For most markets the 100 day ma can be a dominate factor in direction on the daily chart. The key to determine its influence is to see how it reacts when reaches that average during a rally attempt in a bear market & vice versa. If it continues to react to that average, you know it has a strong influence on that market. Once it manages to get over that average in a bear market, the odds of a rally ensuing are very high. Sometimes a market will succeed in getting over it the first time. Other times it takes a few attempts. If a market has been in a bear mode for some time and persists in trying to get over it more frequently it usually is a sign that it will soon succeed. Let's review a few:
For The Grains:
It doesn't take long to notice when observing the daily charts that the 100 day ma has dominated the upside potential of all the grains since they all violated it last year. All rallies were stopped by it - assuming they could even reach it.
But that changed in early February. The entire bean complex breached that wall. That complex has been in a gradual rally since.
Corn succeeded in getting over that hurtle in early February too. But unlike the bean complex it has been struggling with it since. The good news is that it has spent more time over it than under it. Sell-offs under it are immediately corrected the next day. This effort on the part of the market increases the potential that it, too, will follow the way of the beans.
Wheat on the other hand hasn't been able to get over that average since it violated it in June of last year. Finally in late January it got over it. But it did not last. Since then it has been consolidating right under 650 (and that average) and has formed an uptrend since its December low. Is it building the momentum to follow the rest of the grains?
Based on both corn and wheat's action technically, they are giving strong indications that they will try to surpass that average soon.
For The Currencies:
When both the aussie and the canadian finally rallied over that average earlier this year, they experienced an extended rally.
The eurofx just peaked over it again today for the first time since October. That suggests more to this rally.
The swiss succeeded earlier this week and has established a rally. It hung around that average for several weeks before finally leaving it behind. Once done, it has started to move.
The dollar started to violate it in late January. It has struggled since and finally failed it aggressively again today.
The yen first failed it last October. Three times it got back over it only to finally fail this February. Everyone knows the free fall that followed.
For The Metals:
Gold started to struggle with it last October. After recovering, it finally followed through in December with an extended sell-off. It now got back over it in January and has experienced an extended rally.
Silver finally got over it for the first time in late January. After consolidating, it finally started a major rally today.
Based on the reaction of other markets within a resource group that average can be a guide to the potential outcome of the other ones.
GOAL OF THE MARKET UPDATE: The purpose of my Update is to share with readers what the technical aspects of a market is suggesting. It is not my personal opinion but merely conveying to readers what market action potentially suggests drawn from my years of experience with the markets and what similar behavior in the past has produced. I do for you the technical analysis that most of you do not have the time to do personally.
The Update is also designed to help you learn what to look for in a market technically and to develop good trading habits irrespective of the results of a particular trade. It is also a guide and tool for those who want to compare it with their own work.
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MY TRADING APPROACH: I normally enter trades only on buy and sell stops. If the market is not going in the direction of the trade, I am normally not interested and the order is not executed.
I do not enter new positions during the night session but only during the day trading hours. I always use globex and always have a protective stop working - even during the night session. My computation of trading costs for each trade in the Update includes commission plus an estimate of exchange fees.
TRADE ALERTS:
Buy May wheat.Buy 649 1/2 stop. Protective stop 633. Potential projection 700. (Potential risk $825. Potential reward $2525 - regular sized contract.
Potential risk $165. Potential reward $505 - mini contract). Margin regular $3038. Mini $608.
Reasons for the Trade:
1. The monthly chart has a buy signal.
2. On the weekly chart, the recent sell-off held at both the 20 and 150 day ma. They intersect forming a strong support.
3. The weekly chart formed a double bottom in November - suggesting a trend change from down to up. Since then, wheat has been in an uptrend. It appears to be starting a third wave up.
4. The daily chart is in an uptrend and appears to be setting up for a third wave up.
5. Today was an inside day that can trigger a signal and market direction.
Buy March mini Japanese yen.
