Dry Bulk FFA: Supramax Index Bottoming Out

The index is now on wave 4 of a wave C corrective move and starting to show signs of basing.

The March futures have completed their wave 4 correction and have now started a wave 5 bull move. The stochastic is low compared to price, if a new high is not replicated by the stochastic it would create a bearish divergence. A warning of slowing momentum, not a sell signal.

Elliott wave analysis would suggest that the Q2 futures are now on wave 5 of wave 3. We are now seeing a bullish divergence as the market makes new highs.

Cal 19 remains bullish above the 8 period EMA but is showing a bearish divergence.

Above the 50 period MA market pullbacks should be regarded as corrective rather than bearish.

Supramax Index Daily

Source: Bloomberg

Resistance – 10,475, 10,592
Support – 9,339, 9,229, 9,081

Technical support has held at USD 9,339 on the Supramax index. The stochastic remains in oversold territory at 6 on the daily chart, with the weekly stochastic also in oversold territory at 3.

The index is now showing signs of starting to base, with Fibonacci resistance at USD 9,779, USD 9,912 and USD 10,045. Upside moves that fail below or in the resistance zone would suggest that the index is entering its 5th and final wave down.

Upside moves that make new highs above USD 10,475 would have bullish implications going forward. Likewise, a close below USD 9,350 would create a new low and should be considered bearish. However, this would signal a wave 5 down, which is often the last wave before a longer-term corrective or bullish move.

Supramax March 18 Daily

Source: Bloomberg

Resistance – 11,195, 11,370, 11,507, 11,742
Support – 10,453, 10,170, 9,985, 9,655

Last week we highlighted the that the March futures were in a leg 4 corrective phase with technical support at USD 10,453. Support has held, and the futures have so far rallied USD 500 to USD 11,090.

Technically the trend remains bullish based on the Elliott wave analysis with the 8 period EMA looking to cross the 21 period EMA soon. Technical resistance is between USD 11,370 to USD 11,742. If the futures make new highs and the stochastic does not, this is known as a bearish divergence. Not a sell signal, it is a warning that upside momentum could be weakening.

If price action starts to reverse in the resistance zone with a divergence in play, then there is a higher probability that we have seen a wave 5 completion and are likely to enter another corrective phase.

Supramax Q2 18 Daily

Source: Bloomberg

Resistance – 12,007, 12,206, 12,404
Support – 11,367, 11,047, 10,650

The leg 4 corrective wave was short last week, with downside moves failing to test the technical support at USD 11,047.

The Q2 18 futures are now trading at new highs and a bearish divergence has formed with the stochastic only at 35. This is a warning that momentum is slowing down and should not be regarded as a sell signal.

Technical resistance is between USD 12,007 and USD 12,404. Upside moves that fail in the resistance zone with a divergence in play would suggest that we are entering another corrective phase.

Technically the trend is bullish. From an Elliott wave perspective this looks to be leg 5 of a leg 3 wave, and not a leg 5 high, indicating a correction rather than a market top

Supramax Cal 19 Daily

Source: Bloomberg

Resistance – 11,106, 11,241, 11,377
Support – 10,830, 10,444, 10,294,

The 8 period EMA continues to hold firm on the Cal 19 futures keeping the futures in bullish territory.

The stochastic is now diverging with price implying bullish momentum could slow down. This is a warning not a sell signal. Upside moves that fail in the technical resistance zone with a bearish divergence in play would suggest we should be entering a corrective phase.

Downside moves that trade below the USD 10,830 support would indicate that the Cal 19 futures have entered a corrective phase. However, the 50 period MA has acted as a strong support in the market and above this average the market can only be regarded as corrective and not be considered bearish.

Source: Freight Investor Services (FIS)

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