Markets for the most part are in a holding pattern in anticipation of next week’s FOMC.
For the last two days we’ve seen lower lows in Crude oil and although we do not anticipate much downside from here, we think you could see an additional $2-4/barrel decline. Aggressive traders should be looking to offset any shorts and reverse closer to the $85 level in November. Natural gas under $4 is a screaming buy in my eyes, but after violating the downsloping trend line this week we were hoping for a better reaction. That being said, clients will remain in their November longs and we will be suggesting December and January bullish exposure very soon.
Stocks traded higher all five sessions this week. I cannot remember a week in quite some time where that had happened. With a settlement above their 40 day MA’s today in the indices we expect more upside in the coming weeks. The only thing in my opinion that could derail a further appreciation is a curve ball from the Fed next week. A trade 3-4% would be a selling opportunity in the Dow and S&P in my opinion. Continue to use the 20 day MA as your pivot point in 10-yr notes and 30-yr bonds.
December copper will need to hold the $3.85 level or look out below. We would not take the sell signal but it would likely cause us to gain bearish exposure in other commodities ... stay tuned. $1.00-1.50 daily swings are becoming commonplace in silver which equates to $5000-7500 per contract -- NO, thank you, not for me. We have buys under $38/ounce on our radar; stay tuned. Gold’s $30 appreciation today helped the bulls' case but the fact that we broke a trend line that had been in place since late June to me is a bigger story. We have buys under $1700/ounce on our radar.
The dollar will likely be in a holding pattern until the Fed decision next week but on a technical basis we say a trade lower into next week. Continue to buy dips in the Loonie and Swissie but for now back off the Euro and Pound.
Sugar and coffee remain sales on any rallies as we see these two commodities as two of the most overvalued at current pricing for medium to longer term traders. Our clients' only two positions in this sector remain longs in November OJ and longs in March cocoa. Ags are still a sale on our indicators but we would suggest covering a majority of open shorts as we’re getting close to a buy signal in wheat and corn. Close out lean hog longs whether at a profit or loss -- too many conflicting signals. Fade rallies in live cattle or bearish ratio spreads in December would be out play.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.