Buy 125.37 stop. Protective stop 124.45. Potential projection 128.00. (Potential risk $575. Potential reward $1643). Margin $2430.
Reasons for the Trade:
1. On the monthly chart the recent sell-off held at the 20 day ma. It has held that average during every sell-off since the beginning of the major uptrend that started in July 2007.
2. The weekly is in support going back to November 2010.
3. On the daily chart the current wave down met projections.
4. On the daily chart the macd is turning positive.
5. Today was an inside day that can trigger a signal and market direction.
GRAIN COMMENTS:
MAY CORN: It triggered a buy today and then sold off only to regain the loss later. It closed over the 100 day ma again - that's bullish. Other than that, it sure didn't do much today. It is trading into a pennant suggesting that it is building for a good move. Keep stops at 629 3/4. Closed
Position: Long 645 (2.23).
Projection: 685.
MAY MINI WHEAT: I tried to buy it today. Instead it formed an inside day again. I'll try again tomorrow. See Trade Alert for details. Closed
MAY MINI BEANS: They just gradually keep working higher. They do have resistance around 1300. Their overall pattern is bullish, though, as they have made higher weekly highs for four weeks in a row. It was broke only once in the last five weeks. My point being is that if they set up a reversal formation in that resistance area, it could set up a shorting opportunity. Closed
MAY MEAL: It triggered a sell yesterday. The potential sell-off did not materialize. I had mentioned on Tuesday that the overall projection for this second major wave up had not been met yet at 345.00. Negating that sell the quickly suggests that it may now try for that 345.00. Closed
MAY BEAN OIL: It now seems stuck right under the 200 day ma. It did trigger a buy today from yesterday's inside day. The result: nothing! There has not been any follow through yet. This current wave up is mature and the 55.55 projection is still there. Closed
MEAT COMMENTS:
APR HOGS: Yesterday they took out the high (90.77) of the previous up wave by .20 ticks. Technically that confirms that hogs are in the process of a fourth wave up. The projection 92.50. Watching closely. Closed 89.60, down .72.
APR CATTLE: An inside day triggered a buy on Wednesday. It didn't last. It was negated today. The low today 129.57. There could be more correction. Just watching. Closed 129.67, down 1.47.
Position: Long 131.30 (2.21). Exit 130.47 (2.23). Loss $387 (+comm/fees).
SOFTS:
MAY COTTON: Last time I pointed out that the market seemed to be struggling. It has sold off since. On the monthly chart it appears that its attempt to get back over 100.00 has failed. It now appears it may take out the December low of 84.35. The weekly triggered a sell this week and has been following through. Longer term the charts suggest 80.00. Closed 89.23, down 1.30.
MAY ORANGE JUICE: It formed a huge outside day today on the daily chart. On the weekly it held at the 20 day ma this week. Is that suggesting the start of another wave up? The monthly does not show anything specific. Just watching. Closed 183.80, up 5.00.
MAY COFFEE: It continues to struggle to hold the 200.00 support. It triggered a buy. That started to follow through until it triggered a sell today from an inside day formed yesterday. That sell has yet to follow through. Just watching. Closed 202.05, up .20.
MAY COCOA: I tried to buy cocoa today. It reached my price during the night only. During the day it sold off. This is another good example why I don't position at night. The end result is that it sold off over 100 points throughout the day. Today's low 23.07. It had closed over the 100 day ma for two days in a row. It initially traded over it today but that all ended rather quickly. It has support around 23.00 and so far that area is holding the market. It also reached the support of the 20 day ma too. Closed 23.44, down .94.
MAY SUGAR: I took profit yesterday. It was a bit early as it continued to rally after I exited and managed to rally and close over the 150 day ma. It made another new high today at 24.92. It is pushing into resistance. Waiting for a setback to go long again. Closed 24.86, up .15.
Position: Long 23.75 (2.16). Exit 24.40 (2.22). Profit $673 (-comm/fees).
