Energy: Crude started the week higher with a slight gain, picking up 1.5% on the session and finding support around the 8 day MA. I'm not extremely bullish at this point. I would expect prices to be back and forth in a $5 range in the near term. A bullish engulfing candle in RBOB to finish 1.5% higher on the day. As long as $2.65 holds in August, I expect prices to climb in the coming weeks. Use $2.85 as your next upside target. Heating oil was able to put in just better than a 1% gain, maintaining the 8 day MA, which continues to serve as support. Outside strength in this complex should lead to a trade back near $2.82 in August, in my opinion. On an inside day, natural gas was higher by 3.9%. I still think the failed probe of $3 to end last week will serve as an interim top. On the way down, $2.65 is first support in August.
Stock Indices: Equities will finish slightly lower today, but the 9 day MA supported in the S&P and the 20 day MA held in the Dow. A grind lower appears to be the pattern in the making, so traders could gain light exposure to bearish plays. I see very little in the way of support in the indices for another 2.5%.
Metals: Lower levels were rejected in gold with futures finishing higher by 0.50%. Upside resistance is seen at the 50 day MA at $1598 in August, with support around $1550/ounce. I have a slight negative bias because I expect the US dollar to gain. Silver was able to gain 2% today, but unable to really get any traction. I do not expect prices to hold above $28, and see lower ground ahead. Like gold, the 50 day MA should act as resistance in copper at $3.48 while support is seen just above $3.30.
Softs: Cocoa was higher by 2% today to close back above the 50 day MA. I do not think these gains will hold true, and would anticipate a trade under 2200 this week in September. Sugar closed above my stop out point, so recent shorts should have exited at a loss on the 2% appreciation today. Once I see signs of an interim top, I may suggest re-establishing bearish trade. Cotton continues to stumble around the 70 cent mark in the December contract. I have been forecasting a bounce, but I'm going to pull back since we have not seen any spillover strength from the other grain markets. I say we do not see much upside. At the moment I'm on the sidelines…stay tuned. Coffee is back above the 50 day MA. Any shorts that probed bearish trade should exit at a small loss. I am bearish, but prices appear to be headed higher, at least in the short run.
Treasuries: Since trading above their 9 and 20 day MAs late last week, 30-year bonds and 10-year notes have climbed higher. 10-year notes are on the verge of making new contract highs while 30-year bonds are only 2 points off their highs seen in May. My stance is bearish, but I do not wish to have any exposure until an interim high has proven itself in either instrument.
Livestock: August live cattle are back under the 9 day MA as prices continue to wander around $1.19. As long as prices remain under $1.20, I would be bearish. Feeder cattle lost ground again today as prices have been dragged to 10 month lows. Further downside is expected. Lean hogs mustered a rally today to get back above the 9 day MA. Prices remain in no man's land…forced into the market, I would be a seller with stops above the recent highs. A 50% Fib retracement on the move since May puts August back near 90 cents…trade accordingly.
Grains: Fresh highs in corn with prices almost challenging their 2011 highs. Clearly, we have a bull market, as popcorn will be in the fields if the heat continues. But the train has long left the station, and we are due for a correction, in my opinion. The number keeps getting bigger, but a correction at this point could be 50-70 cents, so tread lightly. Soybeans managed to close 2.8% higher, and by the close, was nearly 25 cents off its highs. I know I'm reaching, but my opinion is a correction is long overdue in this complex. Longs have made great money of late, but I would be trimming my positions. Wheat also failed, closing 15 cents off its highs. All three markets are over bought and a correction is imminent, in my opinion.
Currencies: The U.S. dollar is back up near 84.00; previous resistance and it appears we will see higher trade ahead. My take is as the dollar breaks above 84.00, we should see a further breakdown in other crosses. Aggressive traders should be buying dips in the greenback and selling rallies in other crosses. The euro has the worst fundamental picture, but is beaten down as the commodity currencies have the most room to fall. Pick your poison. It will be about risk management and listening to the market.
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.