S&P 500
The S&P futures are up slightly after Monday’s intense sell-off as investors await Pending Home Sales and Fed Chairman Bernanke’s testimony before Congress. U.S. equities came under intense selling pressure yesterday despite slightly better than expected ISM Manufacturing PMI and Consumer Spending data. Investors were locked in on the government’s most recent bailout of AIG after the insurer posted a horrible earnings loss. The term traveling around town is ‘systemic risk’. In other words, companies such as AIG and Citigroup may be too big to fail, posing substantial risk to the entire financial system. Citigroup logged another 20% loss while BofA lost another 8% and change. Furthermore, corporate behemoths such as U.S. Steel, Alcoa, Dow Chemical and GE continue to post significant losses which are overshadowed by the situation of the U.S. banks and insurers. Additionally, we can’t forget GM and Ford are around $2/share. Once one steps back and takes a look across the board, the problem is much bigger than the banks. If the sell-off should continue, we could soon see Dow, GE, and Alcoa each trading under $5/share. The concept is a bit extreme, showing the significance of the economic contraction taking place. Not only are investors pricing Citi and BofA for broke, soon they could be pricing the core of the American economy for bankruptcy. The longer Citi, AIG and the lot stay afloat, the longer the downturn could last. Therefore, we would not be surprised to see the U.S. ‘seal the deal’ relatively soon and follow through by nationalizing Citi, AIG, and possibly Bank of America. Who knows, big brother may have to swoop in and pick up GM and Ford along the way. The focus will come down to raw economic data. If the data does not improve, neither does the stock market. Since Obama’s stimulus packages could take months to trickle down into the economy, the government may have to act soon rather than later. Meanwhile, the S&P futures are finding solace in the psychological 700 level. However, we have not seen a high volume buying spree yet, showing investors aren’t quite ready to initiate a temporary bottom. If the S&P should fall below the 700 area, we could see some more significant selling before the buyers finally step in and stabilize equities again. Fundamentally, we find resistances of 712.75, 717.25, 723.75, and 730.75. To the downside, we see supports of 708 and 700. The S&P futures are currently trading at 708.25.
EUR/USD
The EUR/USD is sitting right on our medium-term uptrend line, holding onto dear life after balancing on our 1.2555 level. The performance of the EUR/USD over the past 24 hours shows us investors aren’t quite ready to give up on the medium-term uptrend considering a drop beneath would likely lead to a sharp leg down. However, the picture isn’t pretty, and it’s difficult to find a reason why the EUR/USD will turn around and head for an uptrend. With the U.S. economy in shambles, it would take a massive shift in investor sentiment to alter the downwards wave taking place. Investors are waiting for America’s Pending Home Sales data coming this morning. Discouraging data could lead the S&P futures below 700 with the EUR/USD following suit. On the other hand, we could see buyers entering to give a temporary boost on oversold conditions. Fundamentally, we maintain our support of 1.2555 with 2nd tier and bottom-end supports resting at 1.2514 and 1.2458, respectively. To the topside, we hold our resistances of 1.2634, 1.2690, 1.2761, and 1.2822. The EUR/USD is currently exchanging at 1.2632.
GBP/USD
The Cable found some support around the psychological 1.40 area as expected despite the large selloff taking place in U.S. equities. However, the Cable failed to close above our 1st tier downtrend line and will likely extend its losses with a possible retest of January lows coming. The GBP/USD is weakening Tuesday after Britain released a much worse than expected Construction PMI. Therefore, with Net Lending to Individuals and Mortgage Approvals each declining yesterday, the housing crisis in Britain is ongoing. Meanwhile, the S&P futures are in a freefall after dropping below 2008 lows. Considering the positive correlation between the Cable and U.S. equities, we maintain our negative outlook on the GBP/USD. Fundamentally, we maintain our resistances of 1.4078, 1.4119, 1.4173, and 1.4219. To the downside, we hold our supports of 1.4023, 1.3964, 1.3905, and 1.3841. The 1.45 level still serves as a psychological barrier to the upside with 1.40 serving as a cushion to the downside. The GBP/USD is currently exchanging at 1.4059.
USD/JPY
The USD/JPY continues to stabilize along our 2nd tier downtrend line as investors show hesitation after February’s impressive run. While it has been easy to be positive on the USD/JPY over the last month with the Carry Trade unwound and the Japanese economy decomposing at a faster rate than America’s, the medium-term downtrend still looms large. The USD/JPY has significant barriers to break through, including the highly psychological 100 level, before we can feel comfortable with the prospect of a lasting uptrend. If the U.S. should continue to release negative data while the financials crumble, the USD/JPY may be forced downwards with U.S. equities. Investors are currently waiting to see if S&P can hold 700 and whether the U.S. steps in to nationalize Citigroup and AIG. Additionally, investors will be keeping a close eye on U.S. Pending Home Sales since the crisis began with a contraction in the housing market. Fundamentally, we maintain our resistance of 98.25 with fresh resistances of 99.05, 99.64, and 100.30. To the downside, we find supports of 97.66, 97.22, 96.56, and 95.96. The USD/JPY is currently exchanging at 97.65.
