Energy: Crude oil started the week 0.31% higher, closing just under its 8 day MA. Though $94 may be challenged, I expect prices to remain under that level and resume their downward move, dragging prices under $87/barrel. RBOB is just under $3/gallon at elevated levels that I do not think are sustainable. We need confirmation of a top, but I sense prices are due for a 20-25 cent correction. Clients have NO exposure currently. November heating oil is finding resistance just under $3.18, closing lower the last two sessions. Once prices break their 50 day MA, currently 7 cents under today's close, I'd expect a bigger retracement. Natural gas surged 4.82%, lifting prices close to their 2012 highs, just under $3.50. Gaining 20% in the last two weeks has been a nice ride for bulls, but the easy money has been made, in my opinion. Use any further advances to close out remaining longs.
Stock Indices: The Dow gained 0.61%, closing just under its 9 day MA. As for December futures, it does not appear trades above 13500 are supported. I've advised traders to use trades at these levels to lighten up on large equity positions expecting a correction to come. The S&P finished well off its highs, gaining 0.19% by the close. 1450 is the line in the sand above the market, while support is eyed at 1425 in December futures. If the trend line that has supported all summer gives way just under that level, expect the 5% plus correction I've been hinting at.
Metals: December gold futures gained just less than $10/ounce, bringing prices closer to the $1800/level. My opinion is the longer prices fail to cover that hurdle, at least on this leg, the less likely they will. My stance remains that a correction should be upon us in the very near future. From here, I think a trade under $1700/ounce is in the cards. Silver gained better than 1%, trading to seven month highs before backing off. I am not comfortable with clients long at these exact levels. I want to see a correction before issuing a buy recommendation. The appreciation in recent months has been steady but remember, especially in this market, silver generally takes the escalator up and the elevator down…trade accordingly.
Softs: A major head fake in cocoa was enough to advise covering shorts, but then today with the loss of 2.62%, prices are back under their trend line. Fade rallies once again, as prices likely have $75-100 more from today's close. Sugar closed nears its highs, gaining 3.48% at a six week high. The appreciation is confirmed with today's breakout, as higher ground is expected. In today's chart of the day, you can see a more detailed assessment. Cotton may bounce from the 70 cent psychological level but fade rallies, as lower ground is the call in the coming weeks. Remain in current positions as long as prices are under their 100 day MA in December at 72.70. Coffee bounced off its 100 day MA, gaining 2.62% and closing at two week highs. I don't see prices above $1.82, and may use a further advance to get positioned short via options for clients …stay tuned.
Treasuries: Shorts are on my radar in 30-year bonds and I see signs of exhaustion, but at this point I'm not ruling out one last gasp near 151'00 in December futures …stay tuned. 10-year notes also look tired, running into the same resistance from late August in the last few days. Let's give it a few more days, but without a probe higher, I should have some bearish trade ideas in one or both of these instruments. While there appears to be no immediate urgency, I like scaling into bearish trade in late 14' euro-dollars to have some skin in the game. Once prices start to drop, I would be adding to the trade.
Livestock: December live cattle gained 1.14% today on a bullish engulfing candle. Aggressive traders can reverse and start probing bullish trade. My favored play is long futures while simultaneously selling out of the money calls 1:1. Go flat in feeder cattle. On its lows today, a 61.8% Fib retracement was completed and then prices reversed. Lean hogs found some buying as well, gaining 1.86% to close back over its 9 day MA. My suggestion is to close out any bearish trade at a small loss.
Grains: After Friday's leap in corn prices, I expected follow through, which was absent today with prices virtually unchanged. Aggressive traders can start scaling into shorts again, as long as prices remain under their 50 day MA -- currently at $7.78. The next leg lower should drag prices in December back near $6.70/bushel. All of Friday's gains were erased in November soybean futures, as prices were unable to trade above their 9 day MA in both sessions. Today, futures lost 2.55%. New lows overnight, as the next support is seen at $15.50, followed by $15.20. Trails stops down to protect any open profits. Wheat closed back below the key $9 pivot point. Expect this market to follow the other Ags, so more selling in corn and beans should drag December CBOT wheat back to $8.30.
Currencies: The dollar index failed at the trend line that has capped rallies for the last two and a half months, closing just under its 20 day MA. 79.50 in the December contract will need to support to see more upside, which I believe is the likely scenario. On a closing basis, the 20 day MA is your key pivot point in euro and Swiss franc trades currently. My favored short remains the pound, as it has the next risk/reward dynamic. In the December contract, my target as follows 1.5940, 1.5840, and finally 1.5750. The aussie and loonie can be sold with stops above their 20 day MAs, in my opinion. Call it intervention, but the yen seems to be defended at the 1.2900 level. Aggressive traders can gain bearish exposure with stops above the latest highs.
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.