BrokersEDGE – Commodity Futures trading – News and research – 2-26-19

LEJ9: .525 at 129.40, trading in a range of 1.25
LEM9: .275 at 119.75, trading in a range of .80
GFH9: -.30 at 142.60, trading in a range of 1.225
GFJ9: .45 at 145.75, trading in a range of 1.05

Cattle Futures Commentary: Cash cattle last week came in from 126-128 but it should be noted that the volume of sales was horrendously low. Friday’s Cattle on Feed report came in as follows: On Feed 102%, Placements 98%, and Marketings 99%. Keep in mind that this data is a month old, giving it even less significance (if that’s even possible). Cold weather has been a concern for some areas of the Midwest, but we continue to keep expectations tempered. If you’re reading this, you probably know that we are in the camp that believes the markets are as efficient as ever and this data was likely priced into the market.

PM Boxed Beef / Choice / Select
Current Cutout Values: / 219.55 / 214.57
Change from prior day: / .16 / 2.22
Choice/Select spread: / 4.98
Live Cattle (April)
April live cattle started the week with a boost, posting new contract highs shortly after the open. The inability to find follow through momentum led to a round of profit taking into the afternoon session. Though intermediate term charts remain fairly friendly, we believe that this continues to be a trader’s market, offering opportunity to play both sides. First resistance tomorrow comes in from 129.85-130.125, pending on the open, this would be a spot we would consider selling against. On the support side of things, we will be looking at 128.00-128.60 as a potential buying opportunity. Whether that be buying back shorts or going net long.
Resistance: 129.85-130.125***, 131.35**, 134.55****
Support: 128.00-128.60***, 126.60-127.25**

Feeder Cattle futures (March)
Please note that we will be moving out of March futures by the end of the week, as volume shifts towards April. Today’s price action is par for the course as we continue to trade in a range, we have defined that as 142-145 +/-. With prices finishing closer towards the low end of the range, the opportunity looks to be favorable to the buy side in tomorrow’s session. Significant support that the bulls must defend on a closing basis comes in from 140.35-141.20. On the resistance side of things, the first pocket we see comes in from 144.175-144.65.
Resistance: 144.175-144.65***, 145.50-146.00***, 147.20-147.575****
Support: 141.95-142.00***, 140.35-141.20****

Lean Hogs (April)
Lean hogs finished last week with a glimmer of hope that quickly vanished with a gap and run lower on the open today. April futures finished the session down 1.575, 1.125 off of the lows. Lean hogs resemble the wheat market, relentless selling in what looks like a technical graveyard on the chart. We think there will be an opportunity to see this market higher, but that’s not to say it can’t get worse before it gets better. We often say that the bottom is a process, not a point. We want to see the market stabilize for consecutive sessions and close back above previous technical support levels (now resistance). First technical resistance for tomorrow’s session comes in from 55.225-55.575. On the support side, there’s not a lot until contract lows at 52.25.
Resistance: 55.225-55.575***, 57.80-58.125****
Support: 52.25-52.75****

