Today In Commodities: Closely Watching Crude

by: Matthew Bradbard

May crude traded within 80 cents of $100 and below the 100 day MA for the third session in a row. This support level is a big deal so I expected a fight. My contention is a break below that level in the coming sessions drags May to at least the 38.2% Fibonacci retracement level at $97.50. I told my clients that are short today that we’ve likely got 60-70% of the profit out of the trade and not to get greedy. Though $92-96 is feasible we will cut and run around $97 if given the opportunity. Another $3-5 depreciation in crude should pressure the distillates 10-15 cents further. As for heating oil a trade closer to the 100 day MA I would start initiating fall hedges to protect from a price spike for heating oil hedgers. I will be advising clients to get longs futures and sell upside calls 1:1. Natural gas is dancing around $2 and I am inclined to wait for a probe of that level before trying to pick a bottom. An ugly jobs number last week and the lack of support from the Fed has the bulls back pedaling as the indices have lost ground in the last five sessions. In fact prices are approaching the 50 day MA for the first time since Christmas. I expect further downside as solid support is not eyed for another 3-4%.

June gold is approximately $30 off its recent low but I am still in the camp that we will see a lower low. I see resistance around $1675 in this contract. As long as May silver remains below the 100 day MA ... at $32.25 I remain bearish. My feeling is that when $31/ounce is breached the flood gates open and we see a violent trade closer to $29.

I still want to see a rally in coffee to re-establish shorts even though I am bearish. Treasuries broke out to the upside on Friday’s jobs number and are approaching one month highs. I expect further upside and open the opportunity to be a seller from higher levels. First I need to see signs of an interim top ... stay tuned. Cattle have gained for the last two sessions but to me the market is taking a breath before it dives lower again. Lean hogs have completed a 38.2% Fibonacci in June but my take is we get a trade over 95.00 In June before buying dry ups. Corn and soybeans are exhibiting signs of an interim top so tighten up stops on remaining longs. The yen has closed over the 34 day EMA the last two days after a 1% pop last Friday. Do not rule out a probe of the 100 day MA about 1.75 cents higher.

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