Further Downside

Most commodities and stocks have traded lower in recent sessions and we feel there is more to come…trade accordingly. From here we see support at the 18 day MA at $96.20 with resistance at the 9 day MA at $98.50 in January. We are advising selling rallies with a first target of $92 followed $89. Assuming our assessment is correct we should see an additional 10-15 cents of downside in RBOB and heating oil. Natural gas appears to be finding support around these levels the last four sessions. Aggressive traders can again start probing longs with stops below the recent lows. Equities are back under their 50 day MA for the first time since early October. The bears are getting back into the driver’s seat as it looks like we should see further downside. The 50 day MA’s should act as the pivot point; in the Dow at 11470 and just above 1200 in the S&P.
Gold broke the 100 day MA today and is lower by 2.4% today as of this post. Gold has lost just over $125/ounce in the last two weeks. From here we think you could see an additional $50/ounce…trade accordingly. Silver is off 2.4% as well as prices approach $30/ounce. Although we’ve traded below $31/ounce we have yet to close below that level. A settlement below that threshold we should see $29/ounce in December futures. As commodities continue to trade lower expect the commodity currencies to continue south. In terms of the charts we still favor the risk/reward bearish positioning in the Pound and Yen. In the last three weeks cocoa has lost 14% and in our opinion traded to levels that longs should be back on your radar. Once we see the greenback stop appreciating we would suggest adding to the trade. My initial suggestion is scale into March willing to take a little heat.
Continue to play the short end of the curve with 2013 Euro-dollars. We feel traders can have bearish exposure and remain short as long as new contract highs are not seen stay the course. Grains continued lower with corn down nine out of the last ten sessions closing today at six week lows back under $6/bushel. On a further commodity meltdown do not rule out $5.50. January soybeans lost 1.7% trading to their lowest levels in 2011. We see further downside and would not rule out prices filling a gap in the chart from October 2010…trade accordingly. Wheat was lower by just over 1% but we feel most of the damage has been done here so though we are not bullish we would start looking for an exit door on bearish trades. We would like to see if in the next few days we can fill the gap from late September in February live cattle before issuing bullish trade to clients. We got very close today but hold off for the next few sessions…stay tuned. Lean hogs remain in bull mode gaining once again today.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

Comments are closed.