Italy is Calling

Energy: The bears are back in the driver’s seat with Crude down 4% closing in on 9 month lows. A penetration of $76 would likely lead to a trade to the low $70’s but I do into see that. I did however advise clients in early dealings to exit remaining longs and move to cash. I will be a buyer form lower levels for those looking for an energy trade. I do not wish to be short with clients. RBOB has lost nearly 20 cents in the last 4 sessions as prices approach 9 month lows. There is likely lower ground as next support is seen10-15 cents lower. Heating oil is at 18 month lows losing 2.4% today. Hedgers were advised to lighten up on their longs hedges. Inside day in natural gas with a gain of 2.5% but prices did not trade higher than the recent highs. It was impressive to see a gain all things considered but until we trade above the triple top I think we see more downside before $3 in the futures.
Stock Indices: Stocks were clobbered today losing 2-2.5% dragging prices back near the 20 day MA. I see further downside with 1300 in the S&P and 12250 in the Dow as viable targets. As opposed to buying the dips my suggestion is sell the rallies.
Metals: I warned of a correction and the market delivered with gold down 3% today dragging prices to 2 week lows. A test of the May lows should happen tomorrow if not next week. The key will be to see if those levels hold which I doubt. Below that level next support is $1485. Silver lost 5.5% today closing near 2 month lows under $27 ounce which I alluded to yesterday on a break of $28. Prices are on the verge of breaking a support level that has held since 2009 and if that happens my next target would be $24…stay tuned. Copper failed to break above the 38.2% Fib line as I has predicted and has started an assault on support under the current price. Mild support is seen at $3.27 but we likely will see a trade down to the highs teens.
Softs: Cocoa lost 1% as and as I said in recent posts a trade lower will persist short term as we see the dollar bounce. Sugar lost nearly 1% closing just under the 50 day MA. Don’t rule out some sideways congestion but I’m sill expecting higher ground. I should have known better that cotton has a strong correlation to the US stock markets and with a faltering stock market we were not going to see an appreciating cotton market. Prices lost the daily limit today losing almost 7%. If we get a rally sell it with stops above the recent highs. You generally see wild volatile movement when a top or bottom is made and that is exactly the action in coffee of late. We should get a sellable rally as prices should challenge at least the 50 day MA approximately 8% above today’s close…stay tuned.
Treasuries: 30-yr bonds and 10-yr notes close slightly higher but even at settlement prices were below their 9 and 20 day MAs. We could work higher short term with another leg lower in stocks but I open the idea of scaling into bearish trade as 2 weeks and 2 months out I expect much lower pricing.
Livestock: Live cattle lost ground again today trading to 7 week lows. Lower ground is expected as I’m eying the April lows. Feeder cattle have lost ground 6 out of the last 7 sessions and that trend should continue. The April lows may be a stretch but at least another 2% should be in the cards. As long as lean hog prices remain under their short term MAs on a settlement basis I remain bearish. Trader’s short could even add to the trade on a breach of 81 cents in October in my opinion.
Grains: December corn met resistance at the 38.2% Fib level falling nearly 3% today. Weakness in outside markets and profit taking could take futures back near $5.25 which in my opinion should be bought. $14 has served as a significant hurdle in recent months as prices in November soybeans failed to overtake that level once again. A 50% Fib retracement puts prices on this contract back near $13.25. December wheat lost less than 1% but prices did close 21 cents off their intra-day highs so weakness in outside markets could continue to pressure wheat short term. Tighten up stops on longs.
Currencies: The greenback was higher by nearly 1% today as the bounce I alluded to yesterday is under way. The 20 day MA is just above the highs so that will be the test in coming sessions…stay tuned. As long as the dollar is in favor expect further downside in other crosses. Yesterday I pointed out 2 trades, on in the Aussie and the Yen. Take a look at today’s action as the Aussie lost 1.3% trading back to the 38.2 Fib level and the Yen broke the support mentioned down 1%. I expect more selling on both of these pairs…trade accordingly.
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