Energy: Crude lost 4% to close at its lowest level in nearly months. At this juncture we're likely close to an inflection point but trying to time this reversal is not a game I want to play. I would exit all longs or seriously cut exposure until there is clear evidence of an interim bottom. RBOB broke support and appears lower ground is likely. At this juncture $2.40 appears in the cards on the August contract. Heating oil lost the least when compared to other products but there was still a break down and if the whole complex is losing value this will likely follow suit. If $2.57 breaks look out below. Some of my guys have some hedges on but would not look to add to their position until futures are back over $2.70 and in fact may scale down on a further loss ... stay tuned. A potential triple top is seen on the daily natural gas chart and without further upside very soon we should see some back and fill which should be viewed as a buying opportunity in my opinion. A 7-10% correction would be a 50% Fib retracement on the last leg.
Stock Indices: After a whole lot of noise the stock market closed virtually unchanged on the session. As of this week we've completed a 61.8% Fib retracement and though we may see slight probes higher my take is that a leg higher will be met with selling and we will reverse and start heading south again very shortly. I'd expect the S&P futures to find their way back near 1300 and the Dow near 12300. If we cannot muster a bounce with the help of the Fed and considering the outside markets weakness is around the bend.
Metals: Gold lost 1% closing lower for the third consecutive session dragging prices back under a critical pivot point; the 50 day MA at $1615. Unless prices retake that level I think we see a grind lower. Support is eyed in August futures at $1,586 followed by $1,560. July silver traded under $28/ounce but was able to pare losses and close just above that level. Weakness in the immediate future looks likely as a trade under $28 would likely lead to $27.
Softs: Cocoa failed at the 50 day MA again giving up 3% today. A trade lower looks likely as I am targeting 2100 in September ... trade accordingly. October sugar is higher by nearly 1% closing above the 50 day MA for the first time since mid-April. The near 8% appreciation in the last week could just be the beginning as I think we see further appreciation. Cotton lost ground for the first time in 6 sessions but I think we're just taking a breath as my target for December remains 77 cents. Orange juice challenged the 50 day MA, a level that has served as resistance since March. Bargain hunters could have back ratio spreads as an inexpensive way to play further upside.
Treasuries: 30-year bonds and 10-year notes lost ground today and yesterday and prices are below their 9 day and 20 day MA are on the verge of crossing. Aggressive traders could have short futures with stops above the MAs, NOB spreads or be long put options as I think we see at least a 2-3% breakdown short-term.
Livestock: Live cattle have been sideways for the last three sessions but as I've stated I'm looking for another leg lower before exploring trading options. Feeder cattle are lower by 4.5% in the last week as prices are currently trading at seven week lows. More downside is expected and I would not rule out a challenge of the April lows approximately 2.25% lower. Lean hogs should continue to fall off as 80.00 in October remains my target. Traders in the market should trail stops just above the 9 day MA on a closing basis.
Grains: In 3 short sessions a 12% leap in December maize is impressive. As seen on the chart of the day yesterday use the Fib levels as your price targets. A 38.2% retracement is complete as of today. The next few days will be key in soybeans as $14/bushel in November has served as resistance for 10 months as every probe has been slapped down. I prefer exposure in corn as opposed to soybeans. Traders could be long wheat as well in my opinion as an interim low is likely in place. Soybean oil is a buy on dips; a trade back near its short term MAs would put the December contract back near 49.35.
Currencies: The dollar index is down by 2.4% in the last 3 weeks and appears to be finding mild support just above the 50 day MA. Consolidation for a few sessions may persist but ultimately I see lower ground. As seen in the chart of the day today for a trade aggressive traders they could take a stab at a bearish trade in the Aussie dollar with a great risk/reward dynamic. Also if the Yen breaks support that has held the last week that could be a good short opportunity as well in my opinion. That level in the September contract is 1.2550.
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.