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
Late last week the headlines rang out “JUICE IS FREE !!!!”. Orange juice immediately dropped 20 cents on that news. OK just kidding folks, that’s just how my warped brain thinks. But remember other OJ, 3 strikes and you’re out.
Metals: Fed inaction on interest rates continues to weaken the US Dollar which has enabled the metals to move higher. After this week’s FOMC meeting there isn’t another until September 20 so no rate hike this week probably keeps the current rally alive for now.
Gold; August futures have continued the slow rise from a bottom near $1200 a few weeks ago to minor resistance at $1260. From the current $1253 I would consider a buy if futures pull back to support at $1240. With no hike this week and no meeting until September 20, futures may be able to sustain the upside to $1275-$1280.
Silver: With no rate hikes and recent poor retail sales numbers there is little immediate pressure for the Fed to raise rates at this time. September silver bottomed a few weeks back just below $15.20 and so far have worked back up to $16,57. For the same reasons as with gold the current environment may enable futures to push to $$16.80 at least with an outside shot at $17.20 if $16.80-$17.00 cannot stifle upside. From the current $16.50 use a slide to $16.20 to consider the long side.
Copper: Since bottoming near 24800 in early May the September copper has slowly and methodically stair-stepped up to new highs last Friday above 27500. There is no reason for lower stock market action other than corrections so I expect copper to continue higher to at least February’s high at 28500 but more likely 30000 will be seen by this fall. Use a correction to 26400 from the current 27375 for a longer term buy opportunity.
Currencies and Financials: Between our Fed holding the line on rate hikes and Mario Draghi insinuating the QE will end for the Euro zone later this year, the US Dollar has been slammed more than it should and European currencies soared to heights they should not have. Rates are still negative in much of Europe and as always markets tend to overact. We should reverse the last two week’s market action this week as reality sets in.
British Pound: Since bottoming near 12600 a month ago the September Pound reached new highs to 13153 last week. Britain’s economy has improved with the shackles of the rest of the Euro zone now off but they still have many issues to deal with. Upside potential would be 13500-13700 which was where the Pound flushed down to right after Britain voting to leave the Euro zone so we may have a bit more on top from the current 13060. A small slide back to 12850 may offer a buying chance.
Swiss Franc: The September Swiss shot from 10375 to 10630 in 2 days after Draghi’s talk last week. That was at least 130 points higher than it had any right to trade up to. I would not buy the Swiss at all unless we see a drop to a minimum of 10465 and more likely 10350 if you wish to buy at all. I am watching the 10600-10650 area for a possible short this week.
Japanese Yen: After crashing from 9228 to 8760 during June, the September Yen joined the buy any currency but the US Dollar club a couple of weeks ago and so far has popped back to 9061. I don’t see a reason for the Yen to be above 9000 so let’s watch this week to see if the area from 9050-9100 is breeched. If it cannot push through those levels, I expect lower action to resume.
Euro Currency: As there was little reason for such sharply higher Swiss and Yen values there is even less reason for the Euro to have made it over 11700 this week. Interest rates remain below 0 in Europe and many poor member countries are struggling more financially than California, New York, and Illinois, which are virtually bankrupt states. I will be looking to short futures on a test of 11675-11700 if seen. They still haven’t been able to stop their version of QE so they are a LONG way from getting out of negative rates. A realistic price for the Euro would be below 11000.
Canadian Dollar: The September Canadian Dollar continues the roll it has been on since bottoming at 7268 on May 5th. It stalled a while at 7780 before resuming the uptrend when Canada raised their interest rate two weeks ago. We pushed to 8017 yesterday and have more upside to 8200. We are quite overbought now with Stochastics near 95 % so I would prefer to wait for a correction before trying the long side. An extreme pull back takes us back to 7880-7900 from the current 7995 so let’s watch for that this week.
US Dollar: Take all commentary so far about currencies and reverse it and you have the US Dollar. We ended QE a few years ago and have raised interest rates 3 times so I find it hard to fathom that the Euro has moved to 11700 while the Dollar dropped to 9350. Europe is still in QE, they aren’t close to raising rates yet, and their economy is far weaker than that in the US. This is one of those deals where you just have to say that the market is always right and stay away for now. From strictly a fundamental viewpoint however, the US $ should certainly be MUCH stronger than Euro zone currencies. If 9350 continues to hold I would expect a push back to at least 9500 if not 9600 for the September Dollar from here at 9365.
