Energy: Looking at today's action in crude oil, we challenged the 50 and 100 day MAs at their H/L, respectively. We could work lower with outside market influence, but I have no client exposure. In April futures, support is seen just above $91/barrel under the 100 day MA at $92.15. RBOB closed lower better than 5 cents off its highs, but did maintain the 20 day MA. A trade under $3.24 in April should lead to further liquidation. Over a 7 cent trading range on the day in heating oil, so be careful. On its lows, we were very close to challenging a trend line that has held since early December. A trade under that level would likely trigger a trade under $3… stay tuned. Natural gas gapped higher on the open, surging 3.6% and closing near 3 week highs. Do not rule out a $3.60, maybe $3.70, trade in the coming weeks. Use higher trade to exit remaining April bullish trade.
Stock Indices: The S&P lost 1.80%, closing under 1500 on a bearish engulfing candle. Could this be the correction I've been calling for? On March futures, support is seen at 1460, followed by 1435. Those in bearish trade, especially in options, may look to liquidate or buy some more time on further selling in the coming days. The Dow gave up nearly 200 points today, closing at 1 month lows. This leg should not meet any significant support for another 250 points, and I think we could see a quick 400-500 point loss on top of the 200 today. Hedging a stock portfolio with futures and options is suggested.
Metals: Gold gained nearly $15/ounce today, and in 3 short days, is $30 from its lows. As buying interest picks up and the race to zero in currencies abroad continues, I would expect gold to appreciate further. My favored play is long futures while selling out of the money calls 1:1. In April futures, if buying returns as it should, do not rule out a quick return to $1640/1650. May silver was higher by 1.85%, closing just above $29/ounce. At its highs, prices were $1 off the lows from last week. I continue to think it makes sense to scale into bullish trade. Some clients are positioned in back ratio spreads, while others have been advised to scale into futures, looking to add to the trade on the way up.
Softs: Cocoa has closed in the green the last 3 days, and if the dollar finds an interim top, we should see a leap in the near future. A close above the 20 day MA -- currently at 2180 in May -- would be further confirmation of an interim low. Sugar ran into resistance at the 20 day MA, backing off and closing just above its 9 day MA. We need to see May above 18.25 the next few sessions or we will likely re-visit the lows. Cotton closed at the low of the day, down by 1.42% -- the lowest close in 1 month. I see lower trade, thinking May is under 80 cents this week or next. OJ is hinting at signs of an interim top, as I see a retracement back under $1.20 in the coming week. Those long should trail stops as to not give back too much. Coffee maintained the 9 day MA, but we need to see May above $1.45 for the momentum for last week to carry over. On that, expect a trade above $1.50.
Treasuries: 30-year bonds were higher by almost 0.90%, lifting prices to 1 month highs. On the highs, a 38.2% Fibonacci retracement, but with falling stock prices, we should see further appreciation. 10-year notes gained 0.45%, but have completed a 61.8% retracement. A trade above 133'00 could be sold, in my opinion, at first look, but I want to see the next few days' action, so I've yet to make a move for clients. Traders should use the recent ascent in long dated euro-dollars to gain bearish exposure in 2015 and 2016 contracts. The closer futures get to their December highs, the more interest I would have.
Livestock: Live cattle have gained the last 2 sessions, but until prices get above their 9 day MA, calling a bottom is premature. I want to see further evidence before making a cal,l but after the 10 cent decline in the last 2 months, we may have found a value zone. March feeder cattle met resistance at its 9 day MA, closing near the lower end of the recent trading rage. Stand aside for now. A potential key reversal in lean hogs today, as lower trade was rejected. I advised clients to scale into bullish trade today. My recommendation was to gain long exposure in futures while simultaneously selling out of the money calls 1:1.
Grains: May corn was a slight gainer after fresh lows were rejected. We shall see, but the same lows that held in January may prove to act as support again just under current levels. After the reversal last week, momentum dragged soybeans further south today, completing a 50% Fibonacci retracement on their lows. We did rally into the close, though, finishing 14 cents off those levels. I do think we see $15 challenged in soybeans, but at this juncture, it is conceivable we see $14/bushel first… stay tuned. Wheat gave up nearly 1.9% to close at fresh 8 month lows. I have a light bullish trade on with some clients, and we are feeling some pain. Longer term, this should be a great bullish trade, but today, wheat is challenging our fortitude. Most of my clients have hedged off some of the trade with options, but still, the $1/bushel slide in the last months cannot be ignored.
Currencies: The greenback reversed intra-day to close higher for the fourth session running. I do think we are in the 8th or 9th inning of his ascent, but understand the flow of money. The dollar still remains a safe haven, and on a stock market route, do not rule out further appreciation. The euro gave up 0.45%, completing a 61.8 retracement on its lows. All European currencies -- the euro, cable and pound -- look overextended, but an inverse relationship will play out to the dollar. I have long entries in those 3 crosses on my radar, but have yet to commit capital. Mixed bag in the commodity currencies, so until the dust settles, stand aside.
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.