Providio’s Daily Futures Market Commentary for Feb 28, 2012


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Gold: 28Feb Watch today’s break out above last Thursday’s high of 1789.5. If it can’t sustain the move, it may be entering a consolidation phase. Resistance should be offered at the psychological 1800 level, which aligns with the November high at 1804.

We continue to track the rising 21-day moving average (1745), as the market has found support at this average since breaking out above in early January. Below the 21-day moving average, we continue to eye 1705 as a significant support level. It’s near the recent lows, is a price the market broke out above, and was a minor support level back in November.

Seasonal Snapshot: The 30yr pattern points down all the way until the end of March. The shorter-term 5yr pattern points modestly lower until 10Mar while the 15yr consolidates before turning down on 28Feb.

Copper: 28Feb The most active contract continues to be supported by the falling 200-day moving average it has been trading around for the last few weeks. Our Rate of Change indicator has turned higher and has our Momentum remains on the cusp of going positive. That said, our ‘middling’ Overbot/Oversold indicator (51) have this market looking for direction.

A failure to forge new recent highs above 399.50 would be negative and may target the recent lows at 370.25. Volume continues to trend lower since the spike on its break out to the upside on 09Feb.

Seasonal Snapshot: A month-long rally in all three patterns lasts until 05Mar.

Interest Rate:

Interest Rates: 28Feb Despite the gyrations after this mornings disparate data releases, the pattern we identified below still holds. New recent highs this morning
We are now looking at June as March is now in go into delivery tomorrow.
As we stated in last Thursday’s comment (cogent comments repeated below based on March prices), our longer dated Treasuries are in a positively biased period within their recent cycling back and forth. If the history we’ve observed serves as a guide, Treasuries should rally for another several days until their upper limits are reached.
Levels to watch for medium-term exhaustion:
June Bonds- near 144-00
June 10-Yr.- near 132-10

The Bonds have gone sideways within a 3-5 point range since early November 2011. We expect a move from the current 142 level up to near 145, with a possibility of a new surge to as high as 146. Our Technicals, which are negative in their Primary indicators, are turning at the secondary level.
Ten-Year Notes have been gently trending higher as the pricing reacts to the same macro-economic influences as Bonds, but also benefits from the US Fed’s Operation Twist. Recent action has bottomed at 130-12. With its approximately 2.5-point range, and the recent action’s pace, look for a rally up to 133 or higher.
As we stated yesterday, both Bonds and 10yr have been gyrating around their 21-day moving averages since November: Look for moves above those levels to bring a more positive bias.
Seasonal Snapshot: Looking at the June contracts. While the Bond and 10yr’s 15&30yr patterns consolidate, the 5yr patterns are quite positive until 02Mar, briefly pauses, then reinstates the up trend until 21Mar.
The 2yr has a strong, upward bias in all three patterns until early March, then consolidate in broad fashion before heading back lower 17-27Mar.

28Feb Early morning tests of lows were rejected across our 3 tracked markets. Later AM action, all rallied.

Corn: 28Feb All Technical indicators point to higher action. 665 is the next major resistance level above. The market hasn’t closed and remained materially above that level since breaking sharply lower on Jan. 12th. 650’s importance as an inflection point goes back to April, 2011.
Seasonal Snapshot: 5-Years pattern is mainly sideways until March 3, then heads materially lower until March 16th. 15 and 30-year patterns trend sideways to modestly higher until March 14th. All 3 patterns bounce on March 16 for a 2-day rally peaking on March 18th.

Soybeans: 28Feb Soybeans continues to march higher, becoming even more Overbot with its RSI at 94 as of this morning’s publishing of our Matrix. Additionally, it has now firmly broken above the still falling 200-day Moving Average.
Volatility is low and falling.
Seasonal Snapshot: All three patterns display an upward bias until Mar 3.

Wheat: 28Feb Wheat is taking a new tack and moving higher in excess of Corn. It is threatening to fight its way to the still declining 200-day Moving Average, which now lies close by only 5-6 cents above as of this writing. All our Technicals point higher now and with its RSI not Overbot, it may have some reasonable room to run.
It has held support on a rising Trend line going back to mid-December lows. If this continues to hold, look for the market to work its way higher to test 700 and higher. The 665-670 resistance level is 1st though.
However, if all these projections of higher prices prove to fail, look for a test to the 600 level with a low likely near 590. Watch if it falls near 620 as support.
Seasonal Snapshot: The 5-year pattern is upwardly biased until peaking on Feb 26. At that point it enters into a long negative bias until April 1. The 15 and 30-year patterns are in a shallow downward bias until March 15.

Petroleum: 28Feb Current chart action is still consolidative. Materially lower Volume likely. Some indications are evident, though, that a turn is in place as Momentum’s ROC and RSI are both headed lower as of this writing. It’s Overbot status is coming off severe levels.
All of the 200-day Moving Averages are either now headed. The fact that all of our Petroleum Volatilities are Low /Very Low speaks to exploring option purchase strategies.
Seasonal Snapshot: All 3 Petroleum contracts are in a period of more positively biased action until the end of February.

NatGas: 28Feb Outside Momentum’s remaining positive (it’s on the cusp of heading negative) as of this AM’s publishing, all of NatGas indicators are negative and getting more so.
With February soon to end, the dynamic for NatGas should shift to Spring shoulder behavior fairly soon. As the current storage is at record levels for this time of year, we expect to see storage rapidly fill and Summer supply levels should be comfortably high in June. As drilling starts to wane, care should be taken on any short side trades a seriously hot Summer would materially increase demand as electricity usage soars. This could shift this market to a bullish tone rapidly and unexpectedly.
Watch the late January consolidation’s upper boundary at 2.85. A break above should be capped by falling trend line resistance (3.10) that goes back to last June.
The March contract’s support lies at 2.34-2.35. A break below that level target prices near 2.00.
We believe, as in years past, that the present low prices will not last. This would indicate a shift at some point to a more bullish bias. We feel position traders are best served by exploring trades that involve spreads of either futures calendar or selling premium. NatGas is one of the very few tracked markets with High Volatility.
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.

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Disclaimer:There is risk in trading futures and options. One's financial suitability should be considered carefully before placing any trades.
Past performance is not indicative of future results.
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