Energy: Crude oil closed lower by 0.66%, trading under the 8 day MA but ending just above that pivot point. With January under $89, I am mildly bearish, looking for lower trade. From here, I think prices can trade 2.5-4% lower. RBOB lost 1.35% today, closing just under its 50% Fibonacci level. A trend line that has supported from the summer lows comes in on the January contract at $2.65 and should be the next stop. From there, I see no stiff support for another dime… trade accordingly. Heating oil the biggest loser on a percentage basis, off by 1.71% as prices appear on the verge of breaking below $3/gallon. Under that level, the next stop should be $2.95, and we would likely see a pause around that price point, in my opinion. Natural gas gave up 1.45%, though it failed to make a fresh low as the 61.8% level has supported the last two sessions. I still need more reason to get long, but bullish probes are on my radar… stay tuned.
Stock Indices: The S&P closed at its 9 day MA, closing in the middle of the daily range slightly negative. I am mildly bearish, thinking an interim top was made yesterday. Untimely, my target on this leg lower is 1370 in March futures. My favored play is a short futures in ESH13 while at the same time selling out of the money puts 1:1. The Dow also gave up ground, registering a loss and closing at its 9 day MA as well. My objective in Dow futures is 12700.
Metals: Gold futures lost 1.7% to close under the 100 day MA, penetrating $1700 for the first time since the first week of November. I expect lower trade, thinking $1670 is in the cards, and I am not ruling out $1640 on a total meltdown. Prices ran up nearly 17% high to low since summer, so a correction lower should be viewed as just that -- a correction. For the bull market to be sustainable -- which I believe it is -- we need to see setbacks along the way. Silver closed lower by 2.82% and under the 50 day MA previously referenced. A challenge of the trend line that has held since summer puts March futures under $32.50/ounce, while the 100 day MA comes in at $31.75. My stance is lower trade, but exactly where I will abandon ship with clients I'm not sure… my guess is around those levels if given the opportunity. My favored play for the trade is back ratio spreads.
Softs: Cocoa traded off the upper end of the recent range, giving back a majority of the latest gains and losing almost 3% today. The 50 day MA held today but on a bounce in the dollar, expect that to be temporary. In my opinion, rallies can be sold. Sugar ran into resistance at the 50 day MA, giving back all early gains to close near their lows. If prices do not challenge those highs very soon, I will be exiting this trade for clients and going elsewhere. As its stands now, they are slightly under water. Cotton lost 1.45% to challenge its 50 day MA; that is your pivot point, so have stops just under that level if still in longs. I think a correction could drag March back to 71 cents… trade accordingly. OJ has been flat of late, but I think we are setting up for a trade back to $1.15 in January… trade accordingly. Bullish coffee trade has been exhausting in recent weeks with a number of false starts. If we see a bottom or what appears to be, I may leg out of my trades for clients and buy back the bottom leg… "manage the trade." I thought the monster crop out of South America had already been factored in, but we shall see in the coming weeks.
Treasuries: 30-year bonds are back above their short term MAs mentioned in previous posts. If securities work lower, we should see a grind higher that I will be on the sidelines watching. March is just over 1 point from the latest highs so on a leg lower in stocks, do not rule out a trade near the July highs. 10-year notes recouped their losses from yesterday as well, remaining above its 9 and 20 day MA. Higher ground would mean a new contract high, which is my opinion at the moment.
Livestock: I'm glad and my clients are glad I'm currently not trading cattle because when I think up, it goes down, and vice versa. Live cattle lost nearly 0.50% to close back under their 9 day MA. I'm bearish medium term, but I would not rule out a challenge of $1.31 before prices roll over, ultimately trading under $1.29. Feeder cattle should track live cattle lower, but I see limited downside as solid support exists less than 1% from today's settlement… look elsewhere. Lean hogs closed under the up sloping trend line mentioned in previous posts, and is 3% lower in the last week. My objective in February remains 83 cents, so expect more selling to follow.
Grains: Corn closed lower for the fourth session in row. In that time frame, prices are only off 13 cents, so client longs are not getting killed, though we are carrying a loss. Remain in bullish trade as long as we find buyers near current levels. A trade above $7.65 should lead to $7.80 -- my initial target when I initiated the trade for clients. Soybeans bounced off their 20 day MA mentioned in previous posts. Like corn, I am mildly bullish as long as the 20 day MA holds, but if that level gives way, all bets are off. On appreciation moving forward, I see no serious resistance in January until $15.25/bushel. March wheat challenged the $8.50 level but as one can see looking at recent months, this remains the line in the sand. I have no stance with clients, but would expect wheat to look for guidance from other Ags.
Currencies: The dollar gave up another 0.30% today, making fresh one-month lows, but what I take away is the lack of effect it had on a number of outside markets that generally have an inverse relationship. As I said yesterday, I think we are due for a snap back and the dollar reversing very soon. If I am correct, which remains to be seen, we should see the pound, euro and swissie trade lower. Those probing bearish trade should have tight stops in case I'm wrong. The BoC left rates unchanged at 1.0%, while the RBA cut rates to 3.0% today. As long as the 50 day MA caps upside in the loonie, bearish trade is on my radar. As for the aussie, I would cut losses, as what should have been a bearish development has the aussie higher by 0.56% today. I think a solid base has formed in the yen and with an inverse relationship to equities, I am forecasting a bounce that I expect to lift prices in the neighborhood of 2%.
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.