Decision Time

A number of markets are at critical points and will decide in the next few sessions if prices reverse from current levels or we have a change in trend. Notable markets include stock indices and Crude oil. Crude was higher by nearly 5% today lifting prices to three month highs above $91/barrel. We do not trust this move but the momentum is bullish and continues to be until we get a settlement back under $88/barrel. Aggressive clients hold a small short position which are now under water. Be careful about getting too long of a position because if you want to weather this trade there is no serious resistance until $95/barrel in December. We continue to caution investors about picking a bottom in natural gas. Wait for a settlement above $4 before gaining bullish exposure.

Stocks have completed a 61.8% Fibonacci retracement as our targets were realized in both the S&P and Dow today. Like Crude oil we feel prices have overshot to the upside but you’re jumping in front of a freight train getting short. We do think stocks are overvalued but we prefer the sidelines until an interim top is made. Gold appreciated 1% toady but remains range bound and the sidelines is our trade until we get a clearer picture. Silver gained 1.6% but until we break above $33/ounce or below $30/ounce on a closing basis we suggest the sidelines here as well. The US dollar as competed a 61.8% Fibonacci retracement trading to a seven week low. The easy money has been made on bearish plays as we could get a bounce from here…trade accordingly. Some clients continue to sell the Yen near contract highs thinking even verbal intervention from Japan should get the Yen to ease in the coming sessions. Our target remains 1.2750 in December contracts. Currency traders that are long should tighten their stops as we are approaching over bought levels across the board.

Use a further appreciation in coffee and sugar to re-establish bearish trades. We see March sugar under 25 cents and March coffee below $2.30 in the coming weeks… trade accordingly. Treasuries traded lower again today but considering the action in outside markets we would have expected much more. Use the 20 day MA as your pivot point…as long as we stay below that level remain bearish and the reverse on a trade above that level. Corn is back below the 200 day MA having trouble holding onto any gains in recent sessions. Aggressive traders could start gaining bearish exposure as long as the recent highs hold. Soybeans and wheat performed better with beans gaining 1.2% and wheat higher by 1.7%. We have opted to stay away from wheat with clients but have a small bullish position in January soybeans with some clients. On a close above the 50 day MA at $12.47 we would be looking to add to their position. Lean hogs were lower again today making today the fourth consecutive loser. Aggressive traders could have bearish exposure thinking we get an additional 2-4% depreciation. Still waiting for a break lower in live cattle to be a buyer of 2012 contracts…stay tuned.

Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

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