Energy: November Crude oil closed slightly lower. On its high, it touched the 61.8% Fibonacci level, and on its lows, it touched its 8 day MA. I continue to position clients with a bearish bias, expecting a trade closer to $90 in the coming weeks. RBOB failed to hold onto its gain, reversing mid-session to close lower by 0.50%. Is an interim top in the making? If so a 38.2% retracement puts November 25 cents lower in the coming weeks. A close under $2.85 on this contract would confirm a correction is underway in my opinion. Heating oil inched higher, closing above $3.20/gallon for the first time since late April. I don't see prices able to maintain these levels, especially in the face of failing RBOB and crude to come. Natural gas added 2.8% today to put prices at five week highs. A grind higher is expected, but I'm on the sidelines with clients. Support is eyed at the 50 day MA, followed by the 18 day MA.
Stock Indices: The appreciation in stocks was mild, but prices did reach fresh 2012 highs. The sentiment remains bullish, but I anticipated more fireworks off Fed rhetoric. My suggestion remains lighten up on longs, as a correction is coming. I would prefer giving up additional upside than to be stuck holding the bag when the next 5-8% correction starts -- in my opinion, very shortly.
Metals: Gold failed to hold onto its gains, closing lower today. I hate to echo previous posts, but a trade above $1745 or below $1725 sets the tone moving forward. My bias leads to a correction, dragging December back near $1680. $1.60 trading range in December silver futures today equates to a $8,000 trading range! On a bearish engulfing candle I say we see a correction from current levels. December futures have support just above $31.50, but do not rule out a trade back near $30/ounce. After a near 30% appreciation, a correction is needed to see further appreciation, in my opinion. I checked back in on platinum, which I rarely trade or follow, and wow. The move has been spectacular, gaining 18% in the last month after bouncing off $1400 -- a long standing support level. My suggestion is trail stops and milk this trade.
Softs: Cocoa held its own, but still looks like a sale to me. My target in December futures remains a trade under 2500 in the coming weeks. Day four of the bounce in sugar, as 20 cents is within my sights on the October contract. I like bullish exposure in 2013 contracts, as I'm expecting prices to trade back near their 50 day MA -- that would represent a gain of roughly 8%. Cotton closed just under its 50 day MA, as prices are breaking out of the descending triangle mentioned in previous posts. This was our commodity chart of the day. I suggest bearish trade, thinking prices are under 70 cents in the coming weeks. Coffee is starting to stall after the 20 cent jump in recent sessions. I would start wading back into bearish option trades as long as December stays under $1.82.
Treasuries: 30-year bonds lost 0.80% to drag prices closer to my 146'00 target in December. Bonds have lost ground the last seven sessions, and lower lows appear likely. 10-year notes broke the 20 day MA today and once 132'00 gives way, 131'00 should play out shortly thereafter. The NOB spread continues to be the play, as it has picked up $3,000 per spread in the last seven sessions. Long term traders should gain exposure in 2013/2014 eurodollar bearish plays at these elevated levels.
Livestock: Let live cattle fluff higher. Do not get in front of this trade. I want to have it on bearish trade, but clearly the market disagrees for now. Feeder cattle bounced off its 9 day MA to close higher and trade at 2 month highs. Feeders may move higher, but without my clients. Lean hogs can be bought as October should make its way toward 76 into next week, in my opinion. I prefer long futures with options protection, either selling calls or buying puts.
Grains: In the USDA report, corn stocks were higher in the U.S. and the world, which should be a negative development. December corn lost 1%, breaching the 50 day MA for the first time since this contract was 35% lower. Though the easy money has been made, I still like fading rallies. There are a number of futures, futures spreads and options strategies that can be used to capitalize on further depreciation. Soybean numbers appear to be supportive longer term and the market agreed, bouncing off support and gaining 2.6%. November beans may challenge their recent highs approximately 2.5% from current levels. I suggest taking off shorts at loss if you're not already out. Wheat should continue to look for guidance from outside markets. I'm okay being bearish under $9 in December. In the coming days if corn breaks down, wheat should be under its 50 day MA, which should get momentum traders shorter in my opinion.
Currencies: The bleed lower in the dollar continues, with September futures approaching 79.50. The trend is your friend -- just trail stops to protect profits. The euro competed a 61.8% Fibonacci retracement. I would be looking for an exit door on longs. The aussie and kiwi might have some left in the tank, but close out longs in the loonie. I do not like today's action, and though the weekly looks great, a correction in metals and energies could hurt this cross.
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.