Energy: Crude oil has tested the up sloping trend line the last 3 sessions, but has yet to penetrate that stiff support level. I suspect crude will soon make its way to $90/barrel on the October contract. RBOB ended the day lower after probing higher levels in early dealings. As long as $3 is not penetrated, I would be looking for a retracement. A 20-25 cent correction is what I feel is in the cards if crude can trade to $90. Heating oil failed to hold onto its gains and also lost 1% today. $2.90/gallon is my call on this contract, but it needs to happen now. The longer prices of the distillates remain above their 8 day MAs, the tougher it will be to see prices break down. At their highs, natural gas penetrated the 38.2% Fib level, gaining the last four sessions. $2.75; the 18 day MA is eyed as support, with my upside target remaining $3 in October.
Stock Indices: Stocks finished slightly lower, but prices remain above the up sloping trend line that has held all summer. To see a major meltdown, prices will need to penetrate 1385 in the S&P 500, and 12975 in the Dow. On that, I would expect an additional swift 2% depreciation.
Metals: Gold futures probed $1700 for the first time since late March, with prices closing just shy of that pivot point. After a $100/ounce appreciation in the last two weeks, do not rule out a retracement. Prices in December could trade as low as $1625 with no near term chart damage. I am bullish longer term, but would wait for a correction before adding length. Silver added 3% today to close above $32/ounce for the first time since mid-April. Like gold, I am bullish longer term, but understand we just added 16% in the last two weeks. It is not healthy for a sustainable move for prices to move in one direction. While we could trade to $33, I would not rule out a trade under $30/ounce before much higher ground. I like scaling into bullish trade out until 2013 on dips and purchasing bull call spreads in both instruments.
Softs: Cocoa is 3% off its recent high with the gap lower trade today. Aggressive traders could take a bearish position. I like bearish ratio spreads, as after a 30% appreciation in the last two months, we could get a decent trade lower. Do not rule out a trade under 2400 in September. With the 2.25% drop today, sugar is approaching the June lows. If those levels are breached, I would close out bullish trades at a loss. My opinion is that prices are too cheap, but that does not mean we cannot see further liquidation. Cotton was lower by 2%, but held the 50 day MA; continue to use that level as your pivot point. In December at just above 75 cents. Coffee continues to tread water near its lows. My stance remains sell if and when prices can get closer to $1.75 in December.
Treasuries: 30-year bonds were in the red today, but that is only the second negative close in the last 12 days. Close out bullish trade, as prices appear to be rolling over. Inside day in 10-year notes, with prices closing lower as well. It is premature to get short, but that is likely the next move. Shorts in both instruments are on my radar, and I will also entertain recommending NOB spreads…stay tuned.
Livestock: Live cattle have gained for the last five days, and as long as prices remain above their 20 day MA, I am mildly bullish. However, I would prefer to establish long trades from lower levels and currently have no client exposure. Feeder cattle remain near their two-week highs -- just under $1.46 in September. Momentum remains bullish, but I'd have to see a break to have any interest in being a buyer for clients. Lean hogs are cheap enough and the risk is small enough to nibble at longs, but I'd keep your size small. I like long futures while simultaneously selling out of the money calls 1:1.
Grains: $8 remains a magnet for December corn, with prices closing within 15 cents of that level for the last week. Aggressive traders can take on bearish positions with stops just over $8.20, in my opinion, as $7.15/7.25 remains my target. On their highs, soybeans were within 11 cents of $18/bushel but as of this writing, prices are 37 cents off that level. I would need to see confirmation, but once an interim top is signaled, this Ag could fall hard. Is the crop horrible? Yes, but how much of that is already factored in? It will boil down to if these higher prices affect demand. Wheat remains the weak sister, closing down the last three sessions and putting prices back under their short term MAs. $8.30 represents a 38.2% Fibonacci retracement.
Currencies: The dollar index has been able to hold above 81.00…could a dead cat bounce be in store? The kiwi and aussie have been hit the hardest of late, which is interesting, as they generally trade off metals and energies, and the latter have not lost ground of late. Maybe the markets are trying to factor in lower rates in these two countries to come? If short, remain short and continue to trail stops, as we could see an additional 2-3%.
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.