Last week Sugar finally broke the fulcrum and went down. You can read the rationale for this down move in the post “The Hunt For The Sugar Short is not over. Japanese Yen and Bonds Are Also Presenting Opportunities” from 02/16/2020.
Now the game is to wait for a pullback and then to take price action short signals. Especially when the latest Commitments of Traders (COT) data shows that Commercials sold more during the beginning of this down move.
No matter the fall (explained in the previous post “Crude Oil, Platinum and US Stock Market” from 23rd of February 2020) the Commercials did not start to buy Crude Oil. Again like in Sugar they sold more, supporting the downturn.
The swing target of 44.50 is reached. Now we can expect some pullback but I won't be looking for buy signals here until Commercials show some buying. Next target for the down move is $39.
After I was so wrong about the Platinum in the last week's post, you should take with caution what I am about to say for Dr Copper.
The good, old Dr Copper is showing a cluster of positive signals. This is contrary to the belief that the coronavirus will slow down the world's economy and might even lead to a global recession.
No matter how we interpret it, there are some things which we can not dismiss (see the chart):
From a price action perspective, Dr Copper was the only instrument which held ground during the last week's debacle.
The last bar is showing that on Monday the initial move should be towards the low of Friday. If that low is breached we can expect with a higher probability that Monday would be a down day. If that attempt fails and Friday's high is broken that might signal the beginning of a tradable rise.
Seasonals, volume, and On Balance Volume are showing an upcoming rise in Soybeans. Soybean Meal is stronger than Soybeans and it can be played on the long side as well. Currently, there is a price action setup so the movement might begin shortly.
Wow, I've expected a fall, but nothing like this. It seems that the Federal Reserve's timing to withdraw some liquidity was really bad.
As you can see from the following chart borrowed from Tom McClellan and published in his latest Chart in Focus, the FED started to depart from the repo market. That is, of course, causing troubles for the market because the fuel is disappearing.
What made the situation even worse is that this time liquidity problems coincided with the global spreading of the coronavirus. And the result was the fastest correction in S&P500 for many years.
Now comes the question what's next?
I believe the Federal Reserve and the US government will act with stimulus and the liquidity problems would be taken care of. But the most important question is can this outbreak cause a global recession? It is too early to answer this.
If they solve the liquidity problem, the next swing should be to the upside. But with so many analysts, revising down their earnings expectations, I don't think we'll see a V-shaped recovery.
Few things to consider:
Enjoy trading and stay safe
Founder of Piece of Trading
Trades mentioned here are either taken or will be taken by the author if the right conditions appear. They are NOT recommendations nor any of this constitute investment advice. Please read the Risk Disclaimer
Seasonal indicators courtesy of Larry Williams, ireallytrade.com. Charts made with TradeStation®. tradestation.com
Get it today!