Energy: A midday reversal bid Crude oil nearly $2 off its lows, closing just under its 8 day MA. My take is we're still due for a trade lower… as I said yesterday, it will take a trade under $95 in March futures, and I think that would attract more selling. Ultimately, I see a trade to $92/93 in the coming weeks. For the last 5 days, RBOB has been contained in a 6 cent range just above the 8 day MA. We need to see this contract pierce $3 to see flow drive prices south, which is still my opinion. I cannot rule out a blow off top, but I see price 20 cents lower in the coming weeks. Inside day in heating oil, with futures still under their fall lows just under $3.20 in March. When prices roll over, I see the next significant support 12-15 cents lower. Natural gas has gained 5 out of the last 6 sessions, probing the 50 day MA today for the first time in 2 weeks. I see a grind higher in the coming weeks, and have advised scaling into bullish trade in May and June… see today's chart of the day.
Stock Indices: The 9 day MA held today with the S&P fighting its way into the green, closing just under the recent lows. I was looking for consecutive closes under 1500 to call an interim top, but that has yet to materialize. Some of my clients remain short and after booking profits on their option leg, their breakeven is approximately 1440/1445 in ES futures. The Dow too bounced off the 9 day MA, which has served as the pivot point for both indices the last 4 days. I do not feel 14000 is sustainable, but we will need to see 13800 penetrated to see additional selling.
Metals: Inside day in gold, with a close just above the 50% Fib level. I hate to beat a dead horse, but I am anticipating short-term pressure and will be willing to establish bullish trade for clients from lower levels. Silver managed to close positive, but we did experience a lower low and lower high with a close just above the 50 day MA. A trade closer to $30.50 should be bought, in my eyes. I will start to generate some ideas as futures approach that level.
Softs: After yesterdays near 2.5% appreciation, cocoa gave back slightly, down 1%, closing at its 20 day MA. I am operating under the influence that scaling into bullish trade for swing traders, cocoa presents a great opportunity. Sugar lost almost 2%, bringing prices back near 18 cents and within .007% of recent lows. Those in multiple legged bullish trades may opt to buy back their top legs on this down draft. Cotton was a slight winner for the first time in 5 days, but prices remained under their 9 day MA. I am targeting 78/79 cents in March in the coming weeks. OJ gave up 1.52% and if $1.20 gives way in March, we should see an additional 6-10 cents of follow through selling. I would be eager to buy that dip with clients. Coffee closed down just better than 1% to register the lowest close in 2 years. Buy low, they say, but only lightly until a bottom is determined.
Treasuries: 30-year bonds closed over their 9 day MA. My eyes see a base being established, and the next leg should be higher. The 20 day MA in March is seen at 144'20, while I think an up cycle could lift prices near 146'00. 10-year notes closed near their highs on the week, also above the 9 day MA. As we see futures above the down sloping trend line in the coming days, we should grind towards 132'16. In the coming weeks, we should see long dated euro-dollar futures trade higher, and I have started to construct strategies for bearish trade, but only after a 15-20 point appreciation.
Livestock: The gap mentioned in previous posts was filled today in live cattle after the 0.64% drop. We should see lower trade, but I don't know if we will challenge the January lows. I've yet to buy, but now bullish trade is on the radar. Feeder cattle closed lower by 0.66%, taking prices to 2 week lows, though more selling is ahead, in my opinion. Stand clear on longs, and if in the market, be short with tight stops. April pigs gave up 1.65%, dropping to fresh 4 month lows. This leg should take April under 85 cents… trade accordingly.
Grains: Corn closed lower for the fourth consecutive session, breaking its 20 day MA today. There is a USDA report Friday, so this could be profit taking, but this may take March under $7/bushel ahead of the number. Soybeans lost ground for only the second time in the last 2 weeks, as $15/bushel remains the line in the sand. A 38.2% Fibonacci retracement puts March back near $14.45, which is my objective from here. Another soy product on my radar currently is bearish trade in soybean oil… stay tuned for ideas to come. Lower trade was rejected in wheat, as prices closed in the green just off its highs. I like scaling back into bullish trade here. Those wanting to cushion the blow could sell out of the moneys calls 1:1.
Currencies: The dollar index probed the 50 day MA and closed above the 20 day MA today… further buying should follow. Bearish engulfing candle in the Swiss franc may hint at an interim top… stay tuned. The euro has lost ground 2 out of the last 3 days, as I am still targeting a trade back to $1.3300 in March. My favored plays are bear put spreads in June, or short March futures while simultaneously selling out of the money puts 1:1. The commodity currencies can be sold with stops just above the 20 day MAs. As for risk in the loonie and kiwi, it is relatively tight stops. Since the aussie has started to trade lower, it would represent almost $1500 per contract, so perhaps implement options as a hedge. The trend remains down in the yen… do not pick a bottom.
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.