Often as a trader one must be forward thinking. Does that mean picking a top or bottom? I like to think not but there is a certain degree of forecasting involved so if the risk to reward dynamic makes sense take the trade.
Inside day in crude oil but the key to me was a settlement again below the 9 and 18 day MAs. I am still favoring a break in prices in the immediate future. I am not bearish ... don’t let me confuse you ... I just think after a $32 advance in the last six months and near $15 appreciation in the last two months we could get a correction. On the May contract a 38.2% Fibonacci retracement would drag prices near $98/barrel. RBOB and heating oil remain vulnerable as I think we could get a sharp 15-20 cent correction starting any day now. There has been limited upside but at least it appears a base if forming in natural gas as prices have chopped in a 15 cent trading range for over one week. Those brave enough to be long May could add to the trade on a settlement above $2.50.
Stocks have lost little to no ground but we have closed lower for the last three sessions and today marks the first close below the 9 day MA for the Dow in two weeks. A close below the 20 day MA would be confirmation and I would be willing to wade into bearish trades ... stay tuned. In the Dow the 20 day MA is 13,965 and in the S&P that level is 1,374. Gold closed slightly higher but near its lows today as a breach of $1,640 in June should encourage sellers to make a run at $1,600/ounce. Fade rallies in May silver as long as the 100 day MA caps upside ... that level is just below $32.50. Ultimately I still am targeting $30-31 an ounce.
Aggressive traders should be staring to build bearish trades in sugar. I view the risk up to 26 cents and have a profit target of 23 cents in May. Dollars and cents your exposure should be approximately $800-900 and your profit objective is roughly $2,500 per futures contract. Let coffee pick up more before re-establishing shorts- that could be $2.00 in May - stay tuned. Orange juice should be cheaper at your local grocery chain with prices of frozen concentrate down 3% today and 20% off levels seen at the turn of the year. I’m expecting more downside so hold off timing this buy. Exit all remaining short trades in Treasuries as this pattern exhibits a bounce and the inverse relationship should play out if equities crack. I would probe bearish plays if 10-year notes and 30-year bonds approached their 20 day MAs and fail to settle above that pivot point. In June 10-year notes at 130’18 and in 30-year bonds at 141’3. Cattle may bounce from here but keep stops at the 9 day MA , if meant to be on the sidelines the market will tell you. Corn and wheat lost ground today which is consistent with my forecast, however soybeans were able to gain marginally. My contention in the ag sector is on a larger break I may have buy recommendations ahead of the planting intentions report ... stay tuned. I like buying the yen at these depressed levels playing a bounce. At a minimum I am targeting a return to the 20 day MA just above 1.2200 in June.
Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor’s needs or investment goals. Any opinions expressed in this newsletter are as of the date indicated. Trading futures, options and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.