Energy: Crude oil closed lower by 2.83%, erasing yesterday's gains and closing just below its 8 day MA. Depending on stop placement, you may have been taken out of outright futures. Some of my clients that got out yesterday got back in longs today, as we think the recent lows will hold. Those that have short calls against their futures should stay the course, in my opinion. RBOB's daily range was nearly 9 cents, with prices closing down about half that level just under its 50 day MA. A trade above $2.75 or below $2.65 should signal the direction of the next leg. Inside day in heating oil, with a close lower by 1.14% under its 38.2% Fib level. If the 18 day MA holds at $3.0150 in January, expect prices to grind higher. If not, then back to the sidelines. I zigged while I should've zagged, as natural gas gained 2.79% to close at the upper end of the recent trading range. My stance is we need a correction before much more appreciation… trade accordingly. As for shorts, you should be pennies away from getting stopped at a loss.
Stock Indices: The S&P gained for the third session in a row, lifting prices 3.4% above the recent lows. A 50% Fibonacci retracement puts December futures at 1405, while a 61.8% retracement is at 1418. Support is seen at the 9 day MA at 1371. Within the same time frame, the Dow has climbed 325 points, lifting prices back above its 9 day MA. As for upside targets, I think we even get close, if not retake, 13000 on this leg.
Metals: Gold futures lost just better than $10 on an inside day. Aggressive traders can gain light bearish exposure as long as prices remain under their 50 day MA -- currently at $1743. Do not rule out a trade back to the 100 day MA -- currently at $1688. Silver ran into resistance at its 50 day MA, closing lower by 0.78%. I want to be bullish, but I refrain until the 50 day MA is penetrated. Ideally, we can get long from lower levels. Aggressive traders can gain light bearish exposure here, targeting a move under $32 into next week.
Softs: Cocoa future gained 1.45% and should continue to be bid higher if the dollar fails. Sugar did not follow through after the 4.13% appreciation yesterday. Remain in bullish trade, as higher ground should be around the bend. 20.50-21 cents remains my target. Cotton futures appear to be stalling, but I am mildly friendly as long as the 9 day MA supports -- in March currently at 71.50. I was not quick enough to jump on the most recent correction in OJ. Hopefully, some of you were. Today, prices gained 4.23% to put prices at two month highs. Coffee lost 3.14%, as yesterday, for now, looks like a false start. My conviction remains on bullish trade, as I think coffee should be accumulated at this devalued price. Buy and hold, as I am shooting for $1.65 in the coming weeks.
Treasuries: 30-year bonds gave up 0.60% as prices continue to trade down as forecast. The next critical support comes in at the 20 day MA at 150'2. Some of my clients have lightened up, as I will be out several days in the next week for the holidays. For traders with a longer time frame, I like the idea of fading rallies, as a major top may be in… stay tuned. The sentiment in 10-year notes also appears to be shifting hands, as a move to its 20 day at 133'11 should play out very soon, in my opinion. My suggestion is at some capacity… futures, options or spreads to gain bearish exposure in this complex.
Livestock: Inside day in live cattle, as resistance remains at $130.70 in February. I suspect we get a probe higher, but have no current exposure with clients. January feeder cattle have gained ground the last foursessions, as prices are trading just above their 9 day MA and below their 20 day MA. Forced into the market, I would nibble at bullish trade. Lean hogs continue to grind higher, though I think the party is almost over. I will be looking for a bearish entry on any sign of a reversal… stay tuned.
Grains: March corn closed at a one week high, picking up 0.64% and penetrating the down sloping trend line… see today's chart. I've advised gaining bullish exposure, thinking prices will find their way to $7.65, followed by $7.80 in the coming weeks. A bullish engulfing candle in soybeans today, with January gaining 1.29% to close just below the 9 day MA. Traders that are not already long corn could buy soybeans, though I see there little need to be long both, as they should move in the same direction. In terms of the fundamental picture, I think there is a more compelling case to own corn, all things considered south of the border. Wheat should also benefit from the overall appreciation I expect in the grain complex. Today, March gained for the second day running, which is an impressive feat after seven losing days. My target in March is $8.75, followed by $8.90.
Currencies: I continue to think the dollar breaks down in the coming weeks, though it will take a trade under the 20 day MA for me to get confirmation as opposed to just my gut feeling. I am targeting a trade under 80 in the coming weeks. Traders can continue to scale lightly into bullish trade in the euro, swiss and pound, adding to the trade as profits increase… trail stops. The best looking play, in my opinion, is the cable… objective 1.6100. The 20 day MA held in the loonie on a slight loss today. Bullish trade is advised, targeting a trade north of 1.0100. As long as equities are in favor, the yen moves lower. Today, it lost 0.43%, dragging prices to seven month lows, and more selling appears likely.
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.