December 12th, 2012 by Scotia Plaza Futures

Risk assets are holding gains and advancing slightly further going into today’s trading session with expectations for another, larger round of quantitative easing driving the sentiment. The Federal Reserve will announce details of its monetary policy action at 12:30pm EST where rates are expected to of course be held at 0.25% but an expansion of QE should see debt purchases of 45 billion per month. Fed chairman Bernanke’s follow-up press conference at 2:15pm EST will shed light on policy guidance going forward. Unless there are any surprises, markets should quickly turn their collective attention back to the fiscal cliff negotiations once Bernanke clears the stage and as such there is a moderate “buy the rumour, sell the news” risk for later this afternoon. The data calendar for the day is otherwise light with only Euro Zone industrial production figures out for consideration which, as has been the norm for the region, failed to meet expectations showing a month to month decline of 1.4%.

 

December S&P futures are up 2.00 points this morning at 1433.50. Yesterday’s rally pushed the contract to the upper band of resistance on the daily chart and the contract has so far hesitated to push beyond the barrier overnight. Momentum studies and moving averages are bullish in all respects and any retracement can be seen as a buying opportunity back to the 1418.00 level. Weekly support is otherwise unchanged at 1408.00. March bond futures meanwhile are continuing to price-in a continuation of Fed QE and as such are down a further 10 basis points this morning at 148’23. The decline brings the preexisting bull trend to an end as moving averages are now in the process of crossing down while both MACD and RSI trend lower in bear ranges. That said, there is price support at 148’18 and the longer term prospect of a broad, sideways trading band remains the greater directional probability.

 

The December US dollar index is down 15 basis points this morning at 79.89. The bear trend has ultimately remained intact despite last week’s extremely abrupt rally. Short term support levels have been breached so the contract is now vulnerable to a retest of the 79.55 lows set early last week with momentum studies and moving averages all pointing lower. The December Euro currency is up 45 basis points this morning at 1.3049, consistent with a bull trend on the daily chart. Last week’s stark warning about slowing growth and the probability of a widespread recession are long forgotten and the contract looks poised to retest major resistance at the 1.3100 level. Short term support has risen to 1.2980. The December Canadian dollar is up 7 basis points at 1.0143 with resistance at 1.0150 still intact. The daily chart trend remains bullish with support rising to 1.0100. As an aside, traders are reminded that last trading day for December currencies is approaching quickly and positions should be closed out or rolled forward by the end of the current week.

 

Precious metals are firmer this morning along side the general uptick in market optimism. February gold is up $7.10 at $1716.70 but the contract has found resistance at its 20 day moving average for the second time in the past three sessions. Momentum studies are climbing but otherwise still slightly into bear levels. Key short term resistance remains at $1720.00 with strength liable to continue on a breakout above that barrier. March silver meanwhile is up 21 cents at $33.23 with the contract also finding resistance at its short term moving averages. Momentum studies mirror that of the gold chart with key resistance still at $33.50.

 

January crude oil is up 66 cents at $86.45 despite yesterday’s API data that showed a substantial build in inventory levels. Today’s EIA data at 10:30am will be checked for consistency with the private sector. The daily chart remains subtly biased to the bear side but with strong support in place at the $85.00 range.

 

Grain prices are down across the board this morning after yesterday’s USDA data brought no significant surprises. January soybeans are down 10 cents at 1462 while corn and wheat are down 2 cents each. Technicals are neutral for soy and corn, strongly bearish for wheat.

