit our 6707 target. Furthermore, we favored a sell on the close yesterday in the Russell 2000 after it failed to hold 1564. Major support in the Russell comes in today at 1547 and a close below this trend line could get the ball rolling. With pressure on equity markets this morning we cannot see ourselves buying the S&P until major three-star support that we discussed on Monday is achieved, this level is now adjusted slightly to 2724.75-2728.75. A close below this level will signal further pressure down to the 2700 area, one in which we have now marked as a rare major four-star level. We are now watching 2740.50 on a closing basis and simply holding this will help neutralize weakness. Only a close back above 2747.75-2752.75 will turn this immediate term bullish.

Bias: Neutral

Resistance – 2747.75-2752.75**, 2759.25***

Support – 2740.50**, 2724.75-2728.75***, 2713**, 2698.25-2703****

 

Crude (March)

Yesterday’s close: Settled at 62.96

Fundamentals: Crude Oil broke out above the May 2015 highs and finished at the highest level since early-December 2014 ahead of inventory data today. As we discussed yesterday, the EIA is expecting the sixth major drawdown in a row and yesterday’s API read heightened those expectations by coming in at -11.19 mb. If confirmed by EIA, this would be the largest draw since September 2016 came in -14.513 mb. That read back then was following Labor Day weekend, and a draw of this size, at this time of year is very uncommon. API reported a build of 4.338 mb in Gasoline and a build of 4.685 in Distillates. This sets a bar for today’s EIA report and we want to remind traders, that a vast majority of traders willing to buy because of inventories have likely already bought. We will now need to see a draw in the ballpark of API to maintain prices at these levels. However, it will be important to look at the read as a whole; including the products which equates to a draw of 2.167. EIA expects a -3.89 mb Crude, +1.46 mb Distillates and +2.625 mb Gasoline which actually equates to an overall build. We will also be keeping a close eye on production coming back online.

Technicals: Price action is in a melt-up mode and we backed away from a potential sell opportunity and our slight Bearish Bias earlier in the week. The next resistance at 63.39 has been taken out with a high of 63.67. As we said yesterday, there is no technical reason to sell and furthermore, the market could easily stay bid through the expiration of the February contract. Price action will now need to settle back below 62.21-62.58 in order to neutralize this immense strength. Still, we see no value in buying at this level and a reversal will need to be sparked by over exaggerated expectations on today’s inventory report.

Bias: Neutral

Resistance – 63.39-62.67**, 66.87***, 68.43**

Support – 62.21-62.58**, 61.80*, 59.87-59.96***, 58.97-58.99***

 

Gold (February)

Yesterday’s close: Settled yesterday at 1313.7

Fundamentals: Gold continues to focus on the Dollar and we cannot emphasize enough how incredibly constructive this continues to be for the metal as we remain long term bearish the Dollar. The even better news here is that Gold investors, buyers, traders. . . everyone, has ignored the rise in global treasury yields. Traditionally, Gold sells off as yields rise which in normal times is a signal of strong economic growth but also a higher cost of storage; all of this is normally tied to a rising Dollar. Instead, we are seeing a tapering of bond purchases from central banks other than the Fed. Remember, the Fed did this years ago and the Dollar rallied on this getting priced in. Now, other currencies are rallying against the Dollar as they taper. Gold is priced in Dollars and this is favorable for Gold. Data from the U.S includes Import and Export Price Index as 7:30 am CT and Wholesale Inventories at 9:00. Chicago Fed President Evans speaks at 8:00 am CT and St. Louis Fed President Bullard speaks at 12:30.

Technicals: After settling just below first key support yesterday and nudging a new swing low last night of 1308.9, Gold has achieved the bull flag that we discussed yesterday. The beautiful thing about this is the short order in which it all happened! Price action traded to a new swing high of 1328.6 this morning and we are watching for a close out above its previous swing high of 1327.3 to confirm this extremely bullish move. The next resistance comes in at 1335.8 and this should be within reach before the end of the week at the latest. A failure to hold 1322.3-1323 on a closing basis will be disappointing while a close below first support at 1317 will begin to signal a failure. Only a close below major three-star support at 1302-1303.4 will signal a breakdown.

