How is your weekend so far? Mine has been relaxing and good so I hope you are having a good one as well.
Alright lets proceed with the weekend updates shall we? :)
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S&P 500 Futures - /es
We traded to these following levels this week:
Opened: 1322
High: 1334.25
Low: 1273.50
Closed: 1273.75
Our levels for last week was:
Possible Weekly Upper Range: 1343
Possible Weekly Lower Range: 1250 and an outer chance to reach 1220.
If you haven't read last week's update, you can click here.
So.. what a week we had. Last weekend, I said that the 1336-40s level would be very strong resistance points and if buyers want this to go up, they need to push this way above this level to convince other buyers to come back in and if they failed, sellers will come back to take back control of this market. We only touched a high of 34.25 and no higher. We also said that with the Euro zone crisis kicker, the risk vs reward remains on the downside. We were right on both counts.
Happily, I am also positioned on then short side, so all is well for tomorrow's opening. :)
However, price fell short of our low of the week, but that is ok. I hope we will fall further next week, but I just want to highlight that we are now approaching the congestion period of last year. Price are not going to be falling straight down through here if there aren't any strong news or reason.
And should we break further, I'm looking for the 200ema in the weekly to hold at about 1224. I want to highlight here that down move sometimes can be really violent and a capitulation may overshoot our target easily should it happen. I am not suggesting that it will happen next week. I am mainly just highlighting to you how price behaves during a down move - fast and furious.
So.. what's in store for next week? That's the million dollar question again.
For me, with so much negative news on the horizon, the risk vs rewards remains on the down side and I am position as such. But I would also take note of the congestion period that we are approaching now and be aware of possible pause or bounce there. We will let price action be our guide. With price falling through the floor last Friday, I think that would have alerted the policy makers and talks of a possible stimulus and easing is on again.
But in any case, I feel that the cracks of failed policy and slowing growth of the world economy is just starting to show through. I'm hoping that this is just the begining! :)
Oh also, the 200ema area of 1224-1200 area also has a major bottom trend line there so its going to take some strength and negative news to break through that area. So just be aware of these levels.
Here are our levels for next week:
Possible Weekly Upper Range: 1318
Possible Weekly Lower Range: 1220 and an outside chance to touch 1200.
Let's move on to the CME grains.
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Soybean Oil Futures
We traded to these following levels this week:
Open: 50.19
High: 50.74
Low: 48.33
Closed: 48.70
Our levels for last week was:
Possible upper weekly range is: 52.50
Possible lower weekly range is: 48.30 and an outside chance to touch 47 should we break further.
Wow.. we called the low of this contract almost to the tick once again. Our projected low of the week was 48.30 and we touched a low of 48.33. Amazing what support and resistance levels can indicate to you isn't it?
So... the down trend remains intact.. we have about 8 weeks worth of red bars in the weekly chart. Last year I went to a candle stick class by Conrad of Singapore and he was talking about Fibonacci numbers. After 8 weekly red bars, according to Fibs theory, the next bar or the one after that has a high probability of being a green bar. What this means is that, you need to be aware of possible pause in this decline although the trend is still clearly down. Puzzling huh? That's what theories and indicators can do to your trading mentality.
Personally, I prefer to let price action be our guide. I would identify the possible levels of support and resistance and see how price reacts when it reached those areas.
This 48.30 area is very crucial and the bulls would need to hold and defend this area. A failure to do this would see price decline in a rapid pace which will effect other grains product including our FCPO. So two possible scenario here: 1) Longs manage to defend this area and we will go back up, which will see a bounce in our FCPO too. 2) A break down from here and things would remain ugly for a while more.
However, should we break further, I think the 200ema area of 47 should hold and if we break even further, I think the long term lower trend line at 45 should hold. If this contract breaks below hard along with Soybean, I think it would drag our FCPO down to the 2800s level too. So we will be following this contract closely.
Here are the levels for next week:
Possible upper weekly range is: 51
Possible lower weekly range is: 47 and an outside chance to touch 45 should we break further.
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Soybean Futures
We traded to these following levels last week:
Opened: 1383
High: 1402
Low: 1317.50
Closed: 1343
Our levels for last week was:
The possible upper weekly range is: 1450
The possible lower weekly range is: 1312-1300 area.
Alright.. we almost got the low if this contract this week too. Our projected low was at 1312-00 area and the low for this week was 1317.50 which was just 5 points off in a 85 points range week which is quite ok to be honest.
Last week, we were biased from sideways trading to slightly downside for this contract. And we also said that should we break further, the 50ema area should hold at around 1312-1300 level. Price really cracked and made new lows during Friday afternoon Malaysian time. The low was actually at the 50ema area. Price recovered a lot of its losses during cash trading at night. The low was also just above at the 200ema in the daily chart. What I want to point out here is the effectiveness of the few ema that we are using to gauge the levels of the market.
Alright.. What can we expect from this contract next week?
The trend is still clearly down, no doubt about that. But I think there will be some support levels below here. If we break down further, we will reach the low of the consolidation pattern of the first part of of last year around the area of 1300 as represented as the yellow line in the chart.
We will follow this contract closely because a break below would drag our FCPO lower and a bounce here will do the same for FCPO too.
On a side note, I am looking at the possibility of price bouncing and trading within a range of 1300 and 1450 should this support hold in the coming days.
Here are the levels for next week:
The possible upper weekly range is: 1415
The possible lower weekly range is: 1300 and an outside chance to touch 1275 should we break further.
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Wheat Futures
We traded to these following levels this week:
Opened: 675
High: 684
Low: 611
Closed: 618.25
Our levels for last week was:
The possible upper weekly range is: 725
The possible lower weekly range is: 623
Last week, after the strong performance in the wheat contract, we said that there was possibility that this contract might try to push up higher. But the upper triangle trend line was too much for price to overcome.
We also said that should the other grains perform weak this week, it would pull this contract down to the choppy range around the 623 level. Price not only pulled this contract down but even exceeded the 623 level and made a low of 611.
What this shows you is that, when price has been trading in a choppy range for a long time, and you have a strong break out from the choppy range, look for the possibility for price to do a head fake and pull back into the choppy range again especially if there are strong resistance ahead just like in this contract where the upper triangle pattern trend line was.
So, nothing much for this contract once again. We are back to range trading and can not derive much indication from this contract other than during intra-day price action.
I am looking for support at 591 to hold but should we break further, the 567 area should hold. A further break from the 576 area would spell trouble for the longs.
Here are the levels for next week:
The possible upper weekly range is: 690
The possible lower weekly range is: 591 and an outside chance to touch 576
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Corn Futures
We traded to these following levels last week:
Opened: 580
High: 583.75
Low: 551
Closed: 556
Our levels for last week was:
Possible upper weekly range: 655
Possible lower weekly range: 542 and and outside chance to touch 529 should we break further.
After price testing the 575 for 3 times in 3 weeks in a row, price finally broke through. This really is bad news for the longs in the market. A further decline in Corn will pull the other grains down further which will also effect our FCPO prices.
However, the one good news is that the 200ema down below should provide some measure of support still. So there will still be some support below here. But if we break further still, I think things could get really ugly and we could be looking at the 450 area in the coming days.
So we will be following this contract closely as we have finally broke down from the range trading area. A strong decline in this contract would effect the other grains accordingly.
Here are the levels for next week:
Possible upper weekly range: 635
Possible lower weekly range: 529-519 area and 507 should we break down further.
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Have a good Sunday everyone. See you in the morning updates tomorrow morning! Ciao!
Best Wishes,
Tech Trader
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