November 8th, 2012 by Scotia Plaza Futures

Futures markets have leveled off overnight but hesitation in risk sentiment lingers. With theUSelection behind markets, attention is returning to deterioration in the Euro zone, highlighted yesterday by Mr Draghi when he focused particularly on weakening economic data out ofGermany. He will have the opportunity to remind markets of his concerns again at this morning’s press conference following the ECB rate announcement at 7:45am EST. Meanwhile, Greek parliament passed its austerity budget by a very slim margin amid some of the largest protests seen since the crisis began. This was to be expected given the stakes but the likelihood of implementation remains exceedingly low. Given that, the next round of parliamentary negotiations are unlikely to meet with any success. And a new wrinkle in the European political minefield comes from the German intelligence service which accusesCyprusof being the primary centre for money laundering for Russian oligarchs. ThoughCyprusseeks “only” a 20billion euro bailout, tiny in comparison to the rest of the peripheral trouble spots, selling the idea that German taxpayers’ funds will flow directly into the hands of Russian crime organizations is, well, impossible. Ms. Merkel is facing a political nightmare; allow the heretofore insignificantCyprusto be the first domino to fall in the EU or hand over her electorate’s money to caste of nouveau riche crime families. North America, so far, remains happily oblivious to the “peace” that reigns inEurope. December S&P futures are trading 4.25 points higher at 1393.25 with support in the 1387.00 range holding despite a slight break-through yesterday. The daily chart trend however remains as a well established bear. Fist resistance would be found at 1408.00 and strength should be sold. December bond futures are otherwise down 8 basis points at 150’02. There is ample room for a retracement but the bull trend initially signaled with a trendline breakout back in early October is now in place. Momentum studies are climbing and short term moving averages are supportive. Support is at the breakout point of 149’08.

 

The US dollar index is up just 7 basis points at 80.92 with quietly mixed action on the crosses. The contract traded to new highs overnight and the bull trend is developing particularly strong trending indicators. There is little by way of technical resistance until 81.60. The December Euro is trending bearishly and the contract is currently 21 basis points lower at 1.2752. Yesterday’s high found resistance at the 10 day moving average but overnight action saw support at 1.2725. Strength should be sold up to the 1.2850 level with an initial downside objective of 1.2525. December CAD is currently up 4 basis points at 1.0028 but the bear trend on the daily chart is alive and well. The contract is below short term moving averages with no divergence between momentum studies and trading levels. The contract must now complete a move to support at the 0.9900 level.

 

Precious metals are slightly firmer this morning with a less than clear technical outlook. Gold and silver appear to have broken ranks with risk assets again but this relationship has proven temporary in the past. December gold is up $5.00 at $1719.00 and holding between short term moving averages. Momentum studies remain bearish. The contract becomes bullish with a close above 1725.00 and bearish below $1708.00. December silver meanwhile is up 26 cents at $31.92 with a technical outlook that remains predominantly bearish. Resistance is at $32.27.

 

December crude oil reached technical support yesterday with its low of $84.05. It is currently $1.00 higher at $85.44 in a rebound from that point with first resistance at $86.10.

 

Grain futures are slightly firmer overnight with soybeans holding a bearish outlook and looking to close a chart gap at 1475 while corn remains range-bound and trendless in the 745 area.

October 22nd, 2012 by Scotia Plaza Futures

Futures markets are rebounding modestly to start the week after losses on Friday. Risk sentiment had deteriorated at the end of last week as it appeared little of substance was accomplished at the EU summit. A broad framework for a banking regulator was discussed but at best this oversight entity would be operational toward the very end of 2013. Otherwise there was consensus that there should be more meetings. In the intervening time regional elections inSpainsaw Prime Minister Rajoy emerge victorious in his home riding ofGaliciawhich is seen by some as an endorsement of his policies and hence supportive for a formal bailout request. But with Spanish 10 year yields in the 5.4% range there is no immediate urgency forSpainto make the leap. Tactically, the timing would be wrong for PM Rajoy. In early North American trade December S&P futures are up 6.00 points at 1430.00 with the contract struggling at trendline support. Friday’s close saw the contract sit precisely at a trendline that originates with the June market low. Earlier overnight trading had S&P futures breaching that support level but the contract has since recovered. But with momentum studies in bearish territory and moving averages crossing down the balance of technical influence is now negative. Last week’s low of 1416.50 is the final point of support before a further slide to 1404.00. December bond futures for the time being are however confirming a risk-on sentiment with the contract off 22 basis points at 146’28. The daily chart is bearish within a broad channel with support at 146’08.

