Cotton Futures—Cotton futures in the July contract are trading lower for the 5th consecutive session down another 85 points at 75.85 as I have been recommending a bearish position around the 75.78 level and if you took that trade continue to place the stop loss at 79.57 as an exit strategy. The agricultural markets especially the soft commodity sector continue to be bearish as I’m also recommending a short position in sugar as the Brazilian Real continues to remain weak against the U.S dollar as that is a negative influence on prices.
Cotton is trading below it’s 20 on 100 day moving average as the trend is to the downside as the volatility is starting to pick up as planting is in full swing in the southern part of the United States as the weather will be the main dictator of where prices go over the next several months.
If you take a look at the daily chart I believe a rounding top chart pattern has formed as that is a bearish technical indicator and one of the main reasons why I am recommending a short position at this time.
The next major level of support is around the 75.00 area and if that is broken I think we could test the contract low which was hit on February 12th around the 72.50 level as there is room to run to the downside in my opinion.
CHART STRUCTURE: SOLID
Coffee Futures—Coffee futures in the July contract is currently trading higher by 50 points at 91.60 a pound as prices are still stuck in a 3 week tight consolidation with very little fresh fundamental news to dictate short-term price action.
The chart structure in coffee is outstanding as we have traded in a 500 point range over the last 3 weeks as I am currently sitting on the sidelines waiting for a bullish position, however if you think a bottom has been formed I would buy it at today’s price level while placing the stop loss under the 14 year low at 89.00 as an exit strategy as the risk would be around $1,200 per contract plus slippage and commission.
At the present time I have short recommendations in sugar and cotton as I’m also bearish the orange juice market, but I do think the downside in coffee is limited, but I will be patient and wait for a breakout to occur which could happen soon.
We are now entering the frost season soon for coffee as in 1994 we had 2 touches of frost that sent coffee from around 75.00 to around 250,00 in a matter of a month as I think a price premium might start to be put into this market or at least the downside is limited until after the frost risk.
CHART STRUCTURE: EXCELLENT
Copper Futures—Copper futures in the July contract is trading lower for the 2nd consecutive session down 200 points at 2.7815 a pound as I have been recommending a bearish position from around the 2.8250 level and if you took that trade place the stop loss tomorrow at 2.9385 as an exit strategy.
Copper prices are right at major support between 2.76 / 2.78 and if that is broken I think we could test the contract low which was going on January 3rd at 2.56 as there is room to run to the downside in my opinion. The U.S dollar is up 15 points today continuing it’s bullish momentum as I’m also recommending a bullish trade in that currency as the precious metals have come under significant pressure this week.
Copper prices are trading far below their 20 and 100 day moving average as the trend clearly is to the downside as the volatility certainly has expanded once we broke out of the 10 week consolidation pattern that we experienced.
Copper historically speaking and be a very trendy commodity as that is exactly what I’m hoping for in this situation as many sectors still remain very bearish as it is tough to find a bull market out there except for the stock market so stay short.
CHART STRUCTURE: IMPROVING
Soybean Futures—Soybean futures in the July contract has traded lower for the 5th consecutive session as this market remains very bearish in my opinion and looks to head even lower as there is nothing bullish fundamentally or technically speaking at this time.
As I write this article the state of Illinois has rained significantly over the last 5 days as flooding is starting to occur throughout much of the midwestern part of the United States and certainly looks to me that more acres will be added to soybeans in 2019 as it looks like corn planting will be delayed.
As I have talked about in many previous blogs I think soybean prices will touch the 8.10 level possibly next week and if that is broken look for 7.75 in the coming weeks ahead as the hot & dry summer season doesn’t start till June so stay short.
Large money managed funds have record short positions in corn, wheat, and soybeans as they certainly think lower prices are ahead so if you are short stay short in my opinion as I see no reason to be buying soybeans.
