Futures Market Technical and Fundamental Recap
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Today's Futures Analysis summary
Treasury market futures finished the week sharply lower. June Treasury Bonds and June Treasury Notes were driven lower after yields unexpectedly surged to the upside. At first these two markets were content with holding inside of a tight range with a bias to the upside this week, but late in the trading session the Fed mysteriously failed to finish its weekly buyback of government assets causing Notes and Bonds to fall. Even later in the week, speculation that a rating agency would lower the U.S. debt rating to below Triple A put additional downside pressure on the markets. Finally, next week’s Treasury auction will increase debt supply and should keep the upside pressure on yields
Stock indices finished the week under pressure and in a position to push through recent support levels. Based on the double-top pattern developing in the June S&P 500, it looks as if there may be an acceleration to the downside once 875.00 is violated. The recent top coincided with the release of the bank stress tests which leads me to believe that the raising of capital by the banks sucked much needed investments out of the broad ranged market.
Stocks could feel additional pressure next week as Treasury yields are expected to rise. Higher interest rates will lead to a decrease in corporate profits if borrowing costs get out of control.
The falling Dollar is leading speculators to seek protection in commodities such as crude oil. This is driving this market higher much like the scenario we had last year in the market place. This is the only explanation for this rally as the oil supply remains in a world wide glut. Recessionary pressures continue to keep demand low and supply high.
Fear of inflation has been providing support for June Gold and July Silver. The falling Dollar and fear of higher interest rates is helping to drive speculators to seek projection against an inflated Dollar. Industrial metals such as July Platinum and July Copper remain in a tight range because recessionary pressures are limiting demand. Catalytic converter production is down because auto sales are down. This should limit gains in platinum.
July Soybeans are expected to continue to march higher. The falling Dollar combined with low production out of South America and increased demand from China has been supporting the current rally. A weather scare could encourage even more buying to push prices higher.
July Corn is also in a position to break out to the upside. Dry fields this week did not allow farmers to catch up on their planting which means the growing season will start with a smaller than expected crop. Higher energy prices are also increasing demand for bio fuel products.
Low supply is helping to drive July Coffee prices higher. Because of the break out to the upside, speculators have also been chasing this market to take advantage of the bull market. Demand is expected to outstrip supply.
The longer-term fundamentals are expected to remain bullish for July Sugar as supply is tight and India needs to supply its needs. The problem is speculators have driven prices too high, too fast. India is playing this rally smart and not chasing prices. Look for a correction before entering from the long side.
By FuturesHound.com the portal for Analysis, Education and exclusive timely market Gann Analysis.
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