Energy: Crude oil has completed a 50% Fibonacci retracement, losing another 1.5% today. This is the first settlement under $90/barrel since the first week of August. The 100 day MA should now serve as resistance. While the easy money has been made on bearish trade, I think we could see a probe under $87. Then I will unload any remaining shorts for clients and advise you to do the same. RBOB advanced 1.8% today, closing back above its 18 day MA. This makes no sense to me with the distillates up and crude down. Close all positions (long/shorts) and move to sidelines. Heating oil bounced off its 50 day MA, paring losses but still closing lower on the session. If $3.13 caps this leg higher, expect prices to move south. If not, a trade to $3.20 is likely. I did not expect it in one day, but natural gas gained 3.5% to trade back at $3.25, as voiced yesterday. From here, likely a probe of the July highs.
Stock Indices: Stocks are down 2-2.5% from their recent highs, and with a settlement under their 20 day MAs, we should see the selling extended in the coming sessions. I'm operating under the influence the up sloping trend line will be breached very soon. I've suggested for clients to use the Fibonacci level in the Dow and S&P as their downside targets. On a speculative trade, traders can get short, and those with larger stock portfolios are advised to lighten up or establish hedges to protect for a 5% depreciation to come.
Metals: Gold futures closed down 0.72%, but $15/ounce off their lows. $1750 was breached intra-day, but prices did manage to settle above that key pivot point. My stance is that more selling is to come. I see $1725 as the next stop, and ultimately, $1690. Silver remained around the $34 level, but I am anticipating a leg lower that could drag prices back near $32/ounce. Copper has fallen nearly 15 cents in the last two weeks, but what would you say if I said there was no serious support for another 15 cents? Palladium has fallen over 10% in the last two weeks, but there appears to be mild support at the 50 day MA. Start working out of bearish trades.
Softs: After challenging the trend line the last two days and failing, we should see further deprecation in cocoa to follow. Under 2450, the next key support in December is at 2375. A large trading range in sugar today has prices closing in the red, down 1.64%. If the recent lows hold, I'd remain bullish, but I'd like to see prices above 21 cents into next week in the March 13 contract. Cotton continues to slide lower, as the previous breakout of the triangle was a picture perfect set up. See previous posts. The 100 day MA should act as resistance, as my target in December is 66 cents. Coffee is back under the 100 day MA, failing 2.42% today. Too choppy for futures in my opinion, but I like bearish ratio spreads in December to play a further deprecation.
Treasuries: 30-year bonds continue to appreciate, gaining 1% today and completing a 50% Fibonacci retracement. Because of the velocity of this move, stay out of its way. I desire bearish trade, but feel I can get an entry at a higher level. Next stop should be 151'00. The path of least resistance should remain higher in 10-year notes, adding 0.35% today. Do not rule out a trade over 134'00 very soon.
Livestock: Follow through in live cattle today, with prices in December trading as low as $1.24075. My target has been achieved with a trade under $1.25, so book it and call it a great trade. Once I see signs of an interim bottom, I will likely have long trade recs. Feeder cattle remain a sale, and if short, stay in bearish trade as long as prices are under their 20 day MA; in November at $1.48.
Grains: Corn gave up 2.55% to drag prices to 10 week lows. Chart damage has been done, and if you listened to recent posts, you likely are back in bearish trade or have freshly established shorts when support was broken. Continue to trail stops, as this leg could put December at a $6 handle. Soybeans gave up 2.4%, dragging prices to the early support levels from the first week of August. While I expect some buying interest at that level, beans should see further deprecation. Under $15.50, the next support is just under $15/bushel in the November contract ...trade accordingly. Wheat lost 1.95% and should follow the other Ags lower short term. $9 is viewed as resistance in December, while support is eyed at $8.55 followed by $8.30.
Currencies: The buck gained 0.43% to lift prices near two week highs. I expect a challenge of the 20 day MA, and will make a future assessment based on its reaction. A trade above 80.25 should lead to an attempt at 81.00 in December. I continue to see weakness in the European crosses; thinking the selling will intensify on a breach of their 20 day MAs. Respectively, these levels are found at 1.2865 in the euro, 1.6090 in the pound, and 1.0650 in the Swiss franc. The loonie and aussie broke below their 20 day MAs today and the kiwi should follow soon thereafter…expect more weakness to follow. Let the yen work higher as I am eager to be a seller closer to 1.3000.
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.