Today In Commodities: Still Heading Lower?

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 |  Includes: BAL, CAFE, CANE, CORN, DBA, DIA, FXA, FXB, FXC, GAZ, GLD, IAU, JJC, MOO, OIL, SLV, SOYB, SPY, UDN, UNG, USO, UUP, WEAT
by: Matthew Bradbard

Energy: Crude will finish the week lower but the key to me was June held onto the $96 level heading into the weekend. Prices have gone from overbought to oversold in less than two weeks by shaving off 10% in value. My take is traders can scale into longs looking to add to the trade when prices get back above $98.50. On a trade below $95 cut losses. RBOB continues to dance around the $3 level. I cannot rule out sideways action as RBOB will likely look for guidance from crude. A settlement above $3.05 in June will get bulls back in control. Heating oil like RBOB is sideways in a 5 cent trading range just under $3/gallon. Being we've completed a 61.8% Fibonacci retracement and prices are holding their own so I think we can wade back into longs. $2.95 will need to hold for me to keep my bullish conviction. Natural gas competed a perfect week gaining all five sessions but until prices can get above $2.50 the 50% Fibonacci level be cautious of setback. Those long trails stops under $2.35 and then under $2.25. If prices can break above $2.50 the next stop should be $2.65.

Stock Indices: Securities finished lower again this week dragging prices on their weekly charts to the 20 day MA. I am in the camp that we break this week's lows and take prices 3% lower from current levels. My targets remain 1,310 in the S&P and 12,450 in the Dow. I typically do not watch Cramer but I caught him last night and he was speaking in regards to a coming spike in the Vix and that foreshadowing a correction to come in stocks and I agree.

Metals: In less than two weeks gold has come down nearly $100/ounce to drag prices to 4 ½ month lows. There is mild support at $1,575 but I'm still expecting $1,535 in the coming weeks in June futures. $1,600 should serve as resistance. Silver lost ground all five sessions this week losing a total of 4.7%. Now with prices under $29 I forecast a move to $27.50 in the coming weeks. Depending on how prices react at that level would dictate if I recommend buying ... stay tuned. Copper held on all attempts at $3.60 but I expect that level to bust next week and see prices trade to fresh 2012 lows. A 50% Fibonacci retracement drags prices to $3.55 while 61.8% puts July back at $3.45.

Softs: Sugar failed to break 20 cents but I do not like today's close. Let's reevaluate long entries next week. I expect to have bullish ideas very soon but do not rush it. This was one of the worst weeks I can remember in cotton losing just over 10% dragging prices near two year lows. After a 40% drop in orange juice we could get a decent bounce from oversold levels. A ratio spread would be an inexpensive way to play a potential bounce to $1.40 in the coming weeks. The idea would be to sell at the money calls and buy several out for the money calls if the math works. I'm still waiting for a bounce to sell coffee.

Treasuries: Like clockwork 30-year bonds and 10-year notes bounced off their 9 day MAs and we're trading back to the contract highs the next day. Until that level is penetrated the bulls are in the driver's seat. In 30-year bonds at 143.24 and at 132.19 in 10-year notes. Traders should be scaling into bearish plays in long-dated euro-dollars. At these levels have stops above the contract highs and have a quarter of the position you ultimately want to have on.

Livestock: Live cattle finished lower on the week as prices fell after reaching overbought levels. I expect sideways sloppy trade and would look elsewhere for now. Feeder cattle closed lower for the fourth day running dragging prices back under $1.50. I expect a lower trade but there is not much there and the risk is too great so this is a no trade as well. June lean hogs settled back over their 9 day MA having bounced nearly 3% off their recent lows. I have advised traders to start gaining bullish exposure anticipating June could appreciate 4%-5% in the coming weeks.

Grains: Corn is approaching 14 month lows down 45 cents in the last three days. From here I think July can trade closer to $5.50 before we would need to be initiating longs. Stay tuned as longs will be on my radar on a further deterioration in prices. Soybeans gave up over 3% today to come within pennies of my first target; the 50 day MA in July at $14.00. I'm looking for the trend line at $13.95 to be challenged on this contract next week and eager to see how the market reacts. Remember a 38.2% Fibonacci retracement drags prices to $13.60 in July. July CBOT wheat closed under $6/bushel for the first time in 2012 to close out this week. I am close to issuing a buy recommendation but with corn and soybeans both falling apart I have held off because wheat has been a follower of other grains not a leader ... stay tuned.

Currencies: The dollar index is overbought and having trouble with the same resistance level it had trouble with in April. Next week will be decision time. As long as commodities come under pressure the loonie and aussie should taper off. My suggestion for shorts is have stop levels just above their 20 day MAs. The pound has lost ground eight of the last 10 sessions closing below the 20 day MA today for the first time since mid April. I am looking for the trend line to be challenged and the Cable to trade below 1.5950 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.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.