 

The December US dollar index is down 11 basis points at 79.57 after rallying to its 20 day moving average on Friday. The daily chart is still negative but there are indications in momentum studies that support in the 79.00 area is strong. First resistance is at 79.85. The December Euro currency is up 47 basis points at 1.3078 after finding support at its 10 day moving average. The daily chart remains bullish but resistance at 1.3150 has proven strong so far. Short term support has emerged at 1.3020. December Canadian dollar futures have declined to a heavy support zone ranging from 1.0030 to 1.0050. Momentum studies are bearish and short term moving averages have crossed down as well. That said, a correction over the next few sessions back toward the 1.0100 range is highly probable.

 

Precious metal futures are also slightly firmer this morning in a correction from Friday’s selloff. December gold is up $2.90 at $1726.90 with a decidedly bearish daily chart. Strength should be sold with a preliminary downside objective of $1690.00. December silver is currently 15 cents higher at $32.25 but here too there is an established bear trend on the daily chart with an initial downside target of $31.55.

 

December crude oil is up 56 cents at $91.00, following the corrective theme seen elsewhere in futures markets this morning. The daily chart is bearishly configured with first support at $89.90 and heavier support at $88.30. But with global growth figures looking particularly soft there is a higher than average probability of an eventual break lower to the $84.00 area.

 

Grain prices are continuing their rebound this morning with short-covering late last week getting the climb under way. November soybeans are up 17 ¾ cents at 1552, pushing to the 20 day moving average and testing resistance at 1560. Momentum studies are still in bear levels but are rising quickly. A close above 1576 would eliminate most if not all bearish chart factors. December corn is up 4 cents at 765 ½ with the daily chart turning bullish this morning. Key support for the contract is at 732.

October 4th, 2012 by Scotia Plaza Futures

Risk appetite is improving ahead of the ECB’s press conference later today where investors hope to glean some insight as to whetherSpainis any closer to requesting a formal bailout. Given that the decision is inSpain’s hands, not the ECB’s, it’s more than likely that today’s policy setting meeting will be a non-event. Tomorrow morning’sUSnon-farm payroll data is also heavily anticipated given that the most recent string of economic releases out of theUShave been marginally positive. Traders will be looking for any sign that theUSlabour market is gaining traction. In market activity December S&P futures are up 5.25 points at 1450.00, pushing to preliminary chart resistance. Momentum and moving averages are climbing so the market looks well positioned for a continuation of recent strength. December US bond futures are down 4 basis points at 149’18 and holding an inside-day range so far. Momentum is fading slightly but the daily chart trend remains mildly bullish.

 

The December US dollar index is down 20 basis points after testing resistance at the 20 day moving average yesterday and overnight. Momentum has been climbing but trading levels have offered a consolidation at best. The underlying trend remains bearish with consideration for a change only being given with a close above 80.10. The December Euro currency is jumping 44 basis points overnight, trading at 1.2953. Overnight action saw the unit find support at its 10 day moving average. Normally a central bank easing or sovereign bankruptcy would be a currency negative but traders seem to look forward to the ECB deploying its “bond buying bazooka”. There is strong technical resistance at 1.2990 but Super Mario Draghi’s big gun could make short work of that. The December Canadian dollar meanwhile is up 16 basis points at 1.0119 in response to improving risk sentiment and some bargain hunting after recent declines. The chart outlook is bearish with significant support still a little further down at 1.0060.

 

Metal futures are firmer overnight and this morning with gold and silver still tracking well on their bull paths. December gold futures are up $11.40 at $1791.20 with the contract holding above its 10 day moving average for five consecutive sessions. RSI and MACD are lagging in confirming the recent rally which suggests a high probability for a brief move to new highs followed by a corrective selloff. Support is at $1760 with an initial upside target of $1810. December silver is up 37 cents this morning at $35.05 with a similar technical outlook to that of gold. RSI and MACD are non-confirming but the contract should be able to post new highs on this run before requiring a correction. Key trend support is at $33.75 while an upside target of $35.60 remains active.

 

November crude oil futures are stabilizing overnight after finding support in the $88.00 area. Yesterday’s selloff was largely technical as intermittently thin trading conditions allowed for several support levels to be breached. Inventory data also showed a notable build in inventory levels at the major refining centre of CushingOklahoma. The daily chart trend is bearish but selling pressure is overdone in the short term.