Crude
Crude futures crashed on Monday, following U.S. equities into the dumps. Valuations in the stock market have investors worried about the U.S. and global economy as a whole for obvious reasons. Therefore, investors ignored the OPEC supply constraints and sent crude tumbling. However, Crude futures are recovering above the psychological $40/bbl area on Tuesday, and are now lodged solidly between our 1st and 2nd tier downtrend lines. Our uptrend and 2nd tier downtrend line experienced an inflection point yesterday with a highly negative result. Therefore, the futures could be sending a message that the downtrend is far from over. Fortunately for the bulls, the Crude futures still have February lows as a base, so potential losses should be limited in the near term. We expect a near-term rise in Crude futures today with a possible retest of our 2nd tier downtrend line. Fundamentally, we find supports of $40.08/bbl, $39.42/bbl, $38.87/bbl, and $38.08/bbl. The $40/bbl area remains a reliable psychological cushion for the near-term. To the topside, we see resistances of $40.73/bbl, $41.26/bbl and $41.75/bbl, and $42.22/bbl. Meanwhile, the $45/bbl area will serve as a psychological barrier. Crude futures are currently trading at $40.61/bbl.
Gold
Gold continued its decline on Monday despite crashing U.S. equities. Gold dropped below all of our supports and tripped beneath our 1st tier uptrend line. Therefore, if Gold does not rise back above the uptrend line very soon, we could see a heightened sell-off in the near-term. Although the fundamentals are turning negative for the time being, the medium-term uptrend is not lost. There are multiple layers of uptrend the precious metal must fall below before we can call the uptrend dead. While investors may be taking profits after impressive gains, if U.S. equities should continue their demise, we have no reason the negative correlation between the two won’t lock in. Fundamentally, we find resistances of $930.76, $937.81/oz, $945.57/oz and $953.15/oz. To the downside, we see supports of $919.22/oz, $911.60/oz, $903.29/oz., and $894.29/oz. The $900/oz area should serve as a reliable psychological cushion in the near-term. Gold is currently trading at $925.05/oz.
Corn
Corn futures recovered a bit yesterday despite the steep selloff in the S&P futures. However, the corn futures are still below our near-term downtrend line and all three uptrend lines. Therefore, we maintain our negative stance on corn. If corn should fall beneath February lows, then we anticipate a large selloff with a possible retest of December lows. Corn futures are following the path of U.S. equities. With Prelim GDP coming in well below expectations, investors are anticipating the demand side of the equation to diminish further. As the U.S. economy grinds to a halt, food consumption should decline. Additionally, lower demand for meat in effect reduces the demand for corn used in livestock feed. Furthermore, with U.S. citizens driving less and crude prices at a bargain, the demand for ethanol based fuel is waning. Hence, if the S&P futures should continue their selloff as we anticipate, corn futures should flex their positive correlation and follow suit. Fundamentally, see resistance at $3.4525/bshl, with 2nd tier and top-end resistances hanging at $3.51/bshl and $3.56/bshl, respectively. To the downside, we find support $3.415/bshl with additional supports resting at $3.365/bshl, $3.3325/bshl, and $3.2825/bshl. The $3.50/bshl area becomes a psychological barrier again with a psychological cushion at $3/bshl. Corn futures are currently trading at $3.4525/bshl.
30 Year T-Bond
The 30 Year T-Bond futures backed away from our 126.64 resistance on Monday despite the massive selloff in U.S. equities. Since equities and treasuries are normally negatively correlated, the lack of movement to the upside in the 30 Year shows the downtrend is intact. Furthermore, the fact the 30 Year futures are declining with equities shows investors are concerned the demand for government debt is insufficient to satisfy supply. As a result, yields are rising and price falling, placing exorbitant downward pressure on the 30 Year T-Bond futures. With the uptrend walking away into the distance and the 2nd tier downtrend line re-approaching, we maintain our negative stance on the 30 Year futures. Fundamentally, we find resistance of 125.75 with 2nd tier and bottom-end hanging at 126.64 and 127.25, respectively. To the downside, we see supports of 124.98 and 124.36. The 30 Year Treasury Bond futures are currently trading at 125 19.5.
