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Cattle Commentary: Cattle futures drifted lower through the whole session, a continuation of much of last week’s trade. Outside markets saw a similar trade which didn’t help the cause. Early calls for cash this week are steady with last week. Keep in mind that we do have a Cattle on Feed report out on Friday afternoon. Early estimates are for On Feed at 108.1, Placements 103.4, and Marketing’s at 101; this would be the largest On Feed number dating back to 2008. Friday’s Commitment of Traders report showed non-commercial traders sold 8,399 contracts, putting their net long at 104,924 contracts. April live cattle finished the session down .80 at 120.45, trading in a range of 1.675. We will begin shifting attention towards June as it will be the leader in terms of volume; June fats finished down 1.425 at 110.325, trading in a range of 2.20. April feeders finished the day down 1.95 at 138.25, trading in a range of 2.85. Boxed beef was mixed on the day.
PM Boxed Beef / Choice / Select
Current Cutout Values: / 224.87/ 217.29
Change from prior day: / (.72)/ .43
Choice/Select spread: / 7.58
Live Cattle (April)
April live cattle tested our last line of defense and have so far held. We have been discussing this level for the past several weeks, and had outlined it coming in from 120.15-120.25. This pocket represents the 200-day moving average as well as the 50% retracement from the August lows to the November highs. A break and close below opens the door to long liquidation from funds, the next line in the sand for support doesn’t come in until 117.90. The RSI (relative strength index) is currently at 38.14 which is the low end of the recent range but far from oversold. On the resistance side of things, there is not a lot until in the way until 122.55.
Resistance: 123.55-123.80***, 125.45-125.675****
Support: 120.15-120.25****, 117.90-118.05***
Feeder Cattle (April)
April feeders took some heat today and achieved our target which we had outlined as 137.75 in last week’s report. Now that we are down at this level and the RSI (relative strength index) is in oversold territory, we feel this is an opportunity for shorts to reduce and longs to look at the buy side. On the resistance side of things, there is not a lot in the way until 139.60-140.25, a close above could encourage a bigger relief rally towards 141.75. This would likely be a relief rally in the near term, meaning the bears are still in control of the chart.
Resistance: 139.60-140.25**, 141.75***, 143.85-143.95**
Support: 137.75****, 134.45-134.75***, 131.25****
Lean Hog Commentary and Technicals (April)
Lean hog futures not only reached the August lows of 65.05, but they also breached them with some serious conviction as longs through in the towel and piled in on the sell side. April futures finished the day down 2.475 at 62.975, trading in a range of 2.275. We will start shifting the focus to June futures as that will start to take the lead in volume. June futures finished the day down 2.425 at 76.70, trading in a range of 2.10. Friday’s Commitment of Traders report showed that non-commercial and non-reportable traders are net short 1,939 contracts.
Resistance: 79.60-80.15****, 81.65-82.15***
Support: 76.525***, 74.45-74.65****, 73.30**
Session close: Settled at 1.24435, up 72.5 ticks
Fundamentals: The Euro staged a strong rebound today after a poor finish to last week. A string of soft regional and Eurozone CPI reads started the Euro off on weak footing Friday. Further pressure was added on strong U.S data that included Industrial Production, JOLTs Job Opening and Michigan Consumer Sentiment; the Euro finished the week at the lowest level since March 1st. A new week and a different tone, the Euro nudged Friday’s low before reversing sharply on U.S politics and what is expected to be a more hawkish ECB. As the Federal Reserve begins their two-day policy meeting tomorrow, the conversation today was about the ECB and exactly what we have been hammering home for months; their bond-buying program is going to inevitably end later this year and now even some of the more dovish members affirmed that the next step is hiking rates. The biggest concern for the ECB is tightening in the face of a much stronger Euro; doing so could hurt the path of growth. We believe the argument to tighten as early as late this year is just getting started and is one of two reasons we are and have been bullish the Euro. The second reason is that the Federal Reserve will not be able to hike at a pace faster than what is already priced in; three times. To dive deeper into Wednesday’s Fed decision, please read our Tradable Events this Week from Sunday. German and Eurozone Sentiment data is due at 5:00 am CT tomorrow.
Technicals: Price action staged a recovery against minor support at the 1.2349 level. This hard low will be key to watch as the week unfolds. Trend line support is now rising to align with this level and comes in at 1.2340-1.2349. First key support now comes in at 1.2394. The rip higher is now hugging the 1.2449 level and a continued close above here will leave the bulls in the driver’s seat. Major three-star resistance comes in at 1.2504 and a close out above here will be very bullish.
