Today In Commodities: Precious Metals Under Pressure

by: Matthew Bradbard

Energy: Crude oil lost nearly 2%, with December fast approaching $88/barrel. Depending on outside markets, we could see a trade under $86, as that is where I see the next major support. I would likely be offsetting bearish plays if that happens this week ...stay tuned. In the last two weeks RBOB has traded lower every session, losing just over 8%. We should see a trade under the 100 day MA, which is 3.5 cents under today's settlement. Buying should come around the 50% Fibonacci level, just over 10 cents from current prices. Heating oil lost 1.63%, with prices in December approaching $3.05. I see a lower trade, as prices should challenge their 100 day MA as well, just better than 10 cents below today's close. The consensus is remain in bearish trades, looking for more downside. Natural gas lost 4.54% to close under at its 18 day MA -- a support level that has held for the last six weeks. I think natural gas will trade lower by 25-40 cents in the coming weeks, and move lower with the rest of this complex. My suggested trade is short futures while simultaneously selling out of the money puts 1:1.

Stock Indices: I expected more follow-through selling in stocks after Friday's move, but prices held on today. A slight gain puts prices in the S&P back above its 50 day MA. That level is your pivot point moving forward -- 1427 in December futures. A close under that level should lead to a trade near 1380, in my opinion. Continue to be defensive, as a further correction should play out. Losses were rejected in the Dow as well, with a close of 0.30% higher. The 9 and 20 day MAs should reject further upside, as a leg lower is still my forecast. The 50 day MA in this contract comes in at 13275.

Metals: Gold futures are finding mild support at their 50 day MA the last two days. While we may get a slight bounce, my take is as long as prices remain under $1755, I see more depreciation on this leg. My targets are $1700, followed by $1675. Silver is below its 50 day MA, but finding support at its 38.2% Fibonacci level. A close under $32/ounce should lead to a breakdown to $30.75. It may behoove traders with large bearish trades on to lighten up, as prices have lost 4% and 7.5%, respectively. In the coming sessions, platinum should trade under its 50 day MA, and palladium under its 100 day MA …trade accordingly. December copper futures have completed a 38.2% Fibonacci retracement, and should continue to be pressured. I see support at $3.57 followed by $3.50.

Softs: Cocoa is up four out of the last five sessions, gaining better than 7%. I am slightly bullish based on the chart pattern and outside markets. My target on bullish trade is 2550/2600, so most of the appreciation has happened in this leg, in my eyes. March sugar maintained 20 cents, but has yet to absolutely convince me that a bounce is ready to resume. Scale lightly into bullish trade, ready to add when the market proves you right. December cotton is finding resistance just above 78 cents. Those long should exit, as prices may start trading lower again. On confirmation in the next few days, I will be prepared to establish bearish trades for clients. Exit short trades in coffee, as we should get a bounce from here. I see this contract drifting to $1.70, and potentially $1.80 in the coming weeks.

Treasuries: I think prices could move 2 points in either direction in 30-year bonds, so I have no new information or trading advice. 10-year notes are also exhibiting signs of indecision. While my overall bias is negative, I think a lower leg in equities could cause this complex to catch a bid temporarily. I would prefer to see a bounce to set up bearish trade from higher levels.

Livestock: Live cattle have traded lower the last two sessions and it's far from a bear market, but it appears we may have put in an interim top. My suggestion would be holding off until we get a settlement under the 9 day MA but on that, scale into bearish trade. I think on a trade lower, December live cattle could see a trade south of $1.25. For the last four sessions, January feeder cattle failed to take out $1.51 and with the bearish engulfing candle today, it should be lower trade ahead. A close under its short term MAs is needed for confirmation, but we should get that the next few sessions. Based on today's action in lean hogs, I like establishing bearish trades. My suggestion would be shorting futures while simultaneously selling out of the money puts. My target on freshly established shorts in December is 75 cents.

Grains: The 50 day MA continues to act as resistance in corn, as prices have failed to take out that level on all attempts in the last two weeks. If prices do not trade above $7.65 the next few days, I'd say it is a good bet to see prices trade near $7.25/bushel in the coming weeks …trade accordingly. Even with the 0.80% appreciation in November soybeans today, prices were unable to close above their 18 day MA. Prices could move 30-50 cents in either direction. I do not like the risk metrics, so back off. Wheat has gained the last four sessions, picking up almost 30 cents /bushel. It may be a reach, but traders wanting Ag exposure could have a small long on with stops under $8.65.

Currencies: The dollar again was met with selling at its 20 day MA -- currently at 79.70. That is the line in the sand this week. The 50 day MA has supported the pound the last few days, but that may not be the case moving forward. Trail stops just above the 20 day MA if still in bearish trade. The loonie remained under the trend line breached last week, but found some support at its 38.2% Fib level. .9925 remains my target in December futures, and we should get there on more weakness in metals and/or energies. The yen lost 0.77% today, making it seven straight days of losses of over 3% in the last month …continue to trail stops.

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. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.