Crude was lower by 2% today, closing under its 9 and 18 day MAs. News out of Saudi Arabia that they will do what it takes to lower overall energy costs had the entire energy complex on its knees today. The key will be if May can break the trend line that was tested last week and has held since last October. I would say a settlement under $105 in May would lead to a trade under $100/barrel. Both RBOB and heating oil are having trouble holding onto their gains as well. This week’s inventory report could in fact be the catalyst to get the distillates moving south. I have advised hedgers to move to the sidelines and wait to re-establish hedges form lower levels. Natural gas finished lower but did hold onto the 9 day MA. Traders with multiple positions could split their order, a partial stop under the 9 day MA and the remainder under the contract lows from last week.
We appear to be putting in a top in the equity market but that is just an observation from the charts, not a trade recommendation. I would prefer to see consecutive lower settlements and a breach of the 9 and 20 day MAs for confirmation. I am content on the sidelines waiting for a short entry ... stay tuned.
Gold is alternating from positive to negative days making very little progress for the last five days. I favor a bearish trade as long as June remains below resistance just above $1,670. A settlement under $1640 on this contract should drag prices under $1600/ounce ... trade accordingly. Silver lost 3.4% closing at its lowest level in two months. I still contend a trade under $31/ounce in the May contract should happen in the near future and $28 is not highly unlikely. May copper has been unable to hold above $3.90 and clearly on a breach of the 50 day MA in the coming sessions, so look out below. The 100 day MA would come into play approximately 20 cents from today’s close.
Aggressive traders can start to probe shorts in sugar and I would be scaling into bearish plays as long as prices remain below 26 cents on the May contract. Momentum should continue to drag on Treasures. The only circumstance that I think could end this route in the short run would be a dramatic decline in the stock market which does not appear to be in the cards. Protect profits and trail stops down in 30-year bonds and 10-year notes. Those short cattle should heed the same advice ... trail stops down. The weekly charts look like this could be the beginning of a much larger move. At this point a correction in my opinion could be substantial. Say it is not so ... finally a correction in the Ag sector. Corn lost nearly 2.5% today while soybeans and wheat lost 1.5%. I’m operating under the influence that an interim high is in. This is the start of the correction I wanted to see ahead of the planting intentions report about one week out. I expect another 25-35 cents south in corn, solid support in soybeans is not eyed for 60-70 cents and I see no reason why wheat cannot approach the $6/bushel level. Yes buying the yen would be picking a bottom but I like the risk to reward dynamic. Outside of this cross I would move to the sidelines as I am getting conflicting signals.
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