There should be enough downside to get a short trade out of the energies, metals and indices. The energy complex got hit today as forecast with Crude breaking its 40 day MA making its way to the 100 day MA. I expect the downward momentum to drag prices in May futures below $100 into next week. A 38.2% Fibonacci retracement would put this contract near $97.50. RBOB and heating oil are also retreating. The correlation generally is that for every $1 move in Crude expect to see a corresponding 3-4 cent move in the same direction in the distillates. Forget decade lows natural gas gave up nearly 6% today making its way closer to $2…run far away. With continued injections in the coming weeks there is no reason to be long at these levels. There has been so much talk about a long term play and I cannot dispute that but if you can buy 10-15% cheaper hold off.
Stocks tested their 20 day MAs but pared losses with the Dow managing to close higher and the S&P virtually unchanged. It may take a few attempts but my feeling is still a trade lower that would be confirmed with a settlement below the 20 day MA as I've stated in previous posts. When that happens I'd be willing to gain short exposure to play an additional 3% plus depreciation with clients. Much like stocks gold and silver were able to pare their losses today. A bounce that is contained by the 100 day MA in gold and 50 day MA in silver should be viewed as a selling opportunity as I am still looking for lower ground. Tighten up stops in sugar as to not give back too much profit on bearish trades. Once we break the 50 day MA in May at 24.30, traders can add to their trade.
I remain bearish coffee but I would like to see a bounce in order to re-establish bearish trades. If we don't see it soon I would walk away though. After looking at the monthly chart today prices reached my target of a 61.8% Fibonacci retracement so I don't want to get greedy. Small losses should have been realized on any fresh bearish trades in Treasuries with the close above the 20 day MA today. Feeder cattle broke to 3 months lows while live cattle dropped to 4 month lows today. Unfortunately I advised profits to be taken on a trade above the 9 day MA which happened in recent sessions. Expect lower trade and then we may be adding longs at that time…until then stand aside. Now we are talking the correction in AGs we called for. This week wheat and corn have lost 50 cents and soybeans 30 cents. Soybeans have not lost as much ground because a lot of ground may be lost. By that I mean there should be massive acres allocated to con and therefore soybean acreage will be less….simple economics. Aggressive traders could buy partial long positions of corn into the report overnight. My suggestion is to only buy 1/4 - 1/3 of the position you want. I like layering in positions close to $6/bushel unless we get a higher number then priced in for acreage. Factored in now is probably 94-95M acres for corn. As long as the June dollar index holds 79.00 I am friendly and therefore bearish other crosses though I have no open trade recs except the Yen for clients. The Yen is above the 20 day MA and should see higher ground so stay long and take what the market gives.
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 article 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.