Energy: Crude oil did close 1% higher on the day but pared losses, closing $1 off its highs. The most significant development in my eyes was a trade above the 100 day MA for the first time in 5 weeks. I have no exposure with clients, but forced into the market, I favor bullish exposure with tight stops. Heating oil and RBOB continue to chop sideways, and I have no direction plays on outrights here, either. If May RBOB trades at a greater than 10 cent premium to heat, I'd be willing to re-establish those spreads… see previous posts. Natural gas gave up 1.6% today, closing in the red for the fourth consecutive session. The key development here is a settlement under the 8 day MA . Bears' plays may finally get some favorable movement. My objective in May is $3.60.
Stock Indices: The 9 day MA remains the line in the sand, serving as the critical pivot point on the indices. That level comes in at 1540 in the S&P and1430 in the Dow for the June futures contract. My stance remains a correction is one shoe drop away. I have been voicing my concerns for weeks and been wrong, but it will happen when the market fully discounts this scenario. A 5% correction from current level takes the S&P 75 points south and the Dow 700 points lower.
Metals: Gold closed lower the second day running, but we did settle $16/ounce off intra-day lows. I am willing to step in with small size under $1600/ounce with aggressive clients. My favored play is long futures while selling out of the money calls 1:1. Unlike gold, silver was able to close higher on the session, registering a small victor,y gaining 0.40%. $28.50 remains the support level, and I will continue to trade as such until it is breached. So we are clear, I am mildly bullish in both metals.
Softs: As the dollar appreciates, expect cocoa to trade the opposite direction. A trade 2.5-4% lower should be bought, in my opinion. Sugar has been in the red the last 6 sessions. Weakness could drag May futures to their lows from last month 1.7% lower… trade accordingly. Cotton has traded lower 5 out of the last 6 days, closing under the 20 day MA today for the first time in 1 month. Support in May is seen at 84.50, followed by 82.00… trade accordingly. Coffee was the chart of the day today, as prices are probing their 9 day MA on the daily chart. I see more upside to come.
Treasuries: For the last 6 days, 30-year bonds and 10-year notes have tread water. There will be a move out of this range, but I'm not clear on in what direction, so stand aside for now. I have started to scale clients back into 2015 and 2016 euro-dollar bearish plays.
Livestock: Perhaps it was the 6 pork belly appetizers my two co-workers and I had last Friday, but demand is out stripping supply in pork. Lean hogs were higher by 1.17% today, with June futures closing over the 20 day MA for the first time in 7 weeks. I believe an interim low was made last week, and in the short run, trade north from here. June futures should find its way to 95 in the coming weeks. My favored play is long futures and selling out of the money calls 1:1.
Grains: Corn has held the 9 day MA the last 2 days. The easy money has been made on bullish play… those still long tighten up stops. I would not rule out a 20-30 cent correction. I am neutral in soybeans, as it could go either way, in my opinion. No outright play in soybeans at this juncture, but I do think soybean meal in July remains a buy. I would be willing to add to longs on a settlement above last week's highs. Since breaching the down sloping trend line last week, wheat futures have maintained that level. What was resistance is now support. I remain friendly, thinking we see a trade 50 plus cents higher in the coming weeks.
Currencies: The dollar is back above the 20 day MA, but with plenty of fireworks, as we experienced better than 1.25 cent range. 83.50 should remain resistance in June. The pound met resistance at the 34 EMA, longs should have stops under the 20 day SMA. Aggressive traders could probe bearish plays in the euro and swissie with stops above the 20 day MAs. The yen closed above the 20 day MA.… roll positions out of April into May or June if you want to stay the course. Those that choose to roll are advised to buy put protection in April against their longs.
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.