William Frejlich's philosophy is that money management is the cornerstone behind any successful trading plan and his weekly newsletter and trade tips emphasize that philosophy. Contact Mr. Frejlich at (312) 264-4356
OK folks, with baseball season starting we can now say for the first time since 1909…. The World Champion Chicago Cubs !!!!!!!!
Metals: At this point it does not appear that we will see any huge moves for metals. Gold held up better than silver on the late break Friday and yesterday and copper has reverted back into a trading range albeit at higher price levels. Palladium made it to $820 and has retreated to $787. Further down to $770 may offer a buying opportunity.
Gold; The rate hike never affected gold too strongly and we did see a spike higher after last week’s bombing of Syria but we look to need something more definitive for much higher or lower action. I would consider a long gold if June futures test and hold near the $1240 breakout area from the current $1255.
Silver: The initial reaction to the aforementioned Syria action was higher for gold as potential world conflicts usually spark higher gold action. US stocks saw an initial lower spike Friday but came back to nearly unchanged by the close. Silver seemed to take the role of an industrial metal however and slid back from highs above $18.50 to lows at $17.73 for May futures during Friday and yesterday’s sessions. The $17.60 level is key and if it continues to hold, a buy may be in order.
Copper: May copper ran to highs near 285 within months of the election and as US stocks finally slowed their advance, so too did copper. We have seen the 255-257 area tested a couple of times while 272 has taken over as resistance. Longer term I feel the stock market will advance so I would rather buy near 255 than attempt a short near 272. From the current 26050 let’s watch for a test of 255-256 for a possible bullish strategy.
Currencies and Financials: Since the break for the US Dollar and rallies for non $ currencies after last month’s rate hike all have reversed course. The Dollar has more room on top while non dollar currencies are approaching recent lows not seen since the hike. The next week or two should determine if the Dollar will continue to rise and others to fall or if they will revert back into volatile trading ranges.
British Pound: The longer term implications of Brexit will be very positive for the Pound. During the remainder of 2017 I expect the Pound along with the US Dollar to be the bullish leaders of this group. The June Pound has shown positive action and from the current 12440 I am waiting for a test of 12300-12350 for a long futures or possibly long call options. If 12600-12650 is defeated I would expect 13000 within a relatively short period of time.
Swiss Franc: The June Swiss has fallen to lows at 9934 since the run to 10250 after last month’s rate hike in the US. For now It may hold near old lows at 9900. From the current 9959 we may see a push to the lower breakdown point of 10050. The bottom of the range is near 9900 and I would prefer to sell at 10050 than buy near 9900.
Japanese Yen: For now the level of 9120 seems to be the point where buying dries up and selling resumes. Down below the area of 8850 has now become supportive. This market does not have a reason to be trading with the strength it has but as we know, the market is always right. In fact another adage I like to use is this; “What a market doesn’t do (in this case drop sharply) tells you more than what it does do” In this case stay relatively firm. That said, I do not wish to buy the Yen except to cover a short position. From the current 9040 lets watch for a test of 9100-9120 and if it fails there again, we will use the “third time is a charm “ expression and look for a bearish position.
Euro Currency: June futures have been whacked down from 10950 two weeks ago to lows near 10600 today. The last three trips to 10550 has seen futures hold firm so that area is key support right now. It may hold that area again and if we drop to 10550 from the current 10630, we should consider a long with a tight stop just under 10500.
Canadian Dollar: During the past few months the June CD has tested the 7700 level numerous times. Each time it found it quite easy to break down quickly. We slid to 7475 yesterday and I am looking for further down to 7400. If we see that level this week a futures buy or long call option may be the way to go as the Canadian may be the market to stay in a dependable range from 7400 up to 7600-7650.
US Dollar: The June buck was the classic example of “Buy the rumor, sell the fact” after last month’s rate hike as it fell from 10225 to 9867. We have climbed back to 10126 and I expect to see 10225 tested within a week or two. The question then is, will it continue to 10300-10400 or settle back into a trading range as currencies are apt to do when there are few economic reports to spark harsher moves? Time will tell so we can have a better picture after seeing market action on a test of 10225. From the current 10090 we may see a slight correction to 10040-10050 this week which may be an opportunity to get long before the expected climb above 10200.
Eurodollar: As I mentioned below in the technical page zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz. Eurodollars have fallen asleep again after the rate hike as they tend to do between FOMC meetings pertaining to interest rates. June futures will likely trade between 9964 and 9973 for the next 1-1 ½ months as we await the next meeting on May 2/3.
30 Year Bonds: June bonds soared from 14600 post rate hike to highs Friday at 15300 after the Syria bombings last week. I had expected 15216 to hold as resistance and it did twice prior to last Friday’s action. It quickly settled back to 15100 yesterday before climbing to 15200 again. Let’s watch for 15216 – 15300 this week as our interest rates look to continue to outpace most of Europe and Asia. If we hold those levels again I will likely recommend a short futures or a put option so be alert a for a trade tip possibly this week.
