The weekly technical on the Capesize index is starting to stall at the US$ 20,155 resistance highlighted last week. Technically the longer term trend is regarded as bullish as it remains above key moving averages, however there are some warning signs that we could once again be entering into a potential corrective phase.
The bull argument – Strong upward pricing with a weekly close near market highs whilst trading above 200, 50 and 20 period moving averages. This all points to a stronger longer term trend on the weekly chart.
The Bear argument – weekly pricing is making new highs at a time the stochastic is failing to do so. This is known as a bearish divergence and although not a sell signal, it is a warning of potential weakness in the future.
Although not an Elliott wave enthusiast, it is hard not to observe the 3 strong upward waves on the weekly chart since April 2016. This five wave pattern (3 up 2 down) meets the minimum requirement for an upward cycle to enter a corrective phase. Another common factor in an Elliot Cycle is the Fibonacci relationship between the first and last upward moves, with the final wave being related in length by 61.8%, 100% or 1.618%. US$ 1,977 is 161.8% of leg 1, and a natural point of resistance, and although broken briefly we are back once again below this level.
We are also at a natural point of resistance dating back to July 2015 (US$ 19,499), with the daily settlement being once again below this level.
Finally if you look at the seasonality chart for the Capesize Index for December, the average 10 year price is + 5.15%, meanwhile the 7 yr is – 28.76% the 5 yr is – 26.33% and the 3 year average is – 20%. This would suggest that the probability that prices are reaching a maximum level are fairly high.
Dec futures are now entering into a corrective phase after failing to make a new high on the last upward swing. Technical confirmation from the sell side is needed, with a close below US$ 11,188 the key level for fresh shorts to enter. However a close below the short period average at US$ 12,013 should have longs on alert as an early warning for a potential test of the US$ 11,188 support, especially as the daily stochastic is currently overbought. Further technical support can be found at US$ 10,683 and US$ 10,000.
Technical resistance can be found at US$ 13,247 and US$ 13,885, if the first resistance is broken it is likely that a new high will be made, however based off the overbought stochastic it is likely that resistance levels will hold.
Cal 17 futures are already well establish within their corrective phase, with prices back below their shorter term averages. Stochastics are now starting to look oversold on the daily chart, however the recent price pullback is less aggressive than that of the stochastic. This is known as a bear trap and would suggest that the next upward move will be the last upward move in this cycle, with the weekly stochastic at 81 it is hard to envisage fresh highs, however not impossible.
Cal 17 futures are already well establish within their corrective phase, with prices back below their shorter term averages. Stochastics are now starting to look oversold on the daily chart, however the recent price pullback is less aggressive than that of the stochastic. This is known as a bear trap and would suggest that the next upward move will be the last upward move in this cycle, with the weekly stochastic at 81 it is hard to envisage fresh highs, however not impossible.
Key support for the Cal 17 futures are at US$ 7,883 and US$ 7,771, with the daily stochastic being oversold these levels could hold in the near term. Look for technical resistance at US$ 8,328 and US$ 8,704. A close above the US$ 8,328 would suggest that we have the potential to challenge recent highs as this is back within the initial corrective wave territory.
Resistance levels have been broken in the Panamax index with pricing taking out weekly and monthly resistance levels. The longer term trend is overbought, however price is now above the 50 period Moving average bands on the monthly chart for the first time since 2008, and this could be significant when entering a market pullback as these could prove to act as support levels going forward.
A close on the weekly chart below US$ 10,697 should have market longs on alert for a potential pullback to the short term averages around the US$ 8,584 level. A close below this level does have bearish implications, however both the 50 and 40 period MA’s pointing upwards you should find further support at US$ 7,027 (July High) and US$ 6,807 as this is the 200 period MA.
Technical resistance can be found at US$ 11,201 as this is the 61.8% retracement of the Dec 13 high and the Jan 16 low. This is a key resistance and a close above here would have fresh buyers looking to test the 76.8% 13,371 resistance level.
It is worth noting that the five year Dec average is – 4.11% and the 3 year average is – 9.24%. this would suggest that technical resistance could hold around these levels, especially as the 5 year average for January is – 31.06% with the 3 year average being – 23.4%
We highlighted that it was best to avoid picking the top in the Dec futures in the last report, and highlighted that a close above US$ 8,675 would suggest that the secondary resistance at US$ 9,475 could be tested, and this has been the case. At this point the US$ 9,475 level remains intact and any rejection from here (currently trading US$ 8,800) would indicate that buyers are withdrawing from the market. Short term support can be found at US$ 8,636, with a close below here suggesting that sellers are now taking on the buyers. Further support will be found at US$ 7,601 and US$ 7,356.
Resistance will be found at US$ 9,475. The technical picture is finally starting to weaken in the short term, however US$ 8,636 will be key to lower pricing.
Last weeks close on the weekly chart for the Cal 17 futures produced a shooting star candles stick. This is a bearish weekly candle and should not be ignored as the weekly momentum is in overbought territory.
Technically still bullish above US$ 6,250 the Cal 17 is starting to look vulnerable, a close below here would suggest that the 34 period EMA at US$ 6,023 would be the next logical support level with further support at US$ 5,775.
Technical resistance will be at at US$ 6,753, as this the 61.8% retracement of the Aug 15 high and Jan 16 low. With the stochastic being overbought we would expect this level to hold in the short term.
A very strong performance by the Supramax index resulted in resistance levels being broken without activating any sell signals. Last weeks close was above the 200 period MA and the 76.8% Fibonacci resistance. Although technically overbought we are now starting to trend once again and this would suggest that we could potentially test the US$ 9,770 high from Aug 2015.
Support can now be found at US$ 7,816 and a close is need below this level for technical sellers to consider entering the market, ideally a close below US$ 7,585 is needed as this is the low price of the short term average.
Dec futures are now trending hard, technically overbought the stochastic is really just mirroring the trending condition. Technical resistance can be found between US$ 8,950 and US$ 9,150, and a rejection of these levels would suggest that we could be looking for a market correction.
Dec futures are now trending hard, technically overbought the stochastic is really just mirroring the trending condition. Technical resistance can be found between US$ 8,950 and US$ 9,150, and a rejection of these levels would suggest that we could be looking for a market correction.
A close below US$ 8,764 should have buyers on alert for a potential correction to the shorter period average at US$ 8,240. A close below this level would indicate to technical sellers to enter the market (not before) and further lower pricing to the US$ 7,576 support.
A close above the resistance levels mentioned would suggest further upside pricing with US$ 10,500 being a potential upside target.
Source: FIS Weekly
