Hot Rolled Futures: Calm Before the Storm?

The following article is written by Andre Marshall, CEO of Crunch Risk LLC and the instructor for our brand new Managing Price Risk II: Strategies & Execution workshop. Every week we produce an article about futures trading and, in Andre’s case, about the broader financial markets. Andre begins with the a look at the financial markets and commodity prices before tackling hot rolled coil, iron ore and scrap futures:

Well the S+P 500 did take out the highs at 1892.50 that I mentioned two weeks back. This reaffirms that the bull market is intact and that recent tests of supports will likely be met by more buying. That said, weak earnings from the likes of Walmart today and disappointing consumer spending numbers have the market a bit worried here. 1900 is the next upside target with 1960 as our next technical high target. We are currently at initial support at 1860 zone with 1844 providing further support below here. There is a divergence building between the S+P small caps and the S+P 500 and the Dow 30. This is material to chartists as a significant divergence is one of the warning signs of a potentially changing trend into a bear market. The ever all time highs, the 5 year historical bull run and concern of the sell in May mantra likely are what’s behind the divergence as investors shift out of riskier assets (small caps) and into more Blue Chip names or larger mature dividend stocks. For now, we continue our ascent into the unknown.