DXU18 – The US dollar index posted an indecisive candle on Monday, holding around the top of the range of Friday’s bullish candle. It will be interesting to see whether or not the price continues to push on tonight as the contagion from Turkey is not a story I would expect to go away quickly. I need to check whether Monday’s session has finished or if the doji candle is incomplete. Most aspects of the trade still look positive and there’s some distance to my stop which is comforting. Another factor I feel is in my favour is the breadth of the contract because so many people are trading this contract it doesn’t tend to move in very large swings. It takes a lot of broad based buying against many currencies for the price to move in one direction strongly.
GCZ18 – I was a little surprised last night by the weakness of gold as I put on a fundamental rationale trade (i.e. if people are worried about Turkey then DXY should go up (already long), US bonds should go up (didn’t act), and other safe haven assets should go up – so where can I find value – what has not really moved so far? Gold. I only lost 7 points on the trade with an entry at 1212 and an exit at 1205 but that’s still $700 that I wasted primarily because I didn’t follow my usual analysis and just tried to rationalize a trade. I suppose that highlights my strength as a technical analyst rather than a fundamental analyst. Focus on technical analysis where I feel the price is due for return I rather than entry and trade because of my fundamental analysis which is relatively poor. Part of the reason that I put on the trade was that I recall 1210 being a level previously where the price rally from and I got stopped out trying to buy out 1220. I would certainly expect a full back at some point from the sell off that we’ve seen especially since the Swiss franc has been strengthening relative to the euro. The fact that US treasuries have rallied, the Swiss franc is strengthening, US dollar index is strengthening all suggests a flight to quality and safe haven assets. So whilst I am perplexed that the price of gold is not also strengthening at the moment there is no action to be taken so I will just stop and wait.
KCU18 – Again I am quite impressed by the resilience of coffee at these levels as it seems to only be a matter of time before the price Heads towards 100 but for now it seems the short sellers might be running out of steam. The open interest in the September contract is really fast so I’ll need to move my analysis to the next contract which is December. The behaviour over the last 10 or 20 sessions has been quite similar there although the levels are slightly higher due to the cost of carry and price expectations. A comparable level for a rally in the December contract might be 115 off a base of 107 as a low. I will keep an eye on the first few hours of trading tonight to see what the range is.
ZWU18 – Wheat has held again with buying interest slightly above the previous low from the 27th of July which was roughly the midpoint of the bullish candle on the 25th of July and I think probably a significant marker for any rally ahead. I’m probably going to go along with us top 10 points lower as I think even after the sell off there is due to be significant interest as drought conditions continue to impact Australian production. All of the moving averages are pointing higher so that is an encouraging sign. Apparently the price is around 539 so if I have an entry around 535 or so and I stop at 520 that is probably just on the borderline of how much risk I am comfortable taking. Maybe that is because I’m bullish on this trade. It’s probably actually a little bit more than I would like to risk on one particular trade so really I should wait.
CCZ18 – December is now the front month for cocoa. The price action throughout August seem to suggest we might see some more sideways action. With 2100 being the bottom of the range to buy at this stage although I don’t know how confident I am going long. I would like to see some more stabilisation before going long as this has been in a sustained downtrend for about 4 months. No action to take here.
SBV18 – Sugar looks to be making a new low and is well on the way to reaching 10. Certainly I’m inclined to take profit on at least one of my units at 10 and I feel there will be a lot of people with a price Target at that level. Ideally what I would like to do is put a stop on the second unit has the price approaches 10 and once that has gone through 10 it will either continue down quickly or my stop loss will be hit at say 10.10. So I should stay up tonight and watch the approach. The first unit I’m just going to put in a take profit order at 10.10 and hopefully that gets hit sometime tonight.
HGU18 – Copper is not quite holding at the lows but in terms of the relative low or lows from the start of August it’s right at the bottom of that range at the moment. The price has displayed significant resolve at these levels especially considering the strength of the US dollar in the last three session. Is it worth another shot in terms of a rally? I certainly wouldn’t want to be going short at these levels given how indecisive it’s been between 2.68 and 2.85. It would be possible to go long at 2.73 with a stop at 2.70 which is about 100 points below the low since the start of August. Given the price has already had a breather since it powered down to the low on the 19th of July I’m probably less confident that we will see another rally. I would have expected at least one rally but a second rally is not a foregone conclusion especially after such a significant top was made three or four times at 3.30 during 2017/2018.
ZSX18 – Soybeans are having a small week rally after the big selling on Friday and today opens around the 860 level. That is still a slightly positive look as the selling on Friday only put the price down about 50% from the range created by the 16th of July low and the 31st of July high. I’m almost inclined to go long but it’s just off a big down session so the best thing to do is simply watch and wait for a better setup.
ZMZ18 – Again the lows around the 321 area have held and it would seem based on yesterday’s rally that prices might move higher again. I can’t really say whether it will push on past the midpoint of the large bearish candle posted on the 10th of August as it seems to be stuck there at the moment and it should be noted that even though the 200 day moving average is very flat it is still slightly upward sloping. In short there’s nothing that stands out as a trade right now, there’s probably about half a trade in terms of requirements to give me confidence to take some risk. So I will just continue to watch and wait.
ZOZ18 – I was not paying attention to this and let myself distracted putting on a ‘rationalised’ gold trade. Everything about this reeks of a false break to me so I’m really hoping I get the opportunity to sell oats around 270. The last three sessions with long upper tails relative to the body in all three and although the price has held so far above the midpoint of the bullish candle on the 6th of August, the price action just doesn’t look that good. Given the strength in the US dollar I’m hoping one more small rally will give me an opportunity to get short above 270 and then I can put my stop at 276 or something like that. I wouldn’t want to put my stop too high because if it’s going to kick on then I’m just burning money so my expectation is that it should melt away from here and not breach the high from the 10th of August. I would expect to see a move back down towards 249 or something around a 61.8% retracement of the move from 233 to 280.