Resistance: 1.2504***, 1.2547**, 1.2659***, 1.2725****
Support: 1.2394**, 1.2340-1.2349**, 1.2254***
Session close: Settled at .94975, up 11 ticks
Fundamentals: The Yen’s reaction to today’s stock market pummeling was fairly muted and it failed to hold gains. While safe-haven assets did see a bid, Gold and the Treasuries both gained, they as well fell back towards the end of the session as the equity market showed signs of steadying. The Yen was also likely held back due to the root of today’s equity selloff. While there is not one catalyst, tech stocks in Japan were some of the first to rollover on news that Apple is designing its own display screen. Ironically, this came on the heels of a worse than expected Japan Trade Balance read Sunday night. Data from Japan Reuter Tankan Index and Machine Orders are due, but these are both minor data points. The focus is going to shift to Wednesday’s FOMC Meeting and whether or not equity markets can cling to the late session rebound.
Technicals: It was no surprise today that the Yen struggled to extend gains; it faces tremendous four-star resistance head-on. Furthermore, today’s lower peak was kept in check by budding trend line resistance. This is not to say that the Yen cannot breakout above here, in fact, we remain very upbeat on the Yen in the long term. Price action remains constructive and the settlement above .9459 leaves the bulls in the driver’s seat.
Support: .9382-.9391**, .9310***
Session close: Settled at .7716, down 85 ticks
Fundamentals: The Aussie has notched its worst two-session run since the Brexit vote in 2016. Talk from the White House that they are going to implement up to $60 billion in tariffs on Chinese goods has hit the Aussie hard. Remember, China is Australia’s number one trade partner and if the Chinese economy suffers, it correlates directly to the Australian currency. House Price Index and RBA Minutes are due tonight at 7:30 pm CT. From here the focus through tomorrow’s session should become more technical and this doesn’t bode well.
Technicals: All bets were off once the Aussie traded through major three-star support as .7843-.7844. As we discussed last week, this was a level that was close to the market but critical in order to maintain its recent uptrend. Price action is now at the lowest level since December and the bears have the clear upper hand. The tape must now regain and close back above .7757-.7794 in order to neutralize this weakness
Resistance: .7757-.7794***,.7843-.7844**, .7924**, .7972-.7986***, .8035**
Support: .7691*, .7651-.7652**, .7501***
Session close: Settled at .7673, up 23 ticks
Fundamentals: The Canadian recovered from the lowest level since June as the U.S Dollar lost ground from Friday. As political drama heats up in the U.S and equity markets slid on a combination of news, the Canadian was able to shake off what is usually a catalyst for lower prices. There is now some positivity brewing around NAFTA and the price of Crude Oil has remained stable to higher. Tomorrow we look to Canadian Wholesale Inventories at 7:30 am CT.
Technicals: After taking out the .77075 level, the Canadian was able to fight off an air-pocket that could have easily taken price action down to the next major level of support at .7550. The tape has notched a constructive session but must regain a close above these previous lows in order to remove the bears from the driver’s seat. Seeing the Canadian fight back on a day like today does open the door for a long-term value play, with tight risk management.
Resistance: .77075***, .7818-.78265***, .7886-.7902***
E-mini S&P (June)
Yesterday’s close: Settled at 2722.75
Fundamentals: Yesterday’s bludgeoning came to a quick end just ahead of the close and against the second major three-star support on the day. The S&P lost more than 2% on its low of 2697.25, but pared losses to settle down only 1.2%. Tech stocks led the way lower and the NQ lost more than 3% on its low before clawing back to finish down 1.8% on the session. A solid finish yesterday coupled with a quiet and steady overnight has laid the groundwork for a “Turnaround-Tuesday” and a “Fed-Drift” barring any new political developments; cliché yes, but also high probability. PPI data out of the U.K. and Sentiment data out of Germany and the Eurozone all missed the mark this morning. Today’s economic calendar out of the U.S is bare as traders eye tomorrow’s FOMC Meeting. With tech taking such a bath and Facebook still under pressure, it will be important to keep an eye out for new leadership during this phase. If one emerges, we could see a strong finish to the week.
