Energy: New lows were rejected in Crude today as prices were able to close out the week gaining 2% today. The lows from October were challenged today but let’s see next week if we can hold. If we do not see more downside I would be willing to scale back into longs but I would like to see a few more days’ action. Is support gives way a violent move would likely follow so being overly cautious is prudent in my opinion. Inside day in RBOB but prices did manage a small uptick today after four losing days earlier in the week. My take is the distillates will take guidance from Crude so look for leadership there. As opposed to RBOB and Crude where prices have remained above their Ocotber 2011 lows heating oil will close out the week approximately 5 cents/gallon below that level. I see very little support but the entire complex should trade together so if Crude holds on so would heating oil in my opinion. Natural gas picked up 2% but prices were still unable to penetrate resistance just above $2.70 in August. I am not ruling out higher ground in fact I see a trade over $3 but first my expectation is a correction 6-10% lower.
Stock Indices: Stocks finished marginally higher after yesterdays route. Upside resistance at the 50 day MA should cap further upside as a leg lower is the trade to me. I’m not looking for a sharp fall but rather a grind lower in the coming weeks. I would be of this opinion as long as the S&P remained below 1350 and the Dow below 12800.
Metals: Gold finished near its lows on the week falling just over $60/ounce on the week. Mild support is seen around $1550 in August futures but I see a challenge of the lows seen in May and late 2011 and at this juncture would not rule out a test of $1500/ounce. I would look to be a buyer from lower levels and see the best place as the sidelines currently. With the 7% drop in silver futures this week prices have settled under a support level that has held since late 2008. I’m not saying we see $24 but that level or a 10% drop from current pricing is where stiff support comes in. What I’m saying is that I see lower ground short term…trade accordingly.
Softs: Cocoa has lost 5 out of the last 6 sessions and as long as the dollar remains in favor we should see further selling. September will likely trade closer to 2000 next week. Sugar fell hard today losing 5% giving back all the previous day’s gains. On a test of the previous lows that hold I would scale back into longs. December cotton gained 2% today but still failed to recoup Wednesday’s and Thursday’s losses. I’m only comfortable selling from higher levels and do not wish to be involved if the bounce forecast does not happen. I’m expecting a bounce on coffee, first target the 50 day MA and then the 100 day MA. Contact me for exact strategy but I like back ratio spreads for option traders.
Treasuries: Treasuries have finished lower now 2 out of the last 3 weeks and as long as prices are below their 9 and 20 day MAs I like bearish trades in both 10-yr note and 30-yr bonds. On the September contract my first target is 145’16 on 30-yr bonds and 131’25 in 10-yr notes…trade accordingly.
Livestock: Live cattle are finding support at the same level they did in late April. I expect this support to be temporary but have no issued trade recommendation at the moment. Feeder cattle squeezed out a gain today but still finished lower by 1.6% on the week. I see lower ground and would not rule out a challenge of the April lows in the coming weeks. Lean hogs traded at a 3 week lows but pared losses in late dealings. I remain bearish the pigs expecting a trade below 80 cents next week if not the week after in the October contract.
Grains: The 38.2% Fib level has served as resistance the last 4 session in December corn as I would expect a trade lower and then on the USDA report month end prices getting thru that level. That being said a trade near $5.25/bushel is a buy in my eyes. $14 should continue to contain November soybeans. A trade lower next week could be bought into the USDA report as well. In a perfect world a retracement occurs dragging prices back near $13.25. In December wheat a trade back near $6.75 would get longs back on my radar.
Currencies: The 20 day MA was able to contain further upside in the dollar as suggested in previous posts but let’s see if that carries thru next week. I may be the minority but I am not expecting a bullish market in the greenback in the immediate future. The Aussie remains on my sell list as we timed an interim top perfectly…see the chart of the day this week. The Yen also broke support mentioned yesterday so this is a sale in my eyes as well. What was support now becomes resistance…trade accordingly.
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