Bias: Bullish

Resistance – 1327.3*, 1335.8**, 1358-1365***

Pivot – 1322.3-1323

Support – 1317-1317.2**, 1314.6-1314.8**, 1302-1303.4***, 1292.9**, 1279.5*** 

Natural Gas (February)

Yesterday’s close: Settled at 2.923

Fundamentals: Expectations for tomorrow’s record storage draw continue to build. But the question we must ask is how much of this is priced in? While a key catalyst in the selling that came late last week was the potential shutdowns, many took profits as these storage expectations climbed to unheard of levels, a read that will be tough to see. Furthermore, more mild weather that has followed the “bomb” storm has also whipsawed price action. Might we just say, what an awful name for a storm.

Technicals: Prices settled at yesterday’s pivot and have nudged above first resistance. The key level to watch remains 3.00-3.01 and it’s a spot where if price action stays below here, the bears will continue to have the upper hand. If we see a close above here, then this could encourage a two to three-week bottom and higher price action.

Bias: Neutral

Resistance – 3.00-3.01***, 3.108-3.145**

Pivot – 2.9415-2.963

Support – 2.9215-2.923**, 2.859-2.887**, 2.734-2.7664**, 2.562***, 2.486-2.522****

10-year (March)

Yesterday’s close: Settled at 123’015

Fundamentals: Treasuries are under immense pressure today and this comes on the heels on Monday night’s news that the Bank of Japan will trim bond purchases in issues longer than 10 years. We have seen a spike in global yields sense. Furthermore, there has been mounting speculation for months that China will trim its purchases of U.S Treasuries and this was confirmed by a Bloomberg article that states, “officials reviewing China’s foreign-exchange holdings have recommended slowing or halting purchases of U.S Treasuries”. As these officials review their investments and compare them to other higher yielding assets, traders are jumping on board the wave lower. Bill Gross, an outspoken bond bear discussed a breakdown in long term technicals last week. We are in the camp that we do not believe yields will go higher for longer, or treasury prices will not go lower for longer. In fact, this could potentially be the capitulation we have been waiting for. Today’s Fed speakers, Chicago Fed President and rate hike dissenter Charles Evans speaks at 8:00 am CT and St. Louis Fed President Bullard speaks at 12:30.

Technicals: Price action has dropped below major three-star support at 122’25-122’29 and this will be critical to watch on a closing basis. The tape feels a bit exacerbated and we will need to continue to watch today’s session unfold before drawing further conclusions in the immediate term.

Bias: Neutral

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

Support – 122’25-122’29****, 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 closed 3 ¾ cents lower to start the week, trading in a range of 4 ¾ cents on the day.

Fundamentals: Export inspections yesterday came in at 849,226 metric tons, this was just above the top end of expectations from 500,000-800,000 metric tons and up from 683,000 metric tons in the previous week. There was a sale of 102,100 metric tons sold to Mexico. There is nothing new to report in terms of weather or crop development in South America. Fridays USDA report will be the big-ticket item this week as we get final looks at US production. We will continue to compile estimates and hope to have those for you before Friday.

Technicals: If you had sold the 50-day moving average last week near 354, yesterday’s action gave you an opportunity to reduce or clear the slate. Support has held on the first test which comes we have been defining as 345-346 ½. We continue to feel there is an opportunity to be a trader a nickel on either side of 350 as that has been the trend for front month contracts; 350 was a magnet for December futures too. At the bottom end of the range we are changing our bias from neutral/bearish to neutral. If you want to be long this market, this isn’t a terrible spot; you just need to have your risked managed because a close below contract lows opens the door to another 10 cents lower.

Bias: Neutral

Resistance: 354 ¼-355 ¼***, 360-361 ¾***, 375****

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

 

SOYBEANS (March)

Yesterdays Close: March soybean futures closed 2 ¾ cents lower yesterday, trading in a range of 11 cents on the session.

