Editor's Note: This article was written on November 30, 2012, and includes prices and statistics relevant and valid as of that date.
Energy: Crude oil closed higher by nearly 1%, finishing just under its 50 day MA. We finished the week near the upper end of the recent trading range, so I do not expect much more… maybe a grind to $90.50-$91/barrel in January. I'm only long futures if they are hedged with options for clients. Heating oil finished just under its 50 day MA after trading above that pivot point in the last two sessions. I see solid support at the 18 day MA, but I would not expect much in the way of appreciation. After three positive weeks, RBOB finished in the red this week, but well off its lows after a mid-week reversal. January ended nearly a dime off its lows. Natural gas has traded 50 cents off its highs from last week, coming within a few cents of competing a 61.8% Fibonacci retracement. Lower trade is expected, but I open the opportunity to get clients long from lower levels …stay tuned.
Stock Indices: In just over the last two weeks the S&P has managed a 5% gain, lifting prices back above the 50 day MA almost to the tic, completing a 61.8% retracement. Prices have shifted from oversold to overbought within that time frame. The Dow's gain has not been as dramatic appreciating 4.4%, lifting prices back over 13000 for the first time in three weeks. This completes 50% retracement back to the 50 day MA, just over 100 points from Friday's close. Perhaps a slight probe higher, but I do not see much gas left in the tank.
Metals: February gold has traded lower four out of the last five sessions, off approximately $50/ounce this week. I anticipate a trade under the 100 day MA while support is seen at the $1700 mark, followed by $1670. On a closing basis, March silver was unable to break its 50 day MA -- currently at $33.25. My take is an interim top was established this week, and we see a correction moving forward. Under the 50 day MA, I see the 100 day MA at $31.55. My suggested play is back ratio spreads, attempting to capitalize on what I view to be a 2-3% correction in gold and 4-5% correction in silver to come.
Softs: At the beginning of the week, it appeared cocoa was ready to break down, but prices recovered to close just under 2500 on the week. With prices over the 9 day MA I am mildly friendly, but below that pivot point, I'd shift gears. That level is 2470 in March. Sugar has finished higher three out of the last five weeks, but prices have gone nowhere. I continue to like scaling into longs above 19 cents, but if prices do not move in the next few weeks, I would abandon ship and start looking for other opportunities. Risk to reward, I still like buying here with an objective of 20.50-21 cents in March. There has been a lot green in cotton, gaining 14 out of the last 17 sessions after bottoming just under 70 cents in March. From here, I would not rule out a probe north of 75 cents, but the easy money has been made on longs, in my opinion. Aggressive traders could be gaining bearish exposure in OJ, playing a retracement after the 20%-plus appreciation in recent weeks. My target in January is $1.15. Coffee appeared to be off to the races mid-week, but the wind was taken from the bulls' sails on Friday, with prices down 3.7%. Some clients have bullish exposure in March with an objective of $1.63-1.65 in futures. Stay the course for now.
Treasuries: 30-year bonds have gained for the last five sessions, lifting prices over their 9 and 20 day MAs… as long as prices are above those pivot points, I'm friendly. If securities start to retrace, which is a wild card right now, we would likely challenge the mid-November highs. Same performance in 10-year notes, with prices in the green the last five sessions. We are a few tics away from making fresh highs, but refrain from picking a top until we get some confirmation.
Livestock: February live cattle have lost their luster and started to break down as predicted. Prices have lost ground four out of the last five sessions as prices have retraced back to their 20 day MA. Further selling is expected and as long as prices are under their 9 day MA, I'm bearish. January feeder cattle also appear to be headed lower, having broken down 1.6% in the last week. Another 1% deprecation would put prices at fresh lows… do not rule that out. Lean hogs closed below their 9 day MA to close out the week, but prices remain just over their 20 day MA. I am operating under the influence that an interim top was established. I like the idea of bearish plays to capitalize on a move back near 83 cents in February.
Grains: Corn did close lower the last two days, but prices were able to be supported by the 9 day MA. A correction is underway in the Ag complex, but corn should get hit the least, in my opinion. I have clients long corn and we will remain in the play, thinking this will be just a brief setback. I still see prices near $8/bushel in the coming weeks. The 9 day MA also held in soybeans, but we could trade under that level next week. We should see another 20-30 cents, but I expect the $14/bushel level to hold. The hardest hit grain was wheat, off by almost 30 cents the last two sessions. Lower trade looks likely, as prices could drift to their mid-November lows roughly another 30 cents… trade accordingly.
Currencies: Prices in the dollar closed out the week at the 50 day MA, closing at oversold levels. In my opinion, we should not see much more downside. I'm thinking 79.80 is about the lowest we will see… again, my opinion. Bearish plays on my radar include the loonie and aussie. My favored play is bearish exposure in the aussie, with an objective of 1.0200. If the yen were to trade back above 1.200, I would be willing to exit all remaining bearish 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.