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Chart View: Will the Rebound Stick Around? by Jeff Gilfillan

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February and March of 2020 were a roller coaster across the board, as described in last month’s Chart View. April, May, and now June have witnessed strong rebounds in many of the most displaced futures markets, and now it feels like a consolidative, lower vol period may follow.

 

Same Old Story

 

The charts displayed below that show markets trading within price ranges or value levels developed prior to the COVID-19 outbreak are the CME ES (S&P), ICE US$ and CME Feeder Cattle.

 

The ES was trading in a low value area for a good part of the last quarter of 2019, and the monthly close in January was arguably a sign of a reversal. Regardless, the equity market was in a strong bull trend prior to February, and I believe this rebound will stick around but encounter similar topping, low value issues the market previously experienced.

 

ICE US Dollar futures have arguably been in the same value zone for five years and in a tighter zone for about the last two years. There was a washout (barely broke five-year highs) and a swift rebound and it’s currently sitting on the 50% price level since the early 90s or the development of the futures contract. Appears to be a market stuck in the middle, although the outside month developed in March 2020 opens the door for a breakout down the road.

 

CME Feeder Cattle impressively rebounded to the lower end of the value area in place for the last three years. The weekly trend prior to COVID-19 was bearish, and the levels tested during March/April and May might very well have been tested regardless. The quick reaction indicates to me that the value area developed between 2017 and 2020 is valid and a further rebound could stick.

 

Moving On

 

The charts below that may have left friends in old places and potentially developing new levels of value are the CME GC futures, CME NQ futures, ICE Brent Crude and CBOT Corn.

 

No mystery behind the gold futures move higher. As mentioned in the last article, the gold market seemed to anticipate market stress prior to COVID-19, as far back as last summer. While the futures markets have not hit new contract highs, the trend is bullish, albeit slightly overbought. The heavy liquidation during the outset of the global COVID-19 outbreak also provides less chance of a market washout lower.

 

Unlike many stock indices, the NQ futures not only rebounded but broke new highs. Like many stock indices, the pre-COVID-19 trend was bullish. It seems the moment I start re-projecting new price targets higher as markets are breaking new highs, the top hits. As noted in the S&P comments, these levels are showing little value development and need time to develop, but the trend is clearly bullish and new highs without a quick reversal are generally a good sign.

 

ICE Brent Crude futures have rebounded just underneath value zones developed over the last five years. The charts have technically been in a bearish market since 2014 on a monthly basis and since October of 2018 on a daily basis. I see nothing on the charts that excites me, and the rebound is less impressive given the artificial circumstances behind the strong move lower and reversal in the first place.

 

CBOT corn futures were stuck in the middle of a five-year value zone with a slight bearish tone pre-COVID-19. The subsequent rebound from the initial sell-off has been less than impressive. I think it’s a coin flip as to how sticky this rebound may be, but the charts appear to need a test and rejection of new lows or old value zones to validate working back into recent value zone. (I have sympathy for a market such as corn – stuck in the basement with real value just waiting for somewhere to go.)

 

 

DISCLAIMER: Trading in futures products entails significant risks of loss which must be understood prior to trading and may not be appropriate for all investors. Past performance of actual trades or strategies cited herein is not necessarily indicative of future performance. The information contained herein is provided to you for information only and believed to be drawn from reliable sources but cannot be guaranteed; Phillip Capital Inc. assumes no responsibility for errors or omissions. The views and opinions expressed in this letter are those of the author and do not reflect the views of Phillip Capital Inc. or its staff.

 

 

CME Group – CME S&P 500 futures

 

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CME Group – CME S&P Futures Continuation Monthly

Chart – Track N’Trade

 

Futures trading is not for everyone. The risk of loss in trading can be substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.

 

 

 

 

E-mini Nasdaq-100 futures (NQ)

 

 

 

 

CME Group – E-mini Nasdaq-100 futures (NQ) Continuation Monthly

Chart – Track N’Trade

 

Futures trading is not for everyone. The risk of loss in trading can be substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.

 

 

 

CME Group – COMEX Gold futures (GC)

 

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CME Group – CME Gold Futures Continuation Monthly

Chart – Track N’Trade

 

Futures trading is not for everyone. The risk of loss in trading can be substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.

 

 

ICE FUTURES U.S - U.S. Dollar Index (USDX) futures

 

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ICE FUTURES U.S - U.S. Dollar Index (USDX) futures Continuation Monthly

Chart – Track N’Trade

 

Futures trading is not for everyone. The risk of loss in trading can be substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.

 

 

CME Group – Feeder Cattle Futures (FC)

 

 

 

CME Group – Feeder Cattle Futures (FC) - Futures Continuation Monthly

Chart – Track N’Trade

 

Futures trading is not for everyone. The risk of loss in trading can be substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.

 

 

ICE Crude Oil, Brent Futures

 

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ICE Crude Oil, Brent Futures – Monthly Continuation

Chart – Track N’Trade

 

Futures trading is not for everyone. The risk of loss in trading can be substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.

 

 

CME Group – CBOT Corn Futures (ZC)

 

 

CME Group – CBOT Corn Futures (ZC) - Futures Continuation Monthly

Chart – Track N’Trade

 

Futures trading is not for everyone. The risk of loss in trading can be substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.