Today In Commodities: Currencies Holding Their Own

by: Matthew Bradbard

Energy: Crude oil has lost $8/barrel in the last three days, challenging the 100 day MA for the first time in five weeks. On its lows, November completed a 38.2% Fibonacci retracement. If prices can get below $91.70, which I believe they can, my next target would be $89.25. The relief predicted at the pump should come in the coming weeks if prices of wholesale RBOB continue to retreat. In the last three days, prices are off just better than 20 cents/gallon. My initial target in November remains $2.65, followed by $2.56. November heating oil challenged its 50 day MA -- a level that prices have been above since mid-July. If prices can penetrate $3, do not rule out a challenge of the 100 day AM at $2.91. A lower low and lower high in natural gas with another settlement under $3. The 50% Fib level is supportive, but I still feel $2.85 could come into pay.

Stock Indices: Doji start in the S&P and the fact that prices have been unable to gain any traction in recent sessions are all warning signs that there just may be some back and fill action to follow. I'd like to see confirmation, as picking a top is not my forte. A close under 1440 would be the first shot across the bow. As for the Dow, prices were unable to hold onto their early gains as well. A close under 13375 in December futures is needed to hint at signs of an interim top. As I've voiced of late, on a correction, expect prices to drift under 1400 and 13000, respectively.

Metals: Very few traders expect a correction in gold, and that to me is why it will likely happen. When the boat is leaning too much to one side generally, the market moves in the opposite direction. Am I speaking my opinion? Yes, but only as a warning, as no market moves in a straight line. In fact, it would be healthy to help the bullish case to see a mild correction. After a $230-plus run up, it does not mean the bull market is over if prices correct $70-90. Again, $1750 needs to first give way, but if it does, I expect prices drift under $1700…stay tuned. Again, silver was incapable of trading above $35/ounce, off slightly today. The longer this level is not penetrated, the less likely it will on this leg. I stand firm that an 8% correction could play out in the coming weeks. Platinum and palladium pared their losses from recent sessions, but I view this as a temporary pause before more selling ensues. My target remains their 100 day MA.

Softs: Cocoa stopped to catch its breath today before a lower leg ensues. My target remains 2450 in December futures. Sugar lost nearly 5% in the last two days, putting prices of the March contract back under 20 cents. If 19.50 gives way, cut losses on remaining longs. The breakout of cotton before we reach the apex may be underway, but in the opposite direction than I anticipated. I expected a break lower, not a trade higher. If this is confirmed in the coming sessions, I will not take the signal, as I was looking for confirmation of bearish trade…stay tuned. After three attempts, coffee has yet to break its 100 day MA to confirm its move lower. In December, a breach of $1.73 would get me interested in bearish trade again. My favored play would be bearish ratio spreads.

Treasuries: 30-year bonds have gained the last three sessions, and are on the verge of trading back above their 9 day MA. December will need to trade back near 149'00 for bearish trade to be back on my radar. 10-year notes are following a similar pattern, gaining this week lifting prices over their 9 day MA. A trade closer to 133'16 gets bearish trade back on my radar. If these futures play out as anticipated, it should get the NOB spread wider than 17'00.

Livestock: December live cattle caught a bid for the last two sessions, but prices under $1.30 remain a sale in my book. Being I'm targeting $1.25 and a trade to $1.30 from current levels is only $200 of additional risk, I believe the profit target window is $1800. Feeder cattle attempted to break its 9 day MA, but failed on the first attempt…expect that in the comings sessions. When November gets below $1.4750, it should be short order to see a $1.4400 trade. Lean hogs have completed a 38.2% Fibonacci retracement, but further hurdles should be overcome, as I anticipate another 2.50-4% appreciation to follow.

Grains: After a $1 drop, corn found some buying support bouncing off nine-week lows. I view this as nothing more than a bounce, and will be willing to sell on a further advance. The closer prices in December get to $8, the more aggressive I'd be selling, as I do not think the harvest lows have been made yet. November soybeans found buying support at its 50 day MA, gaining 1.8% today. This could lift prices back near $17/bushel, but as long as this contract is below that pivot point, I'd be bearish looking for more downside. Wheat was higher by 2.08% today, closing at its 50 day MA. This market remains a follower, so a bounce in corn and beans could get wheat back near $9/bushel. Bottom line -- I'd be looking to fade a further advance in Ag.

Currencies: Aggressive traders could have light bearish trade on in the swissie, euro and cable. Have stops above the recent highs. Surprisingly, the Commodity currencies have held their own, even with the correction in energies. Maybe if the metals can back off as anticipated, we will see the commodity currencies come off as predicted. Trail stops down in the yen just above 1.2850 in December as to not give back too much or use options protection against a futures position.

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.