Today In Commodities: Recent Crude Highs Are Not Sustainable

by: Matthew Bradbard

Energy: Crude oil appears to finish higher 4 out of 5 sessions this week, climbing just over $3/barrel. I don't see prices hanging at these elevated levels, and have advised traders to scale into bearish trades anticipating prices to rollover. Once October closes under $94, I would say we are on our way back under $90…in my opinion. RBOB will close 7 cents off its highs, as an interim top may have formed yesterday. A close under the 8 day MA just above $3 should confirm that into next week. Once prices breakdown, we should see 20 cent deprecation with ease. Lower low and lower high indicates heating oil could be ready for a correction as well. Only a preliminary sign, but on further weakness, I would expect 20 cents here as well. Natural gas tested but failed to break the 50 day MA. Looking at the charts, I would move to the sidelines, exiting all remaining shorts. If October holds $2.70 next week, I would likely be looking to wade back into bullish plays for clients.

Stock Indices: Stocks have finished higher the last 6 weeks, and this week near 2012 highs. My take has been we're in the ninth inning, and a correction should be upon us. From a technical perspective, first the 9 day MA and then the 20 day MA need to be broken to confirm lower ground. Those pivot points come in at 1403, followed by 1382 in the S&P, and 13160, followed by 12995 in the Dow.

Metals: Gold will finish the week just above the 50 day MA, but at about the same level it started the week. As long as prices remain above $1600, the sentiment is mildly bullish, but don't forget prices have been in a $100 trading range for the last four months. Silver was able to maintain the $28/ounce level, but if prices cannot see further appreciation early next week, I would expect prices back near $26.50 in September. The more impressive moves the last few days in this complex were palladium and platinum, 6% moves on both. Solid support has existed around $1400 all years in platinum, and I do not follow palladium enough to comment.

Softs: Cocoa closed within 1.5% of the 2012 highs, just below 2500 in September. I anticipated a correction and still do. However if prices break above 2550, I would take the loss. Sugar closed positive to end the week for only the second time in the last three weeks. Aggressive traders can start probing longs. As long as cotton holds the 50 day MA, I expect sideways action. That level comes in at 71.55 in December. OJ spiked intra-day above the 50 day MA, but that level has capped rallies for the last five weeks. As long as prices are below $1.14 in November, I'm bearish. For the fist time in 9 sessions, coffee managed a positive trade. I expect lower trade, but tighten stops as to not give back too much.

Treasuries: Are Treasuries oversold...yes, but prices could continue to falter. My take is lightening up and then add to the trade on a bounce. As long as prices stay under the 9 and 20 day MAs, I would remain in some sort of bearish trade. Those levels come in at 147'18 and 149'20 in 30-year bonds and 133'05 followed by 134'00 in 10-year notes.

Livestock: After four positive weeks, live cattle closed lower this past week. Prices closed out the week under the 9 day MA, and I have a target of $122.50. Feeder cattle will close just better than 2% off their intra-week highs, but unable to break the 9 day MA on the downside. I expect further selling, but considering the risk, I would be a spectator. If October lean hogs can remain above the 20 day MA for the early part of next week, I would consider wading back into bullish trade…stay tuned.

Grains: Corn finished the week virtually where it started, but it has finished lower three out of the last four weeks, so could the highs be in? If December can break $7.85/bushel next week, I say a 50 cent correction would ensue. Soybeans finished near their highs on the week. To me, it appears we may see one more test of the highs, which would equate to a 3% advance from today's close. Wheat was able to fight back the last few sessions after the selling early in the week. Prices in December did not take out the 20 day MA on the way back and until they do, I'm bearish. That level is just under $9/bushel.

Currencies: The dollar index appears to be in a holding pattern, but as long as prices remain under the 20 day MA, I'd remain bearish. That level in September is 82.85.The yen remains the sale, though I would be trailing stops on open positions, as prices have lost over 2% in the last 2 weeks. Re-examining all the commodity currencies, traders could be short the aussie, though I would not be short the loonie or kiwi…just my opinion. Further weakness in the commodity market or strength in the dollar should get the Australian dollar close to par in the coming weeks.

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.