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)
The S&P 500 Emini futures market continued to be affected by ominous geopolitical that prevented the market from posting a rally as a breakout from the former wedge pattern would have implied.
Last week, President Donald Trump backed out of the North Korea summit citing “hostilities”, thereby stoking increased tension between the two countries. The markets reacted accordingly, with Crude oil and the equity sectors taking the biggest hit, as investors instead were drawn to safer haven assets including Gold and Government bonds.
The S&P500 Emini futures market struggled for momentum through the past week, and remains straddled just above the 2700 price level that lines up with a former swing high. The market continues to weigh prospects of an upward rally or a potential pullback under the 2700 level possibly closer towards the breakout point in what may shape up to be a breakout-pullback-continuation play of the longer term wedge pattern (see chart above).
Light Crude Oil Futures (CL)
Light crude oil futures market was one of the strongest hit markets from the rising tensions between North Korea and US that is now a major global oil exporter.
We had cited the $75 price level as one that could attract sellers, given how it lines up with longer term swing lows from back in 2011. However, last week’s sharp selling off the $73 level, pushes that target further away for now.
As of now the market is sitting just above the crucial $66 price level that earlier provided major resistance to the up trend (see chart above). We would expect this level to potentially hold as support for price now, and possibly allow for the up trend to resume. If the level ceases to hold as support though, the market could dip further possibly indicating a more extended pullback into the up trend.
We remain in the hunt for crude oil potentially hitting the $75 mark at some point in the near future.
Gold Futures (GC)
Futures market for Gold pulled back up sharply last week on Donald Trump’s surprise move to distance himself from rosier relations with North Korea. Despite the breakout past the 1300 major round number earlier on, price seems to have built no momentum to the downside, at least for now.
We had noted last week, that despite the push under the 1300 major support level, price maybe likely to bounce off other support levels in close proximity to the 1300 round number, and we did in fact witness a bounce, fueled in part by the geopolitical scenery.
Last week the market closed near to the 1304 price level that forms the base or support of the former consolidation phase which could potentially provide resistance now for the market that could allow for sellers to build some momentum. However, if buyers continue to remain in control and we get to see higher price levels early this week, it could set the tone for perhaps a failed breakout of the 1300 level that excited us in the week prior to last one.
Euro Currency Futures (6E)
Euro currency futures closed strongly bearish again last week, as sellers continue to push past former potential obstacles and support, now inching closer to the all-important 1.16 price level.
Last week we had noted possible support to come in at 1.175 horizontal support and resistance level. Instead only a brief holdup eventually allowed price to push through to close strongly for the week, setting the platform for sellers to possibly continue to push lower and hit the 1.16 long term horizontal support and resistance level.
Although we have seen price pierce through former obstacles with relative ease, we believe the 1.16 level, being a more longer term significant interest point, could attract some buying this week.
10 Year US Treasury Futures (TY)
The market for 10 year US treasury bonds also benefited from Trump’s move last week, as investors fled to the risk-averse asset to safeguard against rising political tensions between the two countries.
There exists however, reasonable technical explanation as well, for the sharp move up for this market. As highlighted in last week’s analysis for the market, current price levels seem to be tucked close to historical range of prices that last saw an extended period of consolidation and an eventual multi-month up trend off current price levels back in 2011 and 2012.
While we are not predicting for an exact repetition of history, we have been cautioning against the possibility of some buying to come in under 119 price level. The market conformed to that expectation last week, as we saw an extended pullback into the down trend.
The market on Friday closed almost at the critical 120 major round number that previously held as support for the down trend, and later as resistance when the market tested it from under. If the level continues to hold as resistance we could see lower price levels for the market. On the flip-side a move upward through the 120 round number could embark an extended pullback into the down trend.
There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.