Freight Back End Futures Looking Weak Across Board


Upward moves in the Capesize index are now starting to stall. Last week we witnessed some short covering in the market which was supported by the technical picture, and this appears to be now drawing to a close.

The Capesize Index has since started to stall with prices now moving lower, the index seems to be finding resistance at the upper Bollinger band, at a time that the momentum indicators are starting to weaken, suggesting the technical picture could soon be about to change to the downside.

August futures started the week trading lower on lighter volume with small selling coming out of physical trading houses in both Europe and Asia. Momentum here is bearish with prices failing to hold above their 21 period moving averages. Longer term momentum indicators suggest further weakness which is supported by the faster period stochastic that are now starting to turn.

Primary trend support on the August futures is currently at US$7,350, a close below these levels would signal to technical sellers to enter the market and could result in increased downward momentum.

Capesize Cal 17 futures are now seeing bids around $100 below the US$7,450 primary trend support. However at this point there is little evidence of strong selling interest trying to chase the market lower.

The Panamax Index continues unabated with the upward technical continuing to look strong. Momentum indicators currently remain maxed out at 100 on both the slow and fast stochastic, suggesting that the trending environment we are seeing should continue. The next technical resistance is at US$8,010.

August Panamax futures, like the Capesize have started the week on lighter volume, however unlike the Capesize sector, the Panamax futures remain Bid. The slower stochastic, like the index confirm that the strong trend is showing little sign of fading, however the faster stochastic is now showing a bearish divergence. This doesn’t mean that the market is a sell, however if a second bearish divergence forms on the shorter period stochastics then longs should start to tighten their risk.

Cal 17 futures continue to show a weakening technical. The longer term momentum is indicating that prices could weaken. This would suggest that any upswing in the market should now be treated as a selling opportunity with the most logical points of resistance being AT US$5,958 and US$6,017, as these were the two most recent highs.

The Supramax Index like the Panamax looks technically strong, suggesting that we should continue to see support in the front end futures. More populated with natural hedgers we are seeing big name trading houses supporting the fronts.

The Cal 17 futures shares the same technical picture as the Panamax, with the momentum looking bearish. Asian and European trading houses seem to be seeing the longer play here as they are coming in from the sell side on the calendars as prices rise. Technical resistance here is focused on the Fibonacci levels of US$6,183 and US$6,512. The first resistance although broken is still in play. Backend longs should be cautious around these levels

Source: Freight Investors Services

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