Energy: Lower trade was rejected in crude oil, as prices were able to retake the $85/barrel level in December futures. A solid base seems to be forming, as I see limited downside in the immediate future. I am searching for a catalyst to get clients bullish exposure into winter, but have refrained to date… stay tuned. RBOB closed 7 cents off its lows, just under its 100 day MA and higher by 1.81% on the session. I am currently neutral on this market, but a close above $2.65 would get me friendly. Heating oil ran into resistance at the 100 day MA, but a settlement back over $3.00 would get bullish plays back on my radar, at least to play a potential bounce. Close out all remaining bearish positions, as natural gas is finding some buying after completing a 50% Fibonacci retracement today. As long as prices remain above $3.40, I would be comfortable wading back into longs with clients. Into the winter, I think we can probe $4.
Stock Indices: A small gain in the S&P puts prices back over their 9 day MA. Though we could get a bounce near 1425/1430, I still think there is more downside to come in the coming weeks. 1380 remains my target in December futures. The appreciation in the Dow was not as dramatic, as prices were unable to reclaim the 9 day MA. Like the S&P, a rebound may occur, but I do not think we get much more than that. The wild card the next coupe days will be the Presidential election and how the market reacts to the Incumbent or a new president?
Metals: Due to the fact that the up sloping trend line, the 100 day MA and the 50% Fib level all come in at the same level, I think traders need to respect the recent lows in gold more than they are. That is not to say we cannot get lower trade, but I do think traders with medium to longer term perspectives should be using the latest $130 correction as a long entry. Scale into the trade, just in case we do see lower trade. I like the idea of bullish ratio spreads in December, as I've started to work some of my clients back into bullish trade. A close over $1700 should confirm -- at least we get a tradable bounce out of here. A bull market has yet to resume in silver, but the lack of follow through selling today may mean the near $5/ounce correction may be enough to get buyers interested again. The 50% Fib level in December comes in at $30.70, while the 100 day MA is at $30.50. With prices above those levels, I think scaling back into bullish plays out until March is the appropriate move. Like gold, I would start small and add to the trade as the market proves you correct.
Softs: Cocoa has appreciated the last five straight sessions, and it appears like there is more to come. As long as the dollar remains in favor, cocoa should grind higher. For the last week, sugar has hovered just above the 19 cent level… my suggestion is to accumulate longs at these devalued levels to capitalize on appreciation in the coming weeks. My clients have been advised to position a portion of their account targeting 21 cents in March futures. 70 cents has supported cotton the last four sessions, and that may be as low as we go. Those in bearish trades should lighten up or tighten stops. Coffee is trading at new contracts lows… to put things in perspective, prices are off by 35% from where we were started the year. The trend is undeniably down, but we're likely close an interim low…stay tuned.
Treasuries: 30-year bonds are trading at three week highs, getting very close to completing a 50% Fibonacci retracement. Higher trade is expected, and I would use the 9 and 20 day MAs as your pivot points under the market. 10-year notes continue to trade up, closing over 133'00 in December. Use the 9 and 20 day MAs here as well as your support levels.
Livestock: Though it's been a marginal loss, live cattle have traded lower the last four sessions. The 9 day MA continues to cap upside as prices should continue to leak lower. The path of least resistance has been lower in feeder cattle as well, with a trade under $1.46 in January again today. At this point, do not rule out a challenge of the July lows. Lean hogs lost better than 1%, for the lowest close in three weeks. My target in December remains 76 cents, and I would not rue out a probe of 75… trade accordingly. My favored play is short futures while simultaneously selling out of the money puts 1:1.
Grains: Corn continues to be a sleeper, as prices have been range bound for weeks now. My bias remains negative, but only as long as prices remain under their 50 day MA -- currently at $7.51 in December. January soybeans lost 1.54% today to drag prices back to their $15 support level. From here if that psychological level gives way, do not rule out the gap being filled from early July, putting prices 30-40 cents lower than current trade. Like a coiled spring, wheat prices have the potential for a large move -- the problem is it could be in either direction. Until I get a clearer picture looking at the risk vs. reward, I see little reason to be involved. Expect wheat to continue to find guidance from corn and soybeans.
Currencies: The U.S. dollar has gained better than 2% in the last three weeks, as it is making its way toward my objective at 81. The euro has about three-quarters of a cent to complete a 38.2% Fibonacci retracement, as prices are approaching oversold levels. The pound and swissie should continue lower… my suggestion is have stop losses just above their 20 day MAs.
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.