 

Grain prices are rebounding overnight in largely technical trade. November soybeans are 17 cents higher at 1548 ¾ after reaching a downside technical objective of 1504 in yesterday’s session. The underlying trend remains bearish with a short term retracement to 1565 possible. December corn is up 5 ¾ cents at 762 ½ and might finally get its rally underway after last Friday’s limit-up move. A close above 762 moves RSI into bullish ground and makes the contact a buy with risks to a decline below 735. December wheat is up 3 ¼ cents at 876 ¼ with a neutral outlook continuing into third consecutive month.

September 13th, 2012 by Scotia Plaza Futures

Futures markets are on hold for the Fed policy announcement at 12:30pm EST and the follow-up press conference at 2:15pm EST. Until then net changes are liable to stay tight. Roughly 65 percent of analysts surveyed expect some form of Fed bond buying and markets have pretty much priced in significant action by driving the US dollar to its lowest level in four months and US equities to their highest level in four years. While Fed activity is on the radar today it is still the debt crisis inEuropethat remains as the single greatest threat to global growth in the long term. A new study released as a part of the ECB’s monthly report has emphasized the importance of euro zone countries sticking to their fiscal commitments. It warns thatSpain’s debt level could reach 104% of GDP in only four years time if it manages to achieve only half of what it has pledged to date. Looking back at the payment obligations Spain has, which we outlined yesterday, and given that so far achieving half of their fiscal pledges would be a welcome departure from their underperformance to-date, the ECB report should be taken as a forecast rather than a warning. Meanwhile the report further highlighted that under comparable circumstances,Italy’s debt would reach 125% of economic output. Investors have so far allowedItalyto escape from intense scrutiny but it’s clear that their inclusion in the PIIGS is warranted. Behind all of this is the simple fact, largely glossed-over in news reports yesterday, that the ECB’s “unlimited” bond buying was limited by the German court decision to cap that country’s rescue commitments at 190B euro. It feels as though markets are entering a protracted phase of playing fiddle whileRomeburns.

 

September S&P futures are currently down 2.25 points at 1437.25 with resistance at 1440.00 still intact. The daily chart remains bullish with only nominal non-confirmation by momentum studies. A failure by Mr. Bernanke to deliver a powerful bond buying program is the primary market risk. December bond futures are otherwise cautiously positioning for market disappointment after yesterday’s steep selloff. The contract is up 12 basis points at 147’27, holding above yesterday’s lows. Nearest support is at 147’04.

 

The US dollar index is down 7 basis points at 79.65, holding at the bottom end of yesterday’s range. RSI has dropped to 23, fast approaching oversold levels. The September Euro currency is likewise treading water at 1.2909 for a gain of 13 basis points. The chart is bullish and comparably approaching overbought RSI readings. September CAD is steady after declining from trendline resistance yesterday. A further slide to the 10 day moving average at 1.0200 is possible in the short term.

 

Metals are on hold as are virtually all other commodities. December gold is up 70 cents at $1734.40 as prices consolidate near 6 month highs. The chart is bullish but with RSI near overbought readings the preliminary trendline objective of $1770.00 may be tough to break. December silver is down 7 cents at $33.23 after dropping back to its 10 day moving average yesterday. RSI has backed away from overbought levels but remains high. Further declines to the $31.50 range would be healthy for longer term upside price development but short term trading direction will depend on the Fed.

 

Grain prices are steady overnight with technical patterns holding up well. November soybeans are down 5 ¾ cents at 1740 after retracing to address non-confirmation in momentum studies. With that out of the way, the contract looks positioned to make a test of the prior high. December corn meanwhile is down ¼ cent at 769 ¼ with a bearish daily chart still in place to drive prices to the 715 range.

September 6th, 2012 by Scotia Plaza Futures

How many stability mechanisms does it take to hold together an economic union? No, this is not the setup for a joke, at least not a funny one. There’s the EFSM which is supposed to be replaced with the ESM. Now there’s the OMT (Outright Monetary Transactions) which “will enable us to address the severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro”. In effect what Mr. Draghi has said is when bond buyers are driving rates higher in peripheral euro zone countries that they perceive are at risk of default, they are wrong in doing so because he and the ECB say so (the fears are “unfounded” though no basis was provided to explain how so). And in that context they will intervene to buy up debt. So the ECB is right and unless markets behave according to what the ECB wants, the markets are wrong and they will be told what to do. Now that said, included in the conditionality of the use of the OMT is adherence on the part of Euro zone members to imposed austerity measures. So if troubled countries likeGreece,Spain,PortugalandItalydo not meet fiscal, monetary and debt targets, then the stability mechanisms are a moot point in any event. And on that basis investors have been given little reason to believe we’ll see the OMT activated.

