Wheat: 05Apr Wheat is by far the Grain e track that is currently under the most pressure. Trend, Momentum, ROC and RSI are headed lower. Additionally, on our Momentum measure going back to late December, each positive shift has peaked at earlier and lower. This is in a period of a modestly negative bias in what has been largely range trading.
May’s Volatility has peaked just below the High range (< 1 STD).
Pay attention to the harvest in Winter Wheat as it moves ahead of schedule due to warm weather and the plants benefit from rain in both Europe and the US.
This market has been in a gently falling bearish pattern for the last 2 months since peaking on 2/1. On a longer-term view, the bearish dynamic has been in place, albeit with a sizable range, since February 2011.
Volatility is now close to High (> 1 STD higher than Average) indicating there may be opportunities to sell premium in options.
Seasonal Snapshot: All 3 patterns enter a brief upwardly biased period until April 5th. The 5-year then continues in a pattern that ultimately peaks on April 25th. The longer 15 and 30-year patterns change direction on the 5th, entering into a very modest declining period until the same April 25th.


Interest Rates: 05Apr Poor European data and the hangover from what essentially amounts to a failed Spanish bond auction set the tone and contributed to more “risk off” trading, supporting the longer end of the yield curve’s price structure. Bigger picture, Bonds and 10yr are still consolidating their recent steep losses. Today’s strength has not been enough for Bonds to sustain its probe above the 21-day moving average. Both the Bonds and 10yr found some resistance where they struggled at the end of Mar: Bonds 139-00 (also the 200-day moving average. 10yr 130-00. A sustained higher high would be constructive.
Our Trend and Momentum indicators are both now pointing higher. Shorter-term charts reveal stronger Volume on the bounces, though it will take some time to see if this is a turn or just a correction before more negative action.
The Bond’s 21-day moving average has led the cross below the 200-day. The 10yr’s seems to be turning today, as of this writing. A return to more weakness targets the previous lows:
Bonds 135-05
10yr 127-23
2yr 109-27.5
With the Fed seemingly allowing events to play out for now, and merely “jawboning” the markets at this point, reality starts setting in. An ugly reality of too much debt, not enough jobs, and political impasses abounding.
Given that our tracked 2yr depends on the Fed’s Overnight Rates and the Bonds are not a benchmark any longer, the Tens are really, at this point, the ultimate contract that reflects the Fed’s policy stance.
This may be an opportunity for directional positions, but keep stops tight or explore option purchase strategies, as Volatility is starting to expand (the 2yr’s is now “very hi” based upon our measurement).
Seasonal Snapshot: All three patterns in the Bond are a consolidation phase with an upward bias that extends well into April.
The 10yr has a strong, upward bias in all three patterns until early April.
The 2yr’s 5& 21yr patterns have an upward bias until 18Apr while the 15yr pattern is in a wide consolidation phase into May.


Metals: 05Apr Modestly stronger, but “inside” day in the sector after Gold led the charge to the downside. It has displayed weaker tendencies (lower highs and lows) since topping out at the end of Feb than its sector counterparts… all of which (Silver, Platinum, Palladium and Copper) remain stuck inside their two-month consolidation ranges.

Gold: 05Apr Though our Oversold measure (30) still has room to the downside, Gold is recovering the steep losses. Look for resistance at a 38.2% retracement of the decline (1640), then 50% (1649), when we adjust for yesterday’s for the low (1613). Additionally, as we noted last night, the falling 21-day moving average (1669.5) is now well below the rising 200-day (1696.7). Both should offer resistance.
That said, shorter-term charts reveal much stronger Volume on recent weakness and keeps our focus on the rising trend line (1595) that extends back to Oct 2008 that we have been watching for quite a while now… drawing ever closer to the psychological 1600 level. We remind readers that the market found support at this trend line during the last hard sell off (to 1523.9 on 29Dec).
Seasonal Snapshot: All three patterns consolidate with an upward bias well into April.

