Weekly Newsletter: October 17, 2017
Nymex Crude Oil: See on the weekly continuation chart for nearby crude oil futures that prices have rallied the past couple weeks and are now in the upper boundary of a well-defined, sideways trading range. With prices now just above the key $50.00-a-barrel level, it’s very likely that price advances will be much tougher, as stiff chart resistance levels now lie just above the market. It’s my bias that Nymex crude oil prices will remain trapped in the sideways trading range between $42.00 and $55.00 for at least the next few weeks, and probably longer.
Copper: Prices have just hit a 3.5-year high and have been trending higher for the past two years. Bulls have the solid longer-term technical advantage and there are no clues to suggest the price uptrend will end any time soon. Copper is an important industrial metal worldwide, the fact that the red metal’s prices are trending solidly higher suggests at least a couple things: World economies are generally on the upswing, and inflationary price pressures are also on the rise.
U.S. Treasury Bonds: The bond market has backed well down from this year’s high. The specter of rising inflation and higher interest rates around the world have been bearish for the bond market. However, U.S. Treasuries are still highly valued as safe-haven assets during keener geopolitical uncertainty. The above two forces are likely to keep T-Bond and T-Note futures in a choppy and sideways trading posture into the end of the year.
S&P 500 Stock Index: The U.S. stock indexes have been trending higher for nearly two years and have just this month set new all-time highs. Why is it that the stock indexes keep moving higher and with little volatility and not even many downside corrections? My take is that the stock market is “the only game in town” for most investors. With inflation being so low, other assets, especially hard assets like raw commodities, have provided little return the past few years. The stock indexes appear to be blowing through the historically turbulent and bearish months of September and October with nary a speedbump hit. There are no strong technical clues to suggest the U.S. stock indexes have topped out or will see bear markets develop any time soon. However, stock market history shows a day of reckoning for the bulls will come—we just don’t know when. The fact that traders and investors have become complacent (evidenced by the low volatility in many markets, including the stock indexes), is a psychological clue that maybe there is not much upside left in this record-setting bull run for stocks.
Euro Currency: Since mid-summer the Euro currency has traded choppy and sideways, after hitting a two-year high. The Euro currency bulls still have the longer-term chart advantage, even though the market has paused the past two months. A drop below chart support at the 2016 high, as seen by the line on the chart, would produce longer-term chart damage to then suggest that a longer-term market top is in place.
Corn: The daily chart for December corn futures scored a bullish “key reversal” up last week, for a near-term technical clue the market has bottomed out. The weekly continuation chart for nearby corn futures shows prices are right in the middle of a wide trading range. A bear flag has also formed on the weekly chart, with downside measuring projections of around $3.00 a bushel. However, it’s my bias that will not occur. Grain market traders need to keep a close eye on raw commodity sector leader crude oil. With crude oil back above $50.00 a barrel, that’s also a clue that the downside is limited for grains, at their present price levels.
Soybeans: Like corn, there are near-term technical clues (on the daily chart) that prices can continue to work higher in the coming weeks. The weekly soybean chart shows that nearby futures prices need to push above the summertime high of $10.27 3/4 to gain longer-term technical power to suggest prices can sustain a longer-term uptrend.
SRW Wheat: The weekly continuation chart for nearby soft red winter wheat futures shows that prices are trapped in the middle of a wide and choppy trading range. It’s going to take a move in nearby SRW futures above major chart resistance at $5.00 a bushel to provide the bulls with good longer-term technical strength to suggest a longer-term price uptrend can be sustained.