E-mini S&P (March)
Yesterday’s close: Settled at 2797, up 5.75
Fundamentals: Yesterday’s early strength in U.S benchmarks dissipated at the scene of the previous three failures in the S&P. Although they pared all gains, the S&P and NQ did not turn negative on the week until last night. The news cycle picks up today with Fed Chair Powell’s semi-annual Congressional testimony on the state of the economy which begins at 9:00 am CT. His written testimony is released at 8:45 am CT and markets will react. We expect to get insight on the path of raising rates, the direction of growth and the flexibility tied to Quantitative Tightening. Remember, the ECB has already pointed to its power to reintroduce the TLTRO, Fed Chair Powell may field questions tied to measures the Fed could use if conditions quickly deteriorate. We have referenced the CME’s Fed Watch Tool many times in recent weeks and how we do believe that the probability of a March hike was drastically underpriced at 0% as we expect it to near 10-15% before the March 20th decision. This morning it has risen to 5.2% from 2.6% yesterday and 0% one week ago; today’s finish should tell a story and a more hawkish Powell would weight on this over-extended tape.
The economic calendar boasts a deluge of data that begins with Building Permits and Housing Starts at 7:30 am CT. Case Shiller Housing is due at 8:00 am CT and February Consumer Confidence is expected to bounce back at 9:00 am CT. On the earnings front, we look to Home Depot as the most important today. They missed and the stock is down nearly 3% premarket. Macy’s, the beaten down retailer topped estimates and is up 3% premarket.
Technicals: Given the level that was tested, yesterday’s failure to hold a significant portion of the early gains is an outright disappointment for the bulls. Furthermore, the S&P did not close out above the 2794.75-2798 pivot level in order to continue to confirm breakout price action. First key support today is 2791.25, despite a test below here overnight, this level is significant because of Friday’s settlement; continued trading below here would open the door for waves of selling. Similarly, major three-star support in the NQ at 707.25-7088.25 ultimately held last night and this aligns Friday’s settlement and the continuous 200-day moving average; sustained price action below here will encourage additional waves of selling. For either, a move back above yesterday’s settlement and a hold above there will reinvigorate the bulls and a wave back to yesterday’s swing highs. We hold a belief here that this market is overextended and showing signs of vulnerability.
Bias: Neutral/Bearish
Resistance: 2807.75**, 2814-2819***, 2424.25**, 2431.50-2431.75***
Pivot: 2794.75-2798
Support: 2791.25**, 2782.50**, 2771.50-2774.25**, 2763.50***, 2747.25-2750***

NQ (March)
Resistance: 7139-7169***, 7218.50-7231***
Pivot: 7111-7113.75
Support: 7075.25-7088.25***, 7043.25**, 7004.75-7005***, 6966-6972***

Corn (May)
Yesterday’s Close: May corn futures finished yesterday’s session down 4 ½ cents, trading in a range of 8 ½ cents.
Fundamentals: The opium surrounding a “deal” and commitment from China renewed optimism on Sunday night’s open. We always take the overnight/early morning trade with a grain of salt because we are a firm believer that volume confirms price. When we got more participation on the floor open, it did not confirm the move higher, which led to a buyers strike. For clients looking to be buyers in the market, we have been suggesting sitting on the hands until the March futures go off the board tomorrow. Export inspections yesterday morning came in at 751,000 metric tons, below the low end of estimates.
Technicals: Futures rolled over yesterday which has carried over into weakness in the early morning trade. Prices have tested 4-star support this morning, we defined that pocket in yesterday’s report as 377-379 ¾. A break and close below would likely put the bears in the driver’s seat as it would mark lower lows which came after lower highs. As mentioned above, we are waiting for March futures to go off the board before getting aggressive on new positions. We will likely be looking to the long side so long as technical support holds.
Bias: Neutral
Resistance: 383 ¼**, 389 ¼-391***, 395-397 ¾**
Support: 377-379 ¾****, 374 ½-375**, 363 ¼****

Soybeans (May)
Yesterday’s Close: May soybeans finished yesterday’s session up ¾ of a cent, trading in a range of 10 ¾ cents.
Fundamentals: We came into the early morning trade skeptical of the “good news” regarding commitments from China, suggesting that: “it looks like a commitment to continue kicking the can (real issues) down the road.”. The price action should not be all that surprising considering this has been a revolving door of, buy the rumor sell the news. Yesterday morning’s export inspections came in at 1,307,000 metric tons, above the top end of expectations.
Technicals: The market has provided ample opportunity for both the bulls and the bears over the past two months, those paralyzed by hope are left frustrated and beaten down. The market is working lower this morning, inching towards the 100-day moving average at 916 ¾, the top end of our support pocket which starts at 913 ½. A break and close below here leaves the door open for a run towards 904 ¾-907. We are waiting for March futures to go off the board before getting too aggressive with new positions, we will likely be looking to the long side so long as technical support holds.
Bias: Neutral
Resistance: 923 ¾-924**, 934 ½-939 ¾****, 953-955***
Support: 913 ½-916 ¾**, 904 ¾-907*** 893 ½****

