The fact that we did not have a dire jobs number influenced markets today. We continue to think money goes back into commodities and stocks in the weeks to come…trade accordingly.
Crude continues to bump up against resistance at the 50% Fibonacci level and as of this post is in the middle of 3% today, dragging prices to new lows. Use any rally to exit longs and do not establish fresh entries until we penetrate the downsloping trend line. In November that is roughly 40 cents from the current price.
Stocks took a breather today, unable to penetrate the 50 day MA; in the Dow at 11150 and 1170 in the S&P. We expect further upside in the coming weeks lifting the Dow near 11500 and the S&P to 1200. Do I believe today’s NFP…not really, but from the outside the number was a lot better than the market was anticipating and unemployment remained at the same level so for now we dodged a bullet. As I said I think the number is false but I learned a long time ago my opinion does not matter it and that the market is always right. The dollar pared its losses today, bouncing off the 20 day MA. The good news is we hit our target for shorts but we do not like the buying that came in. We will need to break the 20 day MA in the buck back next week to move lower…that level is 78.45 in December. Tighten upstops on any longs in other crosses as the easy money has been made. If the dollar breaks we feel the Pound and Loonie are the best long candidates. 10-yr notes hit their lowest price level in nearly one month and 30-yr bonds closed lower for their second consecutive week…a feat that had not happened since May. Use further selling to exit remaining bearish trades in 30-yr bonds.
Cocoa made a higher high but failed to hold onto its gains. On the week we were able to close positive for the first time in six weeks. Some clients remain long March with a target at the 50 day MA. We continue to like selling rallies in sugar and coffee but at this point we need to see more upside. In sugar a sale closer to 27 cents and coffee near $2.45. With the exception to soybean meal and oil, grains closed lower to end the week. We continue to like scaling into soybeans and corn at these levels. Start small and add to the trade once the market proves you right. Live cattle finished lower three out of five sessions this week but we need more downside to re-establish longs for clients in 2012 contracts.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.