Energy: Crude oil will start the week down 1%, closing just above its 100 day MA. $93 should serve as resistance and on the downside, my target remains a trade under $90 on the November contract. RBOB lost 1.14%, unable to trade above the 8 day MA for the last two sessions. Further downside is expected, with the next support at $2.74. Under that level, my target at $2.65 should be realized. The 8 day MA acted as resistance in heating oil as well, with prices off by .69%. Support is seen first at $3.05, followed by $2.96. A $3 move south in crude should equate to a 7-10 cent loss in the distillates. Natural gas failed to hold onto its gains, closing lower by 1.25%. My bias remains bearish, but prices could really go either way, so I recommend the sidelines.
Stock Indices: Stocks continue to tread water, closing marginally lower around their 9 day MA; which will serve as the first pivot point. If that level is breached, the next stop should be the 20 day MA. In the S&P, that represents a 25 point drop, and in the Dow, 225 points for current levels. I'm still searching for signs of an interim top, as price action is starting to indicate we are ready for some profit taking.
Metals: Right out of the gate, gold prices were backpedaling with a near 0.75% loss today. $1775-1780 has acted as stiff resistance going on one week, and on a breach of $1750 in the next few sessions, a correction will be confirmed. I think it is reasonable to see prices under $1700/ounce in the coming weeks. Silver lost nearly 2%, to drag prices back under $34/ounce. Prices are 3.6% off their high, but if my assessment is correct, we have another 7% to go before first significant support is reached. In other words, I think gold and silver can correct lower in the short run. I expect continued weakness short term in palladium and platinum to pressure metals south as well. After a 9% advance in copper in the last three weeks, this is likely a candidate for a correction south in the coming weeks, in my opinion. $3.55 is my target in December futures.
Softs: Cocoa lost 3%, dragging prices to one month lows as the trend line that has supported all summer was breached. A 38.2% Fibonacci retracement is complete, though more selling is expected. Bearish traders should start unwinding trades on a trade under 2400 in December. Sugar appreciated the last three days, retaking the 20 cent level. Risk/reward, I like bullish exposure in March 13' contracts, as long as the recent lows hold. A possible play would be long futures while selling out of the money calls or buying at the money puts 1:1. In the last three days, cotton has lost nearly 5% as prices broke down just before the apex of the triangle --see recent posts. Prices have closed under their 100 day MA the last two sessions and should continue lower. A 61.8% Fibonacci retracement puts December back under 70 cents. Coffee is finding mild support at a triple bottom just under $1.69 in December. I expect support to give way and prices to be closer to $1.60 in the coming days -- trade accordingly.
Treasuries: For the last six days, 30-year bonds have grinded higher, appreciating approximately 50%. I would like to see a trade north of 149'00 to get bearish trades back on my radar. 10-year notes have also been bid up, having completed a 50% retracement with gas left in the tank. I expect to see a challenge of the highs from three weeks ago in the coming weeks. In my opinion, long dated bearish euro-dollar plays can be scaled into and added to when the market proves you right.
Livestock: As long as prices in live cattle remain under their 9 and 20 day MAs, I'm in the bearish camp. I see support breached at just under $1.28, opening the door to a move lower to my target of $1.25. Feeder cattle have gone nowhere but sideways in the last three weeks, but prices dance above and below their MAs, so I'm getting mixed signals. I'm bearish, anticipating a move lower, but do not wish to have any client exposure. In just over two weeks, lean hog prices are up over 7% and still on the move. I've advised bullish trade for the last 1½ weeks and still recommend long exposure. In my estimation, 75% of the current move has taken place, so I would not be just getting involved. It is about managing a lower entry.
Grains: December corn is finding mild support just under $7.40/bushel. After a $1 correction a bounce could play out, but I would continue to fade rallies as harvest lows have yet to be made, in my eyes. Soybeans lost 0.72%, dragging beans to their lowest trade in six weeks. Prices have traded under $16/bushel as forecast in previous weeks, but further pressure could still be seen. Like corn, I would be selling rallies in the coming sessions. I'm bearish as long as prices remain under $16.50 in November. Wheat lost 0.60% as trade above $9 was rejected. That level should continue to act as the pivot point in the December contract. A close under $8.60 should lead to a trade to $8.30 …my ultimate target. Wheat remains a market that should look for direction from beans and corn.
Currencies: The dollar closed off its highs, but appears poised to be above 80.00 in the coming sessions. The 20 day MA at 80.40 remains my initial target. The Swiss franc and euro have started to fail, while the pound has not rolled over as of yet. I like the idea of bearish trade, trailing stops down as prices fall in these three crosses. The kiwi lost nearly 1% today, as the loonie and aussie were not as big losers. Once the 20 day MAs give way, I think the selling will intensify in the commodity currencies. As I've said in recent posts, a leg lower in metals and/or energies would likely play a role in these three crosses. A spectator in the yen; willing to establish bearish trade from higher levels.
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.