S&P 500: The buying frenzy which was seen from November 8 until late February has subsided. This is not to say stocks are weak or the upside is over, just that no markets go straight up or down forever and we obviously need a new set of positive numbers or a period of less acrimony in the US and overseas to push to new highs. But to keep things in perspective, we did rise from 2020 to 2400 within 3 ½ months so some basing action is not only expected but necessary and healthy. As we await what is to come we now see a range where 2340 is supportive while the high at 2400 is the major resistance while 2380 will serve as minor resistance. For now I believe we can trade those numbers until some event shakes it loose.
Dow: The action for the Dow mimicked the S&P for all of the reasons listed above. From a futures price of 17500 November 8, the June Dow rose to 21100 by mid February so as mentioned above, the slide to lows at 20400 was necessary and healthy. For the time being the 20700 area has been tough to penetrate while 20400 continues as lower support. I would consider buying a rally over 20700 from the current 20635 as a push through there may generate momentum for a run to 21000 once again.
Energies: Energies go up, energies go down. And realistically have gone nowhere since early August as the entire group except for natural gas has been in a wide volatile trading range. Supplies are huge, almost record US supplies, and this is why this group is 100 % dependent on either seeing a massive increase in demand or more OPEC nonsense with cutting back production. Or at least saying they are cutting back.
Heating Oil: Since showing a triple bottom just over 14800 May heating oil has climbed steadily higher pushing towards 16600 today. We are exiting the winter heating season just as this contract is looking to test major resistance a few cents higher at 17000. There is little reason for more than 17000 on top so I would use a further push to 17000 from the current 16520 to consider a short.
Unleaded (RBOB) Gas: Gas has picked up nicely since dipping to 15800-16000 two weeks ago. We do see a tendency for higher action at this time of year for two main reasons. The first obviously is higher demand as we exit winter and enter the spring driving season. The second is a the fact that at this time of year refineries switch over from winter to summer blends and this usually spurs a short term shortage as this process completes. So far we have travelled up to 17600 from the 15800 level and there is little resistance before 18000-18250. Be patient and you should have a chance to short futures at slightly higher levels.
Crude Oil: As mentioned earlier we are currently seeing the highest level of crude storage level supplies in US history. Since bottoming two weeks ago at $47.00 futures have risen to just short of minor resistance at $53.50. This is primarily due to the continuing range trade and OPEC doubling down by saying they may extend production cuts. Here lies their problem. Once we push much $50 US refiners begin to ratchet up production again as they now become profitable again and this is why we fail once we reach the $54-$55 area. For the most part May crude has held near $46.60 and failed near $55.00 going back to August and I see nothing to tell me that will change anytime soon. Let’s watch for slightly higher action to $54.50 from the current $53.10 to see if a short position is appropriate.
Natural Gas: Since the double bottom near 275 in late February the May natural gas has made a nice climb with few setbacks, making it to strong resistance at 335 last week. That was the lower breakout point before the break to 2750. I believe we may see a fairly sharp break to 305-310 and I will be watching that price for a possible buy. With huge supplies a big move is unlikely but we could push to 350-360 if momentum builds.
Grains: The first major quarterly crop production from March 31 showed much higher projected bean plantings for this year while corn and wheat projections were considerably below last year’s final numbers. July oats have dropped from highs a month ago at $2.50 down to $2.14 and I will likely send out a trade tip buy on that today.
Corn: Last year 94 million acres of corn was produced. The March 31 report showed plantings this year to be slightly below 90 million acres. That would be enough to generate a move for July futures to $4.25 if nothing changes and conditions are conducive for a healthy crop. However the Midwest has seen an extremely rainy March and so far April is running well over normal rain wise. IN 2010 we saw a similar occurrence where a very rainy spring continued until May. In May the spigots turned off and no rain was seen for over a month. Futures rolled to nearly $8.00 by year end. I am not saying this will happen but the point is at $3.75 now for July futures, it wouldn’t take much of a weather event for a significantly higher move than the $4.25 I mentioned earlier.
Soybeans: Beans have been slammed from highs at 10.90 in January to recent lows at 9.35. It is significant that9.35 has held for the past week. The crash was a product of a large South American crop coupled with projected plantings of nearly 90 million acres for beans. This was up from 83.5 million acres last year and the first time ever where we expect to see as much acreage planted for beans as for corn. Beans will definitely need weather problems for any large moves but they are oversold now so we may see a corrective bounce. Bottom pickers who may be looking for a cheap option can pick up the July bean 1020 call for about 7 ½ cents = $375. The lower breakout a month ago was from the 10.20 area so any weather problems this spring might generate a nice rise.
Soy Meal: Meal isn’t moving is beans aren’t for the most part so much of the above discussion applies to meal and bean oil besides. March meal has fallen from 3.57 ½ in late February to 310 which it has held for the past 5 days. Bottom pickers here may try a buy at 3115, risking a small drop to 3089 or about $260.
