Energy: For the last 2 days crude oil has attempted to break its 8 day MA but failed. Today futures in March are trading higher by .70% and as of this post just under $95. As I've said for the last week or so prices at these elevated levels are unsustainable but meanwhile futures are higher by better than $3. I'm either early or wrong so consider your risk tolerance if getting short as I've suggested. My favored play remains short futures a few months out and selling out of the money puts 1:1. Inside day in RBOB futures registering a gain of 0.61% finishing just under the 8 day MA. $2.80 in March should contain further upside as I see prices drifting to $2.65. Heating oil closed higher by 1.85%, the highest close in six weeks. While I do not see much upside above the November highs there is little resistance up to $3.20 in March so be cognizant of that. In four days natural gas is nearly 30 cents off its lows closing above the 18 day MA today for the first time since late November. I've advised bullish positioning thinking we could see 20-30 additional cents in the weeks to come.
Stock Indices: The Dow appears that it will close at the exact level it opened ... a doji star on the daily chart. March futures have yet to take out their October highs and I remain in the camp that the gap from two weeks ago should be filled in the very near future. A 50% retracement of the move since November would put March futures under 13,000 ... trade accordingly. The S&P will close marginally lower but failed to make a new high finishing just above the 9 day MA. I expect this level to be taken out as prices make their way to the 38.2% Fib level this week or next. Ultimately I think March futures are under 1400. Clients are holding losing bearish trades still thinking a trade lower in the coming weeks will get them profitable.
Metals: Inside day in gold with a minute profit but we did settle over the 200 day MA; in February at $1667. As long as prices hold $1645/1650 I remain friendly. A settlement above $1680 would give me a signal to get longer and a breakout over $1720 would get me even longer with clients. Silver far exceeded gold today which is not out of the norm but today's margin was impressive for the longs and disappointing for the short with March futures higher by 2.31. With prices over the 200 day MA and the highest close in 3 weeks we should see momentum lift prices to higher levels. I will likely use a spike higher tomorrow to lighten up on recently purchased futures and options for clients.
Softs: Cocoa gained 0.49%, probing the 20 day MA for the first time since the first week of December. I continue to like buying on dips and think traders should be positioned in bullish May and July futures and options strategies. Sugar failed at its 20 day MA, closing lower by 1.41%. Under 19 cents I feel sugar should be bought but don't get too committed as we have been contained in a 1-1.50 cent range now for the last three months. Inside day in cotton with prices slightly lower finishing just under the 20 day MA. I prefer a bearish trade and though we may get a pop with help from outside markets I think eventually futures are 5-8% lower ... trade accordingly. OJ futures gave up 1.15% to close under its 9 day MA. Futures are having trouble rallying but I think risk to reward longs is the trade at current levels. March is 4.2% off its lows in the last 3 months and 23% off its highs. Coffee has traded 10% off its lows 3 weeks ago and I think there is more ahead but it will not be in a straight line. I advised all longs that were in March to roll out to either May or July. As long as dips hold $1.45/1.47 in March I like being in bullish trade with clients.
Treasuries: 30-year bonds finished in the green but well off their intra-day highs. As long as the 9 day MA holds in March just above 145'00 more buying should follow. My take currently is we see futures trade north of 147'00 this week or next. 10-year notes too held their 9 day MA and intra-day probed the 20 day MA, trading above that pivot point for the first time in 3 weeks. I see support in March at 131'20 with upside resistance at 132'24. A 2015 and 2016 Euro-dollars trade higher I would be willing to fade that rally. I do not expect futures to trade more than 10-15 tics higher ($250-$375/per contact).
Livestock: April live cattle closed higher for the first time in 7 sessions but I am not ready to call an interim bottom just yet. Bullish trade is on my radar as I've started to price out strategy but I've yet to commit any client funds. Support was found in March feeder cattle at the 61.8% Fibonacci level. Like live cattle we are seeing preliminary signs of a low but the jury is still out. Let's see if $1.50 can hold in March the next few sessions. April lean hogs closed higher by 0.83% as we may be bouncing off a triple bottom. Being we are oversold I anticipate a rebound from these levels. Aggressive traders could play a potential bounce to 90 cents though I will likely wait to sell from higher ground ... stay tuned.
Grains: Corn added 2.14% today to close above the 50 day MA for the first time in 2013. In just over 1 week prices have advanced 6% though we should not continue at this pace. Next upside resistance in March futures is seen around $7.30/7.35. If we start to fail around those levels I would look to exit March longs and potentially reverse to play a trade back near $7/bushel ... stay tuned. Soybean futures gained 3.26% to erase last week's losses closing at its 50 day MA. I do not see any serious resistance for another 50 cents but I have not bought into this rally as of yet with clients. I am more interested in owning soybean meal than beans. With an inverted market I think owning bullish exposure in July via futures and options is a better play all things considered. Today I started advising this to ag trading clients. Wheat is 30 cents of last week's lows probing the 20 day MA today. The last time prices were above that pivot point March futures were $1 above current levels and I think we could be headed back. I've suggested a bullish trade in CBOT wheat from May all the way out until December to most clients.
Currencies: With the dollar index under its 20 day MA I am bearish but I do not expect much more selling. 79.00 has held March futures for the last 5 month so there should be limited downside in my eyes. That being said there should be limited upside in the Pound and Euro. The big mover today was the Swiss Franc, down by almost 1% closing at its 31 day EMA. Aggressive traders could fade rallies in the Swiss with stops just above the 20 day MA, currently at $1.0910 in March. I would wait for more evidence of an interim top in the Aussie and Kiwi before constructing a trade. As for the Loonie if energy breaks down we should see a trade under $1.01 and then bearish trade is on my radar. The Yen continues to bleed as the sentiment remains extremely bearish. The ship is leaning one way so I do not expect it to be a constant down. A snap back should occur but it is not my favorite play. Those who wish to play it should pay very little for premium in my opinion.
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.