Crude oil futures are driving the bus
Unfortunately for anyone holding stocks in their retirement portfolio, or anybody playing the long side of the e-mini S&P in the future market, stocks aren't trading on their own fundamentals. The broad market is simply following crude oil lower, and occasionally temporarily higher.
It is important to remember the last time crude oil traded near $30, the S&P 500 was near 1,100, and the world was concerned we would no longer have a functioning banking system. This time around, we are in a much different situation. Unless I'm missing something, it is far less dire (unless you are long commodities). Nevertheless, something has to come back into line. Either oil, and the other beaten down commodities need to make a move higher, or stocks need to move lower.
In recent days we've been "blessed" with some rather bold analyst calls in the commodity space. Some large and relatively well respected banks and analysts are calling for oil to fall to 20s per barrel, and in one instance expectations are for $10 crude oil!!! Perhaps these prediction will be accurate, but we have serious doubts. It smells a little like the widespread analyst expectations for $200 crude oil in 2008 when $150 crude oil was considered "cheap".
Treasury Futures
The safety bid finally shows up in the 30-year bond futures market, but is the party over?
Yesterday we were surprised to see Treasury bonds and notes hugging unchanged in an environment in which the S&P 500 was experiencing significant volatility, and downside risk. Today, we finally saw the action in Treasuries that would have been expected in the previous sessions. However, we have to wonder if the bond market is late to the "risk off" party. Both stocks, and (dare we say) crude oil, are attempting to find lows. Even if they prove to be temporary, a few days of bouncing "should" be in the cards. If so, today's Treasury rally could easily be reversed.
We've been looking for resistance near 158 in the ZB and 128ish in the ZN, and we are finally here. The best trades should be from the short side into strength for the time being.
Treasury Futures Market Analysis
**Bond Futures Market Consensus:** Treasuries feel a little lofty up here. The best trades should be from the short side in the coming weeks.
**Technical Support:** ZB : 152'30, 151'11, and 150'10 ZN: 126'10, 125'15 and 124'16
**Technical Resistance:** ZB : 158'05, and 159'19 ZN: 128'05, 128'19, and 129'28
Stock Index Futures
China has stabilized, now can oil?
If oil stabilizes, and earnings are at least tolerable, the S&P should pull out of this ugly dip with bruises, rather than scars. This seems like a big "if" given the current vacuum selling in the energy complex, but we are relatively confident the odds of such a reversal are not only realistic, but maybe even likely.
The March ES traded as high as 1940 this morning, only to find the gains fizzle out as crude oil fell well into negative territory. This isn't shocking given the recent correlation. Algorithm traders (the machines) as well as human traders, have been "programmed" to sell one asset class as the other ticks lower, and vice versa. Yet, there are plenty of potential catalysts for trend changes coming down the pipeline. Hopefully, we are near a climax in volatility.
Stock Index Futures Market Ideas
**e-mini S&P Futures Market Consensus:** It is going to be a bumpy ride, but most of the selling is probably behind us. With that said, the mid-1800s are possible before the tides turn.
**Technical Support:** 1888, 1852, and 1823
**Technical Resistance:** 1940, 1970, 2005, 2026, 2083, and 2120
e-mini S&P Futures Day Trading Ideas
**These are counter-trend entry ideas, the more distant the level the more reliable but the less likely to get filled**
ES Day Trade Sell Levels: 1940, 1964, and 1974
ES Day Trade Buy Levels: 1894, 1885, and 1873
In other commodity futures and options markets....
November 24 - Roll long December corn into March to avoid delivery.
January 7 - Sell April crude oil 26.00 puts near 41 cents ($410).
January 8 - Sell Feb e-mini S&P 500 1700 puts for about 8.00 to 8.50 ($400 to $425).
(Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, Euro, Yen, and more. Email us for more information)
Carley Garner
DeCarley Trading (a division of Zaner)Twitter:@carleygarner
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www.DeCarleyTrading.com
www.ATradersFirstBookonCommodities.com **There is substantial risk of loss in trading futures and options.** These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.