Energy: I would’ve liked to see the 100 day MA breached this week on a closing basis in crude. It has served as solid support and if prices do not close below $102.75/103 in June next week I will be advising to exit all remaining shorts. The $4 range in crude for several weeks is exhausting for longs and shorts. In time I expect when we get out of this consolidation to see the price move $10 in the direction of the breakout. RBOB has lost ground the last six sessions and if this weakness continues it should pressure crude. Heating oil remains range bound in a 7-10 cent range. Do not rule out one more attempt at $3/gallon before prices start to pick up once again. The sentiment remains bearish in natural gas and being cheap is not reason enough to be long. Stay away for now.
Stock Indices: Stocks tried and failed all week to trade above their 20 day MAs. As long as that level caps rallies I expect more work to the downside. In the Dow that level is 12,980 and in the S&P at 1,387. I’m currently neutral but on a trade below 12,650 and 1,350, respectively I would be willing to wade into bearish plays with clients. While the Dow and S&P were able to close higher on the week the Nasdaq lost for the third week running. The biggest winner on the way up and likely the biggest loser moving forward.
Metals: June gold has traded lower the last six days but has lost very little down only $38. I suspect when prices break $1,615 on a closing basis the flood gates will open and all weak longs will be shaken out. If this plays out I would expect a re-visit of $1,550. Treading water is the only way to describe the action in silver in recent weeks. The 100 day MA continues to cap upside and I know you’re tired of hearing it but on a breach of $31 I believe silver quickly finds its way to $29/ounce ... trade accordingly. Though I see short term depreciation I’m not comfortable getting short gold or silver at the moment. Copper gained nearly 2% today but let’s see a consecutive close above the 100 day MA before I’m a believer. That level in the May contract is just above $3.70.
Softs: Sugar is trading near a one-year low and I’m not calling a bottom yet. I see prices challenging 21 cents/lb. in May. Aggressive traders can continue to scale into bullish plays in orange juice anticipating a bounce. After a 30% decline even a 38.2% Fibonacci retracement lifts prices 15 cents higher than today’s close. Coffee picked up 3% the last two sessions ... maybe a selling opportunity if prices can trade near $1.90 in May.
Treasuries: 10-year notes and 30-year bonds are approaching over bought levels but the momentum remains bullish. I expect to see fresh contract highs in 10-year notes and perhaps a 2 basis point advance in 30-year bonds futures before any exhaustion.
Livestock: Cattle could go either way from here so until a clearer picture is identified stand aside. Lean hogs are trading at one-year lows but the fact that buying is being rejected the lows have yet to be established in my opinion. In fact if the 82/83 cent level is breached do not rule out a further assault at 75, a level not seen since 2010.
Grains: Corn held the $6 level but I’m looking for a sub $6 into next week. My favored trade in corn is the CZ12/SX12 spread trade. The spread closed at $8.19 today and a more appropriate price is $6.50. Soybeans traded to seven month highs but a break is long overdue in my opinion. I would be looking for a buying opportunity on next year’s crop on a 5-7% decline. Wheat is finding value around the $6/bushel level but I do not see a catalyst to get prices moving so I would be more interested in trading prospects in corn or soybeans.
Currencies: The dollar index closed below all short term MAs and has closed lower all five sessions this week. Bears are starting to gain control ... expect more deprecation to follow. The cable is approaching eight month highs and I see little resistance for another 2% ... more appreciation to follow in my opinion. The yen put in an interim high this week and appears to be headed lower in the short run. My downside target is 1.2125 in June futures next week.
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.