Turkey and its troubles threw a little Risk Off in the market Friday but the downside was contained. The S&P Futures tagged the 21day MA and reversed course to end the week only sightly down. 

 

 

 

 

 

 

 

 

Inflation has been creeping up but still not enough to ring any alarm bells. Longer term view still remains bullish and a test of January all time highs are in the cards and not far away.  

WTI Crude broke the wedge mentioned last week to the downside and is now below the 8&21 MAs. Friday saw some consolidation to the upside but so long as contained by those MAs the bias is to the downside. The next major support lies at the 200day which is lining up with a horizontal level at 64.50.  

Copper was close to breaking out when pushed through key levels and moving averages but gradually pulled back as the Risk Off sentiment took over the market. The 2.70 level has provided support so the question will be if it does this time. The daily MACD has been creeping up but until a positive close the bias remains sell the rips with long attempts around the 2.7 area. 

And the big winning trade of the week was Wheat. Along with other Ag commodities having extreme moves over the past months due to Tariffs, Wheat has been a beast. Until this week. Wheat was pressing channel resistance when we alerted a Trade Alert to sell. It took the week for the trade to pay out but it did nicely Friday with wheat down 3.2% on the day. With a MACD slowing and clear bearish RSI divergence, sell the rips is the course of action next week until the 21day MA is tagged and then reassess. It could pause and consolidate a little there but until proven otherwise, a test of channel support wouldn’t be a bad thing. 

 

Nearing the later months of Summer, can’t believe I have to say that, big earnings out of the way and the Fed holding rates, I believe we’re in for a grind higher. Unless we take out January the possibility to stay range bound with support of 2800 is pretty good. 

The VIX is giving clues to this as has been forming a falling triangle (they break to the downside more than to the upside) ever since the big spike in Feb. 

On to Crude, bias still remains to the downside towards 64.50 area unless it can get above the 69.60 level.

Its early but Copper is starting to show signs of a stronger bottom. MACD is close to ticking positive. Just keep on eye on daily closings above the 8&21days for confirmation. 

Although I don’t anticipate a whole lot of decisive moves the holiday week there are some interesting setups to keep a watch on. The indexes are looking like a deeper pullback is in the cards. Let’s look at the E Minis first. Currently ES is back within a 2703 to 2740 area it was in for about two week.

If we stay here throughout this holiday week we could be setting up for what looks like a head and shoulders pattern with a slope of 2703.

The NQ  doesn’t have as clear of a pattern but as of now the daily is below the 8 & 21 day MAs and the MACD has ticked negative so bias is still to the downside with a big support of 7000. 

Small Caps broke a Rising Wedge and as usual the pullback so far has been quick and deep. Currently below the 8 & 21 day MAs with a negative tick so again bias is to the downside with a big support of 1618. 

Looking across the Pacific the Nikkei futures appear to be setting up a double top with similar indicators as prior noted indexes with support of 21900 – 21980 area. 

Given all these indexes have a downside bias only adds another downside bias to them all. 

Moving on to energy, WTI oil had a huge week. After OPEC’s big meeting a week ago with promises to increase production the market realized it had been pricing in a bigger, faster production increase and the market reprised in a hurry. Yesterday Trump announced a side deal with Saudi Arabia to increase production by 2 Million barrels a day although the deal is likely to anger Iran and Venezuela. Looking at the weekly, CL is testing a long term channel resistance in place since its lows. 

The weekly RSI slope is downward so each swing high is being met with less strength of so I would not be surprised to see CL pullback from this resistance level. 

The Metals have all been pretty beaten down on trade war concerns and the USD at recent highs. So much so that many as looking like attractive longs for a bounce or more (except Silver).

As I said, the DXY has been flirting with highs of $95 but a big reversal Friday and USD is looking like $94 will not hold putting 92.50 area in play. 

 

If the USD keeps pulling back this is a bullish catalyst for metals so lets look at some interesting options. 