Fundamentals: Yesterdays export inspections came in at 1,183,089 metric tons, this was within the expected range from 1,000,000-1,300,000 metric tons and was identical to the previous weeks 1,139,436 metric tons. There were sales of 132,000 metric tons to unknown and another 120,000 metric tons to Egypt. South American weather and crop development will continue to be monitored, there is nothing new to report this morning. Fridays USDA report will be what traders and other market participants are really looking forward to, this will give us a final look at US production and hopefully more clarity on market direction.

Technicals: The market has not made it easy for short term futures traders as we have been in a whipsaw trade. Trading in wider ranges intraday, only to finish closer to unchanged over the previous three sessions. We feel the market is in a bit of a “no man’s land” here but like the prospects of higher prices. We aren’t’ the most enthused about futures here but think cheap call options are a viable way to play the market here. If the market were to breakdown closer to 950 ahead of the report, that is the spot to consider futures. On the resistance side, we don’t really have an interest in looking short until we see how resistance holds up from 986-989. This pocket represents the 50% retracement from the June lows to the July highs, as well as the 50 and 100 day moving average.

Bias: Neutral

Resistance: 971 ¾**, 985 ¼-986 ½***, 999-1004**

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

 

WHEAT (March)

Yesterdays Close: March wheat futures finished the first day of the week down 4 cents, trading in a range of 6 ½ cents on the session.

Fundamentals: Export inspections yesterday morning came in at 234,418 metric tons, this was towards the low end of the expected range from 200,000-400,000 metric tons and was also below the previous weeks 274,000 metric tons. Cold and dry weather helped support the market last week, but that premium is slowly working its way out of the market. This is so far fitting in with the 15-year seasonal trade we mentioned at the start of the year. If you had sold wheat on January 3rd and bought back on January 16th, you would have been profitable for 12 of the last 13 years with the average gain being roughly 17 cents.

Technicals: The market failed to get out above the 50-day moving average last week with conviction which kept the bear camp in control. The evaporation of weather premium has prices coming back near first technical support. 416 ½-420 ¾ is the first pocket we are looking at. If you had sold the seasonal/technical resistance, this is the area you want to look at reducing or flattening. A break and close below could open the door to extended pressure towards 410 ½, a retest of the December 12th contract lows.

Bias: Bearish

Resistance: 435-437 ½ ***, 443-448 ¼ ***, 459-461 ¼**

Support: 416 ½-420 ¾**, 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.

E-mini S&P (March)

Yesterday’s close: US Equity markets are edging higher after a more or less quiet overnight session. The NQ, as we have discussed, is leading the way and nearing our target of 6707. Nikkei futures are .5% lower after the BoJ announced last night it will trim bond purchases in durations over 10 years. Friday will be crucial for the S&P as it marks an official start of earnings season with JP Morgan and Wells Fargo set to release. This morning we have JOLTs Job Openings data while the Dollar Index works off the lowest level since September in a consolidation phase. Fed speak yesterday didn’t necessarily give the Dollar reason to jump and we attribute this move to technicals. Fed dissenter, Minnesota Fed President Neel Kashkari, speaks today at 9:00 am CT, the same time JOLTs will be released. Commodity prices put in a strong 2017 but an even stronger 4th quarter. Chinese CPI and PPI data tonight will be a key read; Energies and Basic Materials have been a strong component for the S&P.

Technicals: Yesterday’s early drop proved to be short lived and ultimately didn’t give us the buying opportunity we wanted at 2728.75-2730. Resistance at the 2747.75 level has been a bit sticky, though prices traded a new all-time high on today’s session, the fifth in a row. The NQ seems to be the leader and is nearing our target of 6707, we advise against pressing longs upon this achievement. Our main reason for not encouraging the pressing of longs and instead looking for specific trade setups is that the Russell 2000 still has failed to close out above 1564. In our opinion, the continued failure to do this leaves the overall market vulnerable.