August 23rd, 2012 by Scotia Plaza Futures

Markets have lost all connection to common sense and rational investing principles, there is little other conclusion that can be drawn after reaction to yesterday’s release of the FOMC meeting minutes. The release revealed nothing tangible from FOMC members but market participants saw in it the potential for additional easing if economic growth fails to take hold. Risk assets rallied on the revelation, implying that buying riskier assets is the prudent course of action in response to deteriorating economic conditions since central banks will intervene to support markets. So the worse things get, the more risk one should take because governments will step in to bail everyone out. And with what’s been happening in Europe where reckless government overspending, corruption, tax avoidance, flagrant disregard for political commitments and a general unwillingness to take responsibility for poor decisions is rewarded with free money and debt forgiveness, who’s really to fault markets for taking the approach that progressively more dire economic news is a good thing? Markets have responded with a flight to risk while simultaneously moving into safe haven assets and accompanied everything with a completely incongruent response in currency flows. Just buy everything, have no fear, the central bank is here.

 

September S&P futures are up 2.50 points in early morning trade at 1414.75. Fortunately for markets German economic data released earlier in the morning barely met expectations which leaves stimulus hopes on the table. The decline that was under way earlier yesterday took the index to its 10 day moving average and marks only a mild correction in what is otherwise still a very intact bull trend. Trendline targets are still projecting a minimum rally to 1428.00. September bond futures meanwhile are continuing yesterday’s sharp rally in a parallel flight to safety with the contract up an additional 10 basis points at 147’29. The overall chart outlook remains bearish in tone but the overnight high took the contract above the 20 day moving average, calling the pre-existing bear trend into question. Support has built at the 145 level.

 

The September US dollar index has continued on its bear path, dropping through support and into a chart gap left behind in mid-May. That gap closes at 81.19 and the contract may find temporary support at that level. September Euro currency futures remain oblivious to the impending Greek and Spanish bankruptcies and are attracting buying interest nonetheless, gaining 17 basis points and reaching a new 6 week high earlier at 1.2576. A bull trend has emerged on the daily chart and further gains to the 1.2640 range are possible. September Canadian dollar futures meanwhile are 3 basis points lower at 1.0085 after finding resistance at prior contract highs. The bull trend remains intact until proven otherwise but momentum is now declining. Support is at 1.0035.

 

Metals are sharply higher overnight as bull trends in the precious sector take hold. December gold is up $20.50 at $1661.00. Momentum is climbing and a preliminary upside target sits at $1690.00. September silver is up 61 cents at $30.17, rising back above $30.00 for the first time since early May. The market is approaching overbought levels and on light volume a correction can be expected. That said, the daily chart trend is now bullish.

 

Grain price are steady overnight after contracts paused at new highs yesterday. Sharp divergence is beginning to show between momentum studies and price direction, the first warning sign of a market top. New highs are still likely in coming weeks but a correction of a dollar per bushel in soybeans and 50 cents in corn will be necessary soon.

August 14th, 2012 by Scotia Plaza Futures

Markets are slightly firmer overnight in what is largely a technical environment. Daily trading volumes remain astoundingly light and economic data out ofEuropepresented a mixed bag of results with little indication of broad improvement. German and French GDP figures were slightly better than expected on a quarter over quarter basis but worse than expected year over year. The German ZEW economic sentiment index also slipped for the fourth straight month while data showed that Spanish banks have become frighteningly reliant on ECB funding to stay afloat, requiring all time high assistance of 402 billion euros in July. With only 2 ofSpain’s 17 autonomous regions so far acknowledging their financial condition and a rebellion building among the remainder withCataloniarecently boycotting a fiscal conference, there’s no point beating around the bush;Spainwill need to request a formal bailout. It’s only a matter of time. The market response to this event will be interesting as intervention in the form of ECB bond buying is its panacea for everything but the phrase “orderly exit” is going to make a much bigger and uglier return than what’s been bantered about withGreece. In the meantime markets are plugging their ears and enjoying the summer. September S&P futures are up 1.75 at 1404.25, crossing through initial resistance and continuing a technical rally that’s been ongoing since early June. The relative strength index is confirming the rally with trendline targets projecting a move to 1428.00. September bond futures are off 12 basis points at 148’14 after probing the 10 day moving average yesterday. The daily chart trend is bearish and a retest of broad support in the 147-handle is highly probable.