Wheat (May)
Yesterday’s Close: May wheat futures finished yesterday’s session down 17 ½ cents, trading in a range of 22 ¾ cents.
Fundamentals: Wheat got taken to the woodshed yesterday, which wasn’t all that surprising considering the overnight price action. In yesterday’s report we said: “the inability to hold a rally on positive news in the wheat market is not a good sign”. This prompted us to turn our bias to bearish for the time being. We will likely be looking for a near term bottom when the March futures go off the board, there may be opportunity for a relief rally at that point. Export inspections yesterday morning came in at 694,000 metric tons, well above the top end of expectations and nearly double that of the previous week.
Techncials: Our technical take has not changed much from yesterday morning. Looking for technical support on new contract lows is a bit of a fool’s errand in our minds, especially for agricultural commodities where the spreads between months are generally wider due to varying fundamentals. Sure, we are oversold on the RSI, but that alone is not a reliable indicator. We are looking for at playing for a relief rally once the March futures go off the board later this week.
Bias: Neutral/Bearish
Resistance: 479 ¾***, 495-497 ½***, 512**
Support: 466 ½*

Crude Oil (March)
Yesterday’s close: Settled at 55.48, down 1.78
Fundamentals: Crude took a punch to the gut when President Trump criticized OPEC in a tweet yesterday morning for allowing prices to elevate. Our narrative on this sector has not changed; Crude Oil itself is entering into a seasonally bullish time of year and reduced exports to the U.S coupled with pipeline constraints from Canada are all reasons to favor the long side. However, there are other factors. Ironically, record estimated U.S production last week is not the biggest deterrent just as long as OPEC does not back away from their recent rhetoric. The other factors being global weakness in the data, an overextended risk-sentiment and the potential for President Trump to take shots at OPEC. Inventory comes back into the picture today as estimates trickle out through the session and the private API survey is due after the bell. As for that aforementioned risk-sentiment, Fed Chair Powell’s Congressional testimony at 9:00 am CT will certainly have an effect.
Technicals: Price action did not close below major three-star support at 55.44-55.75. Still, we are Neutral in Bias after favoring the breakout over last two weeks. We believe yesterday’s weakness could quickly extend. Traders do want to understand that this market is in an intermediate term uptrend which means levels of support below are significant and we only have those denoted as a major three-star. The next comes in at 54.71-54.76.
Bias: Neutral
Resistance: 56.50-56.76**, 57.05-57.35***, 57.69**, 58.16-58.35**, 59.63***
Support: 55.44-55.75***, 54.71-54.76***, 53.51-53.98***

Gold (April)
Yesterday’s close: Settled at 1329.5, down 3.3
Fundamentals: Gold is slightly lower on the week ahead of Fed Chair Powell’s Congressional testimony at 9:00 am CT. He speaks before the Senate Banking Committee and the written version of his testimony will be released at 8:45 am CT. On the bright side, Treasuries are sharply higher this morning although Gold has quietly ignored this. Housing data was disappointing, and this could end up being a bright spot depending on Powell’s rhetoric. We expect comments on the path of rate hikes, Quantitative Tightening and growth domestically and globally. As we mentioned in the S&P section, we will continue to closely monitor the CME’s FedWatch Tool which now shows the probability of a rate hike in March at 5.2% from what we called underpriced at 0% in recent weeks. Also, February Consumer Confidence data is expected to bounce back from January levels and will be key at 9:00 am CT.
Technicals: We remain unequivocally bullish Gold and believe pullbacks are buying opportunities. For now, major three-star support at 1321.7-1323.4 continues to hold, this has been a level of our and given last week’s hold here, this keeps the immediacy of the uptrend intact. Still, the more significant levels are below and a trend line from the November low comes in at 1315 while the February pullback low is our rare major four-star support at 1304.7-1306.5. Until we see a close below the trend line or an intraday break of 1304.7-1306.5, we believe a strong uptrend to be intact. The bulls must secure a close back above 1331.1-1332.5 in order to bring urgency back to the bull camp.

Bias: Bullish/Neutral
Resistance: 1331.1-1332.5**, 1337-1340.1*, 1350**, 1369.4***
Pivot: 1327.2
Support: 1321.7-1323.4***, 1315***, 1304.7-1306.5****

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