Energy: Inside day in crude oil, with prices marginally higher, closing just over $97/barrel in October. As long as prices remain under $98, I'd be expecting a correction lower. A close under the 8 day MA should confirm that. My downside targets are $94, followed by $90. RBOB advanced just better than 1% as the 8 day MA held once again. Prices should correct lower as oil comes off, but wait for a break of the 8 day MA for confirmation, at $2.89 in October. Heating oil remains at elevated prices, hovering around a 4 month high just under $3.15/gallon. Natural gas has only gained 6%, but the fact that support held at the 100 day MA leads me to believe this could only be the beginning of this leg. In my opinion, the trade is buying dips that hold that critical level.
Stock Indices: Stocks have finished lower the last three sessions, trading below the 9 day MA today in the S&P and closing below that pivot point in the Dow. As prices approach 1400 in the S&P, and 13000 in the Dow, expect more selling. There is no reason to think we cannot get a 400-500 point decline in the Dow, and 50-60 drop in the S&P in the weeks to come.
Metals: Gold closed well off its high, but the 200 day MA was tested just under $1660 in December. With prices trading near 5 month highs, the bullish momentum is returning. It would be a major hurdle for prices to penetrate the 200 day MA, as prices have been below that level since late March. Silver failed to get above $30/ounce, but prices have gained nearly $2, or 7% this week alone. I see support just under $29, with resistance at $30.65. Both platinum and palladium remain bullish.
Softs: Cocoa is off 2% and appears to be beginning a leg lower as forecast. My take is traders can be short with stops above the recent highs looking to capitalize on further 5% break. Sugar broke recent support, closing under 20 cents in October. As long as the June lows hold, I am okay having bullish exposure. This is why I said scale in, and if we see new lows, cut all remaining losses. A new low would represent approximately a $600 further loss per futures contract. December cotton continues to battle the 100 day MA as prices have stalled. If 78 cents is not penetrated this week, I may start exploring bearish trade again…stay tuned. Hurricane season is upon us and as Florida is in the path, OJ spiked on concerns. November OJ can be bought, in my opinion, as long as the 50 day MA holds. I believe there is too much uncertainty in coffee, so until I get a clearer picture, I'd look elsewhere.
Treasuries: 30-year bonds and 10-year notes are above their 9 day MA and appear poised to clear the 20 day MAs. I expect higher ground, at least temporarily, and would be open to selling again for clients from higher ground.
Livestock: Live cattle have traded lower five out of the last six sessions, retracing 38.2% so far. Further downside should play out, as my target in October remains $122.00. Feeder cattle should see lower trades as well, as prices are poised to break their 20 day MA for the first time since trading above that pivot point two weeks ago. Don't rule out a test of the lows in July. Ugly break in lean hogs today, with fresh lows on their year. Since the beginning of July, hog prices are lower by 13% and lower ground looks likely.
Grains: Corn has failed to take out the contract highs from last week, but prices remain at elevated levels still above $8.35/bushel as of this post. At some point, prices will break hard, but let's see a trade under those short term MAs to get these trades back on our radar. Beans in the teens is a reality, as there is now talk of $20 plus. I don't see it, but as followers know, I left the bullish grains trade way too early this summer. I think terrible yields are already factored in, so while I'm not ruling out more upside, a day of reckoning is not too far off for the perma-bulls in my opinion. When a correction plays out, we should be at a $2 assault in my opinion. Wheat continues to take direction from corn and soybeans. I anticipate a 25-40 cent move into the weekend, but let the other Ag markets guide you on direction.
Currencies: The dollar index has nearly completed a 50% Fibonacci retracement, with a bulk of those losses the last two sessions. Further downside should drag September under 81.00 for the first time since mid-May. With the dollar declines some crosses have benefited more than others, the standouts being the euro, pound and yen. Continue to remain long, trailing stops in the three aforementioned currencies. With the commodity currencies above their 20 day MAs, be cautious. I would feel better about bearish exposure when prices are back under that pivot point in the loonie, kiwi and aussie.
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.