Eurodollar: It’s that time again for the Eurodollars. ZZZZZZZZZZZZZZZZZZZ. A range from 9850-9858 for almost 6 weeks of trading will generate those Zs mentioned earlier.
30 Year Bonds: As the Fed continued to do nothing with rates the September bonds soared from lows near 15100 to highs at 15710 just two weeks ago. That was too speedy of a rise in too short of a time and we have quickly reversed course down to lows at 15118 last Friday. We have bounced back to 15200 and as we rose too quickly before, we have now dropped too quickly to oversold territory. I still like the short side for the long-term but I would wait for a further correction to 15316-15400 before taking action.
The words from last time still apply and in fact, the September bonds made it past 15400 to 15427 yesterday. This obviously corresponds to the beating the Dollar has taken of late so it could be a short-lived rise as well. Let’s watch the 15416-15500 resistance this week and if it cannot be dented a short may be in order.
S&P 500: The S&P remains on track for further gains with obvious corrections along the way. After peaking above 2450 in mid June we pulled back to first 2402, then 2405 and have pushed back to 2429 yesterday. Short of any geopolitical shocks we are certainly on course to take out 2450 this month. If we do see one last gasp lower to 2410 I would feel good with a buy there, risking below 2397.
There is nothing to add to last time as the S&P went through 2450 like something goes through a goose on the way to nearly 2480. While Fed inaction on raising rates has hurt the Dollar it has been a helping factor for US stocks. If the administration would be allowed to function on important matters to our country without the daily nonsense from the media and the opposition party we would likely see historic numbers going forward. If we see 2480 beaten no doubt 2500-2525 would be seen within days or weeks. Use a slide to 2440 if looking to buy a dip.
Dow: After peaking above 21500, the September Dow futures corrected to 21257 and have now bounced back to 21380. We should have no problem reaching new highs by month end so use a mini correction to 21320 from the current 21380 to attempt a long.
As with the S&P the September Dow had no trouble pushing to highs at 21628, So far we have come back a bit to 21485 and additional downside to 21300-21250 may be a nice area to buy that correction.
Energies: Even with OPEC production cuts this group was bludgeoned during May and June. All are oversold now and due for corrections higher so this will be our topic of discussion this week as to the breadth of the rebound and where we can look to initiate short positions as supplies remain burdensome.
The words from last time came to pass as all have pushed higher into resistance areas. OPEC did renew their production cuts for another three months and it remains to be seen if that is just a temporary band-aid to stop the bleeding or if it may have any lasting effect.
Heating Oil: Better demand has enabled the September heating oil to drive from 13800 in late June to highs near 15800 just last week. The downturn remains as is and I believe this market must fall further from the current 15250 down to at least 14600-14800 before I would be comfortable with a buy. I would prefer a rise to 15800-16000 for a possible short as burdensome supplies remain.
Unleaded (RBOB) Gas: September no lead roared from 13800 to highs last week just under 16000. Part of the rise was due to short covering during a seasonally bullish time of year, that being peak driving season and part of the demand increase was due to much cheaper gas this summer than most summers past. As with heating oil I would wait for further down here, to 14600 from the current 15300 and also as with HO, I would prefer to short on another pop to 16000.
Crude Oil: Many felt that the projected production cuts from OPEC would give a bullish boost to crude futures. Let me put crude supplies in a simple form. Let’s say a business had 10 of a certain product and all he can ever sell is 5. To get rid of the other 5 what must happen. Common and business sense says they must lower the price to try to move the additional product. The equivalent of the OPEC cuts is to (in using the same example) have 9 of a product and they still are only selling 5. This is why crude oil fell $9 during the period of lower production. As I have stated many times in these pages I expect a trading range from about $42 to $54 for the rest of 2017 barring any Middle East tensions. If we do break from that pattern I would expect a drop to $38 and maybe a buck extra to $55 on top but that would be about it.
Once again there is little to change from last week. After bottoming near $42 last month so far September futures have pushed to $47.74, pulled back to $45.40 and currently reside near $47.10. Today’s highs at $47.27 equates to a 50 % correction from highs at $52.50 to the lows at $42 so let’s see if we push through $47.27. If so addition strength to $48.50 is possible. Again, there is no reason to expect any major rallies from this group as any OPEC supply cuts are offset by large production numbers.
