Read the Tea Leaves

Maybe it is the money some clients have lost on their longs or maybe I’m getting a better feel for the market but I expect prices to head south in a number of commodities…trade accordingly. Crude will close virtually unchanged today but the volatility continues as $2,500-4,000 daily ranges are becoming more and more common. We expect prices to trade lower and continue to operate under the influence that Crude is a sale above $88/barrel and a buy below $78. In December futures 3.75-3.80 continues to support natural gas but wait for a move higher to confirm that an interim bottom is in. Stocks were surprisingly resilient today holding onto slight gains as of this post. We are incapable of picking a top but a close back below the 9 day MA would signal that we are due for at least a pullback.

That pivot point comes in at 1205 in the S&P and 11425 in the Dow. Another flush lower in gold with prices down $25/ounce trading to two week lows. We advised clients to cut losses on their gold longs today. Silver gave up nearly 2.5% today briefly trading back under $30/ounce. Clients were advised to cut loses on their silver longs today as well. The fact that copper lost 5% today and is off 10% this week does not bode well for commodities moving higher in the immediate future. The dollar was unable to hold onto gains reversing mid-day closing under the 34 day MA again. Clients continue to scale into bearish exposure in the Yen anticipating a trade down to 1.2750 in the coming weeks.

Cocoa cannot get out of its own way on a rally in the coming sessions move back to the sidelines. Exit all remaining futures longs in November OJ. Tomorrow is options expiration and we expect a trade below $1.70 in futures. Use downside into the weekend tomorrow to exit 30-yr bond bearish trades. Corn reversed to our surprise and is on the verge of breaking above the 200 day MA…a feat that we had expedited but we anticipated a trade lower first. A close over $6.60 in March triggers buy signals. January soybeans closed lower again today but were able to pare loses almost fighting back into positive territory. Live cattle were lower again today making their way back to the 20 day MA. We may get a window to offset December shorts for clients on a further break. As for February a 50% Fibonacci retracement drags prices back near 122.50…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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