Today In Commodities: Dollar Falls Near 5 Month Lows

by: Matthew Bradbard

Energy: Crude oil finished slightly higher today but as I've said, as long as prices are under $98 in October, I remain bearish. I did advise clients to roll their positions today for October to November, but stay short. In the coming days. I suspect prices will trade south towards $90. RBOB inched out gains to close at fresh 2012 highs just shy of $3.05/gallon. Limited upside should be seen in my opinion, but I'm still waiting for a settlement under the 8 day MA. A rising tide lifts all boats, as heating oil finished 0.40% higher today. $3.21 in October should cap further upside. Two successive leaps in natural gas, gaining nearly 7% today and 4.85% yesterday. A 61.8% Fibonacci retracement was completed, with prices trading to the $3 level mentioned several weeks ago. Unfortunately, followers were jigged out of positions and spectators if they listened to me. 5-6% dips can be bought by aggressive traders moving forward.

Stock Indices: Stocks held their own, keeping their head above water in day one of the Fed meeting. Expect fireworks tomorrow afternoon to set the tone. My opinion is that all good is priced in and there is a higher likelihood of disappointment unless QE begins tomorrow, which I do not foresee. If a leg lower resumes, my downside target in the S&P would be 1370, and in the Dow, my first target would be 12800.

Metals: After the $50 advance in gold, prices have been sideways, consolidating around $1735 in December. The immediate direction will be determined by the FOMC tomorrow. I suspect a break above $1745 or below $1725 will set the direction of the next leg. My bias is a move lower, and I see first support around $1680. Silver again failed to take out $34/ounce on the upside on an inside day today. If $34 is not penetrated tomorrow, I think a trade back near $32 is in the cards. Any traders long copper were advised to book profits, capitalizing on the 7% appreciation in the last week.

Softs: Cocoa has traded in the red the last three sessions, as an interim top may be in the making. A trade in December back to the trend line puts prices back at 2475. Conversely, sugar appears to be making an interim bottom, trading higher the last three sessions. Neither moves are significant on a percentage basis, but appear to be a turning point. I've advised trades to scale back into bullish plays in 2013 sugar positions. Cotton appears to be rolling over, failing to breach the down sloping trend line. Confirmation would be a trade under the 50 day MA at 74.50 in December. Coffee gained an additional 2.25% today, lifting prices over the 50 day MA for the first time in five weeks. Bearish trades are now on my radar, but let's see a few days' action. I will likely be pricing out bearish ratios trades in the coming sessions.

Treasuries: December 30-year bonds closed under their 20 day MA the last two sessions. Use the 9 day MA as resistance and if prices remain under that level, I would remain in bearish trade with a target of 146'00. While 10-year notes have moved in the same direction, prices have yet to penetrate their 20 day MA. Like bonds, use the 9 day MA as your pivot point and my target on the downside is 131'00 in December. The NOB spread is still my favored play.

Livestock: Live cattle gained just better than 1% today to lift prices to five month highs. Prices are approaching overbought levels, so I do not see much more upside but I would wait for an interim top before probing bearish trade again. November feeder cattle continue to gravitate around their 9 day MA. I see limited upside here as well. This week lean hogs have started to bounce and as of this writing, are trading back above their 9 day MA. I like bullish trade as long as 71 supports in October. A 38.2% Fibonacci retracement puts this contract back over 76 cents…trade accordingly.

Grains: In three weeks, corn prices have lost 7% and are now within pennies of their 50 day MA. Prices have been above that level for the whole of summer, and a breach of $7.75 should open up a move back near $7/bushel. Understand traders likely lightened up on longs ahead of tomorrow's USDA, so this report will be market moving and set the tone in the coming weeks. Soybeans have breached the trend line that has held all summer, and with the overnight trade, come close to completing 38.2% retracement. Further deprecation should be supported in November at $16.65, followed by $16.40. On a bearish USDA report, do not rule out a challenge of the 50 day MA just under $16.20. Wheat remains a follower of corn, trading slightly lower today. As long as prices are under $9/bushel, I would be in the bear camp targeting $8/8.30 in December.

Currencies: The greenback lost 0.63% today, dragging prices near five month lows. Looking at the chart, prices may attempt to fill the gap in the chart from 5/1. This would take the September contract to at least 79.275. As I voiced yesterday, as long as the dollar is under pressure, expect other crosses to grind higher. The euro, pound and swissie all traded to four month highs today and should see those gains extend in the coming sessions. The Commodity currencies will also well bid. The best looking chart in my opinion is the loonie. My only fear is that when metals and energies correct, it could get hit hard so those long trail tops. As long as prices remain under last summer's highs, I think we get a decent correction. I am not ready to get clients positioned short, but I think when I do, I could ride prices back under par. Shorts in the yen should have been stopped at a loss.

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. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.