Follow the flow of money as the dollar and Treasuries should benefit and stocks and commodities should suffer. Almost a $4 trading range and Crude is higher by just shy of 2% as of this post. The key today will be if prices close above or below the 9 day MA at $99.90 in January. We will continue to fade any strength as long as last week’s highs continue to cap further upside. Natural gas appears to be in the green today making it the last two sessions… a very small victory all things considered. We would need to see exhaustion at the lows or a volume spike that fills the overhead gap to feel a low is in. Some clients own very small size a few months out and we are fine with that for now. Stocks should finish lower by approximately 1% making new lows on the week and likely headed lower. A breach of the 50 day MA, in the S&P at 1220 and in the Dow at 11700 should confirm lower ground. A 50% Fibonacci retracement drags prices back to 1285 and 11400 respectively.
We pointed out chart damage in gold and the bears seem to be back in the driver’s seat with prices down 2% today. We may probe $1600/ounce on this leg so do not try to call a bottom just yet. As long as prices remain below $1670 on a closing basis our bias remains bearish. Silver gave up 1% and it appears that we will finally get a settlement below $31/ounce. We are targeting $29 on further depreciation this week. Copper lost just over 2% closing back under the 50 day MA for the first time in two weeks. Next stop should be $3.25 and possibly $3.10 in the March contract. A fresh 2011 high was made in the US dollar today so as expected all crosses were lower. With the European woes the Euro got hit breaking support approaching 2011 lows. As predicted the commodity currencies also were losers and they should continue to falter in the short run…trade accordingly.
In just two sessions cocoa is almost 13% off its lows hit yesterday. The fact that we were able to gain in the face of a stronger dollar also lends credence to further upside. We see the 50 day MA in March as a viable target at 2525. Further losses in commodities and stocks coupled with demand on Treasuries from the numerous auctions should keep 30-yr bonds and 10-yr notes in the green. Use the 20 day MA as support as our bias is bullish in the short run. Traders can scale back into bearish plays in 2013 Euro-dollars with stops above the recent highs. Grains are finding their bearings and seem to be building a base…across the gamut corn, soybeans and wheat. Traders can start scaling into longs with stops below the recent lows. We are still accessing at what level we wish to get clients long live cattle..for now we like the sidelines. Lean hogs remain oversold as we are nearing a buy zone here as well…stay tuned.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.