I hope that everyone has had a great weekend! So lets get started and see whats in store for us in the coming week!
We will first start off with the major economic data that might effect the market in the US.
On Monday, some of the major market such as Europe and UK are closed for the Easter holiday and we also have old boy Bernanke speaking. Tuesday we have some data but nothing too big, Wednesday we have a host of numbers such as the Beige Book and Federal Budget Balance which ranks medium in terms of its effect on the stock market, Thursday we have a few major numbers such as the PPI, Trade Balance and Unemployment Claims, and lastly on Friday, we have Core CPI, Prelim UoM Consumer Sentiment and Old boy speaking again.
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We'll start with the S&P500 as usual.
Wow.. What an end to the week! We were trading at the support area of 91 after Thursday night and on Friday, market was closed. However, the futures market was still trading until 9.15pm our time. After the jobs number came out, futures just sank and we closed as a big red bar for the week. Remember during last week we mention that if there are any big news coming out market might trade outside of the possible range. Also, market has now broke through our lower channel trend line to close just at the second less steeper trend line and it was not able to trade above the highs of the previous week too.
When a trend line becomes less and less steeper, it basically signifies the weakening of the market generally as prices were able to make lower lows. Last week we also said that breaking of the trend line to close below 80 is a red flag and might signal a potential pullback swing. We close the week at 1375.
Now, is this going to be the mother of all reversal? Unlikely. But still, market can't keep going up in a channel forever ya know.. at some point, the buyers will have to take profits while bears establish new position to short the market which will depress price a bit.
But it really seems like this is its the first time we closed the week down strongly since the beginning of this year!
Ohh, one thing that I would like to point out here.. If you were trading the FKLI futures and you did not close your long position, you are in for a rude shock tomorrow morning. This is the danger of holding a position over the weekend. The uncertainty brings with it potential for higher profits but also losses. Therefore, you need to try to have as much factors in your favor as possible if you're considering to hold any position over the weekend. Of coz, the shorts will be laughing come Monday morning.. :)
So whats in store for next week?
Ok, when we break a major trend line, it doesn't necessary automatically translate into a short position for the week. We still need to let price action be our guide. The reason is because often enough, price break out of a trend line only to quickly pull back into the original direction which cause the bar to close with a tail. But in our case, last week closed pretty much as a strong red bar. So I think it is reasonable to think that a pullback swing is in store. We have a couple of support points below and are still trading above the 20ema. If this pull back should materialize, I think the 20ema should hold nicely.
The possible weekly range the this contract are:
Upper weekly range: 1408
Lower weekly range: 1336
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Ok Lets look at the 4 CME grains that we are tracking next.
There are also a host of other economic data relating to the grains being released everyday of this week. Kindly refer to the link on the right bar for the USDA report schedule or by clicking here.
Soybean Oil Futures
Alright.. We were trading near the resistance of the broadening wedge of 56.20s for most of week before finally closing strongly above it at 56.70 which is the upper resistance of the major triangle pattern on Thursday. No doubt a strong close for the week with a healthy big green bar.
Will we be able to break above? Well, it remains to be seen. While the price of the Soybean Oil futures do look strong, the upper triangle trend line will likely have to be overcome conclusively before we can consider it as a breakout of the triangle.
We might break above the upper trend line and pull back into the pattern after that unless there are sustained buying pressure. And should this pull back happens, the stops of the early longs will further accelerate the push back into the pattern.
So it remains to be seen what will happen. We will let price action be our guide.
Upper weekly range: 57.40
Lower weekly range: 54.80
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Soybean Futures
Alright, Soybean Futures had a strong finish to the week too. This contract was trading near our upper resistance of 1429 but was not able to close above it until on Thursday at 1432.25.
So it is interesting to see what will happen next. The close is actually above of the upper triangle trend line. Will we be able to continue upwards? Maybe.. Soybean has been the strongest performer among the 4 grains that we are tracking.
A sustained breakout of the triangle should meet with some selling at the yellow resistance level drawn as the yellow line in the chart at about 1450.
Since all of the price action of these grains will have a close effect on our FCPO, we will want to monitor them closely.
Upper weekly range: 1450
Lower weekly range: 1385
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Wheat Futures
Alright now for the Wheat Futures... guess where we are trading now? Surprise surprise!! We are trading within the smaller triangle! Ta-daaa!
Yes we are still trading within a range for this contract. No conclusive break on either side of its triangle yet. Probably soon? Or will we chop all the way to the end of the small triangle?
We are now trading at the lower trend line of the small triangle. We closed the week with a big red bar. So until we have a conclusive break outside of this smaller triangle, and then, outside of the bigger triangle pattern, I think price will remain choppy.
Here are the possible levels for the week:
Upper weekly range: 671
Lower weekly range: 608 which is the convergence of the lower flag trend line and the lower trend line of the main triangle.
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Corn Futures
Alright and lastly, we will look at Corn Futures. Here is another contract that is still trading within its smaller triangle. However, we closed the week positive but as a small bar. Price can't remain as a small bar forever. It has to break out at some point and its just a matter of time.
So the question we need to ask is, when will we break out from the small bar, and where? We tested our upper resistance area of 664 last week but can't close above it yet. But corn does demonstrate more willingness for upside strength.
So, if the Soybean Oil and Soybean Futures can pull higher, perhaps Corn will have a chance to ride along and break and close above its immediate resistance of 664 and test upwards.
Here are the weekly range for corn futures:
Upper weekly range: 676
Lower weekly range: 633
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Alright, looking forward to the week ahead. Remember that we can only read what the possible outcome are from the charts. Do not discount the possibility of prices trading outside of these technical ranges as new information comes in daily. We will let price action be our beacon and trade accordingly to it. I will update these changes in our daily market update.
Wishing everyone a great weekend and I'll post the weekly update for the local update in the next post!
Ciao! :)
Best Wishes,
Tech Trader
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