Energy: Crude oil gave up 1.37%, and is now $5 off its intraday highs on Friday. This has put November prices back under its trend line and is close to confirming a trade lower than has been forecast. Next support is seen at $94.50, followed by $91. I've suggested light bearish exposure for weeks -- will I finally get rewarded? RBOB prices were lower by 1.75%, and in my estimation, November is on its way to $2.65. Heating oil closed below its 18 day MA for the first time since late June, as a leg lower is underway. This deprecation should drag prices under $3/gallon for the first time since early August. Natural gas lost ground again today, dragging prices under $3. My take is $2.85 comes into play on this contract, but clients have no exposure currently.
Stock Indices: Stocks look tired and if fresh highs are not made in the next few sessions, I'd say a correction would ensue. I'm still searching for evidence like a volume spike, breach of support or a significant fundamental development. Assuming a high is in, a correction would likely drag the S&P under 1400 and the Dow under 13000.
Metals: Gold futures fought back to finish slightly higher. While a correction is overdue, a breach of $1750 needs to happen to gain any traction lower. On that, $1700 should be penetrated. Silver gained today, bringing prices closer to $35/ounce. Without a correction, I cannot justify adding length to clients. In fact, I advised most clients to get out at levels much lower. All things being equal, I expect them to get an opportunity to reestablish longs at lower levels. Palladium and platinum both were down hard today, as the weakness in these metals should spill over to the entire metals complex. My target is an additional 6-8% drop, dragging prices back near their 100 day MAs.
Softs: Cocoa lost 2%, dragging December under 2550 as predicted. I'm looking for more selling, and for the trend line that has supported since late June to be breached. March sugar lost 3%, taking the wind out of the bulls' sails today. As long as the lows hold, which would be an additional 3.25% drop, I'd remain in bullish trade. Cotton gained nearly 1% to put December just better than 76 cents. If price are not under 73 by the weekend, I'd cancel my short trades. In fact, I'd stop out at a loss on a trade above 77.25. Continue to fade rallies in coffee, as $1.80 should serve as resistance. Use $1.60 as downside targets in December.
Treasuries: 30-year bonds have picked up marginally in the last two sessions…only if we can get a more significant bounce to sell. Exit remaining bearish trades with the idea of selling December above 148'00…stay tuned. 10-year notes should see appreciation in the coming sessions as well. A trade closer to 134'00 looks like a sale to me. If the December NOB spread widens back near 17'00, I'd explore re-establishing longs.
Livestock: Inside day in December live cattle, with a close just above the 20 day MA. As long as prices are under $1.30, I like bearish trade. My target remains $1.25 in the coming weeks. Feeder cattle have been sideways, but they have closed lower for the last four sessions. A close under $1.47 is needed for confirmation, but expect that soon, in my opinion. December lean hogs continue to grind higher, closing at 3 week highs. My first target is 75 cents, followed by 76.25.
Grains: December corn futures are $1/bushel off levels from one month ago and now within 15-20 cents of my target. If $7.20 is seen, I'd close out 1/3 of your position. November soybeans are finding mild support at its 50 day MA, having lost 7.5% in the last two weeks. Tighten up stops so as to not give back too much. Wheat closed under its 50 day MA for the first time since mid June -- $8.30 remains my target in December.
Currencies: 79.00 could prove to be the line in the sand, as the December dollar should bounce from here. As I said yesterday, maybe 80.90 the 20 day MA, but that may be too ambitious. The point being is I think we bounce, so conversely, close out long trades in other crosses that exhibit an inverse relationship. Aggressive traders could take it a step further and scale into bearish trade in the European crosses with stops above the recent highs. On a swing trade, I also like bearish trade in the commodity currencies. The yen should fall apart as well. I might as well just copy and paste my comments from yesterday…just saying.
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.