Momentum in the form of the stochastic also supports the current upward move, and at 49 it is close to confirming that it is in bullish territory. Recent upward moves have lasted as long as eight weeks (we are currently on week 5) suggesting that there is more to go in this current move. Importantly we have completed a 3 wave down and broken the lower high of the index at US$ 13,176 from the 6-1-17. Technically it looks as if we are starting a new bull cycle implying that index pullback from here should find buying support rather than longer term corrective formations.
The April futures continue to make fresh highs, with the 8 period Exponential moving average acting as support. At this point the trend is technically bullish. The stochastic is now starting to show a bearish divergence. This is not a sell signal, but it does suggest that upside momentum is starting to weaken, and market longs should look to tighten risk. The bearish momentum is also supported by the three impulse upward moves. Again not a sell signal, however three upward moves are often followed by market consolidation, or correction. Technically bullish, there are signs upside resistance levels could hold.
The daily chart for the Cal 18 futures has recently tested trend support. Broken briefly it is currently holding, maintaining bullish trending conditions. There is some cause of concern for the longer term trend at this point. The recent momentum pullback is making fresh lows compared to the rising trend (highlighted by the green circle). This signifies a weakening trend and is known as a stochastic bull trap, and implies that the current upward move is likely to be the last before the Cal 18 enters into a corrective phase. The trend is technically bullish, however the stochastic bull trap would suggest that upside moves could be limited from here. Remembering the longer term trend is bullish on the index, we expect a corrective phase rather than a market top.
The Q2 V Cal 18 futures spread is starting to look overextended. The spread is still walking the Bollinger band with the 8 EMA acting as a support. A US$ 4,500 move has resulted in spread showing a bearish divergence, warning that a corrective phase could be due soon. Shorter period EMA’s (not shown on this chart due to the noise) are also starting to fan out implying that a corrective move down could be upon us soon. Technically any market pullback remains in bullish territory above US$ – 1,207. Only a close below this level would suggest a bear move rather than a corrective move.
PANAMAX
A difficult chart to read on the Panamax index. The trend line held, and the index remains in bullish territory. Weekly momentum is showing a bullish cross from oversold territory. The upward move that started last year is not Elliot wave, as the middle wave is the shortest. The momentum pullback is lower than previous pullback, whilst the market is in an upward trend. This would suggest that the current upward move is a bull trap, rather than a bullish wave. This could still have further to run to the upside, but the stochastic would suggest that this is the final upward move within this trend. It is technically bullish, but longs should be looking for potential market reversals based on the behaviour of the stochastic.
The recent pullback in the April futures is now entering an area of support at the upper range of the primary trend marked in red. As we enter the support area, we can see that momentum has now broken to the downside, indicating that the trending condition for the April futures could be drawing to a close. Although on support and technically still bullish, any upward moves from here should be considered as swing trades only. It is likely to meet selling resistance, with US$ 10,980 being the first point of target. On technical support, this trend looks to be in transition from bull to neutral/bear.
The December to February trend support has now been broken, however the longer term trend remains in place in the Cal 18. The 34 period EMA has been the key average during this trend, and that is about to be tested for the first time this year. If broken it would suggest that the Cal 18 is entering into a corrective phase. Any upward move that closes above US$ 9,200 would suggest that we should once again test the recent highs at US$ 9,496. However the same basis to the rest of the Panamax sector applies here. The momentum pullback would suggest that the upward move is running out of steam for now. Technically bullish, caution of the momentum pullback.
The Q2 V Cal 18 spread has entered into a corrective phase, with the stochastic showing a bearish cross, however at 78 it remains in a bullish environment above the 70 level. Support is coming from the 8 period EMA at US$ 838. A close below this level would suggest potentially further downside, with US$ 650 being the next logical target. Upside moves from here should find resistance at recent highs of US$ 1,124. A close above this level would have bullish implications going forward. It is worth noting that although technically bullish, with the weekly stochastic at 96, and the daily stochastic at 78 it would suggest that upside moves from here.
SUPRAMAX
Having found support in the zone mentioned on the weekly FFA note, the index is now testing the bull trend support that ran from Feb 16 to Jan 17. In theory the previous support should now act as a resistance, a rejection of the trend channel in the chart would suggest that the index should once again test the support zone (US$ 7,525 – US$ 6,750) that we visited in Jan – Feb of this year. A close back into the trend channel has bullish implication going forward and index could test previous highs. The placement of the stochastic at 54 is bullish. However, like the Panamax, the stochastic pullback would suggest this is a corrective upward wave within a downward trend.
The Q2 Supramax has broken below the 8 period EMA for the first time since December, as it enters into a corrective phase. It is currently testing the 20 period simple moving average. The bullish trend has been neutralised by the recent lower low, a lower high would suggest that we are entering into a more sustained corrective phase. A downside break of the 20 period MA at US$ 9,310 would target the 34 period EMA at US$ 8,827. Conversely technical buyers will look to enter the market on a close above the recent high at US$ 9,688.
Source: Freight Investor Services (FIS)
