Energy: November crude traded above $100 barrel, but settled below that level. Lightening up on longs is suggested, but I'm willing to hold onto positions under water into next week to see if prices roll over. If prices reach higher levels, I will be advising clients to take their losses. RBOB recouped the previous two days' losses, closing back near its highs. Prices have yet to take out the highs from the spring, but if they do, a leg higher resumes. I'm operating under the influence that we get a correction. Heating oil gained 1%, being the strongest performer in the energy sector, closing at four and a half month highs. Clients have no exposure, but I still am in the camp that a correction is just around the bend. Natural gas closed lower the last two days, but prices remain above the $3 mark, bouncing off the 38.2% Fib level today. I see support from the sidelines at $3.04, followed by $2.95 in November.
Stock Indices: An unstoppable freight train in stocks of late, but a sharp turn in the tracks is in the future and this train will likely derail. I'm not clear on the timing or even the catalyst, but a black swan event seems likely in my opinion. Could the Dow see 14000 or the S&P 1500? Yes, both are possible, but I will not be there. When an interim top is in place from whatever level, I'd be interested in gaining bearish exposure…stay tuned.
Metals: Gold gained $35 on the week, making it the fifth positive week. I expected prices to be under $1700 at this time, but Uncle Ben saw it differently. Do not rule out a probe above $1800/ounce, which would complete a 100% retracement. I missed the last $70-90 with clients, but believe we can get an entry within that window in the coming weeks. Silver had a nearly $2.50, or $12,500 trading range this week alone. Prices have overshot to the upside, in my opinion. I got clients out too early, and they are looking to re-buy under $32 in December.
Softs: Cocoa finished lower this week, but I'm hoping for a settlement under 2600 in December next week for confirmation on bearish plays. Sugar traded above 20 cents, settling just under that level. Prices in October have advanced 5% off their lows, and should see higher ground in the coming weeks. My suggestion on a swing trade is bullish exposure in 2013 contracts. Cotton traded above it s 50 day MA today but failed, closing just under that key pivot point. Prices should break one way before we reach the apex in the triangle mentioned this week -- my bet is a break lower. Coffee leaped over 16% this week to lift prices to seven week highs. I've yet to issue bearish trade recs, but they are on my radar for next week…stay tuned.
Treasuries: December 30-year bonds gave up 1.55% today, dragging prices to four month lows. It has been nine straight losing sessions, and lower levels look likely. 10-year notes also lost ground, trading lower by 0.70%. I see more downside in both instruments. My favored play and chart of the day is a NOB spread.
Livestock: Aggressive traders can scale into bearish trade in December live cattle. An interim top likely formed this week. Confirmation next week on settlements below its 9 and 20 day MAs. My initial target is $1.26 on this contract. Same sentiment in November feeder cattle, as I think an interim top was established this week. Aggressive traders can gain bearish exposure with stops above the recent highs. December lean hogs advanced 2.11% today, closing at the high of the day and three week highs. Remain in bullish trade trailing stops under the 20 day MA.
Grains: Corn closed back above the 50 day MA, gaining just better than 1% to end the week. We should bounce from oversold levels, but that should set up another shorting opportunity, as the harvest low has not been made, in my opinion. On a bounce of 30-40 cents, look to fade and ride to fresh lows. After bouncing off the 38.2% Fib level mid-week on the USDA report, soybeans almost made their way back to their highs. I'm in the camp that work lower still needs to be done. A close back below $17.25 in November get shorts back on my radar. Supply problems around the globe contributed to the pop in wheat, putting prices back at three week highs. Accept range bound trade between $8.80 and $9.50. Possibly a sell from higher levels, but no trade currently.
Currencies: In the last two weeks, the U.S. dollar has lost 3.1%, putting prices at fresh 2012 lows. As I voiced in previous posts once 81 breaks, the next significant support is near 78, so just a touch more and mission accomplished. From around those levels, I would be expecting all crosses to reverse. That would mean a short term appreciation in European crosses and Commodity currencies should goose a bit more, but I'd be out or looking to reverse from slightly higher levels. The yen lost 1%, as aggressive traders can gain bearish exposure. We should see 1.2500 on this leg relatively quickly.
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.