Energy: The selling is slowing as Crude has reached extremely oversold levels. Aggressive traders should be scaling in on weakness and as I’ve said of late the closer prices get to the $90/barrel the more aggressive a buyer I would be. $90-92.50 is my advised buy window in front month futures. Obviously I would be buying forward contracts though so to stay with the trade on a bounce that gets legs. RBOB penetrated $2.90 breaching the 200 day MA after being above that critical level for the last five months. I think it could get ugly very short term but we should be close to our value zone. If Crude holds near $90/barrel there should not be more than 10-15 cents of risk in RBOB…trade accordingly. Heating oil is approaching six moth lows losing just shy of 2% today. Hedgers are advised to lock in prices at these lower levels. My take is we are very close to a turning point. If for whatever reason prices settled below $2.75 back to the drawing board because we’re likely headed lower. The 8 day MA continues to act as solid support as natural gas crept to eight week highs today. We could inch higher but when the 8 day MA is breached step aside. That level come is at $2.50 on June.
Stock Indices: Equities were hit again today making it five straight sessions down 1.3-2.0% today depending on the index. Prices are now within 1.5% of my forecast from last week. Support is seen in the S&P at 1285 followed by 1245 on a meltdown and as for the Dow 12125 followed by 11800.
Metals: Gold has completed a 61.8% Fibonacci retracement and hopefully some regular readers were buyers in the last 24 hours. I put out a buy recommendation at $1535 two weeks ago and though prices got there quicker than I had anticipated it is now water under the bridge. Prices have closed nearly $40 off that level. As long as $1535 in June holds on a closing basis I like bullish exposure. Upside targets are $1615 followed by $1650 and then I’ll re-evaluate. Silver got some legs today as well picking up 3% to trade in the green for only the second time in two weeks. There is more risk in silver longs as $27.15 is eyed as support. From here I expect a bounce back near $30/ounce. Copper tried to gain but trades above $3.50 were rejected. As long as stocks continue to come under pressure I would expect copper to leak lower. My next target is $3.35 -3.38 in July.
Softs: Those still in cocoa should ride this trade lower…first target in July future 2180 followed by 2150. Unfortunately some may have been stopped only to see prices collapse the next session…that is trading. Day four of the sugar appreciation as prices have advanced just shy of 4%. This represents about 40% of the anticipated move. My suggestion is long futures and some sort of options protection. Cotton may trade lower but it will be without my client as prices appear to be over extended and a snap back is due in my opinion. Coffee is still having trouble getting above the 50 day MA as three days of attempts have been rejected. Look for a pop when prices breach that level which should set up a good bearish trade entry…stay tuned.
Treasuries: Wow…30-yr bonds gained over 1% to reach levels not seen…well let’s see my charts only go back to 1992. Money is clearly going into Treasuries and although the returns are low its better than losing elsewhere…that’s the logic I’m hearing. 10-yr notes and 30-yr bonds are at contract highs and have not seen a top yet in my opinion. As long as prices stay above their 9 day MAs they’re headed higher. In full disclosure I have no long exposure with clients.
Livestock: Cattle appear to be breaking out of the sideways congestion deciding their next direction is up. I do not wish to have bullish exposure but forced into the trade I would rather be long than short. Lean hogs have gained seven out of their last nine sessions with prices reaching three week highs. I suggest bullish exposure with a target at the 38.2% Fibonacci level just below 90 cents in the June contract.
Grains: In four sessions corn has picked up 50 cents completing a 50% Fibonacci retracement at today’s highs. Prices did close above a down sloping trend line that had capped previous rallies for the last three months. I would be taking partial profits though we could see an additional 15 cents in July futures. In three days wheat has rallied over 60 cents lifting prices above it’s down sloping trend line as well. I hope several followers listened and caught these moves! Greedy traders could milk this for another 15-20 cents but I’d be scaling out of longs as this money came quick for recent long entries. Soybeans are 65 cents off support but I just cannot convince myself to buy at these levels for clients…call me stubborn. I am holding out for a lower long entry willing to miss upside form here.
Currencies: The 3.5% appreciation we’ve experienced in the dollar in the last three weeks is in its ninth inning in my opinion. The weakest links in the Forex sector to me remain the Loonie and the Cable. Now with the Pound under the tend line that held all of 2012 fade rallies. Our first objective has been reached, from here 1.5650 in June.
Risk Disclaimer: The opinions contained herein are for general information only and are not intended to provide specific investment advice or recommendations and are not tailored to any specific’s investor’s needs or investment goals. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results.
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