Energy: A serious reversal in energy today as crude will finish down over 3% near its lows for the day. Prices will finish almost $6 off their highs from last night as a bearish engulfing candle forms. This move today is testing my bullish resolve as prices appear to be headed further south. I would not initiate fresh longs and further weakness tomorrow I would suggest cutting losses on open longs. RBOB will get clipped for just shy of 2% having a similar misfortune with a 12 cent reversal. Heating oil lost just better than 2% closing almost 14 cents off its intra-day highs. I would be very cautious as the recent lows on all three products must hold or a new leg lower will follow. Natural gas started the week trading lower dragging prices to seven week lows. Prices are now within 5% of their contact lows hit in mid-April and I would not rule out a challenge of those levels. If prices trade near that level and hold I may suggest probing longs ... stay tuned.
Stock Indices: Securities started the week in the red losing 1.5-1.6%. Though I have no direct client exposure in the indices forced into the market I would prefer being a seller than a buyer. Overnight stocks came within spitting distance of their 50 day MA mentioned last week as my next upside target but settled below the 20 day MA. Next support is seen at the 9 day MA. From here I would expect prices to find their way to last week's lows, which would be a 3% deprecation in both the Dow and S&P.
Metals: August gold traded slightly lower closing just below $1,600/ounce. I see value buying under that pivot point thinking prices will be appreciably higher in the coming weeks to months. I suggest gaining bullish exposure in both options and futures. Silver futures were able to hold the $28.50 level which is mildly bullish but I would like a clearer picture before putting any size on. My take remains as long as prices remain above $28/ounce I remain friendly. Copper appears to be forming a base trading sideways for the last week. We should see a bounce in the coming weeks but I prefer the sidelines.
Softs: In recent days cocoa has had trouble holding above the 50 day MA. Those that are long should tighten up stops as prices may correct short term. Remember the inverse relationship to the U.S. dollar. Sugar closed above the down sloping trend line that was featured last week. This is a big deal because this trend line capped all upside for the last four months. I expect further appreciation and have advised bullish exposure. I would need to see a 6-10% appreciation before advising shorts in cotton. The next significant resistance in the December contract comes in just above 77 cents.
Treasuries: 30-year bonds finished higher for the first time in six sessions. Prices are currently trading below resistance - the 9 day MA and above support as I see it at the 20 day MA. The same circumstances in 10-year notes as prices are stuck between support and resistance. Although I am bearish it will be tough to see lower pricing short-term in the face of a failing equity market as this relationship should be inverse. Exit bearish trade with a close above the 9 day MA. In 10-year notes above 133'27 and above 149'25 in 30-year bonds.
Livestock: I am still unclear on live cattle so I do not wish to have client exposure. Feeder cattle prices were bid higher lifting prices to two week highs and within 1.6% of contract highs. Prices should continue to trade higher short-term but I will be absent. Today's chart of the day was lean hogs. I think it is a viable play for traders to gain bearish exposure as prices appear to be rolling over. This would be confirmed with a settlement below the 9 day MA ... expect this in the next few days in my opinion. My target in October is 80.75 cents.
Grains: After a near 7% appreciation in corn last week some back and fill is expected. Use a further set back in December to gain bullish exposure. I want to have some long exposure into the month end USDA report. Trader's long wheat from last week should have stops just under $6.10 in July as to not give back too much. Those content with the current profit could go to the sidelines as prices could trade lower short term. Soybeans have competed a 61.8% Fibonacci retracement as aggressive traders could gain bearish exposure. My suggestion would be to exit at a loss above recent highs with a downside target of 30-45 cents. Move to the sidelines in soybean oil at a profit or loss as the action in crude today has me skeptical and as you can see from above I am bearish soybeans.
Currencies: For the second day running the dollar closed above the 20 day MA just above 82.50 in June. I recognize the greenback remains the world's reserve currency but I think we've factored in the worst and when reality sets in we see a trade lower. I'm not calling for things to fall apart, just a trade back under 81.00 ... trade accordingly. As for open positions in other crosses I suggest tightening up stops as I continue to get mixed signals. Let the market either make you money or take you out of your positions.
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.