Today In Commodities: Energy Gains, More Downside To Come

by: Matthew Bradbard

Energy: Crude oil gained for the first time in five sessions, closing just above $86/barrel in December. Upside should be contained around $87 on this contract. I am still searching for slightly lower trade however, if prices do no trade under $85 by this time next week, I will likely move to the sidelines. There is no need to stay in a choppy sideways market. RBOB gained 1.58% to close back over its 100 day MA, registering its first positive session in 12 trading days. Do not rule out a bounce after the near 30 cent slide, but as long as December remains under $2.70, I'm bearish. Heating oil too found mild support just above $3/gallon, with prices currently 5 cents above that mark. Prices under $3.10 are bearish, in my eyes. The easy money has been made on bearish plays in the three aforementioned trades, but I'm not convinced the downside is over…stay tuned. A lower high and lower low in natural gas with a settlement just under the 18 day MA. My stance is prices trade near $3.50 in the coming weeks.

Stock Indices: The S&P is down nearly 4% in the last seven days, but buying is coming in around the 1400 level in December futures. We've yet to correct even to the 38.2% retracement level, so more selling should come. I view the consolidation in recent session as the market just taking a deep breath before the dive lower. Same story in the Dow, with 13000 being the line in the sand. As long as we are under 13200 on a closing basis I'm bearish, targeting 12800.

Metals: Gold picked up 0.67% with a higher low and higher high. Don't rule out a challenge of its 50 day MA, $17 above the current prices. Fade that rally, as I'm still expecting a challenge of the trend line $30-40 lower. If we do trade lower, I have already started to price out bull call spreads in early 13' contracts that I think will be of great value. Contact me for details and to get positioned. Silver gained 1.45% to close at the down sloping trend line that has formed in the last month. A trade up to its 50 day MA, approximately 70 cents higher could play out, but more downside is expected. At least a trade under $31/ounce is my current opinion.

Softs: In the last three days, cocoa has lost $100, back testing its 100 day MA. On a breach of that pivot point, expect more selling. I recommend the sidelines. Sugar has traded lower the last seven out of eight sessions, but not much ground has been given up, as prices remain just above contract lows. I suggest scaling into bullish trade and looking to add to the trade when prices start appreciating. Cotton broke its 100 day MA and should head lower short-term. I'm targeting a trade under 70 cents into next week. Flip flop action in coffee, but technical analysis indicates a pop higher. In December, I'm aiming for a trade back near $1.70 in the coming weeks. I would like to be a seller for clients from higher levels.

Treasuries: More weakness in 30-year bonds, with the lowest trade in five weeks before prices pared losses. The 9 day MA should contain upside, as prices appear they will challenge the September lows. 10-year notes traded to eight week lows as yields continue to inch higher. The 9 day MA should cap upside here, and prices should challenge their August lows. I have no client exposure, but would be wiling to sell from higher levels.

Livestock: Live cattle lost 1.12%, breaking support and confirming a move lower. The 9 and 20 day MAs that were previous support now become resistance. My objective has been a trade under $1.25 in December, and if we do not get it tomorrow, it should happen next week. As goes live cattle, so do feeder cattle, with prices down 0.77%, closing under their short term MAs. Selling should put January close to $1.46 in the coming sessions. The 9 day MA has capped upside, while the 20 day MA has supported the last three sessions in lean hogs. My goal is 75 cents in the December contract, as I've issued bearish trade recs in the previous days.

Grains: Corn has traded lower the last 3 days losing nearly twenty cents with prices closing back under their 20 day MA. A fresh lower leg should play out, dragging prices closer to $7/bushel, in my opinion. Soybeans lost 0.41%, but do not count them out just yet. $15.40 will need to hold in November, but with prices above that level, I'm mildly friendly. Likely influenced by corn and soybeans, wheat gave up 1.27%. Prices remain above all support levels, but a trade under $8.60 would mean a lower leg has begun, and we will fail to see $9 once again. Flip a coin… prices could go either way.

Currencies: Indecision in the dollar, as a trade under the 20 day MA leads to lower trade, while above the 34 EMA, higher trade… stay tuned. The euro broke the trend line mentioned yesterday, so aggressive traders can start gaining light bearish exposure. All remaining shorts should be out of the pound due to the latest chart action and prices penetrating their 20 day MA. A 50% Fibonacci retracement was completed in the yen with the 0.58% loss today. Another penny lower could be seen but I'll be absent, as the easy money has been made, in my eyes. Outside of the euro, the only open recommendation is bearish trades in the loonie, as I feel support will give way and we will see a sub-par trade.

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.