Technicals: Yesterday’s price action broke down through key support levels early in the session and once it got below 2727-2729.50, it fell into an air-pocket that could not find relief until trading into the next major three-star support at 2702. The session low was 2697.25 but it only spent a brief stint violating what is now confirmed as strong support. Additionally, traders leaned on this level because of the psychological round number as they also bought ahead of the 100-day moving average that comes in at 2691.50 today. We remain Bullish and though volatility is higher, the market remains constructive. Still, today’s session will be critical in reassuring yesterday’s low. As for the NQ, its low was 6821.25 and major three-star support came in at 6822.25. First key resistance is now the 2727-2729.50 level which has kept the tape in check overnight. Just above here, traders will look to the Sunday night low of 2733. Our first major three-star resistance does not come in until 2739.25; we must see a close above here in order to break the near-term downtrend.
Resistance: 2727-2729.50**, 2733**, 2739.25***, 2745**, 2752-2752.25***
Support: 2697.25-2702***, 2691.50**, 2651.75-2669***
Crude Oil (April)
Yesterday’s close: Settled at 62.13
Fundamentals: Crude Oil fell under pressure late morning yesterday taking a cue from equity markets after struggling to get out above resistance from Friday. Price action traded to a short-lived low of 61.45 before recovering to finish the session back above the $62 mark. A weaker Dollar yesterday also helped lift Oil late in the session. Tension between Saudi Arabia and Iran have helped drive price action out above Friday’s high ahead of inventory data later today. As a meeting between President Trump and the Saudi Crown Prince comes into focus, so does the Iran nuclear deal. Taking Iran production off the market would send prices higher quickly, at least in the very immediate term. Of course, Saudi is sticking to the production deal to keep prices elevated and balance supply with an eye on their IPO. Could we see the U.S and Saudi team up to remove Iran supply which opens the door for Saudi to increase theirs. Also adding fuel is reduced production from Venezuela remaining in the headlines. Traders do want to keep an eye on the Dollar as tomorrow’s FOMC Meeting comes into the picture, it has recovered much of yesterday’s losses on weak data out of Europe.
Technicals: The overnight price action is very bullish as it now sits out above key resistance at 62.48-62.60; this level does not align with a trend line from the high but instead the secondary high. We remain outright Bullish in Bias, but traders do want to take something off the table or lock something in today ahead of inventories. Without inventories in the picture, the path of least resistance is to 64.03-64.07. A failure to settle above the 62.48-62.60 level would likely cause additional selling from longs who are locking in gains ahead of inventories.
Resistance: 64.03-64.07***, 66.00**, 66.66-66.87***
Support: 62.01-62.13*, 61.45-61.67**, 61.10-61.14** 59.91-60.07***, 57.26-57.95****
Yesterday’s close: Settled at 1317.8
Fundamentals: Safe haven buyers showed up yesterday amidst the bloodbath in equity markets. Ironically, the buying also happened once major three-star support was achieved. The Dollar is strengthening this morning on the heels of poor PPI data from the U.K and Sentiment data from Germany and the Eurozone. There is no major economic data out of the U.S today as traders ready for tomorrow’s FOMC Meeting. We discussed our thoughts on this meeting Sunday in our Tradable Events this Week.
Technicals: Gold ran into a wall of resistance yesterday, our first key level at 1318.3-1321.8. At the time, equity markets also began to stage a recovery. Price action has retreated into the pivot at 1312-1313.2 and tomorrow’s FOMC Meeting comes into focus. Still, the constructive bounce against 1303.6-1308 major three-star support is encouraging in the long-run.
Resistance: 1318.3-1321.8**, 1329.8-1330.5**, 1341.2-1342.9**, 1350.2-1351.3**, 1367.8-1370***
Support: 1303.6-1308***, 1298.5****, 1291.5**
Natural Gas (April)
Yesterday’s close: Settled at 2.651
Fundamentals: Price action sold off sharply yesterday morning as the focus is shifting from inventory draws and to building season. This comes regardless of the massive snow-dump expected on the East Coast. Remember though, when this comes plants and factories reduce their load which does not draw supply as much. As of now, storage estimates have remained steady for the last few sessions.
Technicals: Yesterday’s low was 2.64 and support at the 2.656 level has kept price action in check. We remain Neutral more because of a gut feeling, outside of that the tape is fairly bearish and a close below first key support could lead to another 10 cents.
Resistance: 2.717-2.731***, 2.8233-2.837***, 2.983***
Support: 2.64-2.656**, 2.565**, 2.486-2.532****
Yesterday’s close: Settled at 120’125
Fundamentals: Price action opened today’s session last night 5 ticks away from settlement. It becomes ironic how important the technicals are. While the 10-year failed to settle out above the 120’14 level, another safe haven asset in Gold failed to get out above its first key resistance. Most importantly, the S&P and NQ both held crucial major three-star support levels. While the catalyst very fundamental yesterday, the reversal was about as technical as it could be. There is no data out of the U.S today ahead of tomorrow’s FOMC Meeting.
