07-04-2018

Dry Bulk FFA: Panamax Index In Correction Mode

The Panamax index remains corrective with the 8 – 21 period EMA’s showing a bearish cross but remaining above the 55 period MA. Technically the Index is starting to look oversold with the short period RSI on the weekly now at 7. However, a lower low on the daily technical and an overbought medium term stochastic would suggest that there are signs that the longer term technical could be weakening.

The April futures have gone from corrective to bearish with the shorter period EMA’s now below the 55 period MA. Technical support is at USD 10,385 with a mean reversion gap forming with an oversold stochastic and RSI, indicating the market is looking overstretched to the downside at this point. The Q2 futures remain in a leg 4 corrective phase. However, we are now in April indicating it will probably expire in this current corrective phase.

Next week the Q3 futures as this is also in a leg 4 correction but with time on its side.

The Cal 19 futures remain in a wave 4 corrective phase and are now approaching the first of the weekly Fibonacci support levels. The longer-term trend remains technically bullish; however, it looks like we should remain in this leg 4 corrective phase for the near future.

Panamax Index Daily

Source: Bloomberg

Resistance – 12,064, 12,257, 13,034
Support – 11,047, 10,548, 9,856

The Panamax technical remains in a corrective phase with the daily chart making a new low below the USD 12,038 support. The 8 period EMA has crossed the 21 period EMA but both remain above the 55 period MA, indicating that the index remains corrective and not bearish at this point.

However, failure to make a new high on the weekly chart on the last upward move is a warning. The last corrective move that lasted longer than 4 weeks and resulted in a 50% retracement (April 2017).

This opens possibility that we could be in the early stages of a longer-term corrective phase.

Near term the index looks oversold and the daily averages remain above the 55 period MA with the 200-period daily MA at USD 11,047. The 2 period RSI on the weekly chart suggests we are looking overstretched to the downside, however the weekly stochastic is overbought and showing a bearish cross. Upside moves that fail to trade above the 8 – 21 period EMA’s would be regarded as technically weak and suggest lower pricing going forward.

Upside moves now need to produce a higher high on the daily chart for price action to be regarded as bullish as they have now made a lower low.

Panamax April 18 daily

Source: Bloomberg

Resistance – 12,795,12,915, 13,314
Support – 10,385, 9,170, 7,900

The technical last week was regarded corrective as the 8 and 21 period EMA’s remained above the 55 period MA. The downside breakout from the symmetrical triangle has been aggressive and the pullback deep, with the shorter period EMA’s now below the 55 period MA.

Technically the April futures should now be considered as bearish rather than corrective with technical support between USD 10,385 and USD 7,900. Upside moves that trade above USD 12,915 would create a new high on the rolling contract, although not the April futures directly it would put the futures into bullish territory.

Both the stochastic and the 21 period RSI are in oversold territory, not a buy signal it does warn that momentum has the potential to slow down. We also see a mean reversion gap forming with the 55 period MA which would indicate that the futures are starting to look overstretched. Downside moves that hold above the USD 10,385 support would suggest a corrective wave within a bearish environment.

Upside moves that reject the 8 – 21 period EMA’s on the April futures would suggest downside continuation of the bear trend

Panamax Q2 18 Daily

Source: Bloomberg

Resistance – 12,503, 13,090, 13,344
Support –11,169, 10,482, 9,633

Last week we noted the Q2 18 futures had entered into a corrective phase and this remains the case.

The technical support zone highlighted on last weeks chart has been broken and the shorter period EMA’s are now below the 55 period MA.

Price action and the moving averages indicate that the technical remains bearish. Elliott wave analysis indicates a leg 4 correction. The depth of the pullback would suggest a more prolonged and complex corrective phase, than the previous leg 2 correction.

From an Elliot wave perspective this is a leg 4 correction on the Q2 futures, however this is now the front quarter meaning the technical picture will be affected by the front month futures, as the q2 will soon expire. From a purist point of view, it is a leg 4, however time is against the technical and would indicate that it will expire in a Q2 corrective phase making this the last technical before we move to the Q3 futures, which are also in the same leg 4 corrective phase.

Upside moves that reject the USD 12,503 – USD 13,090 resistance zone would suggest downside continuation. Likewise, upside moves that create a higher high would suggest the technical picture is firming (currently at USD 13,927) though this would need to be above the 8- 21 period EMA’s to be considered as bullish.

Panamax Cal 19 Daily

Source: Bloomberg

Resistance – 11,479, 11,766, 11,800
Support – 10,854, 10,345, 9,835

The Cal 19 technical remains in a leg 4 corrective phase. The depth of the pullback would indicate that we have seen completion of the leg 3 wave and this is not leg 4 of wave 3.

Near term support levels have been broken and we are now testing the 0.382% Fibonacci support at USD 10,854 on the weekly chart. The weekly 2 period RSI is in oversold territory and the daily 21 period RSI at 29 also entering oversold territory.

Technically the momentum indicators would suggest that momentum has the potential to slow down, it however is not a buy signal but more a warning that we could see a bull wave within the corrective phase.

Upside moves that reject the 8 – 21 period EMA’s would indicate downside continuation within the bear phase. Upside moves that trade above USD 12,235 would create a higher high and have bullish implications going forward unless we see a lower high form in between.

Source: Freight Investor Services (FIS)

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