The following Commodity Futures Market Analysis is the opinion of Optimus Futures. Click on the charts below to enlarge it.
S&P 500 Index Futures (ES)
Last week the S&P 500 Emini futures market was once again bearish along with almost all other US equity indices as investors brace for a potential global economic slowdown.
China reported weaker than expected economic numbers that forced investors across the globe to consider the possibility of a major global economic recession. As one of the largest economies in the world, China said industrial production grew by only 5.4% in November year over year, which is the slowest recorded pace for the country in three years. Retail sales – a barometer for consumer confidence – grew at the slowest rate since 2003. A weakening Chinese economy may also potentially have an effect on the lingering trade war concerns between the US and China.
The fundamental news weighed in on chart technicals as well for the market as we witnessed a sharp period of bearish trading activity specially towards the end of last week.
The 2600 level which we believe is of prime importance and a major source of hope for sellers appears to be within touching distance for price given Friday’s strong bearish close. If this momentum continues early this week, we see the 2600 level potentially breaking to the downside causing the market to slip further into the red going into the last few weeks of this year.
Light Crude Oil Futures (CL)
The market for light crude oil futures market continues to be in a slow consolidation phase as traders debate the prospects of seeing price slip under the $50 mark since October last year.
The market up until Friday disciplined itself just above the $50 level and while we do not see any major attempts from buyers to take price back up off the major $50 level, the lack of interest of sellers is also perhaps just as noticeable. Considering the strong downtrend that initially helped the market move closer to the $50 level in the first place, we could still favor a move possibly lower going into the end of the current calendar year. However, given the importance of the $50 level itself and the neutral market sentiment, a sharp spike back up cannot be ruled off either.
Gold Futures (GC)
The market for Gold took a breather last week as after two strong weeks of buying the market retraced off the $1255 level for a retest of the all-important $1240 level.
While we acknowledge the pull back and note that buyers were not majorly impactful for the market last week, we see no threatening indications from the retracement posted last week. The low volume pullback allowed for the market to retest the crucial $1240 level which we believe could be a discounted opportunity for more buyers to enter the market – especially given the conspicuous nature of the level itself.
However, a break under the $1240 level or its failure to prove as a worthy source of support for the market could potentially cause for the market to fall some more, at which point we may start considering the possibility of a deeper pullback into the uptrend.
Euro Currency Futures (6E)
The futures market for Euro also continues to be majorly sideways, and while we witnessed a slight interest developing to the downside for the market last week, the close on Friday still reflected more or less a neutral outlook.
We see the wedge pattern formation as still very valid for the market and in the context, we like where the market closed on Friday: at the brim of the pattern to the downside.
We see the $1.133 level as a major source of support holding back price from dropping further south and hence continuing with the longer term down trend. However going by how the market was actually able to close under that level, we suspect it could be a plus for sellers more than for the buyers.
We look forward to more potential bearish development for this market going early into this week.
10 Year US Treasury Futures (TY)
The market for 10-Year US TreasuryFutures continuedd to feed on the weakness in the US equity sector last week as well as the market just fell shy of touching the critical 121 price level.
We did however note that the market pulled back sharply just under the 121 price level, which we believe may already be providing resistance to buyers – consistent with the overall consolidation theme that this market has been in over the past several months.
While we see this pull back as a potentially non threatening one for buyers, we also note that if sellers were to gain any momentum specially early this week, there are fewer sources of support to counter that force potentially allowing for the market to drop farther and possibly at a rapid pace.
There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.