The headlines today about a strengthening US economy and concerns lessening on the European debt helped lift confidence and markets to multi-year highs. I hate to be a skeptic but I am not drinking the Kool-Aid. The 9 day and 18 day MA continue to converge on the daily chart in Crude oil. Why I bring this up is if the 18 day MA closes above the 9 day this would be the first time since Crude was trading in the mid $90s. My interpretation, if this plays out, is that we get the decline I’ve been calling for in recent weeks. My only concern is with a break out in equities in my opinion outside markets like Crude should have been bid higher today. I reserve the right to shift my position if we see fresh highs in RBOB and heating oil which both gained roughly 1% today. A bullish engulfing candle in natural gas today is a preliminary sign of a low but I would like to see some volume return and some follow through in the coming sessions.
A close back above $2.60 in April would get me interested in probing longs with clients again. WOW…fresh highs in equities with price appreciation near 2% today. Bulls are in the driver’s seat but the light volumes do not have me a believer. We’ve missed this recent leg higher and are content advising the sidelines for now.
Gold gave up just over 1.6% today to retest the 50% Fibonacci level for the second time it the last two weeks. A breach of $1667 in June puts $1639 back in play. Silver held on better today losing less than 0.50%. My bias is bearish though thinking the 40 day MA could cap upside in the coming days. My target on a retracement would drag May under $31. Depending on stop placement you were likely taken out of remaining sugar shorts at a profit. Continue to trail stops down on coffee as I think we get a bounce and traders that are already not taking advantage of the meltdown here you should be able to fade a rally in the coming weeks. Treasuries broke down today dragging prices near two month lows in 30-yr bonds and one month lows in 10-yr notes. My suggestion is if short use the 20 day MA’s as your pivot point or stop loss.
Traders should have taken off their cattle shorts and be positioned to sell on a further advance. This goes for both feeder cattle and live cattle. Corn and wheat were flat today while soybeans were higher by better than 1% registering their highest close in six months. I still say wait for downside and be a buyer ahead of the Planting Intentions in the coming weeks if given the opportunity. As long as the 50 day MA holds in the dollar index I remain friendly; that level is 79.80 in March. The only clear loser is the Yen which has lost ground for the last six weeks and I would only be selling rallies as the risk of a bounce exists.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.