 

The US dollar index is drifting lower in response to technical vulnerability. Moving averages and momentum studies are trending lower and the market will be looking to retest trendline support at 82.18. A decline through that level could see momentum push the contract to major support at 81.40. The September Euro currency is up 16 basis points at 1.2354 in what can only be a technical rally. Although moving averages and momentum studies are only slightly biased to the bullish side, a short term trendline was tested last Friday as well as yesterday. The path of least resistance for the time being is now a retest of the 1.2450 double-top. Canadian dollar futures meanwhile are down 3 basis points at 1.0066 with the currency again finding resistance in the 1.0080 range. The trend is still bullish but momentum continues to wane.

 

Metal futures are slightly firmer with technicals providing the only real market guidance at the moment. December gold futures are up $1.60 at $1614.20 with moving averages and momentum studies still leaning bullishly. The contract will however need to break out of the $1633/$1604 band and a fake-out looks unlikely so momentum will probably be sustained in the chosen direction. September silver is up 5 cents at $27.82 in what is for the time being a second consecutive inside-day range. Momentum is slightly biased to the bull side with support dropping to $27.53.

 

September crude oil futures are holding slightly higher in a narrow trading range after testing and finding support at the 10 day moving average for the past two sessions. There’s no immediate sign that prices will find resistance on charts and as long asIsraelandIrancontinue to threaten, traders will continue to justify long-exposure to the market.

 

Grain futures are also rebounding lightly overnight as speculators and commercial interests take advantage of a couple days of price declines. September wheat found support at 854 while December corn looks to have found support in the 790 range. Soybeans meanwhile should see trendline support at 1574 or above. Charts are bullish.

June 8th, 2012 by Scotia Plaza Futures

After time to reflect it’s clear that traders are not so happy with yesterday’s developments. Fed chairman Ben Bernanke delivered a cautious view of the state of theUSeconomy and provided no indication of imminent quantitative easing while the rate cut by the People’s Bank of China is now seen as a harbinger of bad data to come. Yesterday’s downgrade of Spanish debt didn’t seem to faze traders at the time but in the interim it has spawned rumours thatSpainmay seek an external bailout for its banks as early as this weekend. So as we head into the weekend the June S&P is fairing comparatively well, down only 6.00 points so far at 1310.75. Momentum studies are however negative, having only barely moved into bullish ground on an intraday basis yesterday. The contract is sitting between its 10 and 20 day moving averages with minor divergence on the daily chart addressed by the just completed three day rally. The outlook is bearish. September bond futures are confirming a risk-off atmosphere by posting gains of a point and a half at 149’29. The market has remained bullish throughout its recent correction.

 

The June US dollar index is up 71 basis points at 82.81, gaining on all crosses except the Yen which in itself is yet another risk-off signal. The index found support just below the 82.00 level yesterday at its 20 day moving average. There is no divergence in the technical indicators and momentum remains strongly bullish. The June Euro currency is down sharply, losing 141 basis points to trade at 1.2462. After testing its 20 day moving average the contract looks ready to continue its downtrend. RSI had risen to the mid 30’s which implies the possibility of new contract lows before oversold levels can intervene again to slow the decline. A weekly target of 1.1500 remains in play. Canadian dollar futures are also down sharply in the risk-off environment with traders waiting for monthly employment data at 8:30. The June contract is down 92 basis points at 0.9664 and remains vulnerable to general global weakness.