Natural Gas: During June August natural gas made three attempts to rise. Each rally attempt was stifled at the 3125 area before futures finally gave in and flushed to 2830 last week. We probably hold above 2800 for now as we are into hurricane season. Supplies of natural gas are massive but even the hint of a hurricane which may cause shut down of rigs in the Gulf usually generates a spike higher. If we see another drop to 2830 from the current 2980, I would like the long side, risking below 2690.
The words on top refer to August natural gas and sure enough it spilled over into September futures as they held 2830, rose to highs above 3100 last week and so far have slid to 2881. I believe we trade a range from about 2800-3100 short of any hurricane action in the gulf which may cause rigs to shut down temporarily. Due to that possibility I would prefer buying this one near 2800 rather than attempt a sell near 3100.
Grains: Whew!! This group has seen more peaks and valleys than the Rocky Mountains lately. Weather markets can be very frustrating and we are in the latter stages of a fairly vicious one.
Corn: Here is all you need to know. June 23, December corn 3.74. July 11, 4.17 ¼.. July 13, 3.83. July 20, 4.06 ¾. July 24, 3.84 ¾. Folks this classic weather market action shows the volatility involved with each new forecast. Yesterday afternoon crop ratings were lowered for corn and beans. Corn shot from lows yesterday at 3.84 ¾ and close at 3.91 up to 3.97 ½ overnight on that bullish news then proceeded to crash 12 cents down to 3.85 ¼ on prospects for rain and cooler temps in areas needing that forecast. We are still about 1-2 weeks from saying this crop is made and will be bountiful so we can expect a couple more weeks of this volatility.
Soybeans: November beans made a strong run from 9.07 to $10.47 the last week of June and first week of July. Of course an improved forecast and overbought conditions led to a crash from that 10.47 to 9.84 in just three days. We crawled higher and yesterday’s lower crop ratings spurred a spike of 25 cents last night to 10.35 ½ but quite naturally in a weather market we had dropped to 10.12 by this morning. Ugghhh !!! Anyway as you can tell this is a crap shoot and this wild action makes futures trading difficult. Let’s watch the weather the next two weeks and look for a sign of actual better or worsening crops before making a move. Both beans and corn may be near bottoms here but be prepared for choppy moves along the way.
Soy Meal: No need to rehash what’s already been said so let’s watch September meal to see if it holds support near 3240. If so, a buy, risking below 3190 may be the way to go.
Bean Oil: Bean oil has managed to be a bit more stable than beans or meal during this weather scenario. Breaks are less severe and the technical pattern remains bullish. From the current 3400 use a dip to 3340 and if it is not weather related, take a flyer on a long, risking below3280.
Wheat: September wheat had crawled higher from 4.35 to 4.90, took a breather to 4.65 than needed just 4 sessions to soar to 5.75 on the poor Dakotas weather and problems with the Ukraine and Australia crops. Of course needed rains and forecasts for more rain and less heat then sparked a two-week drop from that 5.75 to lows at 4.75 today. After a nearly $1 break we are looking for some support at 4.65 so let’s watch that number this week for a possible buy.
Softs: We have seen some bottoming action for this group and have rebounded somewhat. All have stalled after mini rallies so it remains to be seen if the rallies were short covering affairs and we head back lower or if we hold at support levels after pull backs as the beginning of a longer up trend and confirmation of a bottom.
Sugar; Sugar typifies what I wrote above. We saw lows at 1274 on both June 28 and 29. We saw some choppy higher action which culminated in a high trade to 1469 last Friday. So far we have been resistant at higher action this week and have seen 1418 tested twice. If beaten further down to 1390 is expected. If that holds and we begin to rise, a longer term buy is called for. If 1390 fails however, wait for lower action to 1320.
Cocoa: One year ago cocoa was trading at 3100. A slow crawl lower since then took September cocoa from those highs at 3100 to lows at 1767 by April 20. Futures took a few attempts to rise, making it back to 2100 twice and 2000 just last week. We have flushed to 1807 now and the May lows at 1782 are in sight. If we can manage to hold the 1780-1790 area I would give consideration to a buy, risking below 1750.
The words from last time came to pass as September cocoa did hold at 1791 and needed a little more than a week to make it to 1987 yesterday. From the current 1947 I would either wait for a slide back to 1900 for a possible buy or if we break over 2000 consider a buy as futures may make it to 2100-2150 if 2000 is taken out.