Technicals: We remain Neutral after price action failed to settle out above key resistance at 120’11-120’14 yesterday. The market has dribbled lower into this morning. The range is clearly defined, and we expect support at the 120’01-120’025 level to stand strong ahead of tomorrow’s FOMC Meeting.
Resistance: 120’11-120’14**, 120’24**, 121’02**, 122’02***
Support: 120’01-120’025**, 119’265**, 119’00-119’14****
Yesterday’s Close: May corn futures closed 7 cents lower yesterday, trading in a range of 7 ¼ cents on the day. Funds were estimated to have been sellers of 25,000 contracts.
Fundamentals: Export inspections yesterday morning came in at 1,409,281 metric tons, this was towards the top end of the expected range from 1,200,000-1,500,000 metric tons; last week’s number came in near 1,377,000 metric tons. USDA announced the sale of 206,000 metric tons of corn to Japan and another sale of 115,000 metric tons to unknown. Much of yesterday’s pressure came on the back of tremendous weakness in the soybean and wheat markets as the pressure fed on itself through the session due to better weather forecasts. The highly anticipated Prospective Plantings report is just over a week away and we could see additional position squaring ahead of that.
Tehcnical’s: The past four sessions have done a lot of technical damage as they have now erased the gains from the previous 12 sessions combined. The breakdown below technical support encouraged long liquidation; we would not be surprised to see a little more follow through in the near term. First technical support for today’s session comes in from 371 ¾-373, this pocket represents a key Fibonacci retracement level along with the 50-day moving average. A break and close below this support pocket could accelerate the selling from funds.
Resistance: 379**, 393 ¾-395 ¼***, 400 ¾-406****
Support: 371 ¾-373***, 367 ¾**
Yesterday’s Close: May soybeans finished the day down 24 ¾ cents, trading in a range of 23 ¾ cents for the day (gap lower). Funds were estimated sellers of 16,000 contracts.
Fundamentals: Export inspections yesterday morning came in at 490,536 metric tons, well below the expected range of 700,000-1,050,000 metric tons; last week’s inspections number came in at 930,000 metric tons. Weather in Argentina is the main headline driver for the weakness which seemingly fed on itself through the session. The near-term weather outlook offers the chance for additional precipitation. We will continue to keep an eye on this and the true affects as harvest starts to pick up. The all-important Prospective Plantings report is just over a week away, we will hope to have estimates compiled for you by early next week.
Technicals: Soybeans have been trading technically sound for the past two weeks as funds have started to unwind some of their net long position. First support this morning comes in from 1018-1021 ¾, below that likely encourages additional long liquidation towards 1006 ½-1009 ¾. On the resistance side, a relief rally could lift prices back towards 1038 ¼-1041 ¼, but it will likely be just that; a relief rally which should be sold into on the first test. Despite the pressure over the last three weeks, the RSI (relative strength index) is at 44.19 which is near neutral.
Resistance: 1038 ¼-1041 ¼***, 1049-1055****, 1070 ¼**
Support: 1018-1021 ¾**, 1006 ½-1009 ¾****, 994 ¼-998 ½****
Yesterday’s Close: May wheat futures finished yesterday’s session down 16 cents, trading in a range of 15 ¾ cents on the day (gap lower). Funds were estimated sellers of 13,000 contracts on the day.
Fundamentals: Export inspections yesterday morning came in at 443,269 metric tons, this was right at the top end of the expected range from 275,000-450,000 metric tons; last week’s inspections number came in at 429,000 metric tons. Weather was the major headline to start this week’s trade, good rains in some key areas with potentially more on the way led to the rapid decline in prices. We continue to keep an eye on the KC contract is it will likely continue to be the leader.
Technicals: A technical graveyard would be the best description of the wheat chart as we have seen prices slice right through all sorts of important indicators. Technical support held on the close yesterday which we had outlined ass 451-456 ¼. A breakdown below takes us to contract lows from 423 ¾-426 ¾. We could see a relief rally but that may be all it is. Bears have taken control over the market, so bulls should tread lightly. First technical resistance comes in from 466-467 ¾. The RSI is at 37.84, surprisingly not oversold despite the 40-cent decline in the last three sessions.
Resistance: 466-467 ¾***, 494-495**, 516 ¾-518 ½***
Support: 451-456 ¼**, 423 ¾-426 ¾****
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