Markets remain sluggish looking for direction…either higher or lower. As of this post Crude is virtually unchanged hovering around the $101/barrel level. We still favor fading any rallies as $102 continues to act as resistance. On a settlement below the short term MA’s around $99.50 in January we would be adding length looking to capitalize on a trade back to the low $90′s. After printing new contract lows natural gas was able to pare losses and end 1% higher on the day. Depending on stop placement longs may have taken a loss today. Our suggestion is see if we can hold on the next few days with a small position. For the last four sessions stocks have not been able to get out of their own way. When there is indecision we prefer the sidelines and that is where clients are. We open the opportunity of selling from higher levels…stay tuned.
Gold fought back to close above the 100 day MA after bouncing off the 50 day MA in early dealings. All bets are off but on a breach of $1700 look out below. After three losing sessions silver gained 1.6% today to approach $33/ounce once again. Until we get above $33.50 or below $31.50 trade the range is my suggestion. The dollar index appears like it should move lower but the first obstacle is to break the 20 day MA…a feat unattainable in the last five sessions on a closing basis. There are no defined signals in other crosses, so wait for a clear buy or sell signal…stay tuned. Traders still in their Yen positions are approaching D Day as there are only 3 days until expiration. Ideally lower trade yields better premiums the next few days…stay tuned.
Cotton is on our radar as a potential buy as we could be at the beginning of a nice move north…we should have some trade ideas in the coming sessions. Cocoa prices are down over 20% in the last five weeks getting hit for another 1.2% today. We‘ve advised catching this falling knife with some clients and to date it has been painful. I cannot remember the last time cocoa prices or any commodity for that matter closed lower six weeks in a row since 2008. A bottom is yet to be determined but we will stay the course for now. Continue to use the 20 day MA as your pivot point those trading 30-yr bonds and 10-yr notes. Still wait for higher trade in Euro-dollars before gaining bearish exposure in 2013 contracts. Agriculture appears to be building a solid base as corn, soybeans and wheat have consolidated for the last week. My opinion they are looking for outside influence. Live cattle broke the 20 day MA yesterday and have given up just over 4% in the last three sessions. The momentum should drag prices below the lows seen in August and September…trade accordingly. February lean hogs are finding support around the 88.00 level but we expect this to be temporary still looking for lower ground.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.