Futures Outlook: 06/3/13
Bearishness in notes has been warranted: the 10-Year T-Note dropped from 131-31 to 128.6 by May 29th. This is important to us for a couple of reasons. First, it pushed in the direction that we wanted. Secondly, it is truly to your advantage to understand that these prices can and will move without the government changing rates. When the government does change interest rates it may cause an even larger move, but the bottom line is that market forces can and do make these price points change even in absence of rate alteration. You should absolutely be aware of this. In addition, don’t forget that using options in a fixed risk structure allows you to participate while knowing exactly what your risk is and while allocating less capital than many other investment scenarios.
Per the last article on T-Notes:
“Per the Daily chart you can see that we had a failure in March and then April into May brought us a bit higher. We are now seeing the failures that have broken the ascending trendline on the daily chart. There is momentum here to the downside. If this momentum continues then you will build a further breakdown on the Weekly chart.”
Per our Weekly chart, The 131 territory is a level that I would like to see broken down cleanly. Keep in mind that the play that I am talking about here is not for a day to day scenario, but rather a longer term play. If you decide to play these short term, you will want to pay attention to the Weekly chart and the Monthly chart, but your Daily chart would become paramount.”
(Historical chart from 05-13-13 in prior article.)
I mentioned the need to break the 131 level in a clean fashion and we certainly did that. I also mentioned that if you were evaluating it on a shorter term basis you would want to watch your daily charts. I am hoping that if you did take a play on this that the move served you well and that if you have been watching your daily charts you realized that there is now a little bit of retracement on those charts which may have led you to exit your position well.
You can see on the current Weekly chart the impact the selling pressure has had:
I have highlighted in blue our price point territory at the time of the article and in green the distance we traveled on the push lower that we received. At this time, we are coming up a bit, so it is a good time to watch and wait for additional failures to come our way. Allow it to retrace as much as it wants, but stay ready for the next push down.
When I wrote the article “Is it time for Corn to pick up the slack?” I spoke about its potential to rally from the 636-4 level where the prices were at the time. I have highlighted on the Daily chart below, the run that we have seen since that article.
It pushed upward from the 636-4 territory to highs around 670. It was a nice push for us and I hope that some of you were able to take advantage of the move.
We are still bullish on corn. However, I want to raise a red flag here for the charts that we have now from a Daily picture perspective. This red flag may present a new trading opportunity and direction for some, but also should be a heads up for anyone that is holding any type of long side position on corn.
On the daily chart, I am keeping an eye on a potential for head and shoulders action. It is not a perfect head and shoulders pattern, but if it turns out to be true then you might see corn quickly retrace the upward move and take itself back down toward the 630’s and maybe even test a psychological support level of 625.
Bottom Line: Our views on T-Notes and Corn have not changed, but they may be ready for decent retracements.
In this world that lives through Commodities and Futures daily, these markets are much more than what you need to survive. They are what you can utilize to thrive.