Energy: Inside day in crude oil, trading marginally lower, but prices did regain their 8-day MA. I remain mildly bearish as long as prices remain under $98. My target -- on a breach of $94, we should see prices flow under $90/barrel. My suggested play is short futures while simultaneously selling out of the money puts 1:1. RBOB failed to make it to higher ground, but prices remain above their 8-day MA as well. Prices are overbought and due for a correction, but that does not mean we do not see a probe higher first. A settlement under the 8-day MA is needed for my confirmation. Heating oil was a small gainer, but this distillate too appears to be on the verge of a trade lower. If October cannot retake $3.18 in the coming sessions, a trade under $3/gallon should play out in the coming weeks, in my opinion. Natural gas bounced off the same support that held in late August, gaining nearly 6% today. I have no long or short exposure until a clear direction is determined.
Stock Indices: The Dow finished lower by 0.40%, with the S&P on a percentage basis losing almost twice that ground. If prices can take out their short-term moving average -- about 100-125 points lower in the Dow and 15-20 points lower in the S&P -- I would be willing to probe bearish plays with clients thinking an interim top was established. Until then, stand aside.
Metals: Gold lost 0.75% today, but this is very little relief with the gain in recent weeks. After a near $150 appreciation in recent weeks, a correction would not surprise. This is not a bearish trade recommendation, but perhaps lighten up or establish downside hedges. On a retracement, $1,680 should serve as support with a larger correction $1,625 in December. Silver failed to hold onto its early gain, closing almost 1% lower. On a trade lower in this contract, I see support just under $33, followed by $31.60 and then $30.30. Booking partial profits on remaining longs makes sense to me. Copper failed at $3.70, as prices may be running out of gas after the 20-cent leap in the last two sessions. If $3.60 is taken out, I would suggest exiting remain longs.
Softs: Cocoa was slightly lower but pared losses, closing nearly 3% off its lows. Fade rallies in December future as long as 2700 acts as resistance. If the U.S. dollar can gain traction, I think prices could trade to the trend line about 7-8% from current levels. Sugar gained for the second day running, as 20 cents should be back in play in the coming session. Risk to reward, I like the dynamic thinking one could risk just over ½ cent in futures with a 1½ cent target. Cotton has yet to breach the down sloping trend line that has existed since February. In the next few days, I am expecting cotton to break down, which would be confirmed on a penetration of its 50 day MA.
Treasuries: 30-year bonds traded under their 20-day MA the last two sessions, but the key will be a settlement below that level. It appears to me there is more downside to come. 10-year notes are lagging and have not fallen off as much lately. This is the perfect environment for a NOB spread in my opinion. The only outside consideration is if we see a leg lower in equities, an inverse relationship should play out, so I would not have a large position on.
Livestock: With today's loss, live cattle traded to their 9-day MA. On a trade under that level, expect momentum traders to drag prices lower. My target in October would be 122.50. Feeder cattle were buoyed by their 9-day MA, gaining marginally. Aggressive traders can gain bearish exposure with tight stops. My downside target in November is 144.00. October lean hogs are over 2 cents off their lows from last week, but until prices take out 74.50 on a closing basis, I'm just interpreting this as a bounce. In a perfect world, longs can buy from lower levels…stay tuned.
Grains: Corn lost 2% to put prices at six-week lows. In December if the 50-day MA can be taken out about 15 cents below today's settlement, I think this would confirm a move closer to $7/bushel, which I've been calling on in recent weeks. Traders should remain in bearish trade as long as prices remain under $8.05. November soybeans lost 1%, trading lower now for six straight sessions. This could just be the beginning, as it will take another dime to break a trend line that has supported the last four months. Advice to longs is lightening up or establish hedges. Wheat continues to meander around the $9/bushel level, looking for direction from the other grain markets. A trade under $8.70 puts $8 in play in December, in my opinion.
Currencies: As long as the dollar remains under 81.00, I'm in the bear camp. The European crosses may have gotten ahead of themselves short term, but remain in bull mode as long as the dollar is under pressure. Therefore, it is advised to buy moderate dips in the euro, swissie or cable. Those short the yen should have tight stops, as a trade above 1.2850 should have you out at a loss. Prices have failed several times from around current levels, but as we all know, past performance is not indicative of future results.
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.