Good Morning Traders!
All indexes are back below their previous 20 day highs (bull trap) and the Nazdaq was able to take out its 20 day low. Strong downside momentum was created as the 2-period ROC made new momentum lows. The DOW has now pushed back down into the middle of its prior range (see chart above). As is often the case after a bull trap, it can now trade down to the bottom of its range and even come out the downside. This would give the weekly charts a chance for a much needed swing back down. Look for some early morning consolidation after Friday’s selling. The Dow needs to form a lower high on the hourly charts, though any upside reaction and lower high will be likely to come in around these much lower levels. Perversely, the Canadian Dollar was once upon a time 94% positively correlated with the SPs. The chart above shows how dramatically correlations can change. It recently had a bear trap and now is poised to take out the upside of a long base. A successful close above the year’s highs, can lead to a move back up into the prior range from last fall (marked off on the charts above).
Beans and Corn have continued to hold up well. Wheat is short term oversold and is at a pivotal point. If it can not close back above its daily 5 SMA< it will put it into the “extended run trend” category. There is a big crop report on Wednesday – the USDA world supply and demand report for corn, soybeans and wheat.
Crude pushed back up into a previous “pocket” and has a classic sell short day on the 2-period ROC. 100.30 is the general area it needs to hold now for the bulls if there is a reaction down on Monday.
5 year notes are testing the top of a trading range. If they can close back above it, tens will follow. Otherwise, look for strong resistance at 123’30 in Ten Year notes.
Gold entered a seasonal long window as of Friday according to MRCI.
Have a great day!