S&P 500 Futures—The S&P 500 in the December contract is trading lower by 18 points at 2919 as prices have remained extremely choppy over the last several months as its headline-driven at the current time.
The United States and China will be negotiating a trade agreement this week as that certainly will dictate short-term price action as fundamental speaking manufacturing has slowed considerably as that has put pressure on this market over the last several weeks.
Currently I am not involved as I’m advising clients to avoid this commodity as it is too volatile and can change on a dime so look at other markets with less volatility and a better risk-reward situation.
The S&P 500 is now trading below its 20 & 100 day moving average as the trend has turned to the downside and if you are bearish my recommendation would be to place the stop loss at the all-time high which was hit on July 26th at 3032 as an exit strategy as you’re going to have to give this trade some room due to the high volatility. The month of October historically speaking can experience many crashes to the downside and this year has been no different as we started the 1st day of October sharply lower.
CHART STRUCTURE: POOR
TRADING THEORY—This is an outstanding rule to understand as when a market trades limit down such as what cotton did in today’s trading session that tells you there is a high probability that prices will open lower on the open in tomorrow’s trading session as buying limit down is a fool’s game.
Remember when a market closes limit down there is also the chance of opening limit down the next day as that situation occurs frequently as the volatility when that situation happens explodes as that generally happens off of some type of report.
Also the exact opposite happens when a commodity goes limit up then you would see a higher probability that the next day’s opening will be sharply higher, now it doesn’t have to close higher but it will open higher so never sell limit up and never buy limit down as that is extremely dangerous in the next day’s trading session.
10 Year Note Futures—The 10 year note in the December contract is up 11 ticks at 131/27 continuing its bullish momentum as it looks to me that prices will break the contract high which was hit on September 3rd at 132 /13 in the coming days ahead.
The Dow Jones is down over 300 points today and is experiencing high volatility in the month of October and that is a bullish fundamental indicator towards the bond market as the 10-year note is now yielding 1.51% and if you have followed any of my previous blogs you understand that I think the 1% level is coming in the months ahead.
The Federal Reserve looks like they will continue to lower interest rates at the next meeting which is just right around the bend as I see no reason to be short the bond sector.
Prices are trading above their 20 and 100 day moving average as this trend is strong to the upside as there is still significant room to run in my opinion as we are at major resistance and if this is broken prices could move up to the 134/00 level rather quickly especially if the stock market or problems in Washington D.C accelerate so if you are long stay long.
CHART STRUCTURE: IMPROVING
Wheat Futures—Wheat futures in the December contract is trading higher by 6 cents at 4.95 a bushel looking to crack the September 30th high of 5.01 in my opinion as the grain market in general looks to move higher as all of the bad fundamental news has already been digested into the price.
I have been recommending a bullish position from around the 4.82 level and if you took that trade continue to place the stop loss under the September 3rd low of 4.50 as an exit strategy, however I will raise that stop in next week’s trade therefor the monetary risk will be lowered. If prices break the 5.01 level on a closing basis I will be recommending to add more positions to the upside as I still think there is significant room to run as the volatility should increase substantially in the coming weeks ahead.
Wheat prices are trading above their 20 day but slightly below their 100 day moving average which stands at major resistance at the 5.02 level as the chart structure is outstanding at the current time as we continually grind higher on a weekly basis.
Fundamentally speaking winter wheat was 52% planted as compared to last week’s 39% and the 53% average with 26% of the crop emerged so continue to play this to the upside as the grain market has bottomed out in my opinion.
CHART STRUCTURE: EXCELLENT
Soybean Meal Futures—Soybean meal futures in the December contract is trading higher by 1.7% up $5 a ton at 307 as prices are now hovering right near a 10 week high.
I have been recommending a bullish position from around the 306 level and if you took that trade continue to keep the stop loss at the contract low standing at 291 as the crop report which was released yesterday was construed as bullish as only 14% of the soybean crop has been harvested compared to 34% last year as the crop rating is only 53% good/excellent which is at a 7 year low at this time.
Presently I also have a bullish recommendation in wheat as I think corn prices are also headed higher so continue to play this to the upside as the chart structure will improve the next weeks trade therefor the monetary risk will be lowered.
Soybean meal prices are trading above their 20 day but slightly below their 100 day moving average standing at the 309 level which is also acting as major resistance and if that is broken I think prices could head up to the 320 area rather quickly especially if next week’s crop report comes out bullish so stay long.
CHART STRUCTURE: EXCELLENT
Corn Futures––Fundamentally speaking heavy snow is expected in the Dakotas and Minnesota late this week with freezing temps seen dipping down to parts of Northern Texas, but staying concentrated in the Western areas of the Plains. The weekly crop progress report as of Oct. 6th indicated that those three states showed much of the crop still exposed, with 61% of the crop in Minnesota to mature. The Dakotas have 78% (ND) and 64% (SD) of corn yet to mature. Those States account for 17.14% of estimated 19/20 crop (as of Sep Crop Production) as condition ratings dropped 1% to 56% good/excellent.
At the current time I’m not involved, but I do believe corn prices are headed higher as I also have bullish recommendations in wheat and soybean meal as I think the whole complex has turned bullish as the 2019 crop was terrible in my opinion as I think that will be reflected in the next production report which will come about next week.
Corn prices have now hit a 10 week high while looking to crack the $4 level in the coming days ahead as a long-term bottom is in place in my opinion so if you are long stay long and continue to place the stop loss at the 3.52 level which is the contract low as you need to give this trade some room as I see no reason to be short.
CHART STRUCTURE: SOLID
Palladium Futures—Palladium prices experienced another wild trading session finishing higher by $5 at 1,651 rallying off of session lows which touched 1,605 as this volatility will continue for months to come as prices are still hovering right near all-time highs.
I am currently not involved in this market, but I do have many clients who are involved and as I have talked about in previous blogs continue to place the stop loss at 1,602 on a hard basis only as we were just an eyelash away from getting stopped out today as I still believe higher prices are ahead. For the bullish momentum to continue prices have to break the October 2nd high of 1,667 as that could possibly happen in tomorrow’s trade while closing at session highs tells me to expect to open up strong in tomorrow’s trade.
Palladium prices are trading far above their 20 & 100 day moving average as this trend is strong to the upside and by far the strongest out of the precious metals sector as I see no reason to be short as the commodity markets are starting to percolate to the upside so stay long while continuing to place the proper stop loss.
CHART STRUCTURE: EXCELLENT
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