Stocks and commodities got hit today and there should be more to follow. Stocks, energies, even metals were not spared as risk off was the theme today. Crude failed to make it to higher ground as prices were rejected and the reversal that we’ve been expecting may finally be under way. Aggressive clients started to gain bearish exposure in January contracts. As of this post oil is down 3.7% trading back under $100/barrel. If the 9 day MA gives way expect a trade back to the 38.2% Fibonacci retracement at $92.40 next week. Further pressure in the distillates should drop RBOB under $2.40 and heating oil under $2.90. Natural gas is showing signs of life when all other commodities are getting hit. A 3% advance today could be a sign of price stabilization. Stay tuned as we may be suggesting longs in the very near future.
Stocks continued lower, building on the losses late yesterday. On a breach of the 50 day MA’s expect selling to intensify. Those levels are 1200 in the S&P and 11450 in the Dow. Gold will close down nearly 3% dragging prices to two week lows and on the verge of breaking $1700/ounce as we forecast. If we break the 100 day MA with ease in the next few sessions do not rule out a quick trade to $1660 in December. Silver gave up 6.4% closing below the 40 day MA for the first time in two weeks as prices approach our target at $30/ounce. At this juncture we cannot rule out a sub $28 trade…trade accordingly. Again today’s theme was a higher dollar and lower crosses with the commodity currencies getting hit the hardest. On further commodity pressure expect this to continue. Aggressive traders could have short exposure with any of the int’l pairs. My only suggestion is to have an exit strategy in case of a reversal because the volatility in currencies can be massive. Continue to trail stops on bearish sugar trades. The short end of the curve remains on our bearish radar as 2013 Euro-dollar contracts are in our opinion the way to play this complex. Agriculture resumed its downward movement with corn down 4.4%, soybeans 1.6% and wheat just under 4%. Aggressive traders can be positioned bearishly though we do advise a smaller allocation as this should be one of the first commodity sector to bottom. Those typically trading multiple positions are advised to trim their size. Live cattle appears to be working its way lower…wait for a trade back near $1.21 in February before gaining long exposure…stay tuned. The bulls are back in control in hogs with prices closing above the 20 day MA in February for the first time in three weeks. We have advanced 3.5% in the last week and we feel we could see an additional 3-5% in the coming weeks…trade accordingly.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.