Bulls make money on up moves while bears make money on down moves but when market action is sloppy and unpredictable those on the sidelines may have the correct trade on. While they do not make money, they do not lose either. Crude failed to break the trend line again today and appears to be closing back under the 40 day MA. We feel an interim top was established in recent sessions and we are looking for a $3-4 break…trade accordingly. Crude likely would have traded lower than it did if it was not for the resilience in the products; RBOB and heating oil are higher seven out of the last eight sessions gaining roughly 12% and 10% respectively. Natural gas is cheap but that alone is not reason to be long. We suggest waiting for a trade over $3.80 in November before gaining bullish exposure as the trend would’ve changed. Stocks appear to be running out of gas after the very impressive move we experienced in the last two weeks. At this time we’re not advising shorts but we are advising booking profits on any remaining longs.
Gold will make a decision as for its next leg in the next few days on a break above $1692 or below $1650. We favor a move to the upside but are likely talking our clients' positions as we have been gaining bullish exposure in recent weeks. 3-4% moves are becoming daily occurrences in silver, unfortunately today the direction was lower, as most of our clients have bullish exposure. We still have a target of $35/ounce but it looks to be a bumpy ride. Those with a heavy long exposure are advised to hedge with partial shorts or options.
The 34 day MA capped any upside in the dollar index today as the momentum could still put pressure on the greenback. We feel the easy money has been made on longs in other crosses so tighten up stops or move to the sidelines. Yen shorts are still on our radar but we’ve yet to make a move for clients. OJ, sugar and coffee were all higher by better than 3% today. More upside in sugar and coffee and we will be looking to establish bearish trades for clients. As for OJ on a 3-5% appreciation tomorrow we will likely be exiting clients' remaining November call options…stay tuned. If we make a fresh weekly low in 30-yr bonds tomorrow we will be looking for an exit door on clients' remaining bearish plays as we think we are close to trend change. In late dealings corn pared its losses to close only 0.50% lower in today’s sessions. There may be more downside but we like being long a small position thinking big picture there is more upside potential. We view there to be 40 cents of risk and an approximate 60-80 cents of profit potential…in my opinion. Soybean futures have advanced nearly $1 in the last four sessions and bulls appear to be in the driver’s seat. Our targets in the January contract is as follows: 12.80, 13.15, 13.50. The window to buy live cattle on a dip may be narrowing but we would just soon miss the trade than buy at these elevated prices. The 20 day MA continues to act as the pivot point. Trade accordingly as that level is 120.50 in December and 122.60 in February.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.