Energy: Crude oil has been able to fight its way to positive ground four out of the last five sessions, with January futures closing just below its 18 day MA. I am mildly friendly with a very small long position, with some clients looking for more evidence of bullish trade. Speculators could be scaling back into bullish trade, but I would advise stops just under the 8 day MA -- roughly $1 risk in the futures. RBOB provided very little follow through after gaining 2.31% to close out last Friday. We are finding mild resistance at the 50 day MA -- at $2.6675 in January. I think you could move 5 cents either way, taking guidance from crude oil. Until I get a clearer picture, I have no long or short exposure. Inside day in heating oil, closing lower by 0.82%. Prices will need to retake the 18 day MA at $2.9920 for me to have bullish trade back on my radar. Today's chart of the day is natural gas, and after the 20% reduction in the last three weeks, bullish trade is back on my radar. I am operating under the influence that an interim low is very close if we have not already established it. I issued buy recommendations in bull call spreads and back ratio spreads both in April today.
Stock Indices: The S&P gained 1.26%, recovering from the previous day's losses. I have no faith in prices staying at elevated levels, and still think there is likely a sell-off into the end of the year. My clients that feel the same way are in a trade. They are short March ES from just above 1400, and they have sold out of the money puts 1:1 to cushion the blow. Currently, they are under water approximately $700/per. After three days of losses, the Dow also registered a positive day, bouncing off its 9 day MA to close up 0.74%. Between now and the end of the year, I'm targeting 12700 in March futures. In a perfect world, at least for bearish trade, we stay under 13200 in the next few sessions before we roll over again…
Metals: Gold has traded $40 off its highs from last week, and as long as prices are under the 100 day MA, I think we get more downside on this leg. That level in February futures comes in at $1710. Assuming buyers let go around $1685/ounce, the next area of support is eyed at $1670. Silver prices are off 4.3% in the last three sessions, as prices have completed a 61.8% Fibonacci retracement, trading to my target -- the 100 day MA at $53.35 today. I still am expecting more downside. My back ratio spreads have not worked out as well as expected, as it has been a grind lower. If we get a trade near $31.50 in March, I would be willing to let go and that should yield a decent profit… stay tuned. If I am forced to cut losses on a move higher, I will keep all informed. Clients are in March contracts that have 70 days until expiration, so time is not of the essence just yet. Copper futures have started to back off, as I feel March futures could leak back to $3.54 -- a 3.5% depreciation by year's end. Bearish trades are advised with stops above the recent highs.
Softs: Cocoa prices could go either way, so back off fresh entries -- let's wait for the dollar to determine a direction before making a bullish or bearish call. Sugar gained 2.1% today, adding to the 2.54% leap on Friday. Quickly prices have climbed back over their 20 day MA, closing above that pivot point for the first time in one week. March bull call spreads are back alive. For new entries, I am advising May call spreads. I've been preaching a 20/20.50 cent trade for weeks… will it finally play out? Cotton has far exceeded my expectations as prices have been on a one way track for the last six weeks, appreciating over 8%. I would not jump in front of this train, but I am looking for a reason and evidence why clients should be in bearish trade… stay tuned. OJ has gained for the last five straight sessions, as bearish trades from a few weeks ago should have been stopped at a loss. This is another market that I would like to gain bearish exposure in, thinking we are due for a correction... on my radar, but no current open positions. Coffee perked up, closing higher by 1.96%. Only a small victory, with prices off 6% last week. This is my worst trade on my books currently, as clients are in March calls from late November. Win or lose, I am giving this trade two more weeks -- still targeting a trade north of $1.55 in March. I will post the final outcome.
Treasuries: In just over one week, 30-year bonds have competed a 61.8% Fibonacci retracement... this was forecast in recent post. The easy money has been made with March future at 147'00, in my opinion. I am bearish with prices under the 9 and 20 day MA, but I would not be opening new trade. In the same time frame, 10-year note futures have lost nearly 2 points, moving from overbought to oversold. As long as prices are under 133'00 in March, I'd say we have more selling ahead. Although I was not in the trade because I was out of the office, the NOB spread worked perfectly, gaining 2 points or $2000 in the last week. I will look for bearish opportunities if we get a bounce in the days and weeks to come.
Livestock: With the recent pop in prices, live cattle have advanced to 10 month highs and are fast approaching 2012 highs. As long as February is supported by its 9 and 20 day MA, we could see further upside. In full disclosure, I missed this trade with clients. Talk about consistency -- feeder cattle have been positive the last nine sessions, appreciating 6%. A 50% Fibonacci retracement is complete, though a 61.8% retracement puts January above $1.56… stay tuned. Lean hog prices started to trade south last week, but the 9 day MA has supported, on a trade under 84.75, look for sellers to become more active. I'd be willing to gain bearish exposure, with stops above the 20 day MA on a confirmed break.
Grains: Corn appears to be establishing a base after the recent break. The first hurdle that needs to be overcome is the 9 day MA, which acted as stiff resistance today. Clients have a light bullish trade on in March options, and would be willing to add on signs of a bounce from current levels. In the last month, January soybeans have gained nearly 9%, trading north of $15/bushel today for the first time in six weeks. As long as the 20 day MA supports at $14.75, I would remain in bullish trade. As for the Ag complex, wheat has been dealt the worst hand of late, down 5.5% in the last two weeks. It appears prices in March are basing out just above the $8/bushel level, and if that level supports the next few days, I'd be willing to wade into bullish trade… stay tuned.
Currencies: The dollar is lower, but only by 1.4% in the last week, even with prices in the red five out of the last six sessions. I was wrong, as I anticipated a trade north into the end of the year. We will need to see prices reverse immediately but for now, I am on the sidelines here with clients. The euro is probing the triple top spoken about in recent posts. On signs of an interim top, I'd be looking to play put options again for clients. Just like last time, we will need to be nimble, as if we stayed in the last trade that was booked as a profit, clients would now be in a losing trade. The aussie and kiwi are exhibiting signs of exhaustion, so bearish trades are on my radar, but I've yet to move. I'm thinking short futures against a sale of an out of the money put 1:1… stay tuned. Since my last post, the yen has experienced another leg down, but now both daily and weekly charts are saying a bounce is due. We are within tics of the 2012 low, so risk to reward with tight stops, light bullish probes make sense just to play a bounce, in my opinion.
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