Copper: 05Apr The best advice we can offer is to nibble at the edges of the month-and-a-half consolidation range, bound by 374-392 with tight risk controls. We have been harping on our unstable Momentum indicator, which has gone negative (again). The one thing we can say is that it has been skewed to the downside ever since going negative in early Feb. This is the fourth time it failed to sustain a positive turn over that time period.
If the consolidation is a symmetrical triangle, and a continuation pattern, a break out above on stronger Volume projects above 460, but a test of the August 2011 high (420) will come first.
Seasonal Snapshot: A month-long rally in all three patterns gave way on 05Mar to a consolidation phase with a modest upward bias until mid April.


Softs:
Cocoa: 05Apr A developing “inside day” has the market sustaining its break out below our noted large symmetrical triangle bound by 2160-2420. Although Volume seems to be a bit weaker on today’s modest strength, it has been generally stronger on this dip. If the triangle is a continuation pattern, the formation projects a move down to 1460, similar to the action after last fall’s prolonged consolidation. A test of the Dec low at 2005, and psychological support is first in line.
Our confused technical indicators are all currently tipping negative on the fall towards rising trend line support (2160). At our current measure of 19, the market is getting Oversold, but is no match for the 1 we saw in early Dec.
ICE exchange stocks at 5yr highs should keep a negative tone to the market.
Seasonal Snapshot: The longer-term 15&30yr patterns are in a falling mode until 10Apr while the 5yr consolidates with a modestly weak bias.

Coffee: 05Apr The May contract continues to hug the falling 21-day moving average (183.45), but in wild fashion. Our Volatility measure is above average. Another developing “hanging man” candlestick today would sandwich yesterday’s wide doji formation and signals potential topping action. This would keep with the decline, consolidate, decline, etc dynamic that has been in place since topping out near $3 last Sep. Our falling Rate of Change has some work to do before it can drag Momentum, and therefore Trend, negative.
We can add a large, spec short interest to roaster “bargain hunting”, dry Brazilian weather and a supply deficit as likely supportive factors, although yesterday’s remarkable rally off the lows may have shaken out the weaker hands.
We remind readers that the market has been using the average as resistance since breaking below in mid Jan. A sustained break out above the average, and the previous consolidation range, capped at 188.50, targets the previous consolidation range (197.80-207.25 from 16Feb-02Mar).
If this fails to materialize, a test of the previous lows, 29Mar: 175.90 & 22Mar: 174.45 should be in store. Weakness below these levels prompts us to widen charts out a bit. We note the 50% Fibonacci retracement of the Dec 2001-May 2011 rally at 173.70. Additionally, the market topped out at 169.80 in Feb 2008 before commencing its run to $3.00.
Roasters should investigate low (but rising) Volatility to investigate option strategies to protect upside risks. Please refer to the link on our web site for more information:

Seasonal Snapshot: All three patterns consolidate until they resume their down trend 05-16April.

Cotton: 05Apr An overnight probe above the falling 21-day moving average (90.00) has failed as of this writing. An equivalent “swing” back below the average targets the mid March lows at 87.75. Our falling Rate of Change has our Momentum indicator on the cusp of going negative.
Negative outside forces are likely causing some long liquidation, but watch for more information on last Friday’s USDA projection of shrinking planting areas.
Look for resistance at 94.50 where the market has failed to break out above three times since Feb. If it does, watch the falling 200-day moving average (96.25).
Seasonal Snapshot: Strong downward bias in all three patterns lasts well into the May contract’s expiration.

Sugar: 05Apr No “bullish engulfing” candlestick pattern yesterday still keeps the market on the defensive and struggling on a probe to the 21-day moving average (24.75). A “swing” below targets rising trend line support (23.50) that goes back to mid Dec in the continuous contract. A sustained break out below, targets the ascending series of lows: 23.26 (12Mar. 22.85 (01&02Feb. 22.43 (late Dec. 22.25 (15Dec). Below these levels, it’s anchors aweigh down to 20.40 (May 2011).
Our technical picture has tipped negative and is not Oversold. Additionally, a large spec long open interest and ample supplies keeps the market vulnerable to more weakness.

Seasonal Snapshot: The 5&15yr patterns commenced a quite negative bias on 27Feb and lasts until mid-April. The 21yr pattern consolidates with a negative bias.



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Past performance is not indicative of future results.