Crude taking a breath before a dive

Energy: Crude oil continues to tread water around the $93 level but I think she is taking a breath before a dive lower. I am not as bearish as Byron Wien thinking we see a trade to $70 anytime soon but I think in the coming weeks we can see a trade under $90/barrel. RBOB closed lower by 0.55% just above the 8 day MA but did trade close to $2.75 in early dealings. My stance is that prices crack lower very soon as my objective is $2.66-2.70 into next week. Heating oil closed above its 100 day MA at 5 week highs. I see limited upside but this will likely remain the strongest component in the energy sector. Natural gas lost 3.26% for its lowest close in 8 months. I did not expect to see a sub $3 trade but based on the ease of how support was broken today I may need to reconsider that scenario. For now clients will remain in their April bullish trades but we are taking heat. No pun intended as I do think cold snap could help the cause. If April trades much lower I may consider lifting the bottom leg for some clients…stay tuned.
Stock Indices: Like oil the stock market appears to be running into upside resistance and like oil I think we are headed lower in the near future. The longer the S&P fails to take out 1460 the less likely that will happen on this leg. I see March futures less than 1400 in the weeks to come. After 2 negative days the Dow managed to close higher today picking up nearly $60. 13400 is the line in the sand in the Dow and as prices turn south I think we find our way under 12900 the next few weeks.
Metals: Gold held recent support even closing lower by 0.40% today. As long as February futures hold $1640 I am friendly and when prices take out their 100 day MA on the upside I would add length to bullish trade. Check out a weekly chart of gold and insert the 100 day MA…I think you will be pleasantly surprised. Silver was unable to build on yesterdays gains following up a 1.27% gain by losing 0.71% today. With prices above $30 I would be scaling into bullish trade willing to add if the market proves you correct. Once we start moving north I think March futures can be at $32/ounce in a hurry.
Softs: Cocoa was able to hold onto small gains today and the important part stay above 2200 in March. Once again we will need to see a settlement back over the 9 day MA for me to think prices are ready to appreciate. That pivot point is just above today’s highs. Sugar is 1 penny lower than it was last week but with today’s gains it appears we are starting to find buying interest under 19 cents as I anticipated. Let’s see if we can muster a trade back over the short term MAs; which come in around 19.10 in March. Cotton is a sale as I would suggest bearish trade with stops above 76 cents in March. Futures traders could be probing longs in OJ and today I started pricing out bullish option plays in March and May…expect ideas to follow. Coffee remains above its 9 day MA and though the week is far for over could this week mark the fourth consecutive week in the green? Looking at the weekly chart it would only take a minimal move to get shorts covering in my opinion…stay tuned.
Treasuries: After reversing last week 30-yr bonds have gained ground everyday since and I expect that to continue. I am targeting a trade back near 148’00 in March futures. I am more interested in fading a rally than buying at this juncture. 10-yr notes have traded back up to their 9 day MA and should be above that pivot point in the coming sessions. My objective in March futures is a trade back to 133’00. Assuming 2015 and 2016 Euro-dollars make their way back to the early December highs I am very eager to gain bearish exposure on a longer term swing trade.
Livestock: February live cattle gave up 0.75% to trade down to the up sloping trend line mentioned in previous posts. This pits prices near 1 month lows reaching my objective forecast of late. Lighten up as cattle could bounce and allow you to sell again. Feeder cattle cut through its MAs like a hot knife through butter off 1.5% the last 2 sessions. I think we could see March futures lower by an additional 1.4%. Lean hogs lost 2.49% as futures approach 1 month lows. My objective is 83 cents in February futures.
Grains: It is only a minimal bounce but corn has closed higher the last 3 sessions and today prices closed over their 9 day MA for the first time since the first week of December. This could be the catalyst to get prices moving higher though I do not expect a big move until we get past Friday’s USDA. To me we can get a bullish surprise but a bearish scenario is already factored in so I like small bullish trade into the report. The 9 day MA continues to act as resistance in soybeans closing just under that pivot point the last 3 days; in March at $13.87. Beans are my least favorite Ag but are to some extent intriguing as they can be the most explosive when positioned properly. That being said I prefer corn and wheat for now. Wheat lost 0.67% today and like soybeans has failed to retake their 9 day MA. I have advised clients to nibble on longs and would be willing to add after the USDA if we are moving in the right direction. I think we could see prices 10-15% higher with little ease in the coming months…trade accordingly.
Currencies: The greenback was higher by 0.29% closing at its 61.8% Fibonacci level. We may attempt to probe 81 again but I see limited upside. The Pound is below its 50 day MA and is the weakest of the European currencies as the Swissie and Euro still remain above that pivot point. Trail stops if short any of these crosses. I am still waiting for confirmation of an interim top in the Aussie and Loonie but aggressive traders could probe plays in the CAD with tight stops in my opinion. A move lower is confirmed on a settlement under the 20 day MA; in March just under 1.0100. A bearish engulfing candle in the Yen contributed to a close lower by 0.64%. I still think we can get a violent bounce but talk of 100 today has me reassessing. If playing a bounce view it as a lottery ticket and keep size very small.
Risk Disclaimer: The opinions contained herein are for general information only and are not intended to provide specific investment advice or recommendations and are not tailored to any specific’s investor’s needs or investment goals. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results.

No comments yet.

Leave a Reply