Just when it looks like a market is on the verge of breaking down or breaking out to the upside, the market reverses. Two examples: Stocks appear to be are moving higher, bonds look like they are trading lower, but we are not believers of either just yet. We’re suggesting the sidelines in a number of trades at this time.
As of this post Crude is higher by 2%, trading close to its weekly highs. The volatility continues, so keep your size small. We are still operating under the influence that Crude is a sale above $88/barrel and a buy under $78/barrel. Lower trade was rejected again in natural gas but prices were unable to retake their 9 day MA. Prices are cheap but that is not reason enough to be long. Wait for a close above $4 before establishing bullish exposure.
Equities will close higher for their fourth consecutive week, finishing out the week with a 2% gain. Prices should make a run at their 61.8% Fibonacci retracement levels at 1245 in the S&P and 11820 in the Dow. 30-yr bonds managed to squeak out a very slight positive trade on the week but clearly the momentum is shifting to the bears. Our first target is 136’16…if that level gives way we could see 134’00.
After four losing days gold picked up 1.7% to register one positive day this week. We feel it is a coin toss and have advised clients to move to the sidelines. Silver was higher by 3.3% today after losing about that amount yesterday. We favor being long if you have a longer time horizon, but all bets are off in the short run as we cannot rule out a retest of $26/27 before we see a leg higher. We have advised no new entries until we get a break lower. Copper lost 6% yesterday and gained 6.5% today; that, my friend, is indecision.
The US dollar broke the 50 day MA today, trading below that level for the first time since the beginning of September. On further downside look for the international crosses to gain strength. Our pick for those looking for a bullish allocation is the Swissie as it has got hit the hardest in recent months. Some clients remain in their bearish Yen positions and we still favor a break lower.
Continue to scale into shorts in sugar; being we were unable to trade above 28 cents the last two weeks we likely put in an interim top. Coffee gained 6% today to lift prices to one month highs. On further appreciation closer to $2.55 we will be establishing bearish trades for clients; stay tuned.
Corn mid-day looked like a breakout but prices closed on their lows so let’s see what happens next week; stay tuned. We still like buying breaks in soybeans thinking in the next few weeks they have the best upside potential in this complex. A settlement back over the 9 day MA at 12.50 in January would get us interested in adding to existing longs for clients. Aggressive clients can gain bearish exposure in lean hogs as long as we do not make new contract highs stay the course. Live cattle have traded below their 20 day MA’s but have yet to close below that critical pivot point. We are waiting for a further break before establishing bullish plays 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.