CHART STRUCTURE: POOR
Why Is Chart Structure So Important ? I define chart structure as a slow grinding up or down trend with low volatility and no chart gaps. Many of the great trends that develop have very good chart structure with many low percentage daily moves over a course of at least 4 weeks thus allowing you to enter a market allowing you to place a stop loss relatively close due to small moves thus reducing risk.
Charts that have violent up and down swings are not considered to have solid chart structure as I like to place my stops at 10 day highs or 10 day lows and if the charts have a tight pattern that will allow the trader to minimize risk which is what trading is all about and if the chart has big swings your stop will be further away allowing the possibility of larger monetary loss.
Orange Juice Futures—Orange juice futures in the July contract is trading lower for the 5th consecutive session down another 135 points at 94.45 hitting a 10 year low as I still think prices look expensive.
I have talked about orange juice for quite some time and I do think prices could test major support on the yearly chart at the 75 level as I see no reason to be a buyer at this time as the trend is very strong to the downside.
At the present time I have short recommendations in cotton and in sugar as I also bearish the entire grain market as well as I see no reason to be a buyer at this time.
If you are short a futures contract I would place the stop loss at the 2 week high which in tomorrow’s trade will be 110.00 as an exit strategy, however the chart structure will start to improve on a daily basis next week therefor the monetary risk will also be reduced.
CHART STRUCTURE: POOR
Sugar Futures—Sugar futures in the July contract is up 5 points at 12.26 rallying slightly on concerns that heavy rains have slowed the Brazilian harvest as I have been recommending a bearish position from this level and if you took the trade continue to place the stop loss above 13.05 as an exit strategy.
Commodity markets in general continue to head lower as crude oil is down about $2.50 today as I think that will start to have a negative impact on sugar prices. If you take a look at the daily chart the down trend line remains intact as prices are still trading under their 20 and 100 day moving average looking to retest the January 3rd contract low of 11.99 possibly tomorrow & if that is broken look for further price declines.
At the present time I’m also recommending a short position in cotton as the entire soft commodity sector remains in bearish trends as oversupply and weak demand continues.
CHART STRUCTURE: SOLID
S&P 500 Futures—The S&P 500 in the June contract is trading lower for the 2nd consecutive session down another 4 points at 2918 rallying off of session lows on concerns about an economic slowdown.
If you have been following my previous blogs over the last several months you understand that I remain bullish the stock market and if your long a S&P 500 contract continue to place the stop loss under the 2 week low which stands at 2889, however in tomorrow’s trade that will be raised to 2899 as the chart structure is outstanding at the present time.
Investors are awaiting tomorrow’s highly anticipated monthly unemployment number which should be robust once again as the U.S economy is firing on all cylinders as I still see no reason to be short, however if the 2 week low is breached it will be time to become neutral.
In my opinion I believe the last couple of trading sessions was caused by proper taking as this market has gone straight up in 2019 & once Google came out with disappointing earnings it was a reason to sell in the short term, however I remain bullish as I’m advising clients to continue to place the proper stop loss so let’s see what tomorrow’s trade brings.
CHART STRUCTURE: EXCELLENT
Dollar Index Futures—The U.S dollar is trading higher for the 2nd consecutive session up another 14 points at 97.55 as I’ve been recommending a bullish position from around the 97.40 level and if you took that trade continue to place the stop loss under yesterday’s low of 96.87 as an exit strategy.
The U.S dollar is generally a non-volatile currency with lower risk due to the fact that it is known as a basket against all foreign currencies. The United States economy is the strongest by far in the world in my opinion as king dollar is resurrecting so continue to play this to the upside as the risk / reward are in your favor as the commodity markets continue to go lower due to a resilient dollar.
The monthly unemployment number will be released in tomorrow’s trading session as that should send some volatility back into this currency as the chart structure is outstanding at the current time as I will be looking at adding more contracts to the upside if prices break the April 26th high of 98.80 as then 100 would be the next level that could be tested.
CHART STRUCTURE: EXCELLENT
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