The S&P futures are up slightly after Monday’s intense sell-off as investors await Pending Home Sales and Fed Chairman Bernanke’s testimony before Congress. U.S. equities came under intense selling pressure yesterday despite slightly better than expected ISM Manufacturing PMI and Consumer Spending data. Investors were locked in on the government’s most recent bailout of AIG after the insurer posted a horrible earnings loss. The term traveling around town is ‘systemic risk’. In other words, companies such as AIG and Citigroup may be too big to fail, posing substantial risk to the entire financial system. Citigroup logged another 20% loss while BofA lost another 8% and change. Furthermore, corporate behemoths such as U.S. Steel, Alcoa, Dow Chemical and GE continue to post significant losses which are overshadowed by the situation of the U.S. banks and insurers. Additionally, we can’t forget GM and Ford are around $2/share. Once one steps back and takes a look across the board, the problem is much bigger than the banks. If the sell-off should continue, we could soon see Dow, GE, and Alcoa each trading under $5/share. The concept is a bit extreme, showing the significance of the economic contraction taking place. Not only are investors pricing Citi and BofA for broke, soon they could be pricing the core of the American economy for bankruptcy. The longer Citi, AIG and the lot stay afloat, the longer the downturn could last. Therefore, we would not be surprised to see the U.S. ‘seal the deal’ relatively soon and follow through by nationalizing Citi, AIG, and possibly Bank of America. Who knows, big brother may have to swoop in and pick up GM and Ford along the way. The focus will come down to raw economic data. If the data does not improve, neither does the stock market. Since Obama’s stimulus packages could take months to trickle down into the economy, the government may have to act soon rather than later. Meanwhile, the S&P futures are finding solace in the psychological 700 level. However, we have not seen a high volume buying spree yet, showing investors aren’t quite ready to initiate a temporary bottom. If the S&P should fall below the 700 area, we could see some more significant selling before the buyers finally step in and stabilize equities again. Fundamentally, we find resistances of 712.75, 717.25, 723.75, and 730.75. To the downside, we see supports of 708 and 700. The S&P futures are currently trading at 708.25.
EUR/USD
The EUR/USD is sitting right on our medium-term uptrend line, holding onto dear life after balancing on our 1.2555 level. The performance of the EUR/USD over the past 24 hours shows us investors aren’t quite ready to give up on the medium-term uptrend considering a drop beneath would likely lead to a sharp leg down. However, the picture isn’t pretty, and it’s difficult to find a reason why the EUR/USD will turn around and head for an uptrend. With the U.S. economy in shambles, it would take a massive shift in investor sentiment to alter the downwards wave taking place. Investors are waiting for America’s Pending Home Sales data coming this morning. Discouraging data could lead the S&P futures below 700 with the EUR/USD following suit. On the other hand, we could see buyers entering to give a temporary boost on oversold conditions. Fundamentally, we maintain our support of 1.2555 with 2nd tier and bottom-end supports resting at 1.2514 and 1.2458, respectively. To the topside, we hold our resistances of 1.2634, 1.2690, 1.2761, and 1.2822. The EUR/USD is currently exchanging at 1.2632.
GBP/USD
The Cable found some support around the psychological 1.40 area as expected despite the large selloff taking place in U.S. equities. However, the Cable failed to close above our 1st tier downtrend line and will likely extend its losses with a possible retest of January lows coming. The GBP/USD is weakening Tuesday after Britain released a much worse than expected Construction PMI. Therefore, with Net Lending to Individuals and Mortgage Approvals each declining yesterday, the housing crisis in Britain is ongoing. Meanwhile, the S&P futures are in a freefall after dropping below 2008 lows. Considering the positive correlation between the Cable and U.S. equities, we maintain our negative outlook on the GBP/USD. Fundamentally, we maintain our resistances of 1.4078, 1.4119, 1.4173, and 1.4219. To the downside, we hold our supports of 1.4023, 1.3964, 1.3905, and 1.3841. The 1.45 level still serves as a psychological barrier to the upside with 1.40 serving as a cushion to the downside. The GBP/USD is currently exchanging at 1.4059.
USD/JPY
The USD/JPY continues to stabilize along our 2nd tier downtrend line as investors show hesitation after February’s impressive run. While it has been easy to be positive on the USD/JPY over the last month with the Carry Trade unwound and the Japanese economy decomposing at a faster rate than America’s, the medium-term downtrend still looms large. The USD/JPY has significant barriers to break through, including the highly psychological 100 level, before we can feel comfortable with the prospect of a lasting uptrend. If the U.S. should continue to release negative data while the financials crumble, the USD/JPY may be forced downwards with U.S. equities. Investors are currently waiting to see if S&P can hold 700 and whether the U.S. steps in to nationalize Citigroup and AIG. Additionally, investors will be keeping a close eye on U.S. Pending Home Sales since the crisis began with a contraction in the housing market. Fundamentally, we maintain our resistance of 98.25 with fresh resistances of 99.05, 99.64, and 100.30. To the downside, we find supports of 97.66, 97.22, 96.56, and 95.96. The USD/JPY is currently exchanging at 97.65.
