The Futures Six-Pack: Tuesday, November 4, 2014

11/05/2014 7:00 am EST

Focus: COMMODITIES

John McLane, of Index Futures Group, offers his latest outlook for the commodities futures industry moving forward, along with a chart of the various support and resistance levels for each commodity sector.

Crude Oil

Crude (WTI) prices are sharply lower Tuesday morning, extending Monday’s late price break. The last fifteen minutes of trading Monday saw the market roll over to the tune of $1.80. The bears really poured it on and, so far, Tuesday morning they continue to flash their control. The catalyst to this latest surge lower can be attributed to news the Saudi’s cut prices of crude exports to US customers. Along with seasonal factors that inventories should increase and you have an energy sector that is in a collapse mode. We are fast approaching Goldman Sachs price target of $75. The question now is, will that be the bottom or will we continue to see prices come under additional selling pressures.

For Tuesday, the market needs to defend the overnight low at $75.84 or else we could see another sharp round of selling pressures. Its days like these that one needs to be extremely cautious as reversals do happen.

Gold

Gold prices are trading slightly lower Tuesday morning with the market failing to draw much in the way of interest. A strengthening Dollar and weak global economies, teetering on the brink of deflation are not the sort of market condition that inspires the purchasing and holding of an asset like gold.

For Tuesday, the bears remain in full control but with a market as oversold as this, we could still see a brief rally toward 1180-1190 where one could then step in on the short side. The next downside target is 1125-1140.

S&P 500

The S&P 500 (SPX) is looking at a slightly lower opening based on the sharp drop in the price of crude oil that has oil stocks heading lower on the opening. The market continues to have to deal with weakening global economies in Europe and China but as long as global central bankers continue to deliver QE, the thirst for free money liquidity should help propel prices higher. Earning season has been a big success and with the US economy slowly heading in the right direction, stocks should follow.

For Tuesday, the market could set off a round of profit taking, especially if prices were to fall below the 2000 level. Look at the 1990 level as a point where buyers would be eager to step in.

Treasury Notes
 
Treasury Notes are trading higher Tuesday morning on the lower call for equities and the market staging a sort of mini rebound off Monday’s lower close. The collapse in crude could also be playing a part in that lower prices could be a sign of deflation and put a bid into the treasury market. Global economies continue to hurt and that also should provide support for the long side at these current levels.

For Tuesday, the market will need to get back through the 12620-12624 level if it has any intentions of rallying toward 12708-12716. A break below 12600 on a closing basis would be rather negative.

Euro

The euro is trading slightly better Tuesday morning as the market tries to find some balance ahead of this Thursday’s ECB meeting. Not so sure this will be the meeting where Drahgi goes all-in but with European economies continuing to fail, the path of least resistance for the euro is still lower. I would still look to sell rallies when they do come. Next stop on the downside is 120.00

Soybeans

Soybeans are trading lower again Tuesday morning, meaning the recent rally has likely run its course. The market though could still find levels where buyers step in and we test the recent highs, but for the most part, the ongoing inflow of soybeans into the pipeline should start to turn prices back toward the 950 level.

For Tuesday, the market could see some support at the 1006-1010 level basis Mar Beans, while rallies toward 1040-1050 are now selling opportunities.

Support and Resistance

chart
Click to Enlarge

By John McLane of Index Futures Group

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