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Commodity Futures Market Analysis – February 18th, 2019


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Originally published at: https://optimusfutures.com/tradeblog/archives/commodity-futures-market-analysis-february-18th-2019/

S&P 500 Index Futures (ES)

The S&P 500 E-Mini futures market last week continued to push higher riding on investors’ confidence that renewed relations between the US and China will spur more economic growth and lead companies to post better results in the near future.

We noticed the market found formidable support at the 2700 long term support and resistance level and continued on the sharp rise up taking lead from the bullish momentum that has now seen lead the market to post a near 18% gain from the last major low on December 24.

Notably, though, we also acknowledge that the sharp bouts of buying in the market are taking price closer towards critical swing high locations where the market turned around sharply in the past. While there are no promises that can be made, we do suspect some major obstacles for buyers along the way – starting at the 2800 major support and resistance level (See chart above).

Light Crude Oil Futures (CL)

The market for crude oil also seems to be benefiting from the overall upbeat economic outlook and growing US and China trade relations, especially with the US now emerging as a major supplier of crude oil and China being a leading consumer of it.

Oil prices increased to their highest level in 3 months today resulting from the latest supply cut announcements from OPEC and the US sanctions on Iran and Venezuela.

Late last year, OPEC had announced a combined effort from its member countries to reduce the output by 1.2 million barrels per day to curb oversupply woes. While that effort has majorly fueled the latest round of bullish momentum in the market, keeping price afloat above the $50 major psychological mark, the outlook has also been somewhat tainted by continued shale production by the US.

Last year alone, America’s oil produce jumped more than two million barrels per day to a new record of 11.9 billion barrels per day for the full year.

The broader market outlook has helped price somewhat continue its bullish run, now pushing past the $55 level. We see the $58 level as a near term target for buyers but will keep a cautious longer-term outlook given the broader uncertainty in the global market for crude oil.

Gold Futures (GC)

The market for Gold traded once again close to significant swing highs last week, but the strength from the bulls remained fairly impressive. At this point, we believe this can only be taken as a sign of potentially more buying to come into the market.

The support and resistance level just above the $1300 major round number provided decent support to the market as it pulled back to it the week prior to last one, allowing for bulls to gather even more momentum this past week.

Just looking at the interest in the market from buyers, we instinctively want to see the market touch $1350 not too far from now, but we are also factoring in potential resistance coming in at levels earlier than $1350 as well, especially given how the market was consolidating heavily the last time it was trading at current price levels (See chart above). While we are cheering for the bulls we encourage investors to exercise caution going into the following few trading sessions.

Euro Currency Futures (6E)

The futures market for Euro remained sluggish last week, despite showing signs of potentially breaking out a wedge pattern formation. This raises more concern about the possible longevity of the current sideways consolidation theme.

Last week we noticed the market inching closer towards an interesting location in the market marked by the rising support trend line and the $1.135 support and resistance level. While the market currently appears to be trading well under this level, we are seeing developments far from ideal for a true breakout situation. As has been customary for this market for a while now, one-sided momentum and price movement appears to still be absent from the market.

This makes us believe that what we have been seeing as a wedge pattern formation may likely still be a part of a broader theme of consolidation and that the market may continue to lack momentum until an eventual trend establishes in the market. If we fail to see much bearish activity in the early part of this week, we will likely scratch away our proposition of expecting a potential breakout play towards the downside for this market.

10 Year US Treasury Futures (TY)

While the US equity sector continues to boast a renewed outlook towards the economy, the bond markets interestingly paint a different picture, implying concern from investors of a potential economic recession.

The market for 10-year Treasury Note Futures was not as bearish last week as its historic inverse correlation with the US equity sector might suggest. We instead witnessed indecision on account of both buyers and sellers in the market around the $122 major support and resistance level.

We have been talking about this market potentially being sandwiched between the 121 and the 122.5 long term support and resistance levels and it seems current price levels sitting in the middle of that range may not be helping investor confidence much at all.

We continue to hope for the development of a breakout scenario in the market and until then will be on the sidelines for this market.

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.