Energy: $95 has served as support in Crude oil of late and though that level was probed in early dealings, buying came in to put prices $2 off those levels by the close. As of this post, prices are back above the 8 and 18 day MAs. If futures stay under $98, remain in bearish trade but on a new high, I would likely cut losses. RBOB closed lower by nearly 1.25%, just above its 8 day MA. See today's chart of the day and my explanation on how to play a potential trade lower. I think on a break, we could see March back near $2.90. Inside day in heating oil, with only the 3rd negative close in the last 11 sessions. If $3.25 is not penetrated the next few days, an interim top may have established. On a correction lower, my first objective would be $3.15 in March. Lower trade was rejected in natural gas. I feel we see lower trade and would remain bearish until we see prices back over their 8 day MA, in March at $3.32.
Stock Indices: Extremely low volumes should be noted today. The S&P traded at fresh 5 year highs, but the pace of buying has started to wane. I remain in the camp that a 5%-plus correction should play out at any moment. It would take a settlement under the 9 day MA, currently at 1504, for sellers to re-emerge, in my opinion. The long trade seems very crowded. 13975 continues to cap upside in March Dow futures on the upside, though prices have also been supported at the 9 day MA underneath the market for the last week. A break above or below those 2 pivot points would set the tone for the next leg. My bias remains to the downside, though I have been wrong to date. Once bears grab control of the wheel, I would be targeting 13400, or a 525 point drop.
Metals: Gold traded lower by 1%, reaching my 61.8% target level mentioned in previous posts. The easy money has been made on bearish trade, in my opinion, with futures down $150 in the last 4 1/2 months and $50 in the last 3 weeks. I still cannot rule out a trade under $1600/ounce, and the closer futures get to that level, the more interest I have in buying for clients. I have started to price out bullish trade in June and December, but have to act for most clients. I would be wiling to sell puts under the market on any large down days if a client understood the risk of that type of strategy. Contact me for specifics. Platinum gave up over 1% as well, and is almost $50 off highs from last week. I did close out some of client recent shorts, though I think we could see lower trade ahead. Trade near $1725 that is rejected in April futures can be sold, and as for stiff support, I would not rule out a trade back near $1660. Silver closed lower by 1.69% to end under the up sloping trend line that has supported all of 2013. I see lower trade ahead, and have advised clients trading in silver to have an objective of $30 in the coming week… trade accordingly. Aggressive clients could be short, though I prefer to be a buyer from lower levels.
Softs: Cocoa lost 2.6% to close near 2 week lows and back under the trend line penetrated last week. I see value in gaining bullish exposure on dips, but the wind was taken out of the bulls' sails on today's action. It will take a close back over 2250 in March to resume my bullish feeling short term. Sugar gained 1.65%, only to run into resistance at the 9 and 20 day MA; which both come in at 18.50. A close above this pivot point should help buyers re-emerge. Cotton finished above its 9 day MA, the second day in a row, though I think prices are sale at current levels. March will need to remain under 84 cents, or a higher leg would resume. Currently, some of my clients are in bearish trade and down on their position, but will stay the course for now. OJ has challenged the 9 day MA and held the last 3 session. On a break of that level, I would be looking for a long entry. $1.40 has supported coffee for the last 3 days. My suggestion is lightly start to probe bullish trade, and add to the position if the market moves in your favor.
Treasuries: As long as 30-year bonds are supported at their 9 day MA, I think the likelihood of higher trade outweighs the prospect to lower trade. I think futures are over their 20 day MA and closer to 146'00 in March futures this week or next. 10-year notes have failed at their 20 day MA the last 3 sessions, but just like 30-year bonds, have been supported at their 9 day MAs. I see higher trade ahead, and with first resistance in March futures just above 132'00, followed by 132'16.
Livestock: The same level that found buying in late January supported live cattle today, with April reversing mid-session. If we hold $1.30 the next few days, I will have bullish trade ideas to follow. Risk to reward, we could see trade back to levels seen 2 weeks ago, so stay tuned. Lower trade was also rejected in feeder cattle, but I see less underlying support in this contract. It will take more of a base to establish before I would issue any bullish trade ideas here. Exit remaining bearish trade or trail stops down, though. April lean hogs appear to be establishing in a base just above 86 cents. I have started to price out bullish trade for clients. My initial idea is long futures while simultaneously selling out of the money calls 1:1. Expect more precise direction the next few days.
Grains: Corn gave up just less than 1%, closing lower now for the 7th consecutive session within pennies of $7/bushel. Lower trade is expected, as I would not rule out a challenge of the early January lows. In just 3 days, soybeans have dropped off 60 cents/bushel, completing a 50% Fibonacci retracement. Traders with recently established bearish trade should be covering a portion of the trade, as the 50 day MA at today's lows may support. It would be premature to buy this dip, but long entries are now on my radar for old crop… stay tuned. Wheat lost nearly 2%, dragging prices back near their early January lows. I am comfortable working into bullish trade in wheat. My suggestion is scaling into bullish trade, adding once prices turn around.
Currencies: The U.S. dollar has gained 5 out of the last 6 sessions, with a close at 1 month highs today. I think this leg could carry March futures above 81 cents, which would amount in an additional .008% gain. While the euro remains under its 20 day MA, we are finding mild support just above $1.3450. Those that are short futures were advised to sell out of the money puts under the market to play a bounce. If we trade lower without a bounce, traders should make more in the futures than they lose on their options leg. On a bounce, buy back the options at a profit. The swiss should continue to track lower, as the 20 and 50 day MAs were penetrated overnight. The aussie and loonie should trade lower as well, though you need to give the trades enough room to work, which may be too much for fresh entries, as stops need to be above their 20 day MAs, in my opinion. The yen gave back nearly all of last week's gains, losing 0.65% today. This market remains a bearish trade, as probing longs was a losing battle again on the most recent false buy signal… stand aside on fresh entries.
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.