When Crude was negative in early dealings we reached the 38.2% Fibonacci retracement level; our first target. A trade below $92.50 in February and we could see $89. At that level we would be looking to reverse and shift from a bearish stance to bullish stance; stay tuned. If we do see a further $3-4 slide in Crude expect the products to slide roughly 10 cents/gallon; trade accordingly. The pace of selling has slowed but we still do not see signs of a bottom in natural gas. As we’ve said, we need a spike in volume likely combined with some cold weather or jump in usage. I never thought I’d see a sub $3 trade months ago but it may just happen. When nat gas bottoms we want to be onboard with clients but we may be premature. If long with small size out to March, stay the course for now -- you have time on your side.
The 50 day MA continues to act as magnet in the indices as prices did not wander far from that level the last few sessions. Based on the technicals we favor a further break -- maybe 3-4% by year’s end. 30-yr bonds and 10-yr notes appear to be heading for higher ground as we expect new contract highs in the coming sessions. As for the short end of the curve continue to scale into bearish trades in 2013 Euro-dollars.
The metals complex managed a positive trade today but ended the week lower with gold losing over $100/ounce on the week and silver down just over $3/ounce. A lot will be dependent on outside markets but we welcome a bounce in the coming weeks in both gold and silver to sell into for aggressive clients. I do not see gold back above $1700 or silver above $33 this year, in my opinion.
The dollar has experienced an impressive run but we’re likely running on fumes and we could back off very shortly. That being said on signs of a retracement we will be looking to exit all remaining shorts in other crosses and start exploring bullish trades. The best candidates appear to be the Swissie, Euro and Pound as long as we do not see fresh lows. I would hold off buying the commodity currencies as commodities could see more pressure into year’s end.
For the first time in seven weeks cocoa prices were higher on a weekly basis. Last week’s lows should serve as an interim low so buy dips. Cotton and coffee remain on our sell list as we see lower ground in both. On the weekly chart coffee is on verge of breaking the 100 day MA; on this selling should intensify, trade accordingly. Wheat and corn are still trying to find a bottom while soybeans may have found it with a bullish acreage number out of Informa today. Soybean futures gained 1.6% today closing above the 20 day MA for the first time in nearly two months. Aggressive traders can gain bullish exposure with stops below the recent lows. Remain on the sidelines in live cattle for now. Lean hogs were lower by 2.4% today approaching seven month lows. We are advising scaling into longs. We would advise having 50-65% of your intended long position on at this time.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.