With a positive jobs number and things heating up in Iran, Crude is back on the move, advancing 1.5% today. We may see a bounce but until we see a trade back over $99 I still am thinking prices have more downward pressure. My target in March is a trade closer to $93-94 in the coming weeks. What is disturbing though is the disparity between the Crude daily chart and the distillates as Crude is on the lower end of the recent trading range while heating oil and RBOB are breaking out to new highs. It is a classic case of the tail wagging the dog. My sense is all products should trade lower in the coming weeks but time will tell. Natural gas is cheap, but with the absence of two major events - either extremely cold weather or a significant shut in on production - there is no catalyst for prices to move higher; look elsewhere.
Job growth and lower unemployment rate had stocks off to the races with equities at fresh 2012 highs, up near 5% ytd. Stocks will likely forge their way to higher territory as I am back in the camp, as being long makes sense as long as the 9 day MA holds. That pivot point comes in the S&P at 1318 and in the Dow 12655. Base on the Market’s assumption that sometime in the next year we may see rates increase, Treasuries got hit hard today with 30-yr bonds depreciating 1.5%. Aggressive traders can fade rallies in 30-yr bonds and 10-yr notes with stops just above their 20 day MA’s. Those levels are 143’11 and 131’06, respectively, in the March contracts.
Gold and silver in my estimation made an interim top this week and we should see correction in the short run. Gold lost 1.8% with the June contract giving back most of the week’s gains today. I would expect a further $50-75 correction in the weeks to come. A 50% Fibonacci retracement from the current leg puts prices back at $1650. Silver was able to hold on to most of the week’s gains but still registered a 1.6% loss today. A correction here would likely drag March futures back near $31/ounce.
Nothing new to report in forex as I am still expecting a bounce in the dollar and for the other crosses to back off. In full disclosure I have no recommended plays until we find a top in foreign currencies.
OJ continues to slide as prices have lost ground eight of the last nine sessions; expect that to continue. I like the move in cocoa bouncing off the 50 day MA, but the inverse relationship it generally exhibits to the dollar has me holding off on new purchases - but have this commodity on your radar in case the dollar moves south as opposed to north as I expect. Today in the AG musical chairs, market corn and wheat was flight while soybeans advanced 1.27%. We could see prices grind higher but I prefer to be on the sidelines with customers if and when they get stopped out of their longs that they should be trailing. A leg lower could be bought, but I would like to see a correction before initiating new positions.
Expect further downside in live cattle as today prices gave up 1.2%. A 50% Fibonacci retracement in April puts prices to 125.70 while 61.8% drags prices to 124.75. Lean hogs are a buy on dips that hold the 20 day MA; in April at 88.35.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.