The big news this week about Gold is the Death Cross that occurred (the 50 MA crossing below the 200). The trend is to the downside and not yet oversold but Gold is coming up to a longer term trend support on the weekly so could be near bounce levels. 

The big level many Copper traders have been eying is 2.95. Given Copper has been especially hurt with trade war fears given China consumes about 40% of the metal for industrial use any hint of a resolution would be a very welcome news to Copper longs. Given almost at oversold levels and near a bug support area keep you eyes on a long signal. 

Platinum has been on a steady downtrend for some time but actually has some bullish RSI divergence. Having respected channel support Friday Platinum actually looks like it may have found a longer term trade bottom than other Metals. 

Finally Silver. Unlike the other Metals Silver looks in danger of a deeper correction if cannot regain some bullish momentum quick it has broken pennant support. It should be noted that Silver did break to the upside of the pennant and quickly reversed so it hasn’t exactly holding true to patterns lately and why I’m staying clear of at the moment given other Metals have clearer setups. 

Given the shortened trading week keep an eye on the setups and don’t be in a hurry as trading will likely be choppy on low volume. Happy trading and Independence day.

-Wags

After today’s move up CL_F should find resistance in the 65.89 to 66 area (the bottom of the cloud and horizontal resistance). So long as this area holds, we still view the move today as consolidation off of oversold levels and a back test of the broken bear flag with a continuation to a target of $62 area. The measured move of the larger Rising Wedge from the $72 levels. 

It has been awhile since we called the rising wedge formation for CL_F with a measured move target of $62. WTI has come a long way but on a weekly basis didn’t really move this week other than up and down intraday. Wags still believes CL_F has been backtesting the broken channel support, now resistance, and CL will continue down to the target price. So far CL has found resistance along the former support and reacted on its first test of the 8day. I view this week as a sideways consolidation for the MAs to catch up after an extreme unwind and now can continue down so long as the 8day acts as resistance. 

Since we identified the Rising Wedge pattern the WTI futures have gone from the mid $72 area to a close of 65.71 Friday. Currently, CL is sitting on a trend support line in the area of major horizontal support with the 100day a stone’s throw away.

Our measured move of the pattern break is the 62-62.60 area but given the extent of the move and the converging supports a pause and retest of trend resistance is warranted and or as well as horizontal resistance levels indicated. 

 

The rising wedge we mentioned last weekend broke and like this pattern type the break is quick and big. Looking at the weekly we have a clear rising channel so a test of support at some point is not out of the question.

The measured move of the rising wedge pattern puts CL_F at $62 for that trade. Looking at the daily, CL_F ended right on the 50day and shorter time frames are more than oversold. The 60min time frame has a RSI of 7! So some relief consolidation is in order. CL is now in the box from 69.50-66.5 that it bounced around in so we could see the same type of choppy consolidation between before a push below 66.50 to the eventual trade target of $62. 

That would put CL somewhere midrange of the channel so an evaluation will need to be done there to determine if a further slide to channel support is likely or a bounce back up to the top of the range. 

I believe CL is in the process of topping. There is no confirmation as of yet though but here is why I believe so. Today we have a spinning top daily candle today with bearish RSI divergence at the moment. Looking at the Ichimoku study the tenkan and kijun have flattened out and will pull price towards.

Looking at the 4hr we can more clearly see the RSI divergence and decreasing momentum as well as a rising wedge pattern – my favorite pattern.

Given the extreme Net Long positioning in WTI Crude at the moment, this adds to the extreme unwinding rising wedges typically see already as longs scramble to cover their positions further fueling the move down. 

Now the measured move of a rising wedge is just about 100% putting a target on a break down to $62. Could we grind higher? Sure but given the move in crude YTD and a lot of geopolitical risk already priced in, the risk to reward trade as I see it currently is the short side. If you want confirmation you can wait for a break of trend support to take a position and or add to it on a back test of said trend line if it happens. 

Crude is a highly manipulated commodity and nothing is for certain so use stop losses and be willing to accept the pattern is null if price and indicators are telling you so. In other words, you don’t ever want to marry oil, just date it.