Bias: Bullish/Neutral

Resistance – 2747.75**, 2759.25***

Support – 2740.50**, 2728.75***, 2718.25*, 2708.50-2711**, 2698.25-2700***

 

Crude Oil (March)

Yesterday’s close: Settled at 61.73

Fundamentals: Crude spiked early in the overnight session to mark the highest since May 2015. However, it failed that May high and our key resistance by 2 cents. Taking that level out would put Crude at the highest since the collapse in December 2014. Shorts are anxious ahead of inventory data this week, and for good reason, the EIA is expected to report its eighth straight drawdown in Crude. With early expectations of -4.1 mb, this would be the sixth week in a row with a draw of at least 4 mb. API data is due out at 3:30 pm CT. Production was somewhat stagnant at the end of the year and has helped support prices. This comes at a time when OPEC compliance has been top notch and is now coupled with worries that Iran could see fresh sanctions keeping their Crude off the market. Yes, we do see value in selling up here over the long haul. We are nearing a period where inventories seasonally build, and this coupled with our belief that rigs will come back online and translate directly into production allows us to believe that there is in fact value in selling at this level over the long haul.

Technicals: Yesterday’s settlement stayed below the 61.79 level we pointed to, but price action has not. Last night’s spike to a high of 62.56 was a knee jerk move and price action has stayed below R2 at 62.21 for much of the time. Though we don’t have 62.58 as a three-star level, a failure to get out above there today could evolve it to one. Right now, there is no outright immediate term technical reason to sell other than finding value at the highest level since May 2015 with the idea that everyone who wants to buy has already bought and the anticipation that the fundamental story has been as bullish as it can get over the last two months and is ready to shift.

Bias: Neutral/Bearish

Resistance – 62.21**, 62.58**, 63.39**, 66.87***, 68.43**

Pivot – 61.73-61.79

Support – 61.37**, 61.11**, 60.85**, 59.87-59.96***, 58.97-58.99***

 

Gold (February)

Yesterday’s close: Settled at 1320.4

Fundamentals: The Dollar has strengthened from its lowest level since September putting slight pressure on Gold to start the week. Regardless, the metal has remained very constructive and its ok to go through a healthy consolidation phase. Today at 9:00 am CT, JOLT Job Openings data is due and Neel Kashkari, the Fed dissenter is due to speak. Today will be a good test for the metal after Japan announced last night that they will trim bond purchases in durations over 10 years. The Yen is higher on the session, but this is an act of tightening. We expect Gold to take this is stride and hold well as the week sets up for reads on inflation Thursday and Friday.

Technicals: Gold is hugging the key 1317-1317.2 level into this morning after a test down to S2 overnight. This slight breather is allowing the overbought RSI to refresh, while at the same time, continuing to remain constructive. Ultimately, this could develop into a bullish flag pattern. The next couple session will be key in the development of a more bullish pattern that would lead to the next leg higher.

Bias: Bullish

Resistance – 1323*, 1335.8**, 1358-1365***

Pivot – 1317-1317.2

Support – 1314.6-1314.8**, 1302-1303.4***, 1292.9**, 1279.5***

 

Natural Gas (February)

Yesterday’s close: Settled at 2.835

Fundamentals: Natural Gas is working to recover from yet another bloodbath. Though we are expected to see a little relief from recent cold temperatures, drawdown expectations over the next three weeks are holding steady and this has reinvigorated the bull camp. This week’s draw is expected to be a record and in the range of -330/-345.

Technicals: There was a significant amount of damage done to the chart late last week and price action trading back through 2.88-2.887 is attempting repair that. This is a level we discussed selling the first test yesterday, however, it never got there. Resistance today comes in at 2.9415-2.963 and the main level that traders must watch this week is the psychological $3 mark, a level that price action has struggled to hold.

Bias: Neutral/Bearish

Resistance – 2.9415-2.963**, 3.00-3.01***, 3.108-3.145**

Pivot – 2.9215

Support – 2.859-2.887**, 2.734-2.7664**, 2.562***, 2.486-2.522****

 

10-year (March)

Yesterday’s close: Settled at 123’155

Fundamentals: Overnight the 10-year traded to key support and the lowest level since December 2016 after the Bank of Japan announced they will trim bond purchases in durations over 10-years. The Yen is seeing strength into this morning and this is the sort of exit from Japan that we have been looking for if you have been following our FX Rundown. Still, we do not believe the move lower in the treasury market is sustainable but for now, in the immediate term, the path of least resistance might be lower. JOLT Job Openings is due at 9:00 am CT and Minnesota Fed President Neel Kashkari is also due to speak then. PPI and CPI are due Thursday and Friday and weak reads here will help this market recover firmly.

