April 17, 2017
S&P 500 stock index futures: The monthly continuation chart for nearby S&P 500 futures shows prices are in a steep six-year-old uptrend. There are no early technical clues on the monthly chart that prices are close to topping out. However, it’s very reasonable to assume that the vast majority of the price gains during this record-setting bull run are already in the bank. The risk for the market now is much more for a big downside move than for a big upside move.
U.S. Treasury Bonds: The monthly bond chart shows prices have backed well down from the record high scored in July of 2016. However, a 23-year-old price uptrend remains firmly in place. Until proven otherwise on the monthly T-Bond futures chart, this latest downturn in prices is just a corrective pullback in a longer-term bull market. That being said from a pure technical perspective, it’s still my bias that the bond market has put in a major top and that more downside price action is coming. It’s also my bias that inflation is creeping back into world economies and markets, but the inflation is still very manageable on not problematic.
U.S. Dollar Index: The monthly chart for nearby U.S. dollar index futures shows a longer-term price uptrend is in place. Prices in January hit a 14-year high. The bulls are still in firm longer-term technical control, to suggest still more price gains in the coming months, or longer.
Euro Currency: The “common currency” is in a steep nine-year-old downtrend on the monthly chart for nearby futures. Longer-term technicals suggest the Euro currency will reach par with the U.S. dollar—at the 1.0000 in the coming months, or a bit longer. Bears have the solid longer-term chart advantage in the Euro currency.
Gold: The monthly continuation chart for nearby gold futures shows that prices are still in a downtrend. However, prices have just moved right up to trend-line resistance. Over the coming few months, it will likely be determined if gold can break the longer-term price downtrend. It can be argued that a bullish head-and-shoulders bottom reversal pattern has also formed on the monthly chart for Comex gold futures.
Nymex Crude Oil: Prices have rebounded from last year’s low of $26.05 a barrel. However, there are stiff shorter-term and longer-term technical resistance layers as crude oil approaches $60.00 a barrel. It’s my strong bias that crude oil prices will trade between $45.00 and $60.00 a barrel for quite some time to come—barring any extreme geopolitical event that could produce a brief spike in prices.
Corn: On a longer-term technical basis, as seen on the monthly chart for nearby futures, corn futures prices are trapped in a trading range between around $3.00 and $4.50. Bulls and bears are on a level longer-term technical playing field. It will take a big weather market scare in the U.S. Corn Belt this spring/summer to push prices above that trading range.
Soybeans: The monthly soybean futures chart shows prices are in a longer-term downtrend and the bears have the longer-term technical advantage. Strong longer-term chart support lies at $8.00. It is my bias that a longer-term market bottom is in place.
SRW Wheat: The monthly soft red winter wheat chart also show prices are in a longer-term downtrend. However, it’s also my bias that wheat is at or very near a major market bottom.
The Voice from the Tomb
By Jim Wyckoff
For me, one of the neatest things about being involved in the futures industry is the study of futures markets trading history. The longer I am in this business, the more I look to history for clues that will help me gain that all-important trading edge. Some in the futures industry are busy cramming all sorts of raw data into big spreadsheets on high-powered computers, to get mathematical correlations or some other type of statistical analysis, in hopes of finding of the “Holy Grail” of trading.
Not me. I re-charge my trading and analytical batteries by reading old and tattered and many times hard-to-find books on markets and trading. Usually, the older and more tattered the book, the more interest I have in reading it.
Early in my career, I spent time working on the trading floors of the Chicago Board of Trade and Chicago Mercantile Exchange. I always enjoyed listening to the veteran floor traders share with me some of the lore of the trading pits. The old sayings and superstitions of the trading pits–especially the grains–are indeed fascinating. Below is one bit of trading lore I will share with you, and it goes something like this:
The Voice from the Tomb
An old and very successful grain trader lay on his deathbed. As he neared the end, he called his family members into the room. He told them they would find their most valuable inheritance in an old strongbox. Hoping to find cash, gold or precious jewelry, the family members instead discovered an old scrap of paper, on which the trader had written:
Voice from the Tomb
|Buy Wheat||Sell Wheat|
|February 22||January 10|
|July 1||May 10|
|November 28||September 10|
|Buy Corn||Sell Corn|
|March 1||May 20|
|June 25||August 10|
The old scrap of paper did not provide any further details. And it’s not known whether family members ever made a fortune from following the trading advice written on the scrap of paper in the dead trader’s strongbox. However, there are many present-day grain traders who do pay close attention to those dates written down, as they do correlate with historical seasonal price movements in corn and wheat futures.
I have many readers who work on the futures trading floors in the U.S. and other parts of the world. If you have a bit of trading lore you would like to share with me, please do. I may research it and write a feature about it.
That’s it for now. Next time, we’ll examine another important topic on your road to more trading success.
Disclaimer: There is a risk of financial loss in futures and options trading. Futures trading is neither easy nor an easy way to make money. It takes hard work to have success. Please use sound money management when trading futures. Past performance is not necessarily indicative of future results. Nothing in this newsletter is intended to be a trading recommendation for you to buy or sell futures or options. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed. Readers are solely responsible for how they use the information in this newsletter.