Energy: Crude finished negative but well off its lows managing to close back over the 100 day MA. I anticipate a break of the recent lows around $101.50 ... $100 and then a trade to $97.50 this week or next. The resiliency in oil is impressive but with a failing stock market and growing inventories a setback should play out. If it was not for the comeback in the afternoon on the distillates crude would have finished under $102 on the June contract. Further depreciation is forecast in the RBOB and heating oil that should pressure Crude. Natural gas gained nearly 5% today with volumes nearly twice what we’ve experienced in past weeks. That is a mild buy signal as aggressive traders could wade back into longs with stops just under $2. Picking a bottom has not worked in recent months but a small position is worth the risk in my opinion.
Stock Indices: Equities started the week with a near 1% deprecation with stocks approaching two week lows in early dealings. If 1,350 is breached in the S&P and 1270 in the Dow selling should intensify. Until then expect a sideways grind. The main happenings on the agenda as I see it this week are the FOMC meeting mid-week and the BOJ meeting at week’s end. The presidential election in France may have a short term impact as well.
Metals: Copper reversed at the 100 day MA and appears to be headed south again losing 1.75% today. I’m expecting a test of $3.50 in May futures before we see any sustainable upside. July silver lost 2.6% today closing under $31/ounce for the first time in three months. As I’ve said in recent posts once this happens I think silver finds its way to $29/ounce ... trade accordingly. Today marks the seventh consecutive losing day in gold futures even though the loss has been negligible. I am still expecting a sub $1,600 trade and currently not ruling out $1,550.
Softs: I remain bearish in sugar but do not establish new positions. Those in the trade from higher levels should continue to trail stops down. Aggressive traders can scale into shorts in cocoa with stops above the 50 and 100 day MA which both come in around 2285/2295 in July. Orange juice dropped 5% today. Those that were long take all remaining exposure off. I do not like to see a move of that magnitude in the opposing direction to my trade recs. Coffee is 11-12 cents away from $1.90 ... as it approached that level in July I will have bearish plays back on my radar.
Treasuries: 10-year notes are within ticks of fresh contract highs and 30-year bonds traded near four months highs. Expect further appreciation as long as stocks are under pressure. I will have bearish plays on my radar in 30 year bonds on a trade above 144.00 in June. A possible spread trade short 30-year bonds and long 10-year notes; the NOB spread ... stay tuned.
Livestock: Lean hogs bounced of the 61.8% Fibonacci level to the tick last Friday and now appear to be back on the move. Aggressive traders can buy dips in June with stops just under 80 cents. My bias is bearish in live and feeder cattle but I prefer the sidelines as I am getting mixed signals.
Grains: Corn was higher by 1.6% and soybeans were off by 1% today. Low and behold the corn/soybean spread mentioned in recent weeks is starting to play out. This is my favorite trade in the complex. As I stated in previous weeks I think a more appropriate level for this spread is $6.50 NOT $8.00. If soybeans break the trend line that has been tested the last four days and held for the last five months expect a 60 cent -$1 deprecation. It appears there is a double bottom in July CBOT wheat around $6.15. Aggressive traders can scale into longs with stops below the recent lows.
Currencies: The dollar index is in no man’s land as prices could go either way. I am leaning slightly negative only because recent rallies have been rejected but expect a grind lower not a violent drop, in my opinion. I see no clear signals in any crosses and would refrain from any swing trading. On day trades make sure your profit potential is 2:1 or look elsewhere.
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.