Energy: January crude oil has found buying support just above $84/barrel. A close back over the 8 and 20 day MAs should confirm an interim low. I am operating under the influence that we get a bounce from current levels, and have advised clients to lightly scale into long futures and options plays, targeting a move back near $90 in the coming weeks. Early buying failed in RBOB, with prices closing five cents off their intra-day highs. I see resistance at $2.70 in January with support at $2.60, followed by $2.53. Heating oil was virtually unchanged, closing at its 8 day MA. The 18 day MA was tested again today, and has served as resistance now for the last three attempts. Continue to look for guidance from crude oil. The 100 day MA was tested and held as natural gas finished higher by 1.68%, closing just under its 50 day MA. A close back above $3.74 would get longs on my radar in January… until then, stand aside.
Stock Indices: The Dow has completed a 50% Fibonacci retracement and on an inside day today, it appears that 12700/12750 is being defended. I'm not looking for much, but I do see a trade back above 13000 in the coming weeks. A doji star in the S&P Friday, followed by a very mild bounce today looks like an interim low has formed. While I'm not buying with clients, I am forecasting a bounce, as I expect a trade near 1410 in the coming weeks.
Metals: For three days, gold has been unable to get above the 50 day MA, with prices within $5/ounce in all three sessions. Bullish trades that were established on the recent sell-off have been advised to book profits and look to re-enter on the next correction. After a $130 loss, the latest $70 appreciation was enough for nimble traders to jump in and out with a tidy profit. On a correction, look for support at $1700, followed by $1670 in December futures. I advised recent purchases in silver to book profits as well … though prices are still 75 cents from their 50 day MA, a snap back in the dollar or rally in stocks would likely cause silver prices to back off, and that is where I currently stand. On a trade lower in silver, look for support at $31.75, followed by $30.75.
Softs: Cocoa was within tics of completing a 61.8% Fibonacci retracement, and that may be close enough for a bounce to resume. The key pivot point as I see it is the 20 day MA -- currently at 2360 in March. The sideline is the trade currently until we have a clearer picture. Sugar is 3.8% off its lows from Friday, as an interim bottom may have formed. I like scaling into bullish plays, assuming we trade north from here. Bull calls spreads in March is my current play for clients, with an objective of 20.50/21 cents. Cotton may also be establishing an interim low, just above 70 cents in March… stay tuned. I issued a new trade recommendation today… see the chart of the day. Coffee has established a base, and I'm looking for a 6-9% appreciation in the coming weeks. The recommended trade was back ratio spreads to try to capitalize on that gain.
Treasuries: Inside day in 30-year bonds, with prices closing lower for the first time four sessions. Futures did probe above their September highs but as of this post, prices are back below those levels. As for 10-year notes, we also had an inside day, as a trade above 134'00 is being rejected. I am operating under the influence that interim highs are being established. My favored trade that I started to initiate for clients today is a NOB spread -- short 30-year bonds and long 10-year notes, 1:1.
Livestock: Flip a coin, as live cattle could go either way. My bias is towards a bounce, but I would not establish any fresh trades. Same story in feeder cattle, as a move higher should be confirmed by a settlement above the 9 day MA but from my standpoint, I prefer the sidelines until we get a clearer picture. Lean hogs are starting to exhibit signs of exhaustion and on further evidence that a top is in place, I will advise clients to reestablish bearish plays. If you remember from last week, previous trades were taken off from lower levels last week.
Grains: Corn lost 2.81% to close at six week lows and likely on its way to a sub $7/bushel trade. I have remained bearish as long as prices have been under their 50 day MA, which has been since mid- September. January soybeans lost 3.19% today, and are off $1/bushel in the last week of trading. A 61.8% Fibonacci retracement is complete at $13.70, 40 cents from current levels. In two short sessions, wheat has traded from the top of the recent trading range to the bottom of the range, losing over 60 cents high to low. Weakness should persist in the entire grain complex, in my opinion.
Currencies: The U.S. dollar has risen to overbought status and is running into resistance at the 38.2% Fibonacci level, and I see limited upside on this leg. The sentiment would remain bullish as long as prices remain above their 20 day MA -- in December at 80.20. The pound and euro could continue to leak lower, but trail strops on bearish trades, as the easy money has been made and if the dollar reverses, expect a sharp reversal in these two crosses. The yen traded lower for the first time in five sessions, and could test the trend line and 20 day MA before resuming additional upside. Any futures plays should have stops just below that pivot point. If option traders timed it correctly and have open profits, close out three-quarters of the trade.
Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor's needs or investment goals. Any opinions expressed in this article are as of the date indicated. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.