Crude
Crude futures crashed on Monday, following U.S. equities into the dumps. Valuations in the stock market have investors worried about the U.S. and global economy as a whole for obvious reasons. Therefore, investors ignored the OPEC supply constraints and sent crude tumbling. However, Crude futures are recovering above the psychological $40/bbl area on Tuesday, and are now lodged solidly between our 1st and 2nd tier downtrend lines. Our uptrend and 2nd tier downtrend line experienced an inflection point yesterday with a highly negative result. Therefore, the futures could be sending a message that the downtrend is far from over. Fortunately for the bulls, the Crude futures still have February lows as a base, so potential losses should be limited in the near term. We expect a near-term rise in Crude futures today with a possible retest of our 2nd tier downtrend line. Fundamentally, we find supports of $40.08/bbl, $39.42/bbl, $38.87/bbl, and $38.08/bbl. The $40/bbl area remains a reliable psychological cushion for the near-term. To the topside, we see resistances of $40.73/bbl, $41.26/bbl and $41.75/bbl, and $42.22/bbl. Meanwhile, the $45/bbl area will serve as a psychological barrier. Crude futures are currently trading at $40.61/bbl.
Gold
Gold continued its decline on Monday despite crashing U.S. equities. Gold dropped below all of our supports and tripped beneath our 1st tier uptrend line. Therefore, if Gold does not rise back above the uptrend line very soon, we could see a heightened sell-off in the near-term. Although the fundamentals are turning negative for the time being, the medium-term uptrend is not lost. There are multiple layers of uptrend the precious metal must fall below before we can call the uptrend dead. While investors may be taking profits after impressive gains, if U.S. equities should continue their demise, we have no reason the negative correlation between the two won’t lock in. Fundamentally, we find resistances of $930.76, $937.81/oz, $945.57/oz and $953.15/oz. To the downside, we see supports of $919.22/oz, $911.60/oz, $903.29/oz., and $894.29/oz. The $900/oz area should serve as a reliable psychological cushion in the near-term. Gold is currently trading at $925.05/oz.
Corn
Corn futures recovered a bit yesterday despite the steep selloff in the S&P futures. However, the corn futures are still below our near-term downtrend line and all three uptrend lines. Therefore, we maintain our negative stance on corn. If corn should fall beneath February lows, then we anticipate a large selloff with a possible retest of December lows. Corn futures are following the path of U.S. equities. With Prelim GDP coming in well below expectations, investors are anticipating the demand side of the equation to diminish further. As the U.S. economy grinds to a halt, food consumption should decline. Additionally, lower demand for meat in effect reduces the demand for corn used in livestock feed. Furthermore, with U.S. citizens driving less and crude prices at a bargain, the demand for ethanol based fuel is waning. Hence, if the S&P futures should continue their selloff as we anticipate, corn futures should flex their positive correlation and follow suit. Fundamentally, see resistance at $3.4525/bshl, with 2nd tier and top-end resistances hanging at $3.51/bshl and $3.56/bshl, respectively. To the downside, we find support $3.415/bshl with additional supports resting at $3.365/bshl, $3.3325/bshl, and $3.2825/bshl. The $3.50/bshl area becomes a psychological barrier again with a psychological cushion at $3/bshl. Corn futures are currently trading at $3.4525/bshl.
30 Year T-Bond
The 30 Year T-Bond futures backed away from our 126.64 resistance on Monday despite the massive selloff in U.S. equities. Since equities and treasuries are normally negatively correlated, the lack of movement to the upside in the 30 Year shows the downtrend is intact. Furthermore, the fact the 30 Year futures are declining with equities shows investors are concerned the demand for government debt is insufficient to satisfy supply. As a result, yields are rising and price falling, placing exorbitant downward pressure on the 30 Year T-Bond futures. With the uptrend walking away into the distance and the 2nd tier downtrend line re-approaching, we maintain our negative stance on the 30 Year futures. Fundamentally, we find resistance of 125.75 with 2nd tier and bottom-end hanging at 126.64 and 127.25, respectively. To the downside, we see supports of 124.98 and 124.36. The 30 Year Treasury Bond futures are currently trading at 125 19.5.
