Based on today’s action it appears money is leaving the stock market and going elsewhere. We see money finding its way into the dollar, Treasuries and commodities …there was no clear winner at least today. Crude oil has reached over bought levels and based on outside market influence we still are thinking a correction should happen in the near future. With a slight bounce in the dollar and lower trade in the stock markets we expect December Crude back near $82/83 in the coming weeks…trade accordingly. With the 1.5-2% decline in the products today we think further weakness will drag Crude lower. At its highs natural gas traded to the trend line mentioned in previous posts but by the session’s close prices are lower by nearly 1.5%. A settlement over $4 in December has longs back on our radar.
A 50% Fibonacci retracement may be all we get in the indices as they retreated 2-3% today. Use 1215 as resistance in the S&P and 11600 in the Dow. Aggressive traders can gain bearish exposure looking for a grind lower to the bottom of the trading range. Even with a $10 loss in gold prices maintained the 20 day MA and all other major support. We are cautiously optimistic but would like to see a trade over $1700/ounce for further confirmation. Some clients have recently purchased February bull call spreads. In the next day or two silver should make a significant decision on direction…next stop should be $35 or $29/ounce. A trade below the 9 day MA at $31.75 supports lower trade while a trade above the 20 day MA at $32.30 likely means higher trade. Most clients have bullish exposure anticipating $35/ounce.
The dollar index bounce off the 50 day MA today but we expect just a bounce before the slide continues…trade accordingly. Currency traders should be out of all their longs in the Euro and Aussie. Aggressive traders could continue to scale into bearish plays in the Yen looking for lower trade. Aggressive traders could scale into shorts in sugar as we expect prices to find their way back to levels we were at two week ago; approximately 12% lower than current pricing. On a trade back near 138’00 in 30-yr bonds offset remaining bearish trades.
We opted to exit clients remaining longs in corn as we’ve been unable to break above the 200 day MA for the last five sessions. On a trade lower we will re-establish longs in next year’s crop…stay tuned. Some clients remain long January soybeans but we will need to see a trade above last week’s highs very soon or we will likely advise moving to the sidelines here. For the last two sessions live cattle have had trouble holding onto their gains closing well off their highs. Those long may want to book profits and we may get the correction we’ve patiently been waiting for very soon…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.