METALS & ENERGY COMMENTS:
MAY COPPER: Switching to May. The buy mentioned last time on the daily chart has yet to follow through. But it has not been negated either. It is stuck right under the 20 and 200 day ma. They both happen to intersect right at the same level. Just watching. Closed 381.40, down 2.85.
APRIL MINI GOLD: The 1765.90 mentioned last time was taken out and the new high in gold is 1789.50. It most likely will test 1800.00. If gold is starting a second wave up from the Dec. low, it has projections to 1950.00. Closed 1786.30, up 15.00.
MAR MINI SILVER: It accomplished two significant technical things today: it closed over the 150 day ma and the 35.000 resistance. This is the first time since September. Long term a sell on the monthly was negated today. Watching closely to buy. Closed 35.556, up 1.302.
APRIL MINI CRUDE OIL: Another new high at 108.24 today on the daily chart. Both the weekly and monthly charts have a buy. Silver is clearly over 100.00. The 114.83 I mentioned last time is the next hurtle and taking that out confirms the current rally to be the start of a new wave up. Of course, if the Iranian situation is defused, crude will drop like a rock. But based on the charts, they suggest more rally is in the works. Closed 107.83, up 1.55.
CURRENCIES & FINANCIALS:
MAR MINI JAPANESE YEN: A trade could be developing. See Trade Alert for details. Closed 124.89, up .21.
MAR SWISS FRANC: It finally triggered a buy today. Today's high 111.00. Keep stops at 109.43. Closed 110.62, up .78.
Position: Long 110.36 (2.23).
Projection: 113.85.
MAR DOLLAR INDEX: It triggered a buy yesterday from an outside day. It did not last. It tried to hold at 79.000 but could not pull it off. It tried again today to hold the 20 and 100 day ma and failed. The key now is the earlier low on Feb. 9 at 78.430. If it takes that out a projection to 77.000 is possible. Closed 78.886, .417.
Position: Long 79.41 (2.22). Exit 78.87 (2.23). Loss $595 (+comm/fees).
MAR MINI EUROCURRENCY: It rallied and closed over the 100 day ma today. That is positive. It also took out the previous high at 133.25. It has some resistance at 134.00 but will most likely test 135.50 resistance. However, if we see a rally equal to the one it produced after the low made in October, a projection to 137.00 is possible. Closed 133.36, up .91.
MAR CANADIAN DOLLAR: Last time I pointed out that long term is sure suggested that the rally was not over with. So far, it has not done much on the daily chart. After almost reaching 101.00 on Tuesday, it sold off but is holding at the 20 day ma. Bottom line it is in a range. Just watching. Closed 100.05, up .05.
MAR AUSTRALIAN DOLLAR: It formed a huge outside day on Tuesday. It triggered a sell on Wednesday and closed under the 20 day ma for the first time on the daily chart since mid December. In other words the entire rally since that time has held that average. The violation of that average yesterday was short lived. It rallied back over it today and closed slightly above it. The sell signal is still intact. Like the Canadian, the aussie has been and still is in a range from 106.00 approximately up to 107.50. Closed 106.55, up .42.
MAR E-MINI S&P: The high for the emini in May 2011 was 1373.50 on the weekly. That ended that rally and a sell-off that finally bottomed at 1068.00 ensued. Since then it has been in a rally that reached 1369.50 today. It is very close to that May high. If you check out the monthly chart, the emini suggests that it is in the process of a third wave up from an even deeper sell-off that bottomed in March 2009. If that be the case, the monthly suggests that the 1373.50 high will be taken out. This wave on the monthly chart has a potential to 1440.00. Closed 1363.00, up 7.00.
MAR 10 YR. NOTES: Last time I suggested that notes were in an overall uptrend. That remains the case. They sold off to 130.120 yesterday, forming a double bottom. When all is said and done, they have held the 100 day ma during their entire move up on the daily chart. What is interesting is that the 20 day ma has pretty much stayed in the middle of the range since November. In other words half the time they trade under it, half the time over it. It appears the 20 day ma does not have any significance during this move. Closed 131.065, up .050.