Energy: Crude oil traded on both sides of the trend line I've mentioned in previous posts, closing just under that key pivot point. I know a broken record, but as long as prices remain under $98, I'm bearish. My targets in October are $94 followed by $90. RBOB continues to flirt with $3 on its 1.4% advance today, but as one can see, prices feel apart from around these same levels back in March ... will history repeat itself? Heating oil was a slight gainer today, but is still 7 cents off its intra-week highs. In fact prices appear on the verge of penetrating their 8 day MA, a pivot level for several months. Both distillates when they start moving lower should move in the neighborhood of 20 cents/gallon. Natural gas ran into resistance at the 38.2% Fibonacci level trading back down to the 100 day MA today. I would tighten stops on remaining longs as this price action has bulls on their heels. Remain long if not stopped out, but for new money, I would wait for a clearer picture.
Stock Indices: Hello blow off top in the Dow and S&P. This was on positive ISM and upbeat comments from the head of the ECB, but expect it to be temporary on an ugly NFP number tomorrow. I don't trust the fresh highs and expect a penetration of the trend line this month with prices making their way back to levels not seen since July ... you heard now - how you react is on you.
Metals: Gold finished higher by 0.68% closing above $1,700 an ounce for the first time since mid-March. As I said in recent posts, I do not expect prices to remain above these levels for an extended period. After a correction that should start any day now, I would be willing to re-establish a bullish trade for clients. Those longs should hedge positions or lighten up. Silver hit my $33 target ... (see previous posts) and from here, I would expect some back and fill. $30.50 is my initial target on a correction.
Softs: December cocoa continues to march forward, gaining 1.4% today and lifting prices to fresh 2012 highs. I think prices are far overdue for a correction but I also said that 5% ago. I would stand aside until we find an interim top. Sugar broke its June lows in recent dealings trading down the last 4 sessions to fresh 2012 lows. All longs should have been stopped out at a loss on this. I will be looking to probe longs again once evidence of a bottom develops. The 50 day MA has supported cotton the last few sessions, but when prices break 75 cents in December, I anticipate a quick move to 70 cents. My suggestion is to buy out of the money December puts or ratio spreads trying to capitalize on the coming depreciation. Coffee has lost a dime in the last week - not at Starbucks but in the futures market. This puts prices just above 3 month lows, but if we break $1.55, do not rule out $1.50.
Treasuries: I was half right ... I did recommend closing out longs in Treasuries of late, but unfortunately I did not advise clients to reverse. 30-year bonds have given back just over 2 basis points the last 3 sessions and are on the verge of breaking their 20 day. It appears the tides are shifting ... my only hesitancy is if stocks roll over we could catch a bid so tread lightly. 10-year notes are moving in the same direction having given up ground as well. A breach of 133'16 would likely lead to a 132'00 trade in September. My clients have no direct exposure. Perhaps one of my favorite trades currently was featured today under Premium Research at RCM was bearish exposure in long dated Eurodollars. Getting short December 2014 futures or long puts at these levels is very attractive in my eyes.
Livestock: Live cattle may have reached an interim high - let's see into the weekend if prices can hold their short-term MAs. On a settlement below $125.25 in October, I'd be willing to probe a bearish trade with clients. September feeder cattle are starting to exhibit signs of a top but wait for more evidence. If prices cannot take out $1.46, we should see a trade back near $1.40 ... trade accordingly. Lean hogs lost 2.5% today as prices are on the verge of trading in the 60s ... that has not happened since late 2010. I would love on a swing trade to try to pick up longs in 2013 contracts 5 cents lower ... stay tuned.
Grains: Corn remained under $8/bushel, and as long as prices are capped by their short-term MAs, I like bearish exposure. I've been calling for a correction what seems like a month and prices remain range bound. After a near 70% appreciation, I think it would naive to think we could not get a major correction ... the timing is the difficult part. Soybeans are not off a lot, but prices have closed lower for the last 4 sessions ... a feat that had not been accomplished during this run in the last four months. Could a top be in? From my perspective, traders could probe shorts looking to make $2-3 for every $1 they risk. It is worthy of a trade in my opinion. Wheat has bounced off its 50-day MA the last 2 sessions. If $8.65 can give way in the December contract, next stop should be $8.30.
Currencies: The critical 81.00 level continues to support the dollar, but tomorrow's NFP will set the tone moving forward. Looking longer term at the weekly dollar chart, we are on support that has held since September of last year, so the next few days will be critical. If 81.00 gives way, 78.00 should come into play, so I would likely have to adjust a number of trades in ALL other commodities that remain dollar sensitive. The Kiwi and Aussie reversed as it appears we may get a bounce from here ... bearish trades will likely get stopped out on a further advance. Aggressive traders can gain bearish exposure in the Yen but have tight stops because of the inverse relationship to stocks.
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.