According to several news sources the US government will issue a report on April 24th that explains its stress test on 19 of the largest financial firms and then release the actual results of those tests on May 4th. What these tests should confirm is that we have issues in our banks and in order to get our economy back on track these banks will need to be recapitalized, start lending and some may need to fail. In order for conditions to get back to a state were we can see growth, those are the first things that need to be done. We cannot proceed forward with a broken system as the financial institutions are the lifeblood of the economy. Not only would this increase the health of the economy but it too would instill the much needed confidence and perhaps the risk appetite of the investor may well return.
Energies
The US Department of Energy said crude oil supplies were up 5.6 million barrels last week, supplies of unleaded gasoline were down 900,000 barrels while heating oil supplies were down 700,000 barrels. June crude oil closed down $1.98 unable to stay above the 20 day moving average at $53.20. Resistance comes in between 53.30 and 54.00 with support first at 51.50 followed by 50.00. If prices are unable to take out 54 early in the week we expect a trade down to 48.50. June heating oil was lower by 6 ticks closing at the 20 day moving average. 1.47/1.48 should serve as resistance with support coming in at 1.4225 followed by 1.40. On a move lower in Crude expect the low 130’s. June RBOB was higher by 88 ticks last week. Support comes in at the 50 day moving average at 1.3870 with resistance at the high from 3/26 at 1.5626. On a trade above those levels look for buy stops to be triggered. We advised clients to buy July 1.54/1.74 calls spreads last week; paying just over 650 points with a target of 950/1000 points.
The US Department of Energy said underground supplies of natural gas were up 21 billion cubic feet last week to 1.695 trillion cubic feet. Supplies are now up 35% from a year ago and up 22.5% from the five-year average. June natural gas closed up 15 cents as the lows have held for the last 2 weeks. Since the first of the year prices have fallen by 37% so we feel a bounce is overdue. The stochastic on the daily chart has started to trend higher on an increase in volume which should lead a trade over $4.50 in coming sessions. We maintain positions for clients in June futures and options. 3.65/3.70 on June is our buy zone as we expect the low from 4/13 at 3.64 to hold. Resistance is seen at 4.20; the 50 day moving average which prices have not been above since mid-July. Look at the weekly charts before ruling out a buy at these levels.
Currencies
The Euro started last week strong, but on light volume as Europe was closed only to give back those gains ending the week 163 ticks lower. Our target at the 50 day moving average was reached and as we suggested last week, look to book profits from recent short positions. The trend will remain down but the easy money on shorts has been made. Support is seen at 1.2975 followed by 1.2840 with resistance at 1.3125 followed by 1.3260.
The Aussie was lower by 19 ticks last week and although longer term we are extremely friendly to this currency, in the immediate future we expect a retracement. This should set up an excellent long entry for a position trade. Our buy zone is .6650/.6750 for our clients. The 50 day moving average comes in at .6700. First support comes in between .7050 and .7100 with resistance at .7275. One of clients has suggested 5 cent call spreads in September which is our on our radar.
As predicted the Swissie came under pressure last week giving up 79 ticks. Much like the Euro, the Swissie started the week strong only to fall back the next four sessions down 2 ½ cents in that time frame. Now that the .8600 level has been penetrated we should see .8525. On a trade back over .8600 look for resistance at .8675 followed by .8750.
The Loonie was higher by 71 ticks but is starting to exhibit signs of an interim top closing over 1 cent off its weekly high. Our target has and remains 84 cents, but was the trade up to .8368 close enough to reach our objective? Support comes in at .8100 followed by .8025 with resistance at .8370 followed by .8450. For futures traders you should be trailing stops on longs as to not give back too much. For our clients still holding May and June call options we are still looking for a challenge of 84 cents. The BOC will meet this week and is expected to keep rates at 0.50%.
The yen did as we anticipated, traded back over par last week gaining 122 ticks on the week. .9850/.9950 remains our buy zone but as we alluded to last week we prefer options to futures at this juncture. Resistance comes in between 1.0150 and 1.0250.
The Pound was higher by 154 ticks last week, which in our opinion set up a good short entry. It appears at this point prices have started to roll over and as long as resistance contains prices, we would continue to sell rallies. Resistance is seen between 1.4950 and 1.50 with support at 1.4550. If we do see increased selling, the 50 day moving average at 1.444 would be where we would look to book partial profits.
The Kiwi lost 198 ticks or 3.4% last week closing lower 4 out of 5 sessions. Resistance is seen at .5750 with support at .5525. The trend is certainly down as our target is .5400.
The US dollar was higher by 56 ticks last week and has now gained for 2 consecutive weeks. A move above the 86.00 resistance level should mean a trade to 86.65 the 50 day moving average or perhaps 87.50 the 61.8% Fibonacci level is in our future. On a reversal lower a close below 84.90 should mean 84.00. To take a stance we expect a trade up to 87.00 this week.
Metals
May silver lost 58 cents last week and is lower by $1 over the last 2 weeks. The 200 day moving average has served as tough resistance as prices failed to get over that level after 4 attempts. Prices ended the week below the 100 day moving average with a close below that level for the first time since 1/15. The 11.25/11.50 level needs to hold, if not we will see a trade below $11. We are currently on the defensive and lightening up on longs and advising clients to sell call options against their long futures. Resistance comes in at $12 followed by 12.50. We maintain our long-term bullishness on silver but for the short-term prices could go either way.
June gold was lower by $15 as prices failed to get above $900, closing the week above the support level of $863 but just below the 100 day moving average. We are advising clients to treat the area between 825 and 850 as the buy zone. Being the trend is down, more conservative traders can wait for a more definitive bottom. Resistance comes in at the 200 day moving average at 886 followed by 900. Generally speaking, April is a weak month for gold and this year has been no different. April is a weak month from a demand perspective and it seems investors sell gold in order to raise money for taxes as well. Throw into the mix this year the unpredictability in the equity market and it is a recipe for volatility.
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Disclosure: The risk of loss in trading commodity futures and options can be substantial. Before trading MB Wealth recommends that you should carefully consider your financial position to determine if commodity trading is appropriate for you. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results. There are no guarantees of market outcome stated, everything stated above are our opinions. Calculations of profit and loss have not factored in commissions and fees.
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