Technicals: What was attempting to be constructive price action early yesterday, dissipated throughout the session as equity markets recovered back to all-time highs. Price action is still holding and hugging the key 123’10-123’135 level after trading to a low of 123’095 overnight. Today’s close will be critical and we still see tremendous long-term support in front of the 122’29 level

Bias: Neutral/Bullish

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

Support – 123’10-123’135**, 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.

CORN (March)

Last Weeks Close: Corn futures finished the first week of the year up ¼ of a cent, trading in a range of 4 ½ cents. Fridays Commitment of Traders report showed funds reduced their net short position by 8,957 contracts, putting their net short at 189,536 futures.

Fundamentals: This week’s focus will be on Fridays USDA report which has the potential to give us new direction. We will continue to compile estimates and have those for you in the coming days. Weather and crop development in South America continues to be a big catalyst for the market. Corn used for ethanol production has been a nice silver lining for the market, but the strong trend took a step back last week. Corn use for ethanol dropped from 112.4 million bushels down to 106.5mb. Weekly exports were also dismal last week with a read of 101,200 metric tons, this compares to the expected range from 600,000-900,000 metric tons and the previous weeks read of 1,245,500 metric tons.

Technicals: On the technical side of things, the market has been in a narrow range for several months. We have been in the camp of playing a nickel on either side of 350 until we get a new fundamental catalyst to give us a breakout or breakdown. First technical resistance for Mondays trade will come in at 354 ½. Until we see consecutive closes above, bullish expectations should be tempered. If the market can achieve a conviction close above, we could see short covering from funds to 359 ¼-360 ½. This pocket represents a key Fibonacci retracement, the December 4th highs, and the 100-day moving average.

Bias: Neutral/Bearish

Resistance: 354 ¼-355 ¼***, 360-361 ¾***, 375****

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

 

SOYBEANS (March)

Last Weeks Close: March soybean futures finished the week up 7 ¼ cents, trading in a range of 18 ¼ cents. Fridays Commitment of Traders report showed funds extended their net short position to -87,834, an increase of 16,457 futures from the previous week.

Fundamentals: Soymeal and oil helped offer support to soybeans last week, but this week’s focus will be on the USDA report which will be released on Friday at 11 am cst. We will continue to compile estimates and have those for you in the coming days. Weather and crop development in South America will also continue to be a key catalyst; there is not much new news on that front to report this morning. Weekly export sales last week came in at 554,000 metric tons, this was a hair below the low end of expectations.

Technicals: The market has managed to stabilize well following a dramatic uninterrupted 68 cent meltdown in December. Significant resistance comes in from 985 ½-990. This pocket represents the 50 and 100 day moving average, as well as the 50% retracement from the June lows to July highs. If the market can achieve consecutive closes above this pocket, we expect to see short covering from the funds get us back above the $10 handle.

Bias: Neutral

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

Pivot: 971 ¾

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

 

WHEAT (March)

Last Weeks Close: March wheat futures finished last week up 7 cents, trading in a range of 9 ½ cents. Fridays Commitment of Traders report showed that funds reduced their net short by 16,537 which puts their net short at 135,523.

Fundamentals: Colder and dryer temperatures have offered support to the market, but seasonal weakness continues to reign supreme. If you had sold March wheat on January 3rd and bought in back on the 16th, you would have been profitable for 12 of the last 15 years with the average gain being roughly 17 cents. Fridays USDA report will be the highlight of the week, we would not be surprised to see some position squaring ahead of that.

Technicals: We have been referencing the 50-day moving average for months now as key resistance. The market is lingering right around it as we were not able to see a convincing trade above it yet. If we start to see consecutive closes above, we could see short covering towards 447 ¼. We are tempering the expectations and siding with the seasonal trend and looking at the sell side at these levels. First support comes in from 416 ½-420 ¾. If you were able to sell against resistance last week, this is the area you want to look at reducing.

Bias: Bearish

Resistance: 435-437 ½ ***, 443-448 ¼ ***, 459-461 ¼**

Support: 416 ½-420 ¾**, 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.