Quiet trading today as it appears most markets are waiting for a signal on what’s next. I would remain cautious and with a large cash position looking to pounce when select opportunities present themselves. In other words be selective as you deploy your investment capital. As of this post, Crude is higher by 1.6% trading just under $100 and unable to get above yesterday’s highs. We suggest using the strength today to be a seller and maintain that as long as we do not see fresh highs we are bearish. $93 in January is our first target followed by $89/barrel. The biggest mover in the energy complex today was natural gas and believe it or not the trajectory was higher with pricing higher by just better than 3%. Scale into longs in February and March looking to add on new highs. On a trade above $3.70 in January we think short covering could lead to a probe of $4…trade accordingly.
Stocks are slightly higher but as we voiced yesterday we do not see a sustainable trade above 1210 in the S&P and 11700 in the Dow. Gold continues to have trouble closing above the 100 day MA…the longer this persists the more likely we get a lower trade. My bias remains bearish and I am operating under the influence we see a trade closer to $1650 in the coming weeks. Silver gave up just shy of 1% on an inside day as the $2 sideways range persists. A further liquidation could drag silver back near $29/ounce. The dollar finished lower for the second day running as we appear to be putting in an interim top. A 50% retracement in the dollar index would put December futures back near 77.00…trade accordingly. Staying with the same theme, forex traders could be short the Yen and long other crosses and long as the recent lows hold. The Pound appears to be the best buy risk/reward. The slide in cocoa continued today with prices down 12 out of the last 15 sessions but when is enough enough? I’m suggesting probing longs and adding once we get confirmation of an interim bottom. There is generally a negative relationship in cocoa and the dollar as well as a strong positive correlation with the Pound so as you read our forex commentary you’ll understand why we suggest bullish exposure in cocoa. Coffee remains a sell as it appears we will break support that has held for two months this week or next…trade accordingly. Both weekly and daily charts in the Euro-dollar are oversold so my suggestion is trail stops and let the market take you out of the trade if we do get a rally. With the exception of soybean meal Ag’s were higher in today’s session with wheat being the standout gaining nearly 3.5%. I’m operating under the influence we trade higher from here looking for a 4-6% appreciation in corn, soybeans and maybe more in wheat as prices have gotten beaten down the most. Cattle traders are advised to be on the sidelines looking for a lower long entry in 2012 contracts. The 9 day MA has supported lean hogs in recent sessions but we suggest reaming in bearish positions thinking we bust that level in February hogs closer to 89.000 in the coming weeks.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.