 

Metal futures are losing ground after yesterday’s reversal in gold and silver. August gold is down $5.80 at $1582.20 with momentum studies turning negative again. Moving averages are crossing down as well, only a day after crossing up. With the two-day selloff almost completely erasing last week’s sharp one day jump the market now looks poised to fall below $1500. July silver is down 20 cents at $28.32 with trendline resistance over the past two days reinforcing a bear trend that has been active since mid March. This market now also looks poised to post new contract lows. July copper futures are approaching last week’s lows, down over 8 cents overnight at $3.2885. The daily chart trend remains an uninterrupted bear since early May and with weakened expectations for Chinese data there is little likelihood of a reprieve from the selling pressure any time soon.

 

July crude oil futures are down sharply after correcting from oversold levels during the last few sessions. The contract is down $2.25 at $82.57 with the next downside target at $79.70.

 

Grain futures are down overnight as traders take profits in the risk-off environment after the rally of the last few days. July soybeans are down 12 cents at 1416 but momentum in the short term remains bullish. July wheat futures are down 11 cents at 630 ¾ with momentum remaining bearish and the contract finding resistance at the short term moving averages. July corn meanwhile is down 6 cents at 588 with a moderately supportive daily chart outlook.

May 9th, 2012 by Scotia Plaza Futures

By mid-morning the same pattern is emerging as we’ve seen for the past several weeks. Risk assets are under heavy pressure stemming from political and economic uncertainty in Europe but temporary bases are appearing as short term bargain hunting comes into play. Coincidental with European markets closes, risk assets have typically rallied into the remainder of the trading session only to come under renewed pressure in the subsequent North American overnight markets. Negotiations to form a functioning coalition government in Greece are making little to no progress while 10 year Spanish bond yields have risen above the psychologically significant 6% threshold. With little significant US economic data on tap until tomorrow morning there is still room for optimism, no matter how misplaced, that somehow the sputtering US economy can struggle through the growing global headwinds. June S&P futures are down 12.50 at 1346.00 but the contract has managed to push almost 7 point off its session low. June US bonds, while ahead on the day, are now almost half a point off their session highs as well, confirming the typical pattern of mid-morning risk asset rallies.

 

The June US dollar index is forging ahead and leaving its daily chart gap behind. The contract is up 43 basis points at 80.28 but the overnight high of 80.41 brought the contract directly into contact with technical resistance. Profit-taking should be seen in the short term although the daily chart is on the cusp of confirming an established, longer term uptrend. The June Euro currency is down 92 basis points mid-morning and has finally responded in earnest to its breach of key technical support two sessions ago. All momentum studies are bearish with room in the short term for further declines while moving averages and trading action confirm an established bear market. The current down-leg should see the contract drop to weekly support at 1.2650. June Canadian dollar futures are again under pressure in sympathy with deterioration in risk sentiment. So far the contract has found support at the lower ranges on the daily chart but trend indicators leave the contract vulnerable to additional losses to the 0.9900 level in the short term.

 

Metal futures remain under technical pressure with precious metals also seeing liquidation pressures as they are easy assets to liquidate to meet margin obligations in other market positions. June gold is down $16.70 mid-day at $1587.80. The contract has already slipped through nearest support with weekly support next in line in the $1530 range. July silver is also under pressure again with an earlier session low of $28.61 making a tentative probe of support at $28.40. Momentum studies are strongly bearish.

 

June crude oil futures are down 95 cents at $96.06, almost a dollar off earlier session lows. Inventory data at 10:30 saw a significantly larger build in inventories than expected but competing for market influence was a substantial drawdown in unleaded gas levels. With the June crude contract below a key pivot level on the daily chart for a third consecutive session, additional declines to $93.50 look increasingly probable before oversold readings begin to provide support again.

 

Grain futures are under moderate liquidation pressure ahead of tomorrow’s USDA crop data. July soybeans have declined to daily chart support and bounced by mid-morning. The low of 1413 ¼ sits inline with lows seen throughout much of April. Momentum studies have however slipped into bearish levels. July wheat is down 8 cents at 607 while July corn is down 6 ¾ cents at 616 ¼. Both contracts have been struggling to find support around current levels although wheat prices are seeing heavier technical pressure than corn. Discounts to corn could however encourage feed switches at the cash level.