Pressure on the Horizon

Stocks and commodities should come under pressure as we see lower trade across the board. The only aberration is oil which I remain puzzled on. Crude traded to a six month high closing above $101/barrel. I cannot find any justification for prices to remain at these elevated levels…that being said until we see signs of a top the sentiment remains bullish. We are looking for signs to justify a short entry but as of now we would just be jumping in front of a freight train. Distillates are signaling signs of an interim top so do not rule out further weakness in RBOB and heating oil to spill over into Crude. Natural gas continues its slide lower and now is less than 10 cents from our $3.25 target. We suggest waiting for a clear sign of a bottom because being cheap is not justification alone to be a buyer.
Stocks slide lower in late dealings to close near session lows. If we can garner some bearish momentum we may finally get the slide we’ve been forecasting. Our targets remain 1185 in the S&P and 11300 in the Dow. Gold and silver have failed to make any headway of late with gold down 1% today and silver lower by2%. Both metals appear to be rolling over as we are expecting a sub $1700 trade in gold and silver to find its way back closer to $30/ounce…trade accordingly. The dollar broke out to six week highs today and should continue higher at least in the short run. Our suggestion is bearish plays across the board with other crosses; the Pound and Yen remain our suggested vehicles. If and when Crude backs off and we are correct with our forecast in metals depreciating look for the commodity currencies to be the weakest; the Aussie, Kiwi and Loonie.
Still on the sidelines looking for a higher short entry in cotton and coffee. Continue t o trail stops in any remaining bearish sugar trades. Bearish trade in 2013 Euro-dollars playing the short end of the curve remains our suggestion in this space. Refrain from trading the long end until we get a clearer picture. We have backed off any long or short exposure i grains as we continue to get mixed signals. We’re still thinking live cattle could work lower and allow clients a long entry at better pricing…trade accordingly. Lean hogs lost 1% but remain well above the previous weeks lows. As long as the 9 day MA holds on a closing basis we like being in bullish trade.
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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