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 sharply bearish as a combination of fundamental and technical factors fueled strong interest from the sellers.
We have been talking about the importance of the 2600 support level as being the crucial determinant of the market’s fate going into the end of the year. Last week, this level gave way as sellers continued to push price lower to possibly mark a red year for the S&P 500 index and the broader US equity sector.
We see the 2400 level – now within touching distance – as a potential source of support for the rapidly dropping market, but year-end volatility we suspect could result in even more losses for the market.
Fundamental developments are not helping the bulls’ cause much either. Comments from Trump’s representative about the difficulties of trying to reach an economic agreement with China, and the Federal Reserve’s high profile rate hike earlier last week further fueled sell side pressure for the market.
Light Crude Oil Futures (CL)
The market for light crude oil futures market was also sharply lower last week, as the $50 all-important psychological level was finally pierced by the sellers dominating the bulk part of last week.
We note that the market appears to be sitting just above a solid area of support and resistance level at and around the $45 level, but also acknowledge the sharp breakdown under the $50 level and the preceding buildup and consolidation.
With higher volatility levels expected due to thinned out liquidity towards the end of the year, we suspect price may remain prone to sharp spikes around the $45 level and possibly other support and resistance levels further below like the $43 level – should the bearish momentum sustains itself going into the early part of this week.
Gold Futures (GC)
The market for Gold seemed to behave rather well last week and did not show signs of being affected by lower trading volumes as we witnessed the market transition into what appears to be a solid uptrend.
The $1240 level, which in the past we have frequently referenced as a crucial level for the market, did provide the needed support to the bulls, allowing them to post higher price levels with minimum resistance from sellers.
If this momentum continues going into the end of this year and the start of the next calendar year, we see the market possibly aiming to test the long-term $1300 major support and resistance level and round number.
Euro Currency Futures (6E)
The Futures market for Euro behaved exactly as per our expectations last week, as a sharp breakout from the wedge pattern formation met with heavy resistance coming in from the obvious support and resistance area at the $1.15 level.
We have expressed our interest in seeing more bearish activity for this market, in line with the longer term down trend. Part of the reason had to do with our expectation that a breakout to the upside would possibly meet inertia from the heavy downtrend as well as potential resistance at the $1.15 level.
We did witness the market rebound off that level on Friday sending price back into the period of congestion / wedge pattern.
We look forward to potentially more bearish activity for this market going into this week, but will rule out any volatile spikes amidst lower end-of-the-year trading volumes.
10 Year US Treasury Futures (TY)
The market for 10-Year US Treasury was the most interesting ones last week, particularly with respect to where it closed for the week – pretty much at the all-important 121.00 price level.
Although technically the market was able to close above the level despite the weakness on Friday, we do not believe the level may be ready just yet to serve as a source of support and launch pad for the bulls to shoot for even higher price levels.
We believe the sell-off on Friday appeared a little too threatening to be classified just as a minor pullback to the 121 level before a potential continuation further up. Looking at past instances where price sharply bounced off the level, we want to be very careful with any bearish activity around the 121 price level, which might open the possibility of even a fake bullish breakout.
There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.