NFP was obviously a positive influence today, but the worst behind us ... not, in my opinion. Just kicking the can down the road.
After all the noise Crude is set to finish 75 cents higher on the week. The fact that prices are back over the 9 day MA is mildly bullish but with a strengthening dollar I still think that the inverse correlation comes back to roost. My stance is we see prices break in the coming weeks. I will change my mind if stocks advance to new highs or things heat up further in the Middle East. Recognize that the tail is wagging the dog here as the products are contributing to the gains the Crude. Natural gas managed a positive close today but still ends the week lower by 5%. Wait for a bottom; do not try to pick it as I am still not ruling out a $2 trade. My clients have no exposure here long or short presently.
Stocks ended the week slightly higher after midweek what appeared like the beginning of a correction prices reversed. Next week it will be critical if this is just a test of the highs or fresh highs. I’m advising the sidelines -- waiting to see performance. My opinion is that for this appreciation to be sustainable we must first experience close proximity to a 5% correction.
Bulls were able to right the ship in gold with prices closing near their weekly highs. Traders should have taken their shorts off and on a settlement above $1720 in June I would start to get bullish again. Until that happens I am neutral. Silver showed some resilience, closing higher the last three sessions, but I need to see consecutive closes above the current levels to be a believer. As you can tell I am still skeptical that we’ve seen enough downside in the metals to resume another leg higher.
Continue to trail stops in sugar and coffee as long as the weakness persists. On the week sugar lost just over 5% and coffee was lower by 7.25%. Cattle were not able to pare losses as much as anticipated so the weakness should drag prices lower into next week. My suggestion remains keeping stops around the 20 day MA’s if you are willing to open the trade up a little. This morning’s USDA report was supportive to soybeans and neutral to negative to corn and wheat, according to RCM’s Agriculture derivatives specialist. (Who, I am happy to say, is my co-worker.) Anyone interested in grain specific commentary in my opinion you should add Doug’s work to your trading arsenal. My stance remains the same: that we get a break in the entire complex in the coming weeks so wait for a long opportunity from lower levels.
I should have gone with my first inclination on a higher dollar as prices advanced over 1% today to close above its 50 day MA. All crosses were lower with the Swissie and Euro the hardest hit. Traders who stayed in their short KIwi and Aussie positions should still be short if they heeded my advice having stops above the 20 day MA. Stay short.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results