Bean Oil: May oil is showing some basing action at 3125 after the hefty drop from 3880 in November and 3500 in March. I would prefer to buy the meal or beans but if we continue to hold here near 3125, a short term correction may be enough for a 175 point move to 3300.
Wheat: After peaking near 4.80 in mid February May wheat had been slammed down to 4.15 coming into the March 31 USDA report. Acreage was reduced and so far we have bounced back to 4.35 and currently reside at 4.28. These are relatively low prices for wheat historically speaking so if we continue to hold near 4.25 I would consider a buy of July wheat which saw the same market action but is trading at 4.40 currently.
Softs: All have been battered to recent lows in this complex during the past two weeks. We may be approaching oversold bottoming areas so this is a group we need to watch for a possible buy during the coming weeks.
Sugar; Since mid February May sugar has been bludgeoned down from highs near 2125 to lows last week at 1605. A pop yesterday to 1794 gave hope to bottom pickers that perhaps that test of 1600 may have indicated a bottom. But… in true “softs” form the rally was false and we have retreated back to 1621 today. Now we must wait for some consolidation and a truer picture as to whether this market is cheap on the way up, or cheap on the way down.
Cocoa: Early last month May cocoa showed lows at 1869 and 1878. A two weeksrally driving futures to just shy of 2200 seemed to imply this oversold market had finally found a bottom after dropping from the highs at 3170 last year. That was two weeks ago and the subsequent drop to lows today at 1945 put a temporary halt to that notion. On the plus side we have popped back to 1990 and this volatility may be indicating that we have in fact bottomed. Let’s see if 1950 holds this week for a possible buy.
Cotton: Blah blah blah… Regular readers know I like to inject that thought when I start to bore myself (or others ) with very similar commentary for an entire group. Well folks, the commentary is the same because the market action is eerily similar for each. May cotton had seen a steady climb from lows at 6500 to highs just below 8000 by late February. So quite naturally futures fell back to 7350 by yesterday despite the last USDA report showing a positive tone. The major breakout to the upside was from the 7200-7300 level and if that holds this time around we may consider a buy or a call purchase for July futures.
Orange Juice: Let’s see now… how can I say the same thing in a different way? Oh well, I can’t so I’ll proceed with more of the same. On March 21 May juice had made it to 19250. By April 4, May juice reached 15115. Yesterday saw a rise over 16900 which quite naturally was followed by the 700 point drop to 16060 today. OK ladies and gentleman place your bets, place your bets. If that market action makes you think we should watch this one for a while, I would agree with you. In the meantime I feel long term we will rise so I will be looking to buy, not short. That said the aforementioned volatility means I will be buying call options and not gambling as much with the futures.
Coffee This is a market looking for direction. From highs near 16000 a month ago May coffee has retreated to 14000 and sits currently at 14145. If 14000 is beaten look for 13600 which needs to hold or further down to 13200 is possible.
The words from last time came to pass as May coffee pressed against 13600 three times during the past 1 ½ weeks. We saw a pop to 14300 after the first and 14180 after the second test and currently sit at 13990. If we hold 13600 again I would consider a buy but with July futures.
Livestock: Cattle have remained firm while hogs have fallen back to lows last seen in early December.
Live Cattle: Since bottoming at 10300 in early February June live cattle made it above 11400 last week, slid back to 10867, rose to 11365 yesterday and fell back to 11195 today. This is one of the reasons the “roulette wheel “ of futures markets is not one of my favorites. If 11400 is bested we may eke out a bit more to 115-116 but I would more be in favor of a short near 114, risking above the 116 I mentioned.
Feeder Cattle: May feeders mimicked live cattle rising from 12100 in early March to highs near 13700 yesterday. We have advanced too quickly to buy up here so I would wait for a correction to at least 13000-12900 if going long. If 13700 is not beaten on another attempt a short, risking above 14000 may be the way to go.
Lean Hogs: June hogs saw a major rise after bottoming at 6600 last fall. The steady climb culminated in a peak high above 8000 by early February. It chopped between 7600 after a correction and 7950 and finally capitulated by crashing through 7600 two weeks ago as we continued to a new low for the move below 7200 last week. This 7200 level was the final breakout higher and if it continues to hold we may be seeing at least a temporary bottom for the June hogs. We may have a buying opportunity this week so stay tuned for a possible trade tip buy.
Questions? Ask William Frejlich today at 312-264-4356
A Subsidiary of Price Holdings, Inc. – an Employee Owned Diversified Financial Services Firm. Member NIBA, NFA
Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses.
The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2017
SubscribeReceive daily summaries of all Market Insights blog posts.
Enter email below.
Most Recent Posts
- Morning Softs. 08/16/17
- U.S. plans sale from Strategic Petroleum Reserve
- Housing Starts and Permits & EIA Energy Stocks. The Corn & Ethanol Report 08/16/17
- Crude Draws Continue. The Energy Report 08/16/17
- Oil prices move lower on seasonal pressures
- Morning Grains. 08/15/17
- Morning Softs. 08/15/17
- Crop Progress Seen Unchanged. The Corn & Ethanol Report 08/15/17