24-04-2018

Dry Bulk FFA: Capesize Market Back in Bullish Territory

The Capesize index is now back into bullish territory with the next key obstacle at USD 16,275 the 200 period MA. Market pullback that hold above the 8 – 21 period EMA’s would suggest upside continuation.

The May futures should now be considered as technically bullish, price action is slowing down with a stochastic at 91 suggesting we could see a pullback within the bull move soon.

The moving averages on the Q3 futures remain technically bearish, whilst price action is making higher highs and higher lows (Bullish). 5 waves up would suggest the current move could soon reach exhaustion and there is also the possibility of the market producing a bearish hidden divergence. However, if wave C has completed then we are potentially looking at first impulse move of the new wave 5.

The Cal 19 futures continues to make higher highs and higher lows and remains bullish above USD 16,788. The stochastic at 85 would imply that momentum is slowing however yesterdays close although lower was neutral and not bearish.

Capesize Index Daily

Source: Bloomberg

Resistance – 16,275, 18,743, 21,512
Support – 10,985, 10,141, 6,950

Last week we highlighted that a close above USD 9,304 would create a fresh market high and increase the bull argument and this has been the case with the new high close signaling market acceleration. More importantly we highlighted the key resistance in the RSI at 49, a level that was broken for the first time this year on the 17-4-18 when the index closed at USD 10,151. Technically this would suggest that the dynamics of the longer-term trend are now turning bullish.

The 8 period EMA has now crossed the 21 period EMA for the first time this year which also supports a strengthening technical picture, with the 8 period EMA now above the 55 period MA.

Technical resistance starts at the 200 period MA at USD 16,275 – price action above this level is significant as this is the most followed average, price action that fails to hold above this level would suggest a market pullback with support starting at the 55 period MA at 10,985.

Capesize May 18 Weekly 1 Month Rolling

Source: Bloomberg

Resistance –17,120, 17,920, 18,251
Support – 15,344, 14,902, 14,460

Price action is the lead indicator to any technical and last week this was highlighted by the May futures making a higher high. We highlighted that any market pullbacks that held above the USD 12,750 support would imply upside continuation in the market, and this has been the case.

The stochastic is now above 90, not a sell signal it would indicate that we could see a slowdown in momentum soon, with technical resistance at USD 17,920 being the nearest upside target. Yesterdays price increase also showed a de-acceleration in price indicating a slowdown in upside momentum.

Market pullbacks technically remain bullish above the recent low of USD 13,030. However, from a technical perspective it is preferable if price holds above the 8 – 21 period EMA’s (USD 14,727 – USD 13,968). Market pullbacks that retrace more than 61.8% of the current wave would however be considered as deep and weaken the current technical suggesting price retracements need to stay above the USD 14,460. Below this level the technical focus moves t oa more neutral bias.

Capesize Q3 18 Daily

Source: Bloomberg

Resistance –18,760, 19,540, 20,100
Support – 17,020, 16,660, 16,120

The 5 waves up highlighted last week resulted in a small corrective wave back to the 8 period EMA before moving higher once again. However, the pullback remained above the USD 16,660 support needed to confirm that the move was once again corrective. The bearish hidden divergence failed to produce any form of meaningful pullback.

The Q3 18 futures have now produced a golden cross on the EMA’s and this is regarded as technically bullish, though the shorter period averages do remain below the 55 period MA.

From an Elliott wave perspective, we are now in wave 5, which in theory would suggest that we should achieve new highs within the current phase. However, the stochastic at 93 would imply that upside momentum has the potential to slow down soon and should create another corrective wave within the bull phase.

A close above USD 18,760 would be regarded as technically bullish and signal upside continuation. Likewise a close below USD 17,020 would signal a weakening technical as it would create a lower low, and involve a deep pullback.

Capesize Cal 19 Daily

Source: Bloomberg

Resistance –17,085, 17,267, 17,494
Support – 17,753, 16,860, 16,869

The pullback in the Cal 19 futures was short last week, with price action holding above the USD 16,670 support. The higher highs and higher lows should be regarded as technically bullish. However, to confirm that we are in a leg 5 and not a leg B we do need to see price action make a new high close above USD 17,860.

The stochastic at 85 is in overbought territory but this is not a sell signal, but a warning of a potential slow down in momentum. Yesterdays close was lower and signals that the market momentum is slowing. The close itself although lower should be considered as neutral rather than bearish at this point and upside moves that close above the recent high of USD 17,753 is in theory bullish. However, a close above USD 17,869 9on the 20-4-18) would indicate market acceleration and confirm that we are on a leg 5 in Elliott wave terms.

Downside moves remain bullish above USD 16,788 unless a higher low is formed in between.

Source: Freight Investor Services

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