Energy: Crude oil gave up 1.50%, closing at its 8 day MA just above the 38.2% Fib level. I think if we can break those 2 pivot points, we should see more selling to follow… I see the next support level $2 under current prices. RBOB has gained for the last 5 sessions, but trades above $2.85 are being rejected in March futures. If we are unable to get above that level the next few days, I think we roll over. I see prices 10 cents lower in the coming weeks. March heating oil is finding mild resistance just above $3.07/gallon. Aggressive traders could probe shorts with tight stops. Natural gas has held its 50 day MA the last 2 sessions. We could just be taking a breath before the next leg higher, but March will need to remain above $3.40/3.45 for me to remain friendly. Those traders with large bullish positions have been advised to lighten up in recent sessions.
Stock Indices: The Dow closed above 13700 for the first time in over 5 years. We are extremely over bought and like a stretched rubber band, my stance is we are due to snap back and move south very soon. While I do not see an extended bear market, I could picture a 600-800 point retracement in the coming months. S&P closed higher on the day, but failed to make fresh highs and as of this post, are lower by 0.45% overnight. Could this be the beginning of a correction I've been forecasting? First confirmation would be a breach of the 9 day MA -- currently at 1475 in March futures. A 50% Fibonacci retracement puts that contract at 1415… trade accordingly.
Metals: For 4 sessions now, gold has failed to get above the 50 day MA -- currently at $1695 in February. My stance is prices trade south from current levels, dropping back near $1650/1660. I would be eager to be a buyer on that break with clients, all things considered. Silver managed a 0.81% gain, keeping prices above the 50 day MA but overnight, we are down 0.72%, as I feel prices will be under that pivot point very soon. If brave enough to get short, traders should be targeting a trade back near $30.50 in March futures. Platinum was a very small loser but looking at the daily chart, stiff resistance appears to be developing around $1700 in April futures. I like bearish exposure, looking for breaks in the coming sessions. I think you could see $30-50 drop with ease… trade accordingly.
Softs: Cocoa is trading at 6 month lows, and is a buy at these levels. To date, futures have been able to hold $2200 but even on a breach, I like scaling into bullish trade, thinking we could be much higher in the coming months. Sugar was higher by 2.10% to trade back up near its 9 day MA. Scale into longer-term swing trades, as I see value under 19 cents. For 6 sessions, cotton has traded higher, closing above 80 cents for the first time in 8 months today. I see limited upside, but have not advised clients to get short just yet. OJ has put on 5% in the last 2 weeks, trading up to its 20 day MA. A penetration of that pivot point, which has been challenged the last 2 days, should get March moving towards $1.25. Coffee gained 1.21% today, but that is only a drop in the bucket, as prices were off by nearly 5% yesterday. I like scaling into bullish trade, but you may need to take some heat before the trade develops. Coffee is one of the more volatile commodities.
Treasuries: 30-year bonds traded up to the down sloping trend line that has acted as resistance for the last 2 months I expect prices to get above that line in the coming sessions, as I'm targeting 148'00 in March futures. 10-year notes have penetrated their down sloping trend line, but are finding mild resistance at 132'16. I see a grind to 133'00 in the coming weeks… trade accordingly.
Livestock: April live cattle closed $1 off their lows, as $1.2950 appears to be decent support. I've suggested for clients to gain bullish exposure by either selling puts or long futures and selling out of the money calls 1:1. March feeder cattle are forming a base just above $1.46. From the sidelines, I think I will watch a move to $1.50. I prefer to trade live cattle rather than feeders with clients at the moment. Lean hogs closed at 2 week highs, just below their 20 day MA. I anticipate a trade back over 90 cents in the coming weeks.
Grains: Corn is down 15 cents from the highs last week, and a break of the 50 day MA just under today's lows should extend losses. March could trade back near $7/bushel before buyers re-emerge, in my opinion. Soybeans lost 1%, as an interim top may have been established. I think short term, we trade south of $14/bushel again. I advised clients to take off their soybean meal at a small profit/loss to buy again after this retracement. I advised longs to book profits or hedge their longer-term wheat… as we should trade south short term. I will be willing to buy all AGs after this brief correction for clients… stay tuned.
Currencies: The dollar closed just under its 20 day MA, but that was after an early attempt at the 50 day MA that failed. A trade north of 80.25 in March futures should get the bulls more interested and bears out of the way. The pound is finding mild support with back to back doji stars on the daily chart. If short, trail stops down to protect profits. The euro has yet to turn lower, though I think it is just a matter of time. Risk to reward, I love bearish trade with an exit above $1.34 and an objective of $1.3050. The loonie gave up 0.68%, and like I voiced last week, it could be foreshadowing lower trade in metals and energies to come. The yen below the 20 day MA is worth a stab at inexpensive call options to play a violent move higher… today's chart of the day.
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.