The following Commodity Futures Market Analysis is the opinion of Optimus Futures.
S&P 500 Index
Emini S&P 500 index futures traded in a range this week but managed to close higher yet again.
Compared to the momentum that the longer term uptrend had in the past (two to three months ago), the momentum as of now looks weak with deeper pullbacks and periods of selling coupled with bearish divergence, showing signs of the market perhaps craving for a midterm pull back into the uptrend.
We, however, do not believe this could be the top for the market. With continued signs of US economic recovery, the market may have more upside, but existing price action – as defined by more range bound trading activity rather than strongly upward trending – could lead to a deeper pullback.
The support trend line as drawn on the chart should play a critical role in defining the fate of the medium-term trend. Price could stay in the uptrend as long as it holds as support at the trend line. If we see a break of the trend line, we could potentially head lower for a major correction into the long term uptrend.
Light Crude Oil
Light crude oil futures for December delivery posted some strong bullish price action for the week as momentum tipped in favor of the buyers in the latter half of the week.
The week started off with traders battling out at the critical 55.00 Round number and long-term support and resistance level. This was to be expected given the importance of the level. We, in fact, cautioned against this in our last week’s market analysis.
Buyers were eventually able to come on top as price pushed through the resistance level allowing it to close strongly bullish for the week.
We expect the price to possibly continue pushing higher the following week, but caution against trading into longer-term swing highs.
Gold futures finally seem to be slowly gearing up for a decisive move that could be expected in the following weeks.
The bulk of this week was spent in a tight consolidation phase as candlesticks started leaving long wicks on the upside – which given the longer term downtrend on the market – could potentially be a sign of the broader theme of strong selling taking over in the following weeks.
The market close on the prior week was interesting as we pushed lower and closed strongly under a short term support trend line. If price were to build on this momentum earlier on in the week, we could see price hitting the critical low at 1260 which should further determine the fate of the sellers. If we close strongly below this level, we may well see the resumption of the longer term downtrend.
Euro futures for December delivery contract continued to play by our rules this week. We indicated the bearish head and shoulders pattern on the higher time frames and indications of bearish momentum on the lowers. That theme seemed to continue going into the prior week as well.
As expected, price opened this week pulling back into the sharp down move created two weeks ago. We pulled nearly to the tick to the 1.17 round number before a strong bout of selling pushed prices lower also closing strongly under the short term support trend line.
The higher time frame, with the obvious head and shoulders pattern breakout, looks primed to allow price an easier path toward the 1.14 long-term target. We expect more bearish action in the following week.
10-Year US Bonds Futures
December delivery US 10-year bond market traded higher for the week, but as expected the bulls were interrupted by brisk periods of selling at key resistance levels.
Much of the momentum had seeds sown at the start of the week when price opened above the critical 124.5 level. We had a quick initial pull back to the level and then a delayed one when price bounced off of the highs at 125.00, but the price was able to post higher highs for the week despite quite a few resistance hurdles in the way from short to midterm support and resistance levels.
If this momentum were to continue we could see price eventually to the levels round 125.3 and beyond, although the ride up may not be the smoothest one.
There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.