Providio’s Daily Futures Market Commentary For Feb 9, 2012

Jan 20, 2012
09Feb The Greek austerity plan and the deal to write off as much as 70% of the debt is acting as a support mechanism. The US news flow from economic reports was positive, too. Lost in all this is the fact that the BOE is instituting what amounts to a QE program and the ECB is relaxing collateral rules for banks accessing cheap capital. All indicative of the stress the global financial system is under. Even with the Greek deal seeming to be very close to finalization, little attention is being paid to the other sovereign debt issues that are in back of it. Italy, Ireland, Portugal.

While the specifics throughout the region may be a bit different, the overall dynamic is very similar: the first to run the gamut (in this case, Greece), will set the stage for the rest to come: Portugal, Spain, Belgium, (France?) etc.

Volatility remains at stubbornly low levels across a variety of the markets we track, but is most evident in just about anything “financial” in nature. When we take a closer look, we see some of this paired with the overextensions we have been writing about for quite some time. This history reminds us that these overextensions typically have not lasted too long. A sustained reversal in their Rates of Change have often served to reverse the Momentum. This time around, it is taking a bit longer than “normal”, but is definitely something to watch. The well below average Volatility may open the door to option purchase opportunities if trying to protect profits, or institute a directional strategy.

Currencies: 09Feb The Greek settlement is still “in play” in our opinion as remarks from the German FinMin indicated dissatisfaction with the Greek’s austerity plan.

Nonetheless, all our tracked FX markets are Overbot or 1 tick away from same.

Only the Yen’s AVG Volatility is not low.

Aussie: 09Feb Generally positive technical picture is given a bit of grief today as the market can’t sustain another move and consolidating with higher Volume. Still, nothing indicates a potential fly-in-the-ointment of the recent powerful rally. A day to pause I guess we’d say Support at 10730-10740. Still Overbot, but less so with the pause today.

Seasonal Snapshot: An upward bias commences 09Feb and lasts until March.

British: 09Feb The BOE’s Bond buying/QE program is on its face bearish the Sterling. However, with themost attention being paid to the Greek deal, it was along for a bit of a ride when the Euro rallied. Nothing major and it didn’t last as it reached just shy of 1.59. It has just come off the Oversold list so that bears watching if it is indeed going to turn less positive.

Support at 1.5780

The falling 200-day moving average at 159.50 may offer near term resistance.

Seasonal Snapshot: Choppy consolidation in all three patterns with a modest upward bias into Mar.

Canadian 09Feb Today there was no serious test of the still falling 200-day Moving Average. Instead it tested the highs from Friday and is sitting at levels that indicate it will likely make another more successful go at 10065 or so. Like our other currencies, its RSI is looking less positive today.

Seasonal Snapshot: The 15 and 30-year patterns are modestly negative until Feb. 16. The 5-year is positive until Feb 16.

Dollar Index: 09Feb An early test of the 7850 level was rebuffed and the market drifted higher and is sitting at a quiet level just off unchanged. 7850 should remain as significant support. Substantially Oversold and still falling. However, there is some evidence of secondary turning.

The 200-day Moving Average is still below, but is rising.

Seasonal Snapshot: The 15yr breaks away from consolidation and rallies again until the end of Feb.

Euro-FX: 09Feb Further positive news supporting the Greek austerity deal and bailout. Euro was kicked higher after testing the 13220-13230 support zone. Modestly higher Volume indicates some interest but nothing committal.

We remind readers that this has been on the table since July of last year. There is against the current backdrop of impending protests, haircuts for bondholders, Troika (ECB, Euro Council & IMF) meetings…

With no Overbot situation acting as headwinds, the Euro may be poised for healthy run. This is especially true with recent Fed comments in re short-term rates. The 200-day Moving Average remains well above and falling.

Seasonal Snapshot: A decidedly weak tone until the end of Feb.

Yen: 09Feb Moderate early weakness gave way as a serious sell-off ensued after 9 AM Central. Watch for support at 128. All technicals point to lower action.Oversold now sitting below 35 as we indicated worth watching yesterday. If this pushes lower to the 1287 support and is even more Oversold, look for signs of a serious bounce.

Seasonal Snapshot: All three patterns are negative, but the 15yr is decidedly more so until late Feb.

Energies: 09Feb Better than expected economic news is providing a pop to the upside in Energy today.

Seasonal Snapshot: All 3 Petroleum contracts are entering a period of more positively biased action until the end of February.

Petroleum: 09Feb With the economic picture appearing to firm, March WTI Crude made another foray to test the 100 level. It couldn’t quite stay there. The technical picture is biased positive and because it’s not Overbot has room to the upside.

RBOB Gasoline continues to grind higher despite a waning demand picture. Heating Oil is surprising to the upside given the warm weather this Winter. Both products are Overbot, Heat very much so.

All 3 technical pictures point to higher prices. The Iranian situation helps that dynamic.

NatGas: 09Feb Modestly higher prices in the face of an anemic draw of 78. However, it failed to maintain prices above the falling 200-day Moving Average. 240 is setting up as a support level to watch in March. 260 is the resistance level to heed.

Seasonal Snapshot: A modest upward bias is only sustained until 04Feb and then its down again, especially in the 15&30yr patterns until late Feb.

Equities: 09Feb Another day, another gain in all three markets we track. The NASDAQ continues to lead the strength here and each remains in extreme Overbought conditions. Although all three backed off the previous period of overextension, which peaked around 25Jan, it was only a rest period in the uptrend that has been in place since mid December. Our Volatility measure in all three has been well below average since the last week of January. This should make option purchases a more attractive component in trading strategies.

Keep an eye on developments in Europe, they may hold the key to an uncoiling Volatility spring.

S&P and Dow: Choppy consolidation with a mildly weaker tone in the 15&30 yr patterns until they start to work higher at the end of Feb. After some modest strength, the 5yr pattern displays a material downdraft 19Feb-03Mar.

NASDAQ: Consolidation with a weaker tone in all three patterns until an upswing in the 5yr commences in mid-March.


Gold: 09Feb We pointed out yesterday that the April contract was able to forge a higher high then fell back. Today’s action has taken back some of those losses and may be forming an ascending triangle on falling Volume. The market has come off its extreme Overbought condition (88 out of 100) last week.

The market is struggling with last week’s high at 1765 and forms a horizontal trend line that extends back to 02Dec. A break out above targets the previous, 08Nov high of 1808. A true break out on higher Volume projects a potential move up to $2000, but be very careful… the fact that many of these markets have not been able to sustain moves for very long makes us wary.

The pattern of higher lows aligns with rising trend line support back to the 29Dec low (1525) and forms the lower end of the triangle around 1725. A break below on higher Volume targets the 200-day moving average (1657) where the market found some support in mid Jan.

Our Rate of Change is still falling and threatens to pull Momentum negative.

Our Volatility measure is perking up a bit, but the last two times this occurred (late Dec and late Jan) another fall to lower levels followed. If this time repeats the pattern, Volatility would sink to very low levels. Explore option purchases.

Seasonal Snapshot: Divergence between the 30yr consolidation and the 5&15yr patterns, which rally well into Feb.