Energy: Crude closed slightly lower, unable to hold onto its gains. After a $10 run in less than a week, it makes sense for prices to catch their breath. I see support in August around $84/85 with resistance at $90. At this point, I would not rule out a $5 range between support and resistance. RBOB completed a 38.2% Fibonacci retracement, closing above the 50 day MA for the first time since early April. As long as the trend line breached this week holds, I remain friendly with an upside target of $2.85 in August. Heating oil closed slightly lower, just above $2.75/gallon. Support is seen at $2.67, with resistance at the 50 day MA at $2.81, then 10 cents higher. Natural gas continues to climb higher, gaining 1.9% today and closing at fresh highs. Prices may probe $3, since we're so close, but I still feel a 10% correction is due…trade accordingly.
Stock Indices: After completing a 61.8% Fib retracement earlier in the week, stock indices have had trouble reaching higher ground. Prices could go either way, likely being determined by tomorrow's jobs number. I see the Dow moving 200 points tomorrow, and the S&P 25, but I cannot get a handle on direction, so I will not attempt to predict which way. Until we get a clearer picture, I like no long or short exposure here.
Metals: Inside day in gold, with prices coming back down and challenging its 50 day MA. I remain friendly as long as $1590 supports on a closing basis in August. As for upside, the 100 day MA would be my target at $1645. Silver futures gave up 2.15%, closing back under $28. That level remains my pivot point, and as long as prices are below $28, I would not have bullish exposure. Above $28, I like light bullish plays. Copper will need to hold the 50 day MA on a closing basis to hit my $3.61 objective in September. On a breach, expect a grind back to $3.35.
Softs: For cocoa to close only 1% lower, I was impressed considering the strength in the dollar today. Longs need to have an exit strategy, however, as we could have a correction lower. My take is tighten up stops as longs should have a nice profit after the recent 12% appreciation. Sugar failed to hold onto sizeable gains, closing back under its 100 day MA. Being prices have completed a 61.8% Fib retracement, exit longs here as well. Cotton closed lower for the first time in five sessions, losing nearly 3%. My upside target remains 74.50-77, but there is an equal amount of risk, so walk away until the risk/reward improves. Coffee hit both my targets (the 50 day and 100 day MAs), therefore I would be out of longs. Over the next few days, I may advise shorts…stay tuned.
Treasuries: Treasuries are in a holding pattern back and forth hovering around their 9 and 20 day MAs. Tomorrow's jobs number should determine the next leg. I am interested in having bearish exposure, but I need a favorable set up to issue a short recommendation in 10-yr notes and/or 30-yr bonds.
Livestock: Live cattle could go either way…stand aside. Feeder cattle have broken down in recent sessions, dragging prices to their lowest close. Look at the weekly chart and prices appear to be headed lower with plenty more downside to follow. In fact, a 38.2% retracement of the move since late 2008 could drag prices down an additional 10%. Lean hogs gave up just over 2% today as prices are approaching their short term MAs. I see further depreciation and would not rule out a trade closer to 90 cents in August in the coming weeks.
Grains: It is a perfect storm in terms of the fundamentals in grains and relief does not look to be in sight. This will be a case of a trade (I told clients to leave too early) as Ags continue to race higher. December corn gained 5% today to put corn over $7/bushel, back near the 2011 highs and above their 2008 highs on this contract. While I remain bullish, I do not see this pace as sustainable and cannot rule out a nasty profit taking led correction, so be cautious. Soybeans leapt 3.5%, as prices are fast approaching the $16/bushel level. Upside resistance comes in about 30 cents higher than current pricing, which is the 2008 high. Like corn, I fear a correction, so do not get sucked into initiating positions at these levels unless you are adding to a winner…in my opinion. Wheat gained 4% today to complete a 61.8% Fibonacci retracement, lifting prices to 10 month highs. This whole complex should trade together, but gaps on the way up should be filled underneath the market, so consider yourself warned.
Currencies: The US dollar gapped open and closed 1.3% higher, back at last week's highs above the trend line. Tomorrow's jobs number is the key, but as long as prices remain under 83.50, my stance remains bearish. I will be forced to reevaluate a breach of that level. All European currencies were hit today, but interestingly, the commodity currencies held their own.
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.