Cotton: After bottoming just over 6600 recently from highs at 7500 a month earlier December cotton rose to 6900 and has now slipped back below 6700. I believe we will try to hold between 6600 and 6700 for the short-term. Let’s watch this one closely this week as we may have a buying chance this week. A buy near 6620, risking below 6500 may pay off but I will advise with a trade tip if we see that action this week.
This is another one where the words from last time still apply as market action held true to expectations. After holding near 6625, December cotton ran to 6930, fell back to 6750, rose to 6900 and currently sits at 6855. If 7000 is beaten we should see a quick spike to 7200. If we fail at 6930 wait for another drop to 6650 if thinking of buying.
Orange Juice: From highs at 21000 in December the September juice has seen a relentless break to lows two weeks ago at 12700. After a bounce higher to 14300 after the break we have slid back to 13100 presently. Much as with cotton we may be very close to a short-term low for OJ. Lower demand is said to be the reason for the steady drip drip lower. Let’s watch for a possible buy from 12500-12700 this week.
Blah blah blah. Last Thursday September juice managed a trade to 12495. In true softs and OJ action however it took just two sessions to push to 13600 yesterday. I believe that 12500 was a bottom and we may only see a correction back to 13000 from the current 13450. If so I would like the long side at 13000, risking below 12400.
Coffee: Coffee is another market which fills the bill from the general softs commentary. Let’s throw out the one day spike to 11600 and for the most part September coffee has held the 12200-12400 level. The last 3-4 weeks saw a steady climb higher which enabled futures to reach 13700 last Friday. Naturally, being this softs complex it has taken just two days to fall back below 13000 here today. So I believe you can see what I meant earlier as to whether this group is just pulling back after the rallies to continue higher, or if the rallies were just short covering and now we will head lower. In the case of coffee if we do come down a bit more to 12600 and hold, I would feel OK with a buy near that price.
Livestock: We are showing signs that the long down turn may be ending for cattle while the three-month long rise for hogs may be nearing an end.
The words from last time took hold as hogs saw a hefty drop while cattle made a quick run to recent highs. Hogs I believe can still be sold after corrections but a negative cattle on feed report Friday put an end to that budding rise.
Live Cattle: Since peaking near 12800 last month August live cattle first flushed out hard to the 11300 level and have consolidated between 11250 and 11700. As long as we continue to hold above 11300 the chances are we will see a run to 11700 from the current 11400. Use a dip to 11310 to consider a long, risking below 11200.
August cattle did make it to 11240 since last time and popped to 11867. It could not dent major resistance at 11900 and last Friday’s cattle on feed was bearish with 16 % more cattle added to the feed lots than last year at this time. Expectations were for 3.5 % more added. This sparked a two-day drop back to 11345 yesterday. However, cattle tend to rise as feed such as corn is dropping for the short-term at least since animals can stay on the lots longer beefing up and this causes a short-term lowering of supplies. Grains fell hard yesterday and today which has enabled August futures to hold above yesterday’s lows so far. I would prefer a sell into rallies for October futures now since the huge numbers placed on the feedlots will weigh on prices over time.
Feeder Cattle: Commentary for feeders will copy that for live and the market action of late is as follows. After bottoming at 14100, August feeders soared to 15600 while live was testing 11900. The bearish cattle on feed sparked a two-day dip, bringing futures back to 14730 earlier today. As with live the long-term implications of a huge feedlots placement will weigh on futures. I will be watching the October feeders and if 15000 cannot be breached on top, a long-term short may be in order.
Lean Hogs: After bottoming at 6960 in mid April August hogs went on a steady climb which showed a blow off top at 8545 early last week. We have fallen back to 8200 so far and if we see a close below 8200 further down to at least 8000 down to 7800 is possible.
Futures did make it to 7960 since last time and so far have rebounded to 8125. Let’s switch over to October hogs now. They rose from 6250 to 7250 since mid April until early July when the downturn began. We did break below 6600 yesterday before a late rally brought them back to 6675 near the close. There is strong support at 6550 which I expect to see broken. If so further down to 6350-6250 is expected. These appear to be a nice short at 6725, risking above 6850.
Questions? Ask William Frejlich today at 312-264-4356
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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
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