Energy: Crude oil lost another 1% today, closing lower for the last four sessions. Traders looking to take advantage of what I view to be another $3-$5 of additional downside should be in January contracts. My favored play is short futures while simultaneously selling out of the money puts. RBOB closed under its 100 day MA again today, finding resistance at the previous support level at the 38.2% Fib level. $2.53 is my target, followed by $2.45 in December. Heating oil held the $3/gallon level, but the 100 day MA should be challenged in the coming sessions -- currently at $2.9650. Natural gas lost ground two out of the last three sessions, and remains a sale, in my eyes. Once $2.375 gives way in December, we should see a trade back near $3.50. Currently, the risk dynamic makes this the best short in this complex, in my opinion.
Stock Indices: Buying was rejected in the S&P, as prices are very close to breaking the 1400 level in December futures. I see resistance at 1425 with support at 1380, as my bias remains with the bears. I had expected more follow-through selling, as the Dow only lost 0.15% after yesterday's near 2% drop. My downside target in December futures is 12800.
Metals: Gold probed $1700, closing just above that pivot point. More selling is expected, with $1675 as the next support level, followed by $1645. Traders looking to reverse shorts or establish bullish positions should have those two levels in mind. The slight loss in silver dragged prices to seven week lows, and though a 38.2% retracement is complete, more selling should follow. I think it is feasible to see a challenge of the 100 day MA in the coming weeks at $30.25. I am eager to be a buyer for clients if we can get an entry closer to $30.
Softs: The near 4% drop in cocoa should have gotten long traders stopped out at a marginal profit from entries last week. Let's see how we trade the next few days before picking a direction. Sugar closed lower for the third consecutive day, trading at fresh lows before paring losses by the close. Depending on stop placement, you should be close to taking a loss. Prices will need to hold, or cut and move to the sidelines. Cotton lost 2.15% to trade under its 200 day MA for the first time in two weeks. More selling is expected, but I'd only play via options, as a futures trade has too much risk, since prices have already dropped 6 cents in December. Coffee is back under $1.60 -- within a few cents of the recent lows -- but I'm still calling for a bounce…trade accordingly.
Treasuries: 30-year bonds failed at their 9 day MA, tapering off slightly today. Prices will need to overcome that hurdle to see more upside -- that pivot point is 147'17. At this juncture, I would only be interested in selling from higher level for clients. 10-year notes also failed to take out its 9 day MA, trading to that pivot point to the tick. I do not see a meltdown, and on a leg lower in stocks, one would expect Treasuries to catch a bid.
Livestock: Live cattle gained for the first time in four sessions, finding mild support at its 9 day MA. With prices under $1.28 in December, I am slightly bearish, thinking we see a trade south of $1.25 in the coming weeks. I need confirmation the next few days -- a close under the 20 day MA at $1.260 would suffice. Inside day in feeder cattle, as prices maintained their 20 day MA. I think this contract should follow live cattle lower, but I do not like the risk/reward dynamic. A moderate gain in lean hogs, but the 9 day MA rejected any significant buying. I still like bearish exposure, targeting 75 cents in the coming weeks.
Grains: The corn market is going to make a decision in the next few days that should result in a 30-40 cent leg. My bias remains lower, as the 50 day MA has capped upside the last four days. A gap higher open had soybeans above their 20 day MA, and higher by 1.11% today. I see more upside in the November contracts, as longs should be targeting $16.10. Wheat was the best performer, picking up 1.76% trading to two week highs. This momentum should carry prices north of $9/bushel -- a level that has not been tested yet in October.
Currencies: The dollar again traded above, but failed to close above, its 34 EMA. The next few days' action is critical to see if more upside is likely. The euro is testing a trend line that has held since late July, so pay close attention if December futures can break 1.2900 the next few days. Move to the sidelines in the cable. Exit yen shorts, as I expect a bounce from current levels. The loonie is finding support at the 38.2% Fib level, but I like the price action with futures testing the trend line the last three sessions and failing. Still a sale, with a trade closer to .9900 coming, in my eyes.
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.