Energy: Crude oil has held onto the $78 level for four days now as a base may be building. I like wading into longs in a small way, and am willing to cut loses on a breach of $78 on a closing basis in the front month. As I mentioned yesterday, an interim bottom is not confirmed until we trade back over $85/barrel. RBOB gained for the third session running, closing just under the 8 day MA, which serves as major pivot point in my opinion. A trade above that level should get enough momentum to lift RBOB back near $2.65 in the front month. Heating oil gained 1.5% today, rising for the first time in five sessions. Like RBOB, a trade above the 8 day MA just above today's highs would lead to a further upside, I believe. August should find its way to $2.70/gallon. Natural gas was higher by 3% to lift prices to 5 week highs. I still am in the camp that we see a move south before a $3 trade. I am confident the lows are in, but maybe a 7-10% correction is what I'm thinking.
Stock Indices: With a slight gain today, prices in US markets ended back above their 50 day MAs. Prices may be able to pare losses, but until they are back above their 9 and 20 day MAs -- which come in around the same level -- I would be in sell rally mode. Those levels in the Dow are 12,600, and in the S&P at 1330 in September futures.
Metals: Gold failed to make it to higher ground today, losing 1% and giving back most of the previous day's gains. I believe prices are due for a test of the lows seen in May...trade accordingly. Silver should chop between $27-29 ounce until at least next week. Forced into the market, I would prefer to be a seller from higher ground. For now, I'm suggesting the sidelines. A trade under $26.50, in my opinion, would lead to a trade near $24/ounce.
Softs: Cocoa gained today for just the second day in the last 9 sessions. If the dollar backs off, it may warrant taking a look at buying, but I'd like to see further evidence. For the last 3 months, 2100 has served as a value zone, but will this time be different? Sugar is finding support around the 20 cent level, but I'm still a spectator…stay tuned. As long as December cotton remains above 66 cents, my target of 77 cents stands. I issued a buy recommendation in coffee last week, and prices have appreciated 10% since then. To me, this is the beginning of a larger leg that should lift prices above the 50 day MA and find its way to the 100 day MA -- still 11.5% higher.
Treasuries: 30-yr bonds and 10-yr notes remain range bound, though prices are under their 9 and 20 day MAs as of today's settlement. I still suggest put options looking for a bigger move in the coming months, or scaling into futures with stops just above those key pivot points.
Livestock: October live cattle were lower today and are now within spitting distance of new contract lows, which I expect around the bend. Looking longer term at the weekly chart, a 38.2% Fib retracement would drag prices still another 4%, so I don't think the bears are done. Feeder cattle lost 1% today to trade at their lowest level in 2012. Still, there should be more to come as the next stiff support is 2% below current levels. Lower trade is expected in lean hogs as well, as the May lows should be challenged in the coming sessions.
Grains: Inclement weather has grains on fire with corn higher by 5% today, lifting prices to 10 month highs. We've completed a 61.8% retracement and at this point, I would not rule out a trade to last summer's highs. Buy dips remains the play in maize. Soybeans failed to follow through and, in a perfect world prices retrace, allowing a buying opportunity to get long from lower levels ahead of the USDA report out Friday. Wheat did gain on the day, but the pace of buying is slowing with prices only higher by 1% today. I am not opposed to bullish trade, but in my eyes, there is 30 cents of risk in the futures in the December contract, so trade accordingly.
Currencies: For the second day, prices in the dollar index failed to take out the 20 day MA. Could this be the line in the sand? I still think the aussie could falter, but for those in profits trail stops, you can book a smaller profit in case I am wrong. The yen will continue to exhibit an inverse relationship to the stock market. A trade back above the 20 day MA just above today's highs likely means stocks are headed south. I'm getting